author: ARONOVITZ, District Judge.

text:
    INTER-OCEAN (FREE ZONE), INC. f/u/b/o Certain Underwriters at Lloyd’s, London, Plaintiffs, v. MANAURE LINES, INC., “MANANA V”, in rem, Strachan Shipping Company, Inc., and Metropolitan Dade County Seaport Department, Defendants.
    No. 83-1597-Civ-Aronovitz.
    United States District Court, S.D. Florida, Miami Division.
    April 18, 1985.

      Steven E. Goldman, Standard, Weisberg, Heckerling & Rosow, P.C., New York City, for plaintiff Inter-Ocean (Free Zone), Inc. Certain Underwriters at Lloyd’s, London.
    David R. Canning, Mitchell, Harris, Canning & Murray, Miami, Fla., for Strachan Shipping Co., Inc.
    James A. Jurkowski, Asst. County Atty., Miami, Fla., for Metropolitan Dade County Seaport Dept.
   MEMORANDUM OPINION GRANTING PLAINTIFF’S AND DENYING DEFENDANT STRACHAN’S CROSS MOTIONS FOR SUMMARY JUDGMENT

ARONOVITZ, District Judge.

THIS CAUSE came before the Court upon the parties’ various cross motions for summary judgment. These motions include:

1. Plaintiff’s Motion for Summary Judgment on Liability (D.N. 61);
2. Defendant STRACHAN’s Motion for Partial Summary Judgment on Liability (D.N. 71);
3. Plaintiff’s Cross Motion for Summary Judgment as to Value (D.N. 72) and;
4. Defendant STRACHAN’s Cross Motion for Summary Judgment on- Liability (D.N. 87).

The Court held a hearing regarding these motions and the issues raised therein on November 26, 1984. Counsel for all parties appeared and presented their views on all issues. Thereafter, the Court invited counsel for all parties to submit supplemental memoranda addressing certain issues raised at the hearing. The parties filed such supplemental memoranda. The Court has heard the argument of counsel and has carefully considered and reviewed the various motions, the supporting, opposing and supplemental memoranda filed thereto, the pertinent portions of the record, the applicable law and being otherwise fully advised in the premises, it is thereupon

ORDERED AND ADJUDGED as follows:

1. Plaintiff’s Motion for Summary Judgment on Liability (D.N. 61) be, and the same is, hereby GRANTED for the reasons set forth hereinbelow.

2. Defendant STRACHAN’s Motion for Partial Summary Judgment on Liability (D.N. 71) be, and the same is, hereby DENIED for the reasons set forth hereinbelow.

3. Plaintiff’s Cross Motion for Summary Judgment as to Value (D.N. 72) be, and the same is, hereby GRANTED for the reasons set forth hereinbelow.

4. Defendant STRACHAN’s Cross Motion for Summary Judgment on Liability (D.N. 87) be, and the same is, hereby DENIED for the reasons set forth hereinbelow.

Background

This is a case in which Plaintiff INTER-OCEAN (FREE ZONE), INC. f/u/b/o CERTAIN UNDERWRITERS at LLOYD’S, LONDON (“INTEROCEAN”) seeks damages of $144,656.00 for the unexplained loss or disappearance of a containerized cargo consisting of 600 color television sets and eleven cartons of audio tapes which were to be carried by sea on the Manaure Lines Inc. vessel “MANANA V” from the Port of Miami to LaGuaira, Venezuela, in June of 1982. The container and its full contents were safely delivered by Plaintiff’s trucker into the possession and custody of the ocean carrier’s stevedore, Defendant STRACHAN SHIPPING COMPANY, INC. (“STRACHAN”), at the Port of Miami. However, subsequent to the container’s delivery, when one of STRACHAN’s employees was dispatched to retrieve the container and load it aboard the ship, the container and its contents were discovered to be missing from the STRACHAN lot.

After the close of discovery, and after the submission of a Joint Pretrial Stipulation, Plaintiff INTER-OCEAN and Defendant STRACHAN agreed that the cause was appropriate for disposition by cross motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. The Court agrees and finds that there are no genuine issues of material fact remaining in dispute. Accordingly, the Court awards summary judgment to Plaintiff both as to Defendant STRACHAN’s liability and the stated quantum of damages.

The material facts showing that Plaintiff is entitled to summary judgment on both the issues of liability and damages are contained in the Joint Pretrial Stipulation, STRACHAN’s answers to interrogatories, the depositions of Defendant’s South Florida Operations Manager, John Williams and its Manager of Stevedoring Operations, Mats Erlandson, and in the documents appended by Plaintiff to its summary judgment motions. These documents include Defendant STRACHAN’s Dock Receipt Number 41691, Port of Miami Seaport Scale Receipt Number 075514, Manaure Lines’ Bill of Lading, the deposition testimony of Plaintiff’s vice president and the commercial invoice for Plaintiff’s cargo.

The Issue of Liability

It is clear from an examination of the following undisputed facts that entry of summary judgment for Plaintiff on the issue of liability is mandated. After having been loaded at Plaintiff’s warehouse in Miami, Container Number XSRZ694013 was transported by truck to the Port of Miami on June 30, 1982. The cargo was booked to go aboard Manaure Lines’ vessel the “MANANA V” and was therefore delivered by Plaintiff’s trucker to that carrier’s stevedore at the Port of Miami in June of 1982.

Prior to the container’s arrival, a Manaure Line bill of lading had been issued for the cargo, which described it in the following terms:

40' HOUSE TO HOUSE TRAILER S.T.C. 611 ctns “ELECTRONIC EQUIPMENT.”

Arriving at the entrance to the Port of Miami at approximately 12:30 p.m., Plaintiff’s trucker stopped at the gatehouse or checkpoint on Dodge Island which is maintained by the Metropolitan Dade County Seaport Department and which is staffed by the Seaport Department’s security personnel. In accordance with the Port of Miami’s security procedures, Plaintiff’s trucker duly presented its bill of lading, obtained a gate pass and proceeded on to have thé container weighed at the seaport scale which is the property of and maintained by the Seaport Department.

At the seaport scale, Plaintiff’s trucker had the container weighed and, as evidenced by the weight certificate, the official weight of the container was 50,200 pounds. The time noted on the weight certificate was 1:12 p.m.

The fully loaded container was then delivered to the possession of STRACHAN at the entrance to its yard or facility located on Lummus Island, Port of Miami. Receiving and delivery clerks who are members of the International Longshoreman’s Association (“ILA”), were employed by STRACHAN to accept delivery of such containerized cargo preparatory to being loaded aboard ship. One of these receiving and delivery clerks furnished a STRACHAN receipt (also referred to as a trailer interchange report) to Plaintiff’s trucker, who thereupon parked the container at a spot designated on the face of the dock receipt as space E-32, unhitched the container and drove off both Lummus Island and Dodge Island, and away from the Port of Miami.

When Plaintiff’s trucker drove away, the fully loaded container was left in the possession of Defendant STRACHAN. Sometime later on that same afternoon of June 30, 1982, STRACHAN attempted to retrieve Plaintiff’s container for loading aboard the “MANANA V”, but neither the container nor its contents were anywhere to be found. Several days later, the empty container was found in downtown Miami, but Plaintiff’s cargo was never found or accounted for.

There was no evidence in the record, either documentary or from a witness, showing an authorized removal of the container. There is ample circumstantial evidence in the record indicating that a theft occurred, among other bases for Plaintiff’s asserted claims and legal grounds for recovery as hereinafter noted. STRACHAN has admitted that it is not in possession of a pick-up order (or trucker’s bill of lading) showing an authorized removal of the container and Metropolitan Dade County’s Port Security has no copy of the type of authorized gate pass which is normally required in order for a truck to be allowed to exit from the Port of Miami when hooked up to a container.

Counsel for STRACHAN has, however, maintained that there existed a conspiracy to steal Plaintiff’s container from Defendant’s cargo depot, and has maintained that the Federal Bureau of Investigation in Miami is conducting an investigation into this occurrence. Counsel for STRACHAN has further contended that the FBI is in possession of a forged gate pass and may have narrowed its suspicions to center upon a past employee of the Seaport’s Security Department. However, no document or affidavit of any kind has been produced by counsel for Defendant STRACHAN.

In June of 1982, the area on Lummus Island which STRACHAN held pursuant to a lease from Dade County was fenced on three of its four sides with the side facing the water (Biscayne Bay) left unfenced and unprotected against authorized persons seeking to gain entry to Defendant’s container depot. Defendant’s Manager of Stevedoring Operations, Mats Erlandson testified that, to his knowledge, no other stevedore operating at the Port of Miami as of June 1982 had neglected to install fencing on all four sides of their respective leased premises.

Moreover, while STRACHAN did maintain a gate capable of being closed and locked at the front entrance to its Lummus Island depot, it was STRACHAN’s practice to keep this gate wide open during the course of normal daytime business hours, with no security guard posted at the gate. While the ILA receiving and delivery clerks were supposed to be on duty at this main gate, neither they nor any other STRACHAN personnel kept a log of incoming or outgoing containers.

These same ILA receiving and delivery clerks were not employed for purposes of providing security or protection against theft of containerized cargo kept at Defendant’s depot, although STRACHAN’s South Florida Operations Manager, John Williams did testify at his deposition that these receiving and delivery clerks would be obligated to at least telephone port security in the event that they were to observe someone attempting to remove cargo from the depot without authorization. There is no evidence that any such telephone call was made in this case.

