author: MacLAUGHLIN, District Judge.

text:
    PINK SUPPLY CORP., Plaintiff, v. HIEBERT, INC., Northern Design Products, Inc., Interior Design Products, Inc., Michael Ketcham, and John Brion, Defendants.
    Civ. No. 4-84-77.
    United States District Court, D. Minnesota, Fourth Division.
    May 1, 1985.

      Bradley G. Clary, Marko J. Mrkonich, Cheryl L. Appledorn, Oppenheimer, Wolff, Foster, Shepard & Donnelly, St. Paul, Minn., for plaintiff.
    Daniel R. Shulman, Margaret M. Shulman, Patricia A. Knipe, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., for defendants.
   MacLAUGHLIN, District Judge.

This matter is before the Court on defendants’ motion for summary judgment on plaintiff's federal antitrust claims. The Court will grant that motion. Defendant Hiebert, Inc. also seeks summary judgment on its counterclaim for goods sold and delivered. The Court will deny that motion.

BACKGROUND

Plaintiff Pink Supply Corporation (Pink) is a distributor of office furniture in the Minneapolis, Minnesota area. Defendant Hiebert, Inc. (Hiebert) is a manufacturer of wood office furniture which has Carson, California as its principal place of business, and which transacts business in the Minneapolis area. The other corporate defendants in this action are Northern Design Products, Inc. (Northern) and Interior Design Products, Inc. (Interior). Both Northern and Interior are manufacturers’ representatives for Hiebert, as they both assist Hiebert in the solicitation of business and promotion of Hiebert products. Neither Northern nor Interior actually buy or sell Hiebert products. Northern has Minneapolis as its principal place of business and Interior, a Missouri corporation, has transacted business in Minneapolis. The remaining two defendants are Michael Ketch-am and John Brion. Ketcham is currently president of Northern, and he previously was president of Interior. Ketcham founded both Interior and Northern. Brion was formerly an employee of Ketcham’s at both Northern and Interior. Prior to working for Ketcham, Brion worked at Pink. Currently, Brion is a self-employed manufacturer’s representative.

In 1973, Pink began carrying the Hiebert line as one of the lines of furniture Pink sold. Hiebert terminated Pink as a dealer of Hiebert products in May of 1983. Pink claims that this termination came without warning. After the dealership termination, Pink states that it tried to return to Hiebert recently purchased merchandise, but Hiebert would not accept it. Pink further states that it had to sell this Hiebert merchandise at a greatly reduced price. Apparently, once Pink no longer carried Hiebert merchandise, Pink’s customers were reluctant to purchase Hiebert products from Pink.

At the time Hiebert terminated Pink’s dealership, Hiebert had two other dealers in the Minneapolis area: Dayton’s Commercial Interiors (Dayton’s) and St. Paul Book & Stationery (St. Paul Book). After Hiebert terminated Pink, Hiebert designated Metropolitan Office Equipment Furniture (Metro) as another Hiebert dealer. Subsequently, Hiebert terminated St. Paul Book’s dealership as well. (St. Paul Book sold only minimal amounts of office furniture.) Hiebert now states that it intends to appoint another dealer in the Minneapolis area.

Pink’s termination as a Hiebert dealer came shortly after Pink secured a contract to supply the First Bank of Ridgedale with office furniture. Prior to Pink submitting its bid on the project, defendant Ketcham allegedly told Pink’s president, Robert Wernick, that the First Bank of Ridgedale project was a “Dayton’s spec.” Pink, nevertheless, submitted a bid on the project which turned out to be the low bid. After Pink won the First Bank of Ridgedale account, Dayton’s sales representative, Dick Mesjak, allegedly told Ketcham that Mesjak was upset that First Bank of Ridgedale had even requested bids for the project, because Mesjak had spent three years working on the First Bank of Ridgedale account.

Pink argues that Hiebert terminated Pink as part of a price fixing and boycott conspiracy in violation of section 1 of the Sherman Act, 15 U.S.C. § l. Pink reasons that because it was selling Hiebert furniture at prices lower than Dayton’s and other Hiebert dealers, Dayton’s and defendants conspired to eliminate Pink as a dealer to remove price competition. Plaintiff adds that pressure from Dayton’s led to the conspiracy to eliminate plaintiff’s dealership.

Defendants totally deny that the termination of Pink’s dealership was motivated by a desire to eliminate price competition. Defendants also deny the existence of any conspiracy or concerted action. Defendants argue that Hiebert permissibly terminated Pinks’ dealership because of a concern over customer relations. Defendants further state that Pink was a free-rider in that instead of generating new business, Pink capitalized on other dealers’ efforts in competing for business.

Defendant Hiebert also asserts a counterclaim for $59,179.95 for goods sold and delivered to Pink. Pink admits having received these goods, but asserts that he does not have to pay for them for a variety of reasons, including failure of consideration, estoppel, and fraud. Pink also argues that the Court should not enforce the contract obligating Pink to pay for these goods because the contract is inextricably intertwined with defendants’ antitrust violations.

DISCUSSION

Summary Judgment

A defendant is not entitled to summary judgment unless the defendant can show that no genuine issue exists as to any material fact. Fed.R.Civ.P. 56(c). Summary judgment is an extreme remedy that should not be granted unless the moving party has established a right to judgment with such clarity as to leave no room for doubt and unless the nonmoving party is not entitled to recover under any discernible circumstances. E.g., Vette Co. v. Aetna Casualty & Surety Co., 612 F.2d 1076, 1077 (8th Cir.1980). In considering a summary judgment motion, a court must view the facts most favorably to the nonmoving party and give that party the benefit of all reasonable inferences that can be drawn from the facts. E.g., Hartford Accident & Indem nity Co. v. Stauffer Chemical Co., 741 F.2d 1142, 1144-45 (8th Cir.1984). The non-moving party may not merely rest upon the allegations or denials of the party’s pleading, but must set forth specific facts, by affidavits or otherwise, showing that there is a genuine issue for trial. Salinas v. School District of Kansas City, 751 F.2d 288, 289 (8th Cir.1984).

Summary judgment “ ‘should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of alleged conspirators, and hostile witnesses thicken the plot.’ ” Willmar Poultry Co. v. Morton-Norwich Products, Inc., 520 F.2d 289, 293 (8th Cir.1975), cert. denied, 424 U.S. 915, 96 S.Ct. 1116, 47 L.Ed.2d 320 (1976), quoting Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962). Yet, “where there has been ample opportunity for discovery, summary judgment is appropriate in antitrust litigation, just as in any other litigation, upon a showing by the movant of an absence of any genuine issue of material fact.” Willmar Poultry Co., 520 F.2d at 293. At the time defendants made their motion for summary judgment in the present action, all parties had conducted extensive discovery and the deadline for conducting discovery had passed.

Finally, in ruling on a summary judgment motion, the Court should consider only evidence that will be admissible at trial. Fed.R.Civ.P. 56(e); Filco v. Amana Refrigeration, Inc., 709 F.2d 1257, 1260 (9th Cir.), cert. dismissed — U.S. -, 104 S.Ct. 385, 78 L.Ed.2d 331 (1983); see also McSpadden v. Mullins, 456 F.2d 428, 430 (8th Cir.1972); Chambers v. United States, 357 F.2d 224, 228 (8th Cir.1966).

Conspiracy With Agents

As a preliminary issue, the Court will determine whether, as a matter of law, defendant Hiebert is capable of conspiring with defendants Northern, Interior, Ketch-am, or Brion within the meaning of the Sherman Act. For purposes of the Sherman Act, a corporation cannot conspire with its own officers or employees. Copperweld Corp. v. Independence Tube Corp., - U.S. -, 104 S.Ct. 2731, 2741, 81 L.Ed.2d 628 (1984); Morton Buildings of Nebraska, Inc. v. Morton Buildings, Inc., 531 F.2d 910, 917 (8th Cir.1976). In addition, a parent corporation cannot conspire with a wholly-owned subsidiary. Copperweld Corp., 104 S.Ct. at 2742.

Here, Northern and Interior are not subsidiaries of Hiebert, but rather Northern and Interior are separate corporations. As manufacturers’ representatives, Northern and Interior also represent other manufacturers besides Hiebert. As employees of Northern and Interior, Ketcham and Brion were never actually employees of Hiebert. Neither ever received a salary from Hiebert, although Hiebert pays Ketcham commissions on the basis of net sales. Both sides in this litigation agree that Northern, Interior, Ketcham, and Brion were, at the relevant time, all agents of Hiebert.

A corporation can conspire with its agents if the agents are aware of the anti-competitive purpose for which they are being used. Albrecht v. Herald Co., 390 U.S. 145, 149-50, 88 S.Ct. 869, 871-72, 19 L.Ed.2d 998 (1968). In Albrecht a newspaper publisher hired an outside agent to lure customers away from an independent newspaper retailer. The agent sought to convince the customers to cease delivery from the independent retailer and commence direct delivery from the publisher. The agent was partially successful in its solicitation and a number of customers switched to direct delivery from the publisher. The publisher subsequently engaged another independent retailer to deliver newspapers. The Supreme Court concluded that a combination within the meaning of the Sherman Act existed between the publisher, the solicitating agent, and the replacement independent retailer. Albrecht, 390 U.S. at 150, 88 S.Ct. at 872. The United States Court of Appeals for the Eighth Circuit applied Albrecht in finding that an airline conspired with its agent, an advertising agency, in International Travel Arrangers, Inc. v. Western Airlines, Inc., 623 F.2d 1255, 1265-66 (8th Cir.), cert. denied, 449 U.S. 1063, 101 S.Ct. 787, 66 L.Ed.2d 605 (1980).

Prior to International Travel Arrangers, the Eighth Circuit stated “the general rule” was that a corporation cannot, within the meaning of the Sherman Act, conspire with its officers, employees, or agents, except where the officers or agents are acting beyond the scope of their authority or for their own benefit. Morton Buildings, 531 F.2d at 917 (8th Cir.1976). Subsequent to International Travel Arrangers, the Eighth Circuit reaffirmed the Morton Buildings’ general rule. Green v. Associated Milk Producers, Inc., 692 F.2d 1153, 1156-57 (8th Cir.1982). The pronouncements of Morton Buildings and International Travel Arrangers appear to be inconsistent, but the nature of the agency relationship involved in those cases yields a method to harmonize the decisions. In International Travel Arrangers and Albrecht, the principals engaged the agents for relatively discrete tasks (i.e. advertising, soliciting customers). By contrast, the Morton Buildings court refers to agents and employees in the same breath, indicating that the agents were quite similar to employees. Thus, the Court concludes that when agents resemble employees, the Morton Buildings rule should apply, but where agents are retained for more discrete tasks (e.g. retaining an advertising agency), the International Travel Arrangers rule is appropriate.

Next, the Court must determine if the agent defendants in the present case more closely resemble employees or agents hired for more discrete tasks. Although neither side conceptualized the issue in this manner, they both addressed the issue of whether Hiebert could conspire with the four agent defendants. Aside from relying on Albrecht and International Travel Arrangers, plaintiff cites Tamaron Distributing Corp. v. Weiner, 418 F.2d 137 (7th Cir.1969) to support its claim that Hiebert can conspire with the four agents. Tamaron Distributing held that a distributor and its agent, a manufacturer’s representative, could conspire with one another because they were separate legal entities. Tamaron Distributing, 418 F.2d at 139. The manufacturer’s representative did not purchase products from the distributor, but only solicited customers, which is the function Northern and Interior perform for Hiebert. Also, like Northern and Interior, the manufacturer’s representative received commissions and not a salary. Even though Tamaron Distributing involved facts similar to the present action, the case is of questionable authority. The Tamaron Distributing court relied heavily on Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968) for the proposition that separate economic entities can conspire irrespective of the realities of their economic relationship. See Tamaron Distributing, 418 F.2d at 139. (Perma Life Mufflers held that a parent corporation and its wholly owned subsidiary could conspire.) The Supreme Court, however, overruled Perma Life Mufflers in Copperweld, 104 S.Ct. at 2743, 2743 n. 19, and thus Tamaron Distributing’s holding has been cast into doubt.

In supporting their claim that Hiebert cannot as a matter of law conspire with agents such as Northern, Interior, Ketch-am, and Brion, defendants rely on a number of cases. One of these cases, Fuchs Sugars & Syrups, Inc. v. Amstar Corp., 602 F,2d 1025 (2d Cir.1979), is especially relevant. The Fuchs Sugars court concluded that a corporate sugar refiner could not conspire with its agents who were general brokers. The relationship between the sugar refiner and the general brokers is quite similar to the relationship between Hiebert and the four agent defendants in the present action. The general brokers in Fuchs Sugars did not purchase sugar, but merely solicited orders. Also, the general broker represented more than one sugar refiner, which corresponds to Northern and Interior representing more than one furniture manufacturer. See Fuchs Sugars, 602 F.2d at. 1031 n. 5.

If Fuchs Sugars were controlling in this circuit, it would be clear that Hiebert could not conspire with Northern, Interior, Ketcham, or Brion. Although not controlling, the case is still persuasive, and it indicates that the four agent defendants in this action closely resemble employees. Defendants point out, moreover, that the responsibilities previously performed by the agent defendants are now performed by Hiebert employees. In determining whether entities can conspire under the Sherman Act, form cannot prevail over reality. See Copperweld, 104 S.Ct. at 2743. Thus, the Court concludes that the agent defendants in this action closely resemble Hiebert employees and the rule of Morton Buildings is appropriate.

Under this rule, Hiebert can conspire with its agents only if the agents are acting beyond the scope of their authority or for their own benefit. Here, the record indicates quite the opposite, namely that the agent defendants were performing their normal duties within their authority for the benefit of Hiebert. Therefore, as a matter of law, Hiebert cannot conspire within the meaning of the Sherman Act with either Northern, Interior, Ketcham, or Brion.

Because plaintiff has not alleged that it did in fact sell furniture at a certain price as a result of pressure from Hiebert, e.g., Albrecht, 390 U.S. at 150 n. 6, 88 S.Ct. at 872 n. 6, the only other possible conspiracy in this lawsuit is one between Hiebert and Dayton’s.

Price Fixing

Section 1 of the Sherman Act makes illegal any “contract, combination ... or conspiracy, in restraint of trade or commerce among the several States____” 15 U.S.C. § 1. This prohibition includes vertical restraints on trade. Vertical restraints are those among actors at different levels of distribution, such as restraints between manufacturers and dealers. (By contrast, horizontal restraints involve actors on the same level of productions, such as an agreement between dealers.) Vertical restraints are further divided into two types: concerted action to fix prices and concerted action to establish nonprice restraints. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984). Vertical price restraints are per se illegal, while nonpriee vertical restraints are subject to the “rule of reason.” Monsanto, 104 S.Ct. at 1469; see also Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 51 n. 18, 58-59, 97 S.Ct. 2549, 2558 n. 18, 2561-2562, 53 L.Ed.2d 568 (1977).

While any concerted vertical action to fix prices is illegal, independent action to set prices does not constitute a violation of the Sherman Act. Monsanto, 104 S.Ct. at 1469. A manufacturer generally has the right to independently decide with whom it wants to do business. Thus, a manufacturer, acting independently, can refuse to do business with a dealer which does not comply with the manufacturer’s wishes regarding the prices the dealer should charge. Monsanto, 104 S.Ct. at 1469. Yet, if a manufacturer contracts, combines, or conspires with other distributors to set resale prices, then a violation of the Sherman Act has occurred. Monsanto, 104 S.Ct. at 1469.