Mr. Williams also testified that, other than these receiving and delivery clerks, STRACHAN itself furnished no security during daylight business hours for containerized cargo at its Lummus Island depot, and that under such procedures as existed on June 30, 1982, it would have been possible for some unauthorized person such as a thief to enter the depot, hook up to a container, and drive out through the open main gate without any interference by these receiving and delivery clerks or from anyone else employed by STRACHAN. In essence, Defendant STRACHAN took no steps to furnish protection against theft to cargo and instead took the position that security at the Port of Miami was solely and exclusively the province and responsibility of the Seaport Security Department of Metropolitan Dade County.

In April of 1982, sometime between the 22nd and the 27th, just two months prior to the instant loss, another container filled with cargo was stolen or mysteriously disappeared from STRACHAN’s possession at precisely the same Lummus Island cargo depot. No security guard was at STRACHAN’s depot during the daylight hours either prior to or subsequent to the April 22-27 loss. As stated hereinbefore, no daylight security guards were present at the time of Plaintiff’s loss some two months later.

Manager of Stevedoring Operations Erlandson testified at his deposition that STRACHAN was “concerned that not everything had been done to avoid theft and we felt it our duty to prevent theft.” (Deposition of Erlandson at p. 41). Erlandson thereupon revealed that he and two other officers of STRACHAN had “on several occasions discussed whether we even should have to provide security at the port apart from this which was provided by the Seaport Security Department.” (Deposition of Erlandson at p. 66).

At least one of these discussions concerning security took place prior to June 30, 1982. Erlandson further testified that these discussions concerned whether or not STRACHAN should provide security guards at their Lummus Island depot during the daylight hours (Deposition of Erlandson at pp. 70-81), and he himself confirmed in his deposition testimony that he “considered the security provided madequate for the Port of Miami.” (Deposition of Erlandson at p. 81). In his own words:

I believe that I said I considered the security provided by the Seaport Security Department was not totally adequate to protect the cargo and other property in the Port of Miami.

(Deposition of Erlandson at p. 81). Thus, the facts on the record in these summary judgment motions illustrate that Defendant STRACHAN knew or should have known of the existence of a theft or security problem at its Lummus Island depot, at least during those daylight business hours when its practice was to maintain an open and unguarded front gate.

Defendant STRACHAN has maintained that it was acting at all times as a disclosed agent for its principal Manaure Line, and as such can have no independent liability to Plaintiff. This argument is not persuasive. A person who acts as an acknowledged agent for a disclosed principal is independently liable for his own acts of negligence, despite the fact that these acts are committed in the course and scope of the agency and in furtherance of the disclosed principal’s business. Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 302, 79 S.Ct. 766, 769, 3 L.Ed.2d 820 (1959). Thus,. Defendant STRACHAN would be fully liable to Plaintiff, regardless of any potential or actual status as a mere agent for the ocean carrier Manaure, in the event that Defendant is shown to have been negligent.

In the case of Leather’s Best, Inc. v. S/S “MORMACLYNX”, 451 F.2d 800 (2d Cir. 1971), on remand 346 F.Supp. 962 (S.D.N. Y.1972), a shipper sought recovery for its cargo loss from both the carrier and the carrier’s stevedore. The latter took the position, much as STRACHAN has done in the instant case, that it acted merely as agent for the carrier and hence was protected from liability to the plaintiff for any contractual breach. The appellate court noted that a stevedore which takes custody of a shipper’s cargo occupies a dual role— that of agent for the ocean carrier and “as bailee of the container.” 451 F.2d at 808. The court stated that there is no doubt that a stevedore acting as agent for a disclosed principal could not be held liable ex contractu for a breach even where the breach was a result of its (i.e., the agent’s) own wrongful act.” Id.

However, it is equally without doubt that a shipper such as Plaintiff in the instant action can state a valid claim against the stevedore or terminal operator such as STRACHAN for damages which are due to the stevedore’s or terminal operator’s own independent tortious conduct. Leather’s Best, supra. Such a claim is pendent to the maritime claim set forth against the carrier, and issues of stevedore liability pursuant to this pendent claim for the stevedore’s own independent acts of negligence are to be determined by reference to state law. Leather’s Best, supra at 808. Accord: Robert C. Herd & Co., supra, (wherein the Supreme Court stated that “an agent, because he is agent, does not cease to be answerable for his acts.” 359 U.S. at 304, 79 S.Ct. at 770. This decision also stated that “the liability of an agent for his own negligence has long been embedded in the law ... (and) withdrawal of the right to sue the agent for his torts would result ... in substantial dilution of the rights of claimants.” Id.)

Upon the issuance of its dock receipt (or trailer interchange report), and its acceptance of custody of Plaintiff’s cargo, Defendant STRACHAN became a bailee as to that cargo. The case law supporting this proposition is overwhelming. See, Colgate-Palmolive Co. v. S/S DART CANADA, 724 F.2d 313, 1984 A.M.C. 305 (2d Cir.1983); Phillip Bros. Metal Corp. v. S/S RIO IGUAZU, 658 F.2d 30, 1981 A.M.C. 854 (5th Cir.1980); ITT Rayonier v. Southeastern Maritime Co., 620 F.2d 512, 1981 A.M.C. 854 (5th Cir.1980); LaSalle Machine Tool, Inc. v. Maher Terminals, Inc., 611 F.2d 56, 1980 A.M.C. 1187 (4th Cir.1979).

It is thus clear that Defendant STRACHAN was a bailee of Plaintiff’s cargo from the moment that it took possession thereof, pursuant to its issuance of a dock receipt to Plaintiff's trucker. All of the traditional elements of the bailment set forth in familiar case law are in evidence in the instant case and the facts are not in dispute. See, Puritan Insurance Company v. Butler Aviation, 715 F.2d 502, 505 (11th Cir.1983).

In this regard, Defendant STRACHAN maintains that it exercised due care for the safety of Plaintiff’s cargo and therefore cannot be held liable as a bailee for what it insists was a conspiracy to steal Plaintiff’s container. The issue of STRACHAN’s liability as a bailee is to be determined by reference to the law of the State of Florida. Leather’s Best, supra, 451 F.2d at 813. A provision from the Uniform Commercial Code, Florida Statute Section 677.403(l)(b), is the codified law on bailment in Florida. That subsection provides that a “bailee must deliver the goods” to the bailor, unless and to the extent that the bailee can establish:

Damage to or delay, loss or destruction of the goods for which the bailee is not liable, but the burden of establishing negligence in such cases when value of such damage, delay, loss, or destruction exceeds $10,000 is on the person [who owns the goods (i.e., the bailor) ].

As this language indicates, Florida’s version of the Uniform Commercial Code provision places the ultimate burden of proof upon the owner of the bailed goods. E.S.I. Meats, Inc. v. Gulf Terminal Co., 639 F.2d 1348 (5th Cir.1981), quoting, 9 Wigmore on Evidence § 2485 at p. 272. Therefore, in cases like the one at bar wherein damages exceed $10,000, Plaintiff INTER-OCEAN must establish its prima facie case against the bailee STRACHAN by showing delivery of the goods to the bailee and the latter’s failure to redeliver the goods in like quantity and condition. This is Plaintiff’s initial burden of proof under Florida’s law of bailment.

The burden then shifts to the bailee to come forward with some evidence to explain the circumstances of the loss of the bailed goods. The explanation proffered by the bailee must be supported by sufficient evidence and cannot be merely the product of speculation and conjecture. It is not enough to show that the bailee used reasonable care if “mysterious disappearance” is the only explanation given. See, E.S.I. Meats, supra, and J. Aron & Company, Inc. v. Service Transportation Co., 486 F.Supp. 1070 (Md.1980). If the bailee fails to provide a sufficient explanation supported by evidence, then he will be liable for breach of bailment and negligence. Only after the bailee has offered proof of the circumstances of the loss, or has come forward with some evidence of some intervening cause, such as theft, which is sufficient to legally excuse non-delivery, must the plaintiff go forward with affirmative evidence of the defendant-bailee’s negligence. Lonray, supra, at 194.

In this case, Defendant STRACHAN has offered no record evidence sufficient to enable this Court to determine how the loss occurred. Defendant has maintained that a conspiracy existed to steal Plaintiff’s cargo from the Lummus Island container depot, but Defendant has failed to come forward with any evidence in support of this theory. The only evidence offered has been unsupported statements by Defendant’s counsel and unless an attorney has first hand knowledge, it is clear that no insistence on his part, not even his affidavit, can have probative force in a motion for summary judgment. See, Denby v. Seaboard World Airlines, Inc., 575 F.Supp. 1134 (S.D.N.Y.1983). Summary judgment may therefore be granted in this case based simply upon Plaintiff’s proof of its prima facie case showing the delivery of the full container to Defendant, as evidenced by the Dade County weight certificate and Defendant STRACHAN’s complete inability to account for or explain other than by “mysterious disappearance” the reasons for its inability to return or account for the container.

However, although there is ample circumstantial evidence establishing a presumption of theft, there is also ample uncontested evidence of a shocking degree of negligence with respect to protecting Plaintiff’s cargo against a foreseeable risk of its theft. Summary judgment in favor of Plaintiff therefore is awarded for the additional reason that Defendant STRACHAN failed to exercise reasonable care for the safety of Plaintiff’s property in its possession, resulting in the theft of that property.

In the Leather’s Best case, for example, on remand, the District Court concluded that a breakdown in the stevedore’s security precautions was the most likely explanation for the loss of Plaintiff’s container. In other words, the container was probably stolen while the security personnel were away from or not attending to their duties. This was held to constitute negligence sufficient to impose liability upon the stevedore as a bailee. 346 F.Supp. 962 (S.D.N. Y.1972). This Court similarly concludes that the simplest explanation in the instant case is that STRACHAN’s ILA receiving and delivery clerks were simply not attending to their duties at the depot, and that no member of this work force took any action to prevent some unknown, unseen thief from driving away with Plaintiff’s container.

Additionally, even had there not been a prior loss of a container from STRACHAN’s depot under similar circumstances to place Defendant on notice of the existence of a perilous state of affairs requiring the institution of cautionary measures, and even had Defendant’s corporate personnel not conferred together and discussed their recognition of the problem, there would still be sufficient evidence of negligence to award summary judgment to Plaintiff. Defendant’s failure to maintain any control over access to its premises, by neglecting to fence all four sides of its depot and by neglecting to maintain any security at the front gate which was routinely kept “wide open” (Deposition of Erlandson at p. 31), constitutes shocking evidence of negligence.

However, together with the prior loss of a full container at the end of April 1982, and the admission on the part of Mr. Erlandson that he himself believed security against theft during daylight hours was inadequate, Defendant’s negligence and liability for Plaintiff’s cargo becomes indisputable. STRACHAN knew that it had a security problem at its Lummus Island depot, yet it neglected to take any steps to protect the property of innocent bailors such as Plaintiff who might unwittingly place its cargo into Defendant’s uncaring custody.

See, McCormack on Evidence (2nd Ed. 1972) § 200. Defendant is therefore liable on summary judgment, as a negligent bailee, for the theft of Plaintiff’s cargo.

The Issue of Damages

Concerning the respective motions for summary judgment as to damages, the Court awards summary judgment to Plaintiff in the amount of $144,656 as evidenced by the commercial invoice covering this shipment of goods. Defendant STRACHAN maintains that if it is held liable for any negligence proximately causing the loss of Plaintiff’s cargo, it is nonetheless entitled to limit its liability under the “Himilaya clause” of carrier Manaure’s bill of lading extending to the carrier’s stevedore the statutory privilege of the Carriage of Goods by Sea Act’s $500 package limitation. 46 U.S.C. § 1304(5). Defendant STRACHAN also contends that its Port of Miami freight handlers tariff provides for a valid limitation of its liability to $500 per package. As to Defendant’s first contention, the single ocean container in the instant case cannot be deemed to constitute a single COGSA package, for the same reasons set forth in the case of Allstate Insurance Co. v. Inversiones Navieras Imparca, 646 F.2d 169 (5th Cir.1981), as well as the more recent Eleventh Circuit case of Vegas v. Compania Anonima Venezolana de Navegacion, 720 F.2d 629 (11th Cir. 1983). See also, Croft & Scully Co. v. M/V SKULPTOR VUCHETICH, 664 F.2d 1277 (5th Cir.1982).

The bill of lading in this case sufficiently described the contents of the container, in virtually the exact same fashion as did the bill of lading in the Allstate case. In the space in the Manaure bill of lading set aside for a description of goods, the cargo was described as 611 separate cartons of electronics goods and each of these must be held to constitute a single COGSA package.

Defendant’s reliance upon its Port of Miami freight handlers tariff is equally unavailing in its effort at limiting its liability. Defendant attempts to rely upon the limitation of liability clause contained on Page 8 at Paragraph 10. That provision states in pertinent part:

Liability for damage, if incurred as a result of proven negligence by the Freight Handler during handling, loading or unloading of cargo shall not exceed $500.00 per package.
... A loaded container or loaded trailer will be considered as a single unit.

There are several reasons why Defendant’s reliance on this provision is erroneous under the instant facts. To begin with, the limitation of liability clause is expressly limited to liability for negligence. The clause does not cover breach of bailment claims. Moreover, the tariff is not mandated by statute and does not have the force and effect of binding law on Plaintiff. Rather, it appears to the Court that the “tariff” is merely an executed agreement amongst eight stevedore and terminal operations collectively known as the Port of Miami Freight Handlers. Although the tariff is filed with the Federal Maritime Commission, it is not a statutorily required tariff. Further, it seems as though the agreement seeks to impose certain obligations on future customers of the freight handlers who are not even parties to the agreement. It is this Court’s opinion that the “tariff” at bar does not constitute binding law. This conclusion is borne out by the language of the agreement on Page 1 wherein the scope of the tariff is delimited:

Rates, rules, and regulations for cargo handling and other port terminal services rendered in the Port of Miami, Florida, and in connection with a common carrier by water in the foreign commerce of the United States or in interstate commerce on the high seas.
Tariffs (Current), Revisions, Rates, Rules, and Regulations governing Port facilities in the Port of Miami, will apply in addition to the charges stated herein.

This language does not encompass the future customers as potentially binding parties to the tariff. Further, the “tariff” itself does not indicate that future customers such as Plaintiff are to be automatically charged by the terms and provisions therein as they might be pursuant to a tariff that is required by law to be filed with the Federal Maritime Commission.

Finally, Defendant cannot rely upon the limitation of liability clause because it is well established that one seeking to rely upon a limitation or exculpatory provision such as the one which STRACHAN has presented must prove that Plaintiff had actual knowledge or notice of the provision and its applicability. See, LaSalle Machine Tool, Inc. v. Maher Terminals, Inc., supra. Nor can Defendant successfully maintain that the mere filing of the tariff gives constructive notice to the limitation of liability provision contained since it is equally well established that the filing of a tariff gives constructive notice only of those terms which are required by law to be filed. See, Federal Commerce & Navigation Co., Ltd. v. Calumet Harbor Terminals, Inc., 542 F.2d 437 (7th Cir. 1976).

Since Plaintiff’s vice president testified at his deposition that he was not actually aware of the limitation of liability provision contained in the freight handlers tariff and since there is no legal requirement imposing upon Defendant STRACHAN, the necessity for filing such a limitation provision in its tariff, the freight handlers tariff provision relied upon by STRACHAN cannot be utilized for limiting its liability.

Defendant maintains that Plaintiff should be charged as if it had actual notice because the Dock Receipt whereby STRACHAN took possession and INTEROCEAN relinquished control of the subject cargo states: “shipper agrees to all terms and conditions of the tariff governing storage at this facility.” Defendant maintains that this provision binds Plaintiff to the limitation of liability clause in the tariff amongst the Port of Miami Freight Handlers. This argument, like all of Defendant's other arguments must fail under the applicable caselaw. A similar situation was confronted by this Court and subsequently by the Eleventh Circuit in Allstate Insurance Company v. International Shipping Corp., 703 F.2d 497 (11th Cir.1983) (“Allstate”). There, the Eleventh Circuit held that a one year limitations period as provided for under a long form Bill of Lading was not binding on the parties because it was not actually brought to the contracting parties’ attention. The Allstate case involved a short form bill of lading, which much like the Dock Receipt at bar incorporated by reference the terms and conditions of another longer document. The Allstate short form Bill of Lading provided: “This bill of lading -is issued and the goods covered hereby are subject to, and all parties to this contract are bound by the terms, provisions, stipulations and conditions stated in the company’s regular long form bill of lading ...” 703 F.2d at 500. The long form bill of lading specifically provided that suit must have been brought within one year of delivery of the subject goods. The Eleventh Circuit held that since no actual notice of this provision could be established, the limitations period could not be applied and the suit was properly instituted despite the fact that it had been filed after one year from the delivery of the goods in question. In Allstate, the longer document was a long form Bill of Lading and in the case at bar, the longer document was the Port of Miami Freight Handlers tariff. The rationale employed by the Eleventh Circuit is applicable to the case at bar. The Allstate Court stated:

(W)e are reluctant to give effect to limiting clauses with which a carrier could shield itself from manipulation of fine print clauses contained in standardized contract forms ... In this regard, we follow the Second Circuit’s decision in Encyclopedia Brittanica; we will not limit the period within which Allstate could bring suit when that limit was expressed in fine print in a document never specifically brought to Allstate’s or Alumax’ attention and when neither Allstate nor Alumax had actual knowledge of its terms.

703 F.2d at 500. The Court finds Allstate persuasive in the instant case and cannot hold Plaintiff accountable for the limitation of liability provision when it had no actual knowledge of said limitation.

The Court therefore awards summary judgment to Plaintiff in the full amount of its damages of $144,656, plus interest at the legal rate and costs.


source: Caselaw Access Project

author: CLEMON, District Judge.

license: Public Domain

text:
    Patricia GREEN, et al., Plaintiffs, v. Billy D. HARBIN, et al., Defendants.
    Civ. A. No. 82-C-5598-NE.
    United States District Court, N.D. Alabama, Northeastern Division.
    May 20, 1985.