In a distributor termination ease (i.e., the plaintiff had its dealership terminated) involving a claim of concerted price fixing, the antitrust plaintiff must put forth sufficient evidence to establish an agreement to fix prices. Monsanto, 104 S.Ct. at 1470. Evidence of other distributors complaining about the plaintiffs price cutting efforts prior to the termination of the plaintiffs dealership, while probative, is not sufficient in itself to establish an agreement. Monsanto, 104 S.Ct. at 1470-71, 1471 n. 8. Instead, a plaintiff must put forth evidence which tends to negate the possibility that the manufacturer acted independently. Monsanto, 104 S.Ct. at 1471. A plaintiff must introduce

direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others “had a conscious commitment to a common scheme designed to achieve an unlawful objective.”

Monsanto, 104 S.Ct. at 1471 (quotation omitted). Monsanto involved review of a jury verdict and not a summary judgment motion. Thus, for plaintiff to defeat defendants’ motion for summary judgment, plaintiff does not have to satisfy the Monsanto standard. Rather, plaintiff must show that a jury might reasonably conclude that plaintiff satisfied this standard. American Dermatologists’ Medical Group, Inc. v. Collagen Corp., 595 F.Supp. 79, 82 (N.D.Ill.1984).

A. Termination Motivated by Pricing

Here, defendants argue that plaintiff has not produced any evidence to support plaintiff’s claim of a resale price fixing scheme. Plaintiff notes that Hiebert did supply its dealers with suggested resale price lists, but that does not appear to be an unusual practice in the industry. (Brion 39). Moreover, Pink’s president, Wernick, stated that he or his staff established all the prices at which Pink would sell Hiebert products (Wernick 42-43; 60-61). Defendants also note that plaintiff has not produced any evidence that Hiebert tried to influence the other Hiebert dealers in the Minneapolis area. Finally, defendants stress that plaintiff has not produced any evidence that defendants ever talked to plaintiff about the prices plaintiff should charge. Defendants are correct that plaintiff has not come forth with any evidence that defendants explicitly told plaintiff how to price Hiebert products. Defendants are also correct that numerous employees of plaintiff stated that defendants never even brought up the topic of plaintiff’s pricing of Hiebert products.

Plaintiff does, however, put forth evidence which could reasonably support a finding that Hiebert’s motivation for terminating Pink’s dealership was Pink’s pricing. Initially, Pink eliminates a number of legitimate nonprice reasons for the termination of its dealership, e.g., Hiebert admits the termination was not the result of consumers complaining about Pink. Pink also casts some doubt on Hiebert’s claim that Pink was a free-rider, because Pink claims that it did generate sufficient new business. The memorandum which Ketcham wrote to Hiebert suggesting termination of Pink’s dealership, further indicates that Hiebert was concerned about Pink's pricing. The memorandum listed the number one reason for termination as “Bid to [sic] low. 46% off or more.” (Ketcham Exh. 15).

Although ambiguous, the “Dayton spec.” statements also arguably support plaintiff’s claim that Hiebert’s motivation for terminating Pink’s dealership was Pink’s pricing. Before Pink submitted its bid on the First Bank of Ridgedale contract, Ketcham allegedly told Wernick that First Bank of Ridgedale was a “Dayton’s spec.” (Wernick 67). After Pink won the First Bank of Ridgedale contract, but before the termination, Ketcham visited Wernick’s office and purportedly reminded Wernick that the job was a “Dayton’s spec.” Ketcham also allegedly stated that he would “lack ... credibility in the marketplace if he [Ketcham] couldn’t control his dealers.” (Wernick 71). After the termination, according to Wernick, Ketcham told Wernick that “neither Dayton’s nor [Pink] could make a profit at the price levels” which Pink was charging. (Wernick 78). Ketcham also allegedly said that Pink was pricing very low with a Honeywell project. (Wernick 119).

Defendants correctly argue that Ketch-am’s alleged statements after the termination of Pink’s dealership could not have constituted an attempt to influence Pink’s future pricing of Hiebert products because Pink was no longer a Hiebert dealer. Defendants also point out that Wernick admits that Ketcham never explicitly told Wernick what Pink should bid on the First Bank of Ridgedale project, and that Ketch-am never even mentioned pricing. (Wernick 67-71). Defendants conclude that at most, any restrictions Hiebert might have attempted to impose on Pink were valid customer restrictions.

In sum, while defendants have strong arguments that the evidence reviewed thus far relates only to nonprice restrictions, this evidence does seem sufficient to allow a jury to conclude that Hiebert terminated plaintiff because of the low prices which plaintiff was charging.

B. Concerted Action

Plaintiff making an adequate showing on the specific issue of Hiebert’s motivation, however, does not in itself allow plaintiff to survive defendants’ motion for summary judgment. An independent decision by Hiebert to terminate plaintiff because plaintiff was a price cutter is not a violation of the Sherman Act. Monsanto, 104 S.Ct. at 1469; United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 468, 63 L.Ed. 992 (1919). Plaintiff must ultimately establish that the termination of their dealership was the result of a contract, combination, or conspiracy to cut prices. Monsanto, 104 S.Ct. at 1469. Plaintiff cannot meet this ultimate burden solely by showing that Hiebert terminated plaintiff’s dealership after Hiebert received complaints from other dealers regarding plaintiff’s pricing. Monsanto, 104 S.Ct. at 1470-71. Neither can plaintiff meet this ultimate burden solely by demonstrating that Hiebert terminated plaintiff’s dealership “in response to” other dealers’ complaints concerning plaintiff’s pricing. Monsanto, 104 S.Ct. at 1470. The key issue on this summary judgment motion, therefore, is whether plaintiff has admissible evidence beyond mere dealer complaints sufficient enough to allow a jury to reasonably conclude that a conspiracy to fix prices existed. See American Dermatologists’, 595 F.Supp. at 82.

1. Insufficient Evidence

Plaintiff, of course, states that it has put forth ample admissible evidence of concerted action to fix prices. For instance, plaintiff states that its evidence excluding legitimate reasons for the termination (mentioned previously) tends to exclude the possibility that Hiebert acted independently. Citing Monsanto, 104 S.Ct. at 1471 (“must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently”). As previously stated, this evidence could show that Hiebert was concerned about Pink’s pricing, but this evidence does not indicate that Hiebert in any way acted other than independently. Thus, this evidence does not tend to show that Hiebert and others engaged in concerted action.

Next, plaintiff points to a variety of evidence which plaintiff claims is “relevant background” evidence of shared concerns about dealer profits between Hiebert and its dealers. Dayton’s officials testified that Dayton’s wants many customers and tries to obtain the highest profit margin possible. Hiebert’s former vice president, Grant Seltzer, testified that Hiebert is interested in the profits of its dealers and that Hiebert is concerned about preventing dealer profits declines. (Seltzer 61-62, 64). In reference to Hiebert’s concerns about how much business dealers in a local market would generate, Seltzer stated “I think that you need a meeting of the minds as to what you’re going to do business-wise.” (Seltzer 52). Finally, Seltzer stated that he assumed local Hiebert representatives discussed with local dealers the latter’s sales volumes.

Jerome Loomis, an employee of Metro, states that Hiebert representative (and defendant) Ketcham frequently talks to Loomis about sales meetings and pricing questions. (Loomis 39). Ketcham himself stated that he hoped Minneapolis area Hiebert dealers would be respectful of each others’ profits. (Ketcham 209).

Again, plaintiff notes that Hiebert publishes a suggested list of prices, and plaintiff also points to a December 16, 1979 memorandum Hiebert sent to all of its dealers. The memorandum stated, in part:

CONFIDENTIAL:
OUR NEW SEATING PRICE LIST REPRESENTS AN OPPORTUNITY FOR YOU TO INCREASE YOUR PROFITS BY SELLING HIEBERT SEATING....
WE HAVE BEEN SENSITIVE TO THE DECLINING PROFIT PICTURE IN OUR INDUSTRY....
WE OF COURSE FEEL THIS IS AN INCENTIVE FOR YOU, TO INCREASE YOUR HIEBERT SEATING SALES AND YOUR PROFITS....