      Thomas G. Keith, Legal Services of North Central Alabama, Huntsville, Ala., and Charles G. Spratling, Jr., Birmingham Area Legal Services, Birmingham, Ala., for plaintiffs.
    Charles Graddick, Atty. Gen., Montgomery, Ala., James H. Harris, Charles Driggars, Birmingham, Ala., Robert H. Harris, Decatur, Ala., for defendants.
   MEMORANDUM OF OPINION

CLEMON, District Judge.

On October 15, 1982, plaintiff filed this class action against Alabama’s circuit and district court clerks, alleging that the State’s garnishment laws are unconstitutional in certain aspects. Specifically, the plaintiff class asserts that the Alabama statutory garnishment scheme fails to provide judgment debtors with adequate notice of their exemption rights and the procedure for claiming exemptions, and that it fails to provide a reasonably prompt procedure for the dissolution of garnishments where exemption rights are claimed by judgment debtors—both in violation of its due process rights under the Fourteenth Amendment to the United States Constitution.

On July 13, 1982, plaintiff moved for certification under Rule 23 of the Federal Rules of Civil Procedure (“FRCP”) as both a plaintiff and defendant class action. Counsel for defendant clerks agreed to the certification sought by plaintiff; and on August 31,1982, the action was certified as a class action.

In their joint Statement of Facts, the parties have agreed to the relevant facts. Plaintiff Patricia Green is an adult resident of Huntsville, (Madison County), Alabama. She is the sole source of support for her two minor children. On August 8, 1980 Avco Financial Services (“Avco”) obtained a $381.06 judgment against her in the Madison County Circuit Court, based on her default in the repayment of a consumer loan. The judgment so obtained was without waiver of exemption rights. On March 10, 1982, Avco applied for a writ of garnishment from defendant Billy D. Harbin in his capacity as clerk of the District Court of Madison County; and on the same date, Harbin issued the writ to Central Bank of Alabama, where plaintiff maintained a checking account. Plaintiff’s checking account, consisting of approximately $500, was immediately frozen by Central Bank upon its receipt of the writ of garnishment on March 12, 1982.

Plaintiff did not know, and was not given any written notice by anyone, of her exemption rights under Alabama law. Prior to the freezing of her checking account by Central Bank, plaintiff had written several checks on the account. These checks were returned by the bank for insufficient funds; and as a result of the dishonor of one of these checks, plaintiff was arrested and incarcerated for issuing a worthless check.

On March 19, 1982, after receiving legal advice and assistance from her present counsel, Legal Services of North-Central Alabama, Inc., plaintiff executed and filed a claim of exemption in the District Court; and on the same date, she moved for a stay of the writ of garnishment. The District Court did not hear the motion until nearly a month later—on April 19, 1982. At that time, the writ of garnishment was dissolved and Central Bank was ordered not to release any funds being withheld from plaintiff’s checking account due to the garnishment.

As of the time of the filing of this action, no circuit or district court clerks in Alabama provided written notice of exemption rights to judgment debtors in pre-garnishment or post-garnishment proceedings. Not more than one of the district and circuit clerks in the State automatically dissolve a writ of garnishment where a claim of exemption is filed and there is no timely contest of exemptions, in the absence of a court order.

Based on these undisputed facts, the plaintiff class successfully moved for partial summary judgment that the defendants’ failure to provide adequate notice of exemption rights of judgment debtors violates the due process clause of the Constitution. The motion was granted on October 5, 1983.

In the last few days of December, 1983, the Court granted plaintiffs’ unopposed motion to add a defendant class consisting of all district and circuit judges in Alabama. The state judges were added as FRCP 19 defendants.

Also in December, 1983, Polly Conradi, the Circuit Clerk of Jefferson County, Alabama moved to intervene in the case. She further sought to vacate the certification of the defendant class and to set aside the order of partial summary judgment. The motion to intervene was granted under FRCP 24(b); the motions to reconsider class certification and partial summary judgment were overruled.

At the time the case was called for trial, counsel for all of the main parties (other than intervenor Conradi) announced that they had reached a tentative settlement. They presented the Court with a proposed consent decree shortly thereafter. The Court reviewed the terms of the proposed Consent Decree and tentatively approved it, based on the Court’s conditional finding that the decree was fair, reasonable, and adequate. The Court scheduled a hearing on objections to the decree for December 28, 1984.

The only record objections to the decree were filed and made by four state court judges. Their basic objection is that state court judges should not have been included as defendants in this case; and that the certification of the state court judges as a class was improper. They also made certain substantive objections to the content of the proposed decree.

Insofar as they contend that state judges are, as a class, beyond the pale of federal jurisdiction in cases challenging the constitutionality of state statutes or policies, their contention must be rejected. See Lynch v. Baxley, 386 F.Supp. 378, 385 (M.D.Ala.1974). However, upon consideration, the presence of state court judges in this action is not necessary to accord complete relief between the parties; and principles of comity suggest that they be dismissed from this action. Accordingly, the motion of the four judges to reconsider the certification of the judges as a class will be granted by separate order; and the action will be de-certified as to them. The state court judges will be dismissed from this action, over the objection of the plaintiff class.

The parties have agreed to a modification of the proposed decree in light of three of the four substantive objections. Pursuant to the agreement, the decree will not apply to those garnishments issued to enforce child or spousal judgments. Further, the decree will specify that only the property which is in fact exempt should be discharged where the judgment creditor fails to contest a claim of exemption. Moreover, in the interest of providing the requisite flexibility and discretion in the docketing of court cases, the decree will provide that contests must be initially scheduled within 7 calendar days after a contest is filed.

Counsel for the remaining defendant class has argued in chambers that Paragraph Five of the Proposed Consent Decree should be amended to provide that the enactment of any statute or the adoption of any court rule concerning the procedure to be utilized in garnishments will, ipso facto, dissolve the injunction to be entered in this case. Finding that the proposed consent decree, with the decertification of the class and dismissal of state court judges and the agreed to modifications, is completely fair, adequate, and reasonable, the Court is without authority to modify the consent decree in the manner suggested by defendant’s counsel. Paragraph Five is the result of intense and hard-fought negotiations between counsel for both classes; it embodies the agreement of the parties. In the absence of unfairness, inadequacy, or unreasonableness, the Court is powerless to grant the defendant class now what it was unable to achieve in negotiations. Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157, 1172 (5th Cir.1978); Cotton v. Hinton, 559 F.2d 1326, 1331-32 (5th Cir.1977). Significantly the defendant class has voiced no objection whatever to the Court concerning the provision now complained cf.

The defenses of intervenor Conradi are now under submission to the Court on a Trial Stipulation.

Defendant Conradi’s position is simple and straightforward: “due process does not require notification of ‘basic’ exemption rights (or any other exemption rights) in the context of post-judgment garnishments.”

At the time a writ of garnishment is issued by the clerk, of the Jefferson County Circuit or District Court, the judgment debtor (if a resident of Alabama) is served with a copy of notice of the Process of Garnishment which is served on the garnishee. This notice does not once mention exemption rights.

After the circuit and district clerks in Jefferson County became aware that this Court had issued a partial summary judgment holding that the Alabama garnishment scheme is unconstitutional in part, they implemented a policy of providing judgment debtors with an additional document entitled, “Notice to Defendant-Exemption Rights.” This “notice” basically informs the judgment debtor that he/she may have exemption rights which may be claimed, and it advises the debtor to contact a lawyer for further explanation; and it advises the debtor of the procedure for claiming an exemption.

If a judgment debtor files a claim of exemption in the District Court of Jefferson County, the judgment creditor must file a contest of the claim within ten days after receiving notice of the claim. If the creditor notifies the Clerk that it does not plan to contest the claim, the District Court will dissolve the garnishment writ and release any property seized pursuant to it. However, if the judgment creditor does nothing within the ten-day period, the judgment debtor must file a motion to dissolve the garnishment and release the property. This motion may be set for hearing on any Wednesday or Thursday on which the Court is open, provided that the judgment creditor is given at least five days actual written notice or eight days notice by mail (excluding intermediate Saturdays, Sundays, and legal holidays).

If the judgment creditor files a contest within the allotted time in District Court and does not schedule a hearing on the contest, the judgment debtor may schedule a hearing at 2:00 P.M. on any weekday on which the Court is open, provided that the judgment creditor is given at least five days actual written notice or eight days notice by mail (excluding intermediate Saturdays, Sundays, and legal holidays). In the circuit court, such hearing may be scheduled on the Wednesday or Thursday following such notice.

In the Circuit Court, if the judgment creditor fails to timely contest the claim, the judgment debtor must file a motion to dissolve the writ and release the property; this motion may be scheduled no earlier than the Wednesday or Thursday morning five days after written actual notice to the judgment creditor or eight days after notice by mail.

If neither party schedules a hearing in the District Court after a contest is filed, the district court will set a hearing. No specific time frame governs the setting of such hearing by the Court.

In the Circuit Court, if oral testimony is desired in a contest of a claim of exemptions, the hearing will be rescheduled to a later date. The case is thereafter considered a preferred ease, and it is set as soon as the parties notify the Court that they are prepared to go forward.

These are the only established procedures in Jefferson County for the dissolution of a writ of garnishment and release of the property of a judgment debtor. The filing of a claim of exemptions does not stay the effect of a garnishment writ.

The Court infers that defendant Conradi and the Jefferson County district court clerk implemented the practice of sending to judgment debtors the above-described notice of exemption rights only in response to the Court’s partial summary judgment for the plaintiff class on the constitutionality of Alabama’s garnishment scheme; they are free, in the absence of such judgment, to resort to the former practice of not providing any such notice.

In Finberg v. Sullivan, 634 F.2d 50 (3rd Cir.1980), the Third Circuit noted that

In a case involving an attempt to garnish an individual’s bank account, notice that informs the debtor of the exemption under federal law for social security benefits, of the $300 exemption under Pennsylvania law, and of the procedure for claiming these exemptions would provide substantial protection to the debtor’s interest in having funds available for basic necessities. Knowledge of these exemptions is not widespread, and a judgment debtor may not be able to consult a lawyer before the freeze on a bank account begins to cause serious hardships.
The conveyance of this information would not place a great burden on the state____ The creditor would not have to incur any additional expense or delay.

634 F.2d 62. The circuit squarely held that the failure to provide such information constituted a violation of the due process clause of the Fourteenth Amendment. Federal district courts considering the issue have generally agreed. Clay v. Fisher, 584 F.Supp. 730 (S.D.Ohio 1984); Dionne v. Bonley, 583 F.Supp. 307 (D.R.I. 1984); Harris v. Bailey, 574 F.Supp. 966 (W.D.Va.1983); Dreary v. Guardian Loan Co., Inc., 534 F.Supp. 1178 (S.D.N.Y.1982); Betts v. Tom, 431 F.Supp. 1369 (D.Haw. 1977). This Court adopts the reasoning of those decisions.

The issue presented in this case is very much akin to that involved in Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1977), in which the United States Supreme Court held that due process requires a public utility, in terminating service to customers, to notify such customers of the availability of a procedure for contesting the proposed termination.

Defendant Conradi premises her position largely on Brown v. Liberty Loan Corp. of Duval, 539 F.2d 1355 (5th Cir.1976), a case which preceded Memphis Light, supra, and which is, in any event, inapposite to the issue in this case.

In Brown, supra, the circuit found no constitutional infirmity in the Florida scheme which authorizes post judgment garnishment of an individual’s wages without first providing notice of the garnishment and an opportunity for a hearing on entitlement to exemptions. Id., at 1362. Here, the plaintiff class does not contend that it is entitled to notice and hearing prior to the issuance of a writ of garnishment; instead it asserts that it is entitled to notice of exemption rights contemporaneously with the issuance of the writ and an opportunity to be heard on exemption claims reasonably promptly after the attachment of property pursuant to the garnishment writ.

Further, “the most significant factor” in the circuit’s validation of the Florida scheme “... is the apparent availability of prompt judicial determination of the debt- or’s claim of exemption.” Id., at 1368. The court pointed out that the judgment debtor claimed his exemption on the same day that the writ of garnishment was served on her employer; that the judgment creditor had only two days under Florida law within which to contest the claim (actually the creditor filed his contest on the next day after the claim was filed); a hearing on the claim was held and the writ of garnishment dissolved—all within two weeks after the writ of garnishment was issued.

By way of contrast, a judgment creditor has ten days under Alabama law to contest a claim of exemptions. In Jefferson County, scheduling of a hearing on a contest must await at least another week; and even longer in Circuit Court if either party desires to present testimony. In the instant case, five weeks elapsed between the freezing of plaintiff’s bank account and a hearing on the dissolution of the garnishment writ.

More important is the consideration that the issue of the judgment debtor’s knowledge of his right to claim exemptions was not presented in Brown. In fact, the judgment debtor there obviously knew of his exemption rights, as attested by the fact that the exemption was claimed on the same day as the garnishment writ was served on him. In this case, the representative plaintiff did not learn of her exemption rights until nine days after the garnishment writ had issued. Based on the interrogatory answers on file, the Court finds that most judgment debtors in Alabama are unaware of the availability of exemptions.

The Court concludes that the statutory garnishment scheme, as applied in Jefferson County, Alabama, is unconstitutional. Therefore, the defendant Conradi shall be subjected to the terms of the Consent Decree.

By separate order, the Consent Decree shall be APPROVED and entered, as modified herein; the defendant class of state court judges shall be DE-CERTIFIED and the action DISMISSED as to defendant the Honorable Jeri Blankenship, as Judge of the District Court of Madison County, Alabama.

FINAL DECREE AND INJUNCTION

Based on the accompanying Memorandum of Opinion, and the finding by the Court that the proposed consent decree, as modified, is fair, adequate and reasonable, it is hereby ORDERED, ADJUDGED DECREED and DECLARED as follows:

1. That due process of law, as embodied in the Fourteenth Amendment to the United States Constitution, requires the following:

(a) that contemporaneously with the service of a writ of garnishment on a garnishee, judgment debtors must be served with written notice of their basic exemption rights under State and Federal law and of the proper procedure for asserting or claiming those exemption rights;

(b) that a writ of garnishment must be dismissed, and so much of the judgment debtor’s wages, money or other assets withheld or attached pursuant thereto which have been claimed as exempt released to the judgment debtor, within 15 calendar days after the judgment debtor files a claim of exemptions with the Clerk issuing the writ of garnishment if no contest of said claim of exemptions has been timely filed by the judgment creditor after notice of the filing of said claim of exemptions, and

(c) that if a timely contest of a claim of exemptions is filed, the hearing before an appropriate judicial officer to determine said contest must be initially scheduled within 7 calendar days (or the next business day thereafter if the Court is not open on the said seventh day) after said contest is filed with the Clerk issuing the writ of garnishment.

2. On and after 30 days following the entry of this FINAL DECREE and INJUNCTION, the defendant BILLY D. HARBIN, individually and as the Clerk of the District Court of Madison County, Alabama; POLLY D. CONRADI, individually and as Clerk of the Circuit Court of Jefferson County, Alabama; and ALL OTHER DISTRICT CLERKS and CIRCUIT CLERKS in the State of Alabama; their successors in office, their agents, servants, and employees, and those persons in active concert or participation with them who receive actual notice of this injunction by personal service or otherwise, ARE hereby ENJOINED from the issuance or processing of any writ of garnishment (except to collect child or spousal support), unless and until:

(a) judgment debtors, contemporaneously with the service of a writ of garnishment on the garnishee, are served with a notice of exemption rights and of the procedure for claiming or asserting such rights which is no less informative and accurate in content than that which is attached hereto as Exhibit A and incorporated herein by reference, and

(b) the requirements of due process set forth in Paragraph 1, above, have been provided for by statute, rules of statewide application adopted by the Supreme Court of Alabama, or local written administrative orders.

3. Notwithstanding the foregoing, the injunction provided for in the preceding subparagraph 2(a) shall automatically be dissolved and of no force and effect upon enactment of legislation or the adoption of rules by the Supreme Court of Alabama prescribing a form of written notice to judgment debtors of their basic exemption rights under State and Federal law and of the proper procedure for claiming or asserting such rights, required to be used throughout the State of Alabama in connection with writs of garnishment; but nothing contained in this Paragraph 3 shall in any way preclude any individual from challenging the legal sufficiency of any such form of notice prescribed by legislation or rule of the Supreme Court of Alabama in another action in State or Federal Court.

4. The injunction provided for in sub-paragraph 2(b), above, shall automatically be dissolved and of no force and effect upon the enactment of legislation or the adoption of rules by the Supreme Court of Alabama prescribing procedures required to be used throughout the State of Alabama for the dissolution of writs of garnishment and release to the judgment debt- or of wages, money or other assets withheld pursuant thereto, and the scheduling of a hearing on a timely filed contest of a claim of exemptions, within time periods no longer than those set forth in Paragraph 1, above; but nothing contained in this Paragraph 4 shall in any way preclude any' individual from challenging the legal sufficiency of any such procedures prescribed by legislation or rule of the Supreme Court of Alabama in another action in State of Federal Court.

5. This Court will not consider any petition or application for relief with regard to any alleged violation of or non-compliance with this FINAL DECREE AND INJUNCTION, except upon the written certification of the petitioning party or their counsel that at least 30 days have elapsed since written notification of the details of the alleged violation or non-compliance was provided to the individual against whom an adjudication of contempt or similar relief is sought, without any resolution satisfactory to the petitioning party.

6. Within 10 days following entry of this FINAL DECREE AND INJUNCTION defendants shall cause to be transmitted a copy of this FINAL DECREE AND INJUNCTION, including Exhibit A hereto, to each and every District and Circuit Court Clerk in the State of Alabama.

The costs of this action, including the cost of the transcript of the hearing on objections to the Proposed Consent Decree are hereby taxed against defendant and intervenor, in their official capacities, for which execution shall issue.

EXHIBIT A

NOTICE TO DEFENDANT

YOUR RIGHT TO KEEP WAGES, MONEY AND OTHER PROPERTY FROM BEING GARNISHED

The Process of Garnishment delivered to you with this Notice means that wages, money or other property belonging to you has been garnished in order to pay a court judgment against you. HOWEVER, YOU MAY BE ABLE TO GET YOUR MONEY OR PROPERTY BACK, SO READ THIS NOTICE CAREFULLY.