(Carpenter Exh. 15). The memorandum offered dealers an increased discount if dealers purchased Hiebert fabric for seating covers instead of other fabrics. (See Seltzer 62).

Plaintiff deemed the evidence recapped in the preceding three paragraphs as relevant background of shared concerns about dealer profits between Hiebert and its dealers. This “relevant background” label appears to be an implicit concession that this evidence, by itself, is not sufficient to allow a reasonable inference of a conspiracy. Dayton’s desire to obtain many customers and to maximize profits, for instance, is perfectly natural, as is Hiebert’s supplying a suggested price list. Neither is Hiebert’s discussions of pricing with its distributors inherently suspect because “[a] manufacturer and its distributors have legitimate reasons to exchange information about prices and the reception of their products in the market.” Monsanto, 104 S.Ct. at 1470. Hiebert also exhibited concern over the profits of its dealers, but manufacturers will often be legitimately concerned about the profitability of their dealers. Monsanto, 104 S.Ct. at 1470. The confidential memorandum to which plaintiff points shows nothing more than Hiebert offering its dealers a good deal because Hiebert was concerned about dealer profits. This memorandum is in sharp contrast to the newsletter the Supreme Court found to be evidence of a conspiracy or agreement in Monsanto. The newsletter in Monsanto spoke of the defendant’s attempt to “get[ ] the ‘market place in order,’ ” and stated that defendant would make “every effort ... to maintain a minimum market price level.” Monsanto, 104 S.Ct. at 1471. A distributor of the defendant issued this newsletter four weeks before the defendant terminated the plaintiff’s dealership, but here Hiebert issued its memorandum three and one-half years before it terminated plaintiff’s dealership. Thus, while not irrelevant, all plaintiff’s background evidence does not provide sufficient evidence to permit a reasonable inference that a conspiracy existed.

In addition to its relevant background evidence, plaintiff states that a variety of evidence does establish that a conspiracy existed. The Court has already mentioned some of this evidence, concluding that the evidence could show only that Hiebert was concerned about pricing and not that a conspiracy existed, e.g., Ketcham telling Wernick that the First Bank project was a “Dayton’s spec.”

Another piece of evidence worth reviewing is the memorandum Ketcham wrote to Hiebert suggesting termination of plaintiffs dealership. Ketcham listed plaintiff’s low bids as his number one reason for suggesting termination. Plaintiff reasons that this document indicates that Hiebert, Interior, Northern, and Ketcham acted in concert to eliminate plaintiff as a dealer. This argument fails for two reasons. Initially, the memorandum is analogous to a dealer complaint, and dealer complaints are not sufficient to support a finding of conspiracy. More importantly, as a matter of law, Hiebert is incapable of conspiring with Northern, Interior, Ketcham, and Brion.

Plaintiff also points to testimony of Ketcham concerning a conversation with a Dayton’s sales representative, Dick Mesjak. After plaintiff won the First Bank contract, Mesjak called Ketcham. Mesjak indicated that he was upset that the bank even put out bids for the project because he had worked three years on the account. (Ketcham 109). Ketcham further testified, however, that Mesjak did not ask Ketcham to take any action in response to Mesjak’s complaint, nor did Mesjak ask Ketcham to speak with the bank. (Ketcham 109). Defendants do not challenge the admissibility of this evidence, but they do state that the evidence is not helpful to plaintiff. Defendants appear to be correct that Mesjak’s statements do not deal with price fixing but only customer restraints. Even if Mesjak’s statements relate to price, the statements amount to nothing more than a dealer complaint.

2. Inadmissible Evidence

Plaintiff does point to certain evidence, which, if admissible, might tend to establish the existence of a conspiracy. Defendants strongly contest the admissibility of this evidence.

Plaintiff first notes that Loomis of Metro testified that he heard “rumors” that Hiebert terminated Pink’s dealership because Pink was a price cutter. The rumors further indicated that Wernick was very aggressive and that the other dealers did not like Wernick’s presence in the market place. (Loomis 42-43). Loomis testifying about rumors, of course, is clearly hearsay. Plaintiff does not even attempt to force Loomis’ testimony into one of the hearsay exceptions.

A statement which plaintiff does strenuously try to fit into a hearsay exception is the statement of Dayton’s employee Herb Polachek. Polachek, then director of Dayton’s Commercial Interiors, was playing golf with an independent manufacturer’s representative, Tom Hendrickson, in late summer or early fall of 1983. During the round of golf, Polachek allegedly discussed Hiebert’s termination of Pink’s dealership, but Polachek does not recall discussing that topic with Hendrickson. (Polachek 79). Hendrickson later recapped his conversation with Polachek to Pink employee Pitra. Pitra will testify that Hendrickson told her some Dayton’s people said that Hiebert dropped Pink because of Pink’s competitive pricing and because of pressure from Dayton’s. (Pitra 33-34). Hendrickson’s own affidavit is less dramatic, as he says that Polachek stated that Dayton’s sales vice president and Ketcham had some conversations before Pink’s termination. According to Hendrickson, Polachek also stated that he thought there had been a “test run” before the termination. (No explanation is given as to what a “test run” means.) Finally, Hendrickson acknowledges having a conversation with Pitra, but he cannot recall the specifics of that conversation.

Defendants argue that Pitra testifying about this conversation would be inadmissible double hearsay. Plaintiff puts forth a number of justifications for admissibility of this testimony but these arguments do not support the conclusion that Pitra can testify about what Polachek said. Whether Hendrickson can testify about Polachek’s statement is a closer issue. Plaintiff first argues that Polachek’s statement is admissible because it is a statement by a coconspirator during the course of and in furtherance of a conspiracy. Fed.R.Evid. 801(d)(2)(E). Before a statement is admissible under Rule 801(d)(2)(E), other independent evidence of concerted action must be present, but the proponent of the statement need only show a “likelihood of illicit association” involving the declarant. United States v. Shursen, 649 F.2d 1250, 1256 (8th Cir.1981). Here, defendants argue that no independent evidence of a conspiracy exists. Even if independent evidence of a conspiracy existed, Polachek’s remark would have to be in furtherance of a conspiracy. Plaintiff reasons that Polachek’s statement was in furtherance of a conspiracy because he was implicitly warning Hendrickson not to under sell Dayton’s. Hendrickson’s affidavit (and even Pitra’s deposition), however, do not indicate that Polachek’s statement was in any way a threat. Thus, Polachek’s statement is not admissible under Rule 801(d)(2)(E).

Plaintiff’s second rationale for admitting Polachek’s statement is that the statement is a declaration against Polachek’s interest. Fed.R.Evid. 804(b)(3). Plaintiff is correct that Polachek’s failure to recall this conversation satisfies the rule’s definition of an unavailable declarant. Fed.R.Evid. 804(a)(3). The rule also requires that at the time a statement was made, it was so far contrary to the declarant’s interest that a reasonable person in the declarant’s position would not have made the statement- unless it was true. Fed.R.Evid. 804(b)(3). Plaintiff reasons that the statement qualifies because Polachek was implicating Dayton’s in a price fixing conspiracy and thus Polachek was exposing his employer and himself to civil liability. This argument assumes that it would be obvious to Polachek that in making his remark he would be exposing himself to civil liability. Yet, making a statement which a plaintiff might later use to assert a claim of vertical price-fixing is in sharp contrast to admitting something obviously inculpatory like running a red light and causing an accident. Plaintiff has offered no indication that at the time he allegedly made his statement, Polachek had any understanding of verticle price-fixing. To the contrary, Polachek testified in his deposition that he never had any business law course in college. (Polachek 7). Polachek’s alleged remark, therefore, was not so far contrary to his interests that a reasonable person would have only made the statement if true.