State and Federal laws say that certain money and property may not be taken to pay certain types of court judgments. Such money or property is said to be “exempt” from garnishment. In addition to the exempt portion of your wages or salary indicated on the Process of Garnishment, the following, for example, are also exempt from garnishment:

(1) Social Security; SSI; Veteran’s benefits; AFDC (Welfare); unemployment; worker’s compensation;

(2) Up to $3,000 in other personal property, including money, bank accounts, automobiles, appliances, furniture, etc.

IN ADDITION, if the amount of your wages which is ordinarily subject to garnishment, when added to the value of all your other personal property, is not more than $3,000, you may be able to claim all of your wages or salary as exempt.

CAUTION: THESE PARTICULAR EXEMPTION RIGHTS DON’T APPLY IN EVERY CASE, SO YOU SHOULD SEE A LAWYER FOR ADVICE.

TO KEEP YOUR WAGES, MONEY AND OTHER PROPERTY FROM BEING GARNISHED, OR TO GET BACK ANYTHING ALREADY TAKEN, YOU MUST PREPARE A “CLAIM OF EXEMPTIONS” FORM LISTING ALL YOUR WAGES AND PERSONAL PROPERTY, HAVE IT NOTARIZED, AND FILE THE FORM WITH THE CLERK’S OFFICE. YOU MUST ALSO MAIL OR DELIVER A COPY TO THE PLAINTIFF. THE CLERK CANNOT GIVE YOU LEGAL ADVICE. IF YOU NEED ASSISTANCE YOU SHOULD SEE A LAWYER.

The Plaintiff will have approximately 10 days to file a “contest” to dispute your Claim of Exemptions. If the Plaintiff does file a contest, a court hearing will be scheduled and you will be notified of the time and date of the hearing. If the Plaintiff fails to file a contest, the garnishment will be dismissed and the Court will release your wages, bank account, etc.

YOU SHOULD FILE YOUR CLAIM OF EXEMPTIONS FORM IMMEDIATELY TO KEEP YOUR WAGES, MONEY OR PROPERTY FROM BEING APPLIED TO THE COURT JUDGMENT. IF YOU HAVE ANY QUESTIONS, YOU SHOULD SEE A LAWYER. IF YOU CAN’T AFFORD A LAWYER, CONTACT YOUR LOCAL BAR ASSOCIATION OR ASK THE CLERK’S OFFICE ABOUT ANY LEGAL SERVICES PROGRAM IN YOUR AREA.

      . A judgment creditor, Avco Financial Services, Inc., was the other original defendant in the case. It was dismissed on the stipulation of the parties.

      . Under Alabama law, personal property, up "to the amount of $3,000.00 in value..is exempt from levy and sale for the collection of debts. § 6-10-6 of the Code of Alabama of 1975 (as amended 1980). "Personal property”, within the meaning of the exemption laws, includes everything that is subject to ownership other than realty or an interest in realty. Enzor v. Hurt, 76 Ala. 595 (1884).

      . The Rule provides, in pertinent part:
      A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party to the action if (1) in his absence complete relief cannot be accorded among those already parties____

      . Intervention was conditioned on the assumption by Ms. Conradi of liability for any attorney’s fees incurred by plaintiff’s counsel on issues raised solely by Ms. Conradi, should the Court determine that the plaintiff is entitled to a reasonable attorney’s fee. This issue shall be determined upon appropriate motion by counsel for the plaintiff class.

      . Conradi's Letter Brief to the Court, dated December 20, 1984; p. 2.

      . The "Notice to Defendant” erroneously suggests to the debtor that if the creditor fails to contest the claim, the garnishment will be dissolved and the debtor's property released without any further action by the debtor.

      . Since this is a Rule 23(b)(2) action, the defendant Conradi may not opt out of the defendant class where, as here, there is a conspicuous absence of a showing of inadequacy of representation. United States v. United States Steel Corp., 520 F.2d 1043, 1057 (5th Cir.1975); Kincade v. Gen. Tire and Rubber Co., 635 F.2d 501, 507 (5th Cir.1981); Holmes v. Continental Can Co., 706 F.2d 1144, 1152-1160 (11th Cir.1983).


author: MANOS, District Judge.

text:
    A.I. ROOT COMPANY, Plaintiff, v. COMPUTER DYNAMICS, INC., and Management Assistance, Inc., Defendants.
    No. C84-1348.
    United States District Court, N.D. Ohio, E.D.
    May 31, 1985.

      Eugene McShane, Ralph Breitfeller, Alan Witten, Columbus, Ohio, for plaintiff.

      David A. Schaefer, Cleveland, Ohio, for Computer/Dynamics, Inc.
    Donald J. Mooney, Jacob K. Stein, Cincinnati, Ohio, for Management Assistance, jnc
   MEMORANDUM OF OPINION

MANOS, District Judge.

On October 28, 1983, plaintiff, the A.I. Root Company (Root), filed the above-captioned case against the defendants, Computer Dynamics, Inc. (CDI) and Management Assistance, Inc. (MAI). It alleges that CDI and MAI engaged in anti-competitive activity in violation of the Sherman Antitrust Act, 15 U.S.C. § l. Jurisdiction is invoked pursuant to 15 U.S.C. § 15. The case is currently before the court on CDI’s and MAI’s motions for summary judgment. For the following reasons, their motions are granted.

I.

Root is an Ohio corporation that manufactures beekeeper’s supplies, ecclesiastical candles and other products in Medina, Ohio. It has two (2) subsidiaries located in San Antonio, Texas and Council Bluffs, Iowa. MAI is a New York corporation which manufactures Basic Four computer equipment and operating software for that equipment. CDI is an Ohio corporation and MAI’s authorized dealer in Medina, Ohio.

Since 1977, Root has purchased from MAI dealers, including CDI, small business computers for payroll and other administrative purposes. In the fall of 1982, it decided to computerize its inventory and manufacturing processes. To do so, it had to upgrade its computer capabilities. CDI offered Root a new MAI Model 710 computer. However, Root purchased a used MAI Model 730B computer from Assured Systems Development, Inc. (ASD)—a dealer in used computers in Cleveland, Ohio. To operate the Model 730B, Root needed properly configured “BOSS” operating software. It obtained a BOSS software package through ASD; however, Root was not satisfied with this software since it did not have an “imput buffering” feature. Root’s efforts to have the software reconfigured by MAI dealers outside the Cleveland area were unsuccessful and thus it contacted CDI. A dispute arose between Root and CDI over the cost of the proposed reconfiguration services and, also, Root’s failure to sign license agreements for software it purchased previously from CDI. See MAI’s Exhibit C. The parties negotiated for approximately eight (8) months. As of September 2, 1983, CDI offered Root reconfigured BOSS software under the following terms:

1) That Root sign the appropriate license agreements for the BOSS software and other software it already purchased from CDI; and
2) That Root agree to pay a $2,500 transfer fee for any subsequent reconfigurations it should need.

MAI’s Exhibit C.

Root elected not to accept these terms. Rather, it purchased new IBM equipment and software. This suit followed with Root alleging that CDI’s and MAI’s concerted refusal to reconfigure its BOSS software constituted a tying arrangement and group boycott in violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. See supra note 2.

II.

Root alleges that CDI and MAI imposed an unlawful tying arrangement by conditioning the sale of reconfigured BOSS software (the tying product) on its purchase of computer hardware (the tied product). Complaint at ¶ 18. A tying arrangement exists when a seller sells a product (the tying product) only if the buyer will purchase another product (the tied product). Accord Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, —, 104 S.Ct. 1551, 1558, 80 L.Ed.2d 2 (1984); Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 508-09, 89 S.Ct. 1252, 1261, 22 L.Ed.2d 495 (1969); Atlantic Refining Co. v. FTC, 381 U.S. 357, 369-71, 85 S.Ct. 1498, 1506-07, 14 L.Ed.2d 443 (1965); United States v. Loew’s Inc., 371 U.S. 38, 44-45, 83 S.Ct. 97, 102, 9 L.Ed.2d 11 (1962); Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958); Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 605, 73 S.Ct. 872, 878, 97 L.Ed. 1277 (1953). Under section 1 of the Sherman Antitrust Act, such arrangements are unlawful per se if the seller has “sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product and a ‘not insubstantial’ amount of interstate commerce is affected.” Bender v. Southland Corp., 749 F.2d 1205, 1215 (6th Cir.1984) (citing Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1329-30 (6th Cir.1983); Bell v. Cherokee Aviation Corp., 660 F.2d 1123, 1127 (6th Cir.1981)). See Jefferson Parish Hospital District No. 2, supra, 466 U.S. at —, 104 S.Ct. at 1559-60; Fortner Enterprises, Inc., supra, 394 U.S. at 49, 89 S.Ct. at 1256; Northern Pacific Ry. Co., supra, 356 U.S. at 6, 78 S.Ct. at 518. It bears emphasis that in order to have a per se unlawful tying arrangement, the seller must possess sufficient economic power in the tying product market so that competition in the market is appreciably restrained. See United States Corp. v. Fortner Enterprises, Inc., 429 U.S. 610, 97 S.Ct. 861, 51 L.Ed.2d 80 (1977); Fortner Enterprises, Inc., supra, 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495.

Economic power in the tying product market may be established in one of three ways. First, it may be shown that the defendant occupies a dominant position in the tying product market. See United States Steel Corp., supra, 429 U.S. at 620, 97 S.Ct. at 867; Fortner Enterprises, Inc., supra, 394 U.S. at 502-03, 89 S.Ct. at 1258; Moore v. Jas. H. Matthews & Co., 550 F.2d 1207, 1215 (9th Cir.1977). Second, it may be shown that the seller’s product is sufficiently unique in that he has “some advantage not shared by his competitors in the market for the tying product.” United States Steel Corp., supra, 429 U.S. at 620, 97 S.Ct. at 868. See Fortner Enterprises, Inc., supra, 394 U.S. at 502-03, 89 S.Ct. at 1258; Moore, supra, 550 F.2d at 1215. Lastly, economic power may be demonstrated when a substantial number of customers have accepted the tie-in and there are no explanations other than the seller’s economic power for their willingness to do so. United States Steel Corp., supra, 429 U.S. at 618 n. 10, 97 S.Ct. at 866 n. 10; Moore, supra, 550 F.2d at 1216.

Because CDI and MAI do not have the required economic power to impose the alleged tie-in, the court holds that Root has not established a per se tying arrangement.

A. Dominant Market Position

It is uncontroverted that MAI’s share of the relevant product market in 1982-83 was only 2%-4%. See Murawski Affidavit at ¶¶ 13-17. This market share is insufficient as a matter of law to infer market dominance. Accord Jefferson Parish Hospital District No. 2, supra, 466 U.S. at —, 104 S.Ct. at 1566 (30% market share insufficient to infer market power); JBL Enterprises Inc. v. Jhirmack Enterprises, Inc., 698 F.2d 1011, 1017 (9th Cir.) (seller lacked economic power in tying product market since its share of the relevant market did not exceed 5%), cert. denied, — U.S. —, 104 S.Ct. 106, 78 L.Ed.2d 109 (1983); Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d 1376, 1379 (9th Cir.1981) (market share of I. 87%-5.2% too small to establish market dominance), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981); Blackwell v. Power Test Corp., 540 F.Supp. 802, 816 (D.N.J.1981) (market share of 6% is insufficient to establish economic power in the tying product market), aff’d without opinion, 688 F.2d 818 (3d Cir.1982). Accordingly, the court holds that CDI and MAI did not have a dominant position in the market during 1982-83.

B. Uniqueness of Tying Product

Root asserts that BOSS operating software is unique and thus CDI and MAI possessed sufficient market power. “Uniqueness confers economic power only when other competitors are in some way prevented from offering the distinctive product themselves.” United States Steel Corp., supra, 429 U.S. at 621, 97 S.Ct. at 868. To prevail, Root must prove that no competitor of CDI and MAI produced or could have produced a comparable product. Id., 97 S.Ct. at 868; II E. Kintner, Federal Antitrust Law 238 (1980). In 3 P.M., Inc. v. Basic Four Corp., 591 F.Supp. 1350 (E.D.Mich.1984), Judge Phillip Pratt held that Basic Four's software products are not unique as MAI’s competitors produce comparable products. In so holding, the court stated:

[Plaintiff’s] burden, rather, is to prove that none of defendants’ competitors could have produced products which would perform the functions performed by defendants’ products, because defendants possessed some advantage not shared by their competitors. [Plaintiff] has not even attempted to make such a showing. In fact, the only evidence on this record which is relevant to this issue suggests that defendants’ competitors could have produced similar products, and had actually begun to produce such products subsequently. Robert Yanover, [plaintiff’s] president testified at his deposition that [plaintiff] now sells equipment manufactured by one of B/4’s competitors which is the “functional equivalent” of the B/4 equipment which [it] earlier sold. Yanover Deposition at 70. In addition, William Bittick, a programmer for [plaintiff], has stated in an affidavit that “other computer manufacturers are now offering new business basic programming languages patterned after the Basic/Four Business Basic Language.” [Plaintiff] has produced no evidence which tends to show that none of defendants’ competitors could have offered similar products during the period at issue.

591 F.Supp. at 1358-59.

In this case, Root concedes that competitors of CDI and MAI, including IBM, NCR and Seiko, produce computer hardware and software equivalent to that manufactured by MAI. See Root Deposition at 93-94; Burke Deposition at 18-19. See also Benjamin Deposition at 188 (BOSS operating system not unique as compared to Altos and IBM operating systems); Vedrody Deposition at 59 (other operating software has advantages over BOSS software). However, Root asserts that BOSS software is unique because it is copyrighted. In 3 P.M., Inc., supra, Judge Pratt rejected the same argument:

Similarly, the fact that some of B/4’s software is copyrighted does not establish that defendants possessed economic power. See In Re Data General Corp. Antitrust Litigation, supra, 490 F.Supp. at 1112 (“[T]he sole fact of the existence of a copyright notice has not been held sufficient to prove economic power”). In arguing to the contrary, 3 PM relies upon United States v. Loew’s, Inc., 371 U.S. 38, 83 S.Ct. 97, 9 L.Ed.2d 11 (1962). In Loew’s, the Court held that each of a number of copyrighted motion pictures was a unique product, and that the defendants who sold or licensed these films therefore possessed economic power. However, this finding was not based merely upon the fact that each film was copyrighted; rather, the Court found that each of the films “varied in theme, in artistic performance, in stars, in audience appeal, etc.” Id. at 48, 83 S.Ct. at 104. Thus the copyrighted nature of the B/4 software, standing alone, similarly fails to establish that the B/4 units were “unique” as that term has been defined in Fortner II.

591 F.Supp. at 1359. See also Rex Chainbelt Inc. v. Harco Products, Inc., 512 F.2d 993 (9th Cir.), cert. denied, 423 U.S. 831, 96 S.Ct. 52, 46 L.Ed.2d 49 (1975). Accordingly, the court finds that BOSS operating software is not unique.

C. Acceptance of Tie-in

In Fortner Enterprises, Inc., supra, 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495, the Supreme Court indicated that economic power in the tying product market may be established by showing that the alleged tie-in had been imposed on an “appreciable number” of customers. 394 U.S. at 503-04, 89 S.Ct. at 1259. In United States Steel Corp., supra, 429 U.S. 610, 97 S.Ct. 861, 51 L.Ed.2d 80, the Supreme Court held that even if the tie-in has been accepted by a large number of customers, the plaintiff is still required to prove (1) that the seller possesses economic power to raise prices and (2) that there is an absence of any other explanation for the buyers’ willingness to accept such an arrangement. 429 U.S. at 618 n. 10, 620 n. 13, 97 S.Ct. at 867 n. 10, 868 n. 13. See 2 J. von Kalinowski, Antitrust Laws and Trade Regulation at § 66.05[2] (1983).

Root has failed to meet its burden. Indeed, it has identified only three (3) customers that accepted the alleged tie-in. Root did not; rather, it purchased new and comparable computer products from IBM. Failing to demonstrate that an appreciable number of customers accepted the alleged tie-in and that CDI and MAI possessed the economic power to raise prices, Root cannot prevail and the court so holds. Accord 3 P.M., Inc., supra, 591 F.Supp. at 1360-61.

In sum, Root has raised no disputed issues of material fact as to CDI’s and MAI’s lack of sufficient economic power in tying product market. The facts are uncontroverted that Root was not forced to purchase computer hardware from CDI and MAI due to their market power. Indeed, Root and other buyers were and are free to choose among various sellers offering comparable computer hardware and software. As a matter of law, Root has failed to prove a per se violation of section 1.

III.

“In order to prevail in the absence of per se liability, [Root] has the burden of proving that the [alleged tie-in] violated the Sherman Act because it restrained competition.” Jefferson Parish Hospital District No. 2, supra, 466 U.S. at —, 104 S.Ct. at 1567. See Ware v. Trailer Mart, Inc., 623 F.2d 1150, 1153-54 (6th Cir.1980). Under this theory, commonly referred to as the “rule of reason,” Root must “establish the facts peculiar to the business involved, its condition before and after the alleged restraint was applied, the nature and history of the alleged restraint, the reason for adopting the alleged restraint, and its actual probable effect.” 3 P.M., Inc., supra, 591 F.Supp. at 1361 n. 16 (citing Chicago Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683 (1918)). See Jefferson Parish Hospital District No. 2, supra, 466 U.S. at —, 104 S.Ct. at 1567-68. Root, however, has maintained that the alleged tying arrangement is per se illegal. Further, its reference to the rule of reason in its Memorandum in Opposition to MAI’s Motion for Summary Judgment, is limited to the following: “[E]ven if MAI’s claim that it lacks market power were correct, summary judgment would impermissably [sic] cut off plaintiff’s right to prove its case under the rule of reason.” Id. at 28.

Rule 56(e) of the Federal Rules of Civil Procedure provides in pertinent part:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

CDI and MAI have moved for summary judgment on all counts of Root’s complaint. Root cannot avoid their motions by asserting, without proof, an alternative theory of recovery. Rather, it was required to present sufficient evidence supporting its rule of reason claim to demonstrate that there is a genuine issue of material fact. See Bouldis, supra, 711 F.2d at 1324 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 159 & n. 19, 90 S.Ct. 1598, 1609 & n. 19, 26 L.Ed.2d 142 (1970); First National Bank of Arizona v. Cities Services Co., 391 U.S. 253, 288, 88 S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1968); Smith v. Northern Michigan Hospitals, Inc., 703 F.2d 942, 947-48 (6th Cir.1983)). Because it failed to do so, CDI and MAI are entitled to and the court grants their motions for summary judgment.