Finally, plaintiff states that Polachek’s statement is admissible under the catch all or “other” hearsay exceptions of Federal Rules Evidence 803(24) and 804(b)(5). These exceptions are the last resort for proponents of evidence when evidence does not qualify for admission under established hearsay exceptions. These exceptions are appropriately used when evidence does not squarely fit into a hearsay exception, but nonetheless the evidence has circumstantial guarantees of trustworthiness equivalent to the other hearsay exceptions. Fed.R.Evid. 803(24) and 804(b)(5). Plaintiff states that because Polachek made this statement shortly after Pink’s termination, the statement is of increased reliability. A statement being made contemporaneous to or shortly after an event is an indication of reliability. See United States v. Van Lufkins, 676 F.2d 1189, 1192 (8th Cir.1982). Here, plaintiff’s termination took place in May of 1983 and Polachek allegedly made his statement in August of that year. While this time period is not excessively long, it is not at all contemporaneous with the relevant event. In Van Lufkins, moreover, the hearsay statement admitted under Rule 804(b)(5) because it was shortly after the event took place within one week after the relevant event. (Another hearsay statement which took place more than six months after the relevant event was also admitted under Rule 804(b)(5). The rationale for admission, however, was that the evidence was trustworthy because it was corroborated by other evidence, and not because it was made shortly after the event.) In advocating the use of the catch all exceptions, plaintiff does make the legitimate point that both Hendrickson and Polachek will be available for cross examination. Nevertheless, the Court will not allow Polachek’s statement into evidence under the catch all exceptions. Over use of the catch all exceptions can lead to the destruction of the hearsay rule, and plaintiff simply has not demonstrated the necessary “equivalent circumstantial guarantees of trustworthiness.” In conclusion, neither Hendrickson nor Pitra can properly testify about Polachek’s statement.

Another statement which plaintiff vigorously argues is admissible is a statement allegedly made by defendant Brion to Pitra. After the termination, Brion purportedly told Pitra that Hiebert eliminated Pink as a dealer because of “general pressure from Dayton’s, and the straw that broke the camel’s back virtually was the First Bank job.” (Pitra 39). At the time Brion allegedly made this remark, he was no longer employed by Northern. Brion denies making this statement, but Pitra will testify that Brion did make it. If admissible, this testimony could indicate concerted action between Dayton’s and Hiebert.

Plaintiff offers a number of justifications for the admissibility of Brion’s statement. Plaintiff reasons that Pitra can testify as to what defendant Brion said because Brion’s statement is an admission of a party-opponent. Fed.R.Evid. 801(d)(2)(A). Defendants contend that plaintiff named Brion as a defendant in order to provide a basis for admissibility of Brion’s statement. At most, reason defendants, Brion’s statement is admissible against Brion, but inadmissible to prove a conspiracy between Hiebert and Dayton’s. Defendants are correct that Brion’s statement can only be used against Brion, Battle v. Lubrizol Corp., 673 F.2d 984, 990 (8th Cir.1982), aff'd on other grounds by an equally divided court, 712 F.2d 1238 (8th Cir.1983) (en banc), cert. denied, — U.S. -, 104 S.Ct. 1718, 80 L.Ed.2d 190 (1984); Filco, 709 F.2d at 1267, and the Court has previously concluded that plaintiff must put forth evidence of a conspiracy between Hiebert and Dayton’s.

If Brion’s remark qualified as a statement of a coconspirator under Rule 801(d)(2)(E), then it would be admissible to establish a conspiracy between Hiebert and Dayton’s. Plaintiff asserts that Brion’s statement does qualify under this rule because the statement is that of a coconspirator made in furtherance of a conspiracy. Plaintiff has not, however, put forth other independent evidence of a conspiracy, which is a necessary for admissibility under Rule 801(d)(2)(E). Shursen, 649 F.2d at 1256. Neither is Brion’s statement in furtherance of a conspiracy. At the time he purportedly made this remark, he no longer worked for Northern. Moreover, his statement in no way furthers a conspiracy because it does not constitute a threat to other dealers.

As in the case of the Polachek statement, plaintiff argues that Brion’s statement is admissible as a declaration against interest, Fed.R.Evid. 804(b)(3), and under the catch all hearsay exceptions. ' Fed.R.Evid. 803(24) and 804(b)(5). Yet just as these hearsay exceptions do not justify the admission of Polachek’s remark, neither do they justify the admission of Brion’s statement. Brion’s statement purportedlly exposing him to liability for a vertical price-fixing scheme, was not so far contrary to his interest that a reasonable person would not have made it unless true. Brion had taken a course in college which did include antitrust as a topic. (Brion 5). Nevertheless, plaintiff has made no showing that Brion was aware of his potential civil liability for vertical price-fixing. Such a showing is necessary because a reasonable person would have no idea that a statement such as Brion’s could expose the declarant to civil liability. Admission under the catch all exceptions is also not warranted because plaintiff has not established circumstantial guarantees of trustworthiness equivalent to the other hearsay exceptions.

As has been seen, plaintiff’s extensive discovery in this litigation has failed to produce admissible evidence which could support a reasonable finding of concerted action to fix prices. Summary judgment is therefore appropriate.

Counterclaim

Even though plaintiff admits that it received goods from Hiebert and that plaintiff did not pay Hiebert for those goods, defendant Hiebert is not entitled to summary judgment on its counterclaim for the price of the goods sold and delivered. Because plaintiff’s federal antitrust claims have proven unsuccessful, plaintiff cannot use these claims as a defense to Hiebert’s counterclaim. Yet, simply because plaintiff cannot raise antitrust allegations as a defense to Hiebert’s counterclaim, it does not follow that plaintiff cannot raise other defenses. See Kelly v. Kosuga, 358 U.S. 516, 517 n. 1, 79 S.Ct. 429, 430 n. 1, 3 L.Ed.2d 475 (1959). In addition to its Sherman Act defense, plaintiff has asserted a number of other defenses including failure of consideration, waiver, and estoppel. Defendant Hiebert argues that plaintiff should be held only to its Sherman Act defense because plaintiff’s president testified at a deposition that the reason plaintiff was not paying for the goods was because plaintiff’s antitrust damages exceeded the price of the goods. (Wernick 271-72). The Court, however, will not limit a litigant’s legal defenses because of a layperson’s understanding of those defenses. Werniek, moreover, did not testify that plaintiff’s antitrust damages exceeded the price of the goods, but only that plaintiff’s “claims ..., whether by antitrust or otherwise, exceed[ed] the value” of the goods. (Wernick 272).

State Claims

Summary judgment not being appropriate on Hiebert’s counterclaim, the question before the Court becomes whether the Court should retain jurisdiction over Hiebert’s counterclaim or should dismiss the counterclaim without prejudice. This same issue is also present with respect to plaintiff’s remaining state claims. In determining whether to proceed to trial on pendant state claims, or to leave pendant claims for trial in state court, a number of considerations are relevant. Koke v. Stifel, Nicolaus & Co., 620 F.2d 1340, 1346 (8th Cir.1980). These considerations are:

the difficulty of the state claim, the amount of judicial time and energy already invested in it, the amount of additional time and energy necessary for its resolution, and the availability of a state forum.

Koke, 620 F.2d at 1346.

Here, very little of the judicial time and energy devoted to this action has concerned the state law issues. While the parties have engaged in extensive discovery in this action, those efforts would not need to be duplicated for a state court action. See Koke, 620 F.2d at 1347. No party, moreover, has indicated that a state forum would be unavailable because of statute of limitations problems or for any other reason. Finally, the trial of the remaining state law claims could involve difficult questions of state law, and the resolution of those questions is best left for the state tribunals.

The federal district court in Green v. Associated Milk Producers, Inc., 1981-2 Trade Cases (CCH) ¶ 64,346 (Sept. 30, 1981), aff'd, 692 F.2d 1153 (8th Cir.1982) faced a similar situation. The district court granted the defendants’ motion for summary judgment on plaintiffs’ federal antitrust claims. The plaintiffs had also asserted claims under the Minnesota Antitrust Law of 1971, Minn.Stat. §§ 325D.49-.66 and various common law claims, while one defendant had asserted a counterclaim for breach of contract. The district court dismissed all of these state law claims without prejudice, and the Eighth Circuit implicitly approved of this resolution. See Green, 692 F.2d at 1154 n. 4.

The Court concludes that a similar resolution would be appropriate in the instant case, and thus the Court will dismiss all remaining claims without prejudice.

Based on the foregoing, IT IS ORDERED that defendant’s motion for summary judgment on plaintiff’s federal antitrust claims, counts I and II, is granted.

IT IS FURTHER ORDERED that defendant Hiebert’s motion for summary judgment on its counterclaim is denied. Defendant Hiebert’s counterclaim is dismissed without prejudice.

IT IS FURTHER ORDERED that plaintiff’s remaining claims, counts III and IV, are dismissed without prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.

      . Interior no longer serves as a manufacturer's representative for Hiebert in the Minneapolis area.

      . Ketcham left Interior in April of 1983 to form Northern.

      . Pink also alleges a violation of Minnesota’s antitrust laws, Minn.Stat. §§ 325D.51; 325D.53, and violation of Hiebert’s contractual obligation to keep Pink as a dealer as long as Pink performed satisfactorily.

      . The Court will occasionally refer to these four defendants as the "agent defendants.”

        . Green made no reference to International Travel Arrangers, which in turn made no reference to Morton Buildings.

      . Examples of nonprice restrictions are a manufacturer limiting the territory in which a dealer can sell, or limiting the customers to whom a dealer can sell.

      . The "rule of reason” involves a weighing of relevant factors in each case to determine if a restrictive practice is an unreasonable restraint on competition. Monsanto, 104 S.Ct. at 1469.

      . Citations to a name followed by numbers refer to a deposition and its relevant pages. A name followed by an exhibit number denotes a deposition exhibit.

      . See, e.g., (Doyle 24; Loomis 20-21; Pitra 9; Prindle 13; Ritchie 17; Ruter 39-41; Venero 20).

      . "Spec." is slang for specification. In the office furniture business, customers can “specify" a particular brand of office furniture in their orders. Also a furniture distributor may be said to have a "spec.,” e.g., a Dayton’s “spec.,” if it convinced the customer to specify a certain line of furniture.

      . Nonprice vertical restraints, such as customer restrictions, must be unreasonable before they constitute antitrust violations. Monsanto, 104 S.Ct. at 1469. Plaintiff does not, however, argue in its brief that defendants violated the Sherman Act via nonprice restraints. If plaintiff was going to assert such a theory, plaintiff would ultimately have to demonstrate that the nonprice restraints were unreasonable. Defendants repeatedly try to characterize their actions as, at worst, nonprice or customer restraints. In light of plaintiffs position, if defendants’ actions only amounted to nonprice or customer restraints, defendants would not be liable to plaintiff for Sherman Act violations.

      . Metro is the dealer which replaced plaintiff.

      . Defendants argue that even if Pitra can testify to Brion's statement, the statement makes no reference to price. Defendants are correct, but other evidence has shown that plaintiff’s pricing may have been a factor causing Hiebert to terminate plaintiffs dealership. Thus, if plaintiff had admissible evidence of any type of concerted action, that evidence coupled with the other evidence of Hiebert’s concern over plaintiff's pricing, might support a reasonable inference of a vertical price-fixing conspiracy.

      . Plaintiff apparently has abandoned its claim of an illegal boycott conspiracy, Count II of plaintiffs complaint. Plaintiff’s only reference to this claim was a footnote in its brief which stated that the same evidence which establishes plaintiffs price-fixing claim also establishes plaintiffs illegal boycott claim. Because plaintiffs evidence cannot support a reasonable inference of the former, it cannot support a reasonable inference of the latter.

      . The Court need not decide the question of whether plaintiff could use its federal antitrust claims as defenses to Hiebert’s counterclaim if those claims had survived summary judgment. See Kelly v. Kosuga, 358 U.S. 516, 520, 79 S.Ct. 429, 432, 3 L.Ed.2d 475 (1959); Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743, 755, 67 S.Ct. 1015, 1020, 91 L.Ed. 1219 (1947).


source: Caselaw Access Project

author: HAMILTON, District Judge.

license: Public Domain

text:
    Kenneth L. BROCK, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. A. No. 82-1388-15.
    United States District Court, D. South Carolina, Anderson Division.
    May 2, 1985.

      Richard S. Vaughan, Anderson, S.C., for plaintiff.
    J.D. McCoy, Asst. U.S. Atty., Greenville, S.C., for defendant.
   ORDER

HAMILTON, District Judge.

The plaintiff, Kenneth L. Brock, brought this action under 42 U.S.C. § 405(g) for review of the final decision of the Secretary of Health and Human Services (hereinafter “Secretary”) finding that the plaintiff is not entitled to disability insurance benefits based on his application filed July 2, 1981. The matter is before the court along with the report and recommendation of United States Magistrate Charles W. Gambrell made pursuant to 28 U.S.C. § 636(b) and this court’s order of May 9, 1977. The magistrate found that the decision of the Secretary was supported by substantial evidence and recommended that the Secretary’s decision be affirmed. The magistrate also found that the plaintiff’s motion to remand, based upon “new” medical evidence, should be denied, since the proffered medical evidence was merely cumulative. The plaintiff has filed exceptions to the magistrate’s report and recommendation.

The determination of disability under the Social Security Act is an administrative decision, and the review by this court is limited. This court cannot try such cases de novo or resolve mere conflicts in the evidence. It is the duty of this court to scrutinize the entire record in this case to insure that the Secretary’s findings have a sound foundation and that her conclusions are supported by substantial evidence and that the correct legal principles have been applied. Vitek v. Finch, 438 F.2d 1157 (4th Cir.1971). Additionally, the court is charged with making a de novo determination of any portions of the magistrate’s report and recommendation to which specific objection is made, and it may accept, reject or modify, in whole or in part, the report and recommendation made by the magistrate or recommit the matter to the magistrate with instructions. As the designation indicates, the magistrate only makes a recommendation to the court. It has no presumptive weight, and the responsibility of making a final determination remains with the United States District Court. Mathews v. Weber, 423 U.S. 261, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976).

The plaintiff is thirty (30) years old, married and has one son and one stepson. Plaintiff has a limited education, having completed the fourth grade and only part of the fifth grade. Through the alleged onset of disability, plaintiff’s job experience was limited to heavy manual labor. On July 9, 1980, while working for Chiquola Manufacturing Company, the plaintiff fell from a ladder and injured his back. On July 2, 1981, the plaintiff filed his application for disability insurance benefits. The claim was denied on July 22, 1981, and again on reconsideration on September 14, 1981. The plaintiff requested a hearing, and on November 19, 1981, a hearing was conducted before an administrative law judge (hereinafter “AU”), at which the plaintiff, his wife and his attorney appeared. On December 18, 1981, the AU issued his opinion finding that the plaintiff was not disabled. The AU concluded that the plaintiff could not return to his former occupation as a laborer, but concluded that the plaintiff was capable of performing sedentary work. In applying 20 C.F.R. § 404.1569 and the grids found in Appendix 2, Table 1, Rule 201.24, the AU determined that the plaintiff was not disabled. The decision of the AU became the final decision of the Secretary when the Social Security Appeals Council denied the plaintiffs request for review on April 7, 1982.

On June 7, 1982, the plaintiff initiated this action. The only issue presented for this court’s determination is whether the decision of the Secretary is supported by substantial evidence. On September 20, 1982, the plaintiff submitted a motion to remand this case, contending that there was new medical evidence relevant to the Secretary’s determination, i.e., that his back condition had continued, he had been hospitalized twice, and had undergone back surgery a third time. The magistrate has fully and completely summarized both the medical evidence and the testimony presented to the Secretary; accordingly, pages eight (8) through fourteen (14) of the magistrate’s report and recommendation are incorporated herein by specific reference.

In plaintiff’s first exception to the report and recommendation of Magistrate Gambrell, plaintiff contends that the magistrate “did not give proper weight to the medical evidence which showed the plaintiff suffered from severe exertionaal [sic] impairments as well as non-exertional impairments.” Exceptions at 2. The plaintiff apparently misconstrues the scope of review afforded to this court. It is not the function of this court to “weigh” the competing evidence presented to the Secretary and make its own determination as to plaintiff’s disability. This court’s responsibility is to examine the record to determine if there is substantial evidence to support the Secretary’s determination.

Substantial evidence, it has been held, is evidence which a reasoning mind would accept as sufficient to support a particular conclusion. It consists of more than a mere scintilla of evidence but may be somewhat less than a preponderance. If there is evidence to justify a refusal to direct a verdict were the case before a jury, then there is “substantial evidence.” Woolridge v. Celebrezze, 214 F.Supp. 686, 687 (S.D.W.Va.1963). If there is substantial evidence to support the Secretary’s decision then our inquiry must terminate. It is not within the province of this court to determine the weight of the evidence; nor is it our function to substitute our judgment for that of the Secretary if his decision is supported by substantial evidence. Snyder v. Ribicoff, 307 F.2d 518, 520 (4 Cir.1962).

Laws v. Celebrezze, 368 F.2d 640, 642 (4th Cir.1966). “The fact that the record as a whole might support an inconsistent conclusion is immaterial, for [the Social Security Act] precludes a de novo judicial proceeding and requires that the court uphold the Secretary’s decision even should the court disagree with such decision as long as it is supported by ‘substantial evidence.’ ” Blalock v. Richardson, 483 F.2d 773, 775 (4th Cir.1972).

In examining the evidence presented to the Secretary, the magistrate correctly concluded that there was substantial evidence to support the Secretary’s denial of benefits. Although all of the medical evidence established that plaintiff suffers pain emanating from the L3-4, 4-5 and S-l vertebrae on the left, this does not of necessity establish the plaintiff’s alleged disability. In order that the plaintiff may be found disabled, he must be incapable of performing any substantial gainful activity. 20 C.F.R. § 404.1505(a) (1984). While the Secretary correctly determined that plaintiff was incapable of performing his past relevant work, there was substantial evidence to support the conclusion that the plaintiff could perform sedentary work activities. Following the plaintiff's first surgery, Dr. Kenneth Heller recommended that the plaintiff seek employment that did not require heavy lifting (Record at 101). Dr. Robert James recommended that the plaintiff contact the South Carolina Vocational Rehabilitation Department for job retraining (Record at 127). Dr. Robert Downie indicated that the plaintiff’s back pain was related to associated ligament and muscular strain and should improve with exercise (Record at 134). After treatment at the Roger C. Peace Institute of Rehabilitative Medicine, the plaintiff’s upper extremity strength increased three hundred percent (300%), his lower extremity strength increased four hundred and sixty percent (460%), his standing and sitting tolerance tripled and complaints of pain were reduced by seventy-five percent (75%) (Report of Dr. David Tollison, Record at 145). Dr. Tollison concluded that the plaintiff could return to employment with an upgrading of education and training (Id.). In a later report, Dr. Tollison concluded that the plaintiff could return to work with his previous employer at a less strenuous position (Record at 142). The medical evidence is thus entirely consistent with the Secretary’s determination that the plaintiff could perform sedentary work. Although Dr. Tollison did opine that the plaintiff was disabled upon admission to the Peace Institute (Record at 141), this is inconsistent with the occupational conclusions reached by Drs. James and Heller and the later reports of Dr. Tollison. The issue of disability is a legal conclusion, and although Dr. Tollison’s opinion on disability is entitled to weight, it is not conclusive upon the Secretary. In light of the conflicting diagnoses of the physicians and the lack of objective medical findings which accompanied Dr. Tollison’s opinion, there was substantial medical evidence to support the Secretary’s finding that the plaintiff could perform sedentary work.

The testimony presented to the AU further supports the conclusion that the plaintiff could perform sedentary work. The plaintiff testified that he can do light chores around the house for three to four hours per day, and spends one and one-half hours a day walking. Furthermore, plaintiff performs light gardening work (Record at 41), and drives a car every day (Record at 43). When plaintiff’s attorney asked him if he could work, plaintiff replied, “If they can find something for me, without having me doing any lifting or anything.” (Record at 36). There is clearly substantial evidence to support the Secretary’s conclusion that the plaintiff was capable of sedentary work.

Furthermore, there is substantial evidence to support the Secretary’s conclusion that the plaintiff’s ability to perform sedentary activity is not significantly affected by any nonexertional limitation. Plaintiff testified that he gets upset because of monetary problems and was so upset at one time that he took an overdose of pills (Record at 34). Plaintiff also testified that his children get on his nerves, “and I feel like I just want to go off there in the woods somewhere away from it, till it eases up.” (Record at 36). Plaintiffs wife also testified that he gets short-tempered and depressed (Record at 44-45). Despite these statements, the Secretary could find that the plaintiff did not suffer from a nonexertional impairment. Not every malady of a nonexertional nature rises to the level of a nonexertional impairment. “It is amply clear ... that not all nonexertional conditions or limitations affect an individual’s capacity to perform such work. Whether a given nonexertional condition affects a particular claimant’s capacity to engage in certain job activities is a question of fact.” Smith v. Schweiker, 719 F.2d 723, 725 (4th Cir.1984).

During the plaintiff’s visits with Dr. James, he was described as mentally clear, coherent, oriented and capable (Record at 131). After treatment at the Peace Institute, Dr. Tollison indicated that plaintiff’s depression and anxiety had subsided significantly and plaintiff was demonstrating a great deal of extroverted socially appropriate behavior (Record at 145). Plaintiff’s depression would appear to be situational in nature, in that it is brought on by overwhelming external factors such as monetary troubles. “Anxiety or depression occurring in connection with overwhelming external situations (i.e., situational reactions) are self-limited and the symptoms usually recede when the situational stress diminishes.” Appendix 1, Part A, § 12.-00(B)(3)(b) (1984). Accordingly, there was substantial evidence to support the conclusion that the plaintiff’s depression would not affect the residual functional capacity of the plaintiff to perform sedentary work. Since the plaintiff was found to be capable of sedentary work, the Secretary properly applied 20 C.F.R. § 404.1569 and Appendix 2, Table 1, Rule 201.24, which directed a finding that plaintiff be found not disabled.

The plaintiff next excepts to the magistrate’s report by asserting that the magistrate erred in recommending that his motion for remand be denied. The plaintiff continued to suffer back pain beyond the date of the Secretary’s decision, and a report of the Peace Institute dated March 10, 1982, indicates that the plaintiff was having difficulty with residual pain and depression and with finances. Furthermore, plaintiff’s leg brace was causing calf abrasions. Plaintiff was admitted to the hospital on June 14, 1982, for a CT scan of the spine and a myelogram. Plaintiff was again admitted to the hospital on June 28, 1982, and underwent lumbar body fusion surgery on July 2,1982. On September 15, 1982, Dr. James wrote a letter to the plaintiff’s attorney wherein he stated, “Mr. Brock is presently disabled and has been so since we initially saw him. He is still under our care and unable to work at this time.” The magistrate concluded that the aforementioned evidence was merely cumulative and would not justify a remand under 42 U.S.C. § 405(g). Plaintiff contends that the Appeals Council relied heavily on the plaintiff’s reported improvement while at the Peace Institute in January of 1982, and this new medical evidence showing regression could reasonably have altered the Secretary’s opinion.

Pursuant to 42 U.S.C. § 405(g), this court may remand a case to the Secretary for further review upon a showing that there is new evidence which is material and that there is good cause for the failure to incorporate such evidence into the record in a prior proceeding. This provision, which was enacted on June 9, 1980, as part of the Social Security Disability Amendments of 1980, Pub.L. No. 96-265, § 307, 94 Stat. 458 (1980), reflects a Congressional concern with situations in which a claimant failed to present convincing medical evidence of his disability before the ALJ, but presented such medical evidence to the district court and moved for remand. See 1980 U.S.Code Cong, and Ad.News 1277, at 1336; Saliby v. Schweiker, 522 F.Supp. 541, 543 (E.D.N.C.1981). The amended provision defines “good cause shown” as a “showing of the materiality of new evidence and an explanation why it was not presented in a prior proceeding.” Barnard v. Secretary of Health and Human Services, 515 F.Supp. 690, 693 (D.Md.1981).

In applying section 405(g), the court must first inquire whether there is new evidence which is material. While the proffered medical evidence is new in the sense that it purports to show the continuation of the plaintiff’s back pain subsequent to the hearing, it fails to shed any light on the plaintiff’s condition at the time the Secretary rendered her decision. The medical reports submitted are thus not material to the question whether the plaintiff was disabled at the time of the Secretary’s decision. Plaintiff correctly points out that the Appeals Council relied on the Peace Institute report showing the plaintiff’s improvement, and alleges that evidence of subsequent back problems might alter the Secretary’s decision. Had the Secretary’s denial been founded upon the ground that plaintiff’s back problems could not be expected to continue for one year, the plaintiff’s contention might have merit. See Mitchell v. Schweiker, 699 F.2d 185 (4th Cir.1983). The Secretary found, however, that as of April 7, 1981, even with the plaintiff’s complaints of back pain, the plaintiff was capable of performing sedentary work. The subsequent medical evidence is not material to plaintiff’s ability to perform such work on that date. Mongeur v. Heckler, 722 F.2d 1033 (2d Cir.1983); Chandler v. Secretary of Health and Human Services, 722 F.2d 369 (8th Cir.1983); Ward v. Schweiker, 686 F.2d 762 (9th Cir.1982); Barnard v. Secretary of Health and Human Services, 515 F.Supp. 690 (D.Md. 1981).

Similarly, the September 15, 1982, letter of Dr. James does not constitute grounds for the remand of this action. To the extent that Dr. James opines that the plaintiff “is presently disabled” and is “unable to work at this time,” such evidence does not relate to plaintiff’s condition at the time of the Secretary’s decision. To the extent that Dr. James’ letter states that plaintiff has been disabled since Dr. James started treating him, the statement contradicts Dr. James’ earlier opinion and plaintiff has shown no good cause for failing to introduce this statement into the record prior to the Secretary’s determination. Willis v. Secretary of Health and Human Services, 727 F.2d 551 (6th Cir.1984); Brown v. Schweiker, 557 F.Supp. 190 (M.D. Fla.1983); Thompson v. Harris, 508 F.Supp. 134 (D.Kan.1981). Thus, a remand based on this letter is not warranted. In ruling that plaintiff has failed to support his motion for remand, the court expresses no opinion as to whether the plaintiff could establish a period of disability commencing subsequent to the Secretary’s ruling. The court merely concludes that plaintiff has failed to present material new evidence and good cause for failing to incorporate such evidence in the prior administrative proceeding, and plaintiff has thus failed to justify a remand pursuant to 42 U.S.C. § 405(g).

Plaintiff next excepts to the magistrate’s emphasis upon the plaintiff’s youth in recommending affirmance of the Secretary’s decision. Plaintiff contends that with his limited education and no transferable skills, he could not perform sedentary employment. Age, however, is a very significant factor to be considered in determining if one is disabled. For a younger person (age 18-50), his age does not seriously affect his ability to adapt to a new work setting. 20 C.F.R. § 404.1563(b) (1984). Age is a positive factor for claimants under age 45 and generally does not limit an individual’s ability to make a vocational adjustment, “even an adjustment to unskilled sedentary work, and even where the individual is illiterate or unable to communicate in English.” Appendix 2, § 201.-00(h) (1984).

Approximately 200 separate unskilled sedentary occupations can be identified, each representing numerous jobs in the national economy. Approximately 85 percent of these jobs are in the machine trades and benchwork occupational categories. These jobs (unskilled sedentary occupations) may be performed after a short demonstration or within 30 days.
These unskilled sedentary occupations are standard within the industries in which they exist. While sedentary work represents a significantly restricted range of work, this range in itself is not so prohibitively restricted as to negate work capability for substantial gainful activity.

Id. at § 201.00(a),-(b). Plaintiffs age was a positive factor in determining whether he was capable of adapting to unskilled sedentary employment, and neither the Secretary nor the magistrate erred in considering plaintiffs youth as a factor in their rulings. Although plaintiff contends that one with chronic severe pain and chronic severe depression/anxiety cannot concentrate for prolonged periods of time, even in sedentary employment, the severity of such symptoms was a question of fact to be decided by the Secretary. Since, as this court has noted, the Secretary’s factual determinations are supported by substantial evidence, this exception lacks merit.

Finally, plaintiff requests a remand so that he may have a residual functional capacity evaluation performed and submit it into evidence. Plaintiff states that he failed to submit such an evaluation before the Secretary because “he felt his lack of functional capacity would have been presumed when his exertional impairments and non-exertional impairments were considered in combination.” Exceptions at 5. Since plaintiff bore the burden of proof in the administrative proceedings, the court fails to see why he would “presume” such a material fact. Remand would not be warranted on this ground, as this is the very type of “floating application” that Congress intended to disallow in passing the 1980 amendment to 42 U.S.C. § 405(g). The motion to remand on this ground must thus be denied.

The court notes, as reflected by the Earnings Record Determination (Record at 56), that the plaintiff’s insured status continues through December 31, 1985. In light of the plaintiff’s subsequent deterioration, hospitalizations and treatment, it is conceivable that plaintiff may be able to establish a disability onset date subsequent to the Secretary’s final decision. The court expresses no opinion as to whether the plaintiff can establish the onset of disability after April 7, 1982.

After a thorough review of the pleadings, the briefs of the parties, the record and the report of the United States Magistrate, the court is of the opinion that the Secretary’s decision is supported by substantial evidence. Furthermore, the plaintiff has presented no material new evidence which would justify a remand under 42 U.S.C. § 405(g). For the foregoing reasons and based upon the cited authorities,

IT IS ORDERED that the decision of the Secretary be, and the same hereby is, affirmed. IT IS FURTHER ORDERED that the plaintiff’s motion to remand be, and the same hereby is, denied.

      . At the time of the hearing before the administrative law judge, the plaintiff was twenty-seven (27) years of age.

      . The plaintiff receives a weekly payment as a result of an award under the South Carolina Workers’ Compensation Act.

      . Plaintiff did not set forth each exception separately, but merely cited to certain passages of the magistrate’s report and recommendation and stated how he thought the magistrate was mistaken. The court will treat each such objection in the order it was raised by the plaintiff.

      . The plaintiff’s admission to the Peace Institute was subsequent to the hearing before the ALJ, and thus is not evidence supportive of his decision. These reports were, however, submitted to the Appeals Council and considered by it in affirming the decision of the ALT. Accordingly, these records were considered by the Secretary in her determination of disability and may be considered by the court in passing on the "substantial evidence” review.

      . The computer printout reflects that plaintiff's insured status expires in December 1984. It appears, however, that plaintiff was not given credit for the four quarters in 1980 when he was employed, and in the "Remarks" section of the Earnings Record, the date last insured was recomputed to reflect December 31, 1985.