IV.

In a further attempt to establish a per se section 1 violation, Root alleges that the license agreements and future transfer fee imposed by CDI and MAI constituted a group boycott. This claim is without support as a matter of law.

A horizontal restraint is an agreement among independent business entities or competitors at the same market structure level. Accord Dunn & Mavis, Inc. v. Nu-Car Driveway, inc., 691 F.2d 241, 243 (6th Cir.1982); Davis-Watkins Co. v. Service Merchandise, 686 F.2d 1190, 1196 & n. 9 (6th Cir.1982), cert. denied, — U.S. —, 104 S.Ct. 1718, 80 L.Ed.2d 190 (1984); Com-Tel, Inc. v. DuKane Corp., 669 F.2d 404, 408 (6th Cir.1982). “The hallmark of such a restraint is a collusion among competitors.” Laurence J. Gordon, Inc. v. Brandt, Inc., 554 F.Supp. 1144, 1151 (W.D. Wash.1983) (citing Krehl v. Baskin-Robbins Ice Cream Co., 664 F.2d 1348, 1354 (9th Cir.1982)). On the other hand, vertical restraints involve a combination of persons at different market structure levels, such as manufacturers and distributors. Accord Com-Tel, Inc., supra, 669 F.2d at 409 (citing Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 131 (2d Cir.), cert. denied, 439 U.S. 946, 99 S.Ct. 340, 58 L.Ed.2d 338 (1978)); Muenster Butane, Inc. v. Stewart Co., 651 F.2d 292, 295 (5th Cir.1981). It is important to distinguish between horizontal and vertical restraints of trade because horizontal restraints are per se violations of section 1 while vertical restraints are judged under the rule of reason. See Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 58-59, 97 S.Ct. 2549, 2561-62, 53 L.Ed.2d 568 (1977); United States v. Topeo Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972); Davis-Watkins, Co., supra, 686 F.2d at 1196; Com-Tel, Inc., supra, 669 F.2d at 408.

In this case, it is uncontroverted that CDI and MAI are not competitors. Rather, their relationship is that of a manufacturer and authorized dealer. Thus, a restrictive agreement between them would be vertical, not horizontal. See Sports Center, Inc. v. Riddell, Inc., 673 F.2d 786 (5th Cir.1982); Barnosky Oils, Inc. v. Union Oil Co. of California, 665 F.2d 74 (6th Cir.1981); Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d 1376 (9th Cir.), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981). Because a group boycott requires a horizontal conspiracy, Root’s group boycott claim is without support. See Dunn & Mavis, Inc., supra, 691 F.2d at 243; Davis-Watkins Co., supra, 686 F.2d at 1196 & n. 9; Ron Tonkin Gran Turismo v. Fiat Distributors, Inc., 637 F.2d 1376, 1381-82 (9th Cir.1981), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981); Laurence J. Gordon, Inc., supra, 554 F.Supp. at 1152.

V.

When a restraint is weighed under the rule of reason, the challenger bears the burden of proving the unreasonableness of the alleged restriction. See Continental T. V., Inc., supra, 433 U.S. at 59, 97 S.Ct. at 2562. Root must prove that the activity of CDI and MAI, on balance, affected competition in the relevant market adversely. See supra section III. Root has not, however, come forward with such evidence. Further, in light of CDI’s and MAI’s insignificant market power in the highly competitive market of small business computers, their activities are incapable of having a substantially adverse effect on competition. Indeed, Root’s decision not to accept the alleged restriction and to purchase a competing brand of computer hardware and software buttresses this finding. Accordingly, Root has failed in its burden to establish a restraint of trade in violation of section 1 of the Sherman Act.

VI.

This court is not unmindful that motions for summary judgment are generally disfavored in antitrust litigation. See Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); Bouldis, supra, 711 F.2d at 1324. “However, this general rule does not preclude the use of summary judgment in appropriate antitrust litigátion.” Bouldis, supra, 711 F.2d at 1324 (citations omitted). In order to withstand a motion for summary judgment, it is not enough to refer to disputed factual issues; rather, such issues must be material and thus affect the outcome of the litigation. See Mutual Fund Investors, Inc. v. Putnam Management Co., Inc., 553 F.2d 620, 624 (9th Cir.1977). Further, “ ‘[t]he showing of a “genuine issue for trial” is predicated upon the existence of a legal theory which remains viable under the asserted version of the facts, and which would entitle the party opposing the motion (assuming his version to be true) to a judgment as a matter of law’.” Bushie v. Stenocord Corp., 460 F.2d 116, 119 (9th Cir.1972) (quoting McGuire v. Columbia Broadcasting System, Inc., 399 F.2d 902, 905 (9th Cir.1968)).

Root has failed to sustain its burden of proof. It cannot prevail as a matter of law under its asserted version of the facts. Accordingly, CDI’s and MAI’s motions for summary judgment are granted.

IT IS SO ORDERED.

      . The case was filed initially in the United States District Court for the Southern District of Ohio. On January 6, 1984, Computer Dynamics, Inc., filed a motion for change of venue to the Northern District of Ohio pursuant to 28 U.S.C. § 1404(a). On April 18, 1984, its motion was granted.

      . 15 U.S.C. § 1 provides:
      Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony and, on conviction thereof, shall be punished by fine not exceeding one million dollars if a corporation or, if any other person, one hundred thousand dollars, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

      . 15 U.S.C. § 15 provides in pertinent part:
      [A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.

      . BOSS is the acronym for Basic Four Operating System Software. It is a copyrighted product manufactured by MAI and is not usable on non-MAI computers.

      . Operating system software is a set of computer programs that guide and control the basic function of a computer. It also provides the necessary link between the computer equipment "hardware” and the various application programs “software," designed to perform specific functions, such as accounting, word processing and payroll. Thus, whenever a user expands its computer system and adds peripheral equipment, the BOSS software must be reconfigured by MAI. If it is not reconfigured, the computer will not function at its full capacity.

      . ASD obtained the BOSS software from a MAI dealer in California. The order was placed in the name of J & B Computing, Inc.—the prior owner of the Model 730B purchased by Root.

      . Input buffering is a software feature that permits faster data entry.

      . Although MAI sells computer hardware, it distributes BOSS software only under license agreements which strictly limit the user's rights to reproduce and transfer the software. Murawski Affidavit at ¶ 7.

      . In its response to MAI's motion for summary judgment, Root argues that CDI’s September 2nd offer is "irrelevant,” since it already decided to purchase a new IBM computer on August 30, 1983. The court finds this argument to be without merit because Root has not offered evidence to indicate that it communicated to CDI its decision to discontinue negotiations and buy new equipment from another company.

      . Root defines the relevant market as one limited to Basic Four computer hardware and software. Such a narrow definition is erroneous. "The essential test for ascertaining the relevant product market involves the identification of those products or services that are either (1) identical to or (2) available substitutes for the defendant’s product or service.” White and White, Inc. v. American Hospital Supply Corp., 723 F.2d 495, 500 (6th Cir.1983) (citing United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956)). See Brown Shoe, Inc. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 1523, 8 L.Ed.2d 510 (1961). In this case, it is undisputed that there are competing computer systems that are identical to those manufactured by MAI and distributed by CDI. Such competing brands are available substitutes for Basic Four hardware and software. Thus, the court finds that the relevant market is that of small business computers.

      . Frank Murawski is a research consultant and analyst for MAI.

      . The Court stated:
      Market power is usually stated to be the ability of a single seller to raise price and restrict output, for reduced output is the almost inevitable result of higher prices. Even a complete monopolist can seldom raise his price without losing some sales; many buyers will cease to buy the product, or buy less, as the price rises. Market power is therefore a source of serious concern for essentially the same reason, regardless of whether the seller has the greatest economic power possible or merely some lesser degree of appreciable economic power. In both instances, despite the freedom of some or many buyers from the seller’s power, other buyers—whether few or many, whether scattered throughout the market or part of some group within the market— can be forced to accept the higher price because of their stronger preferences for the product, and the seller could therefore choose instead to force them to accept a tying arrangement that would prevent free competition for their patronage in the market for the tied product. Accordingly, the proper focus of concern is whether the seller has the power to raise prices, or impose other burdensome terms such as a tie-in, with respect to any appreciable number of buyers within the market.

      394 U.S. at 503-04, 89 S.Ct. at 1259 (emphasis added).

      . In United States Steel Corp., supra, the Court noted that although a large number of customers accepted the alleged tie-in, such evidence standing alone was insufficient to establish the requisite economic power.

      . "Group boycotts are concerted refusals by traders to deal with other dealers____" Davis-Watkins Co., supra, 686 F.2d at 1196 n. 9 (citing Klor's Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1957)).

      . CDI asserts a permissive counterclaim pursuant to Fed.R.Civ.P. 13(b). In essence, it seeks to compel Root to sign two (2) license agreements for software it purchased previously from CDI. It is well-settled that a permissive counterclaim must be supported by an independent source of jurisdiction. See McCaffrey v. Rex Motor Transportation Inc., 672 F.2d 246, 248 (1st Cir.1982); Federman v. Empire Fire & Marine Ins. Co., 597 F.2d 798, 812 (2d Cir.1979); 6 Wright & Miller, Federal Practice and Procedure § 1422. Since Root and CDI are citizens of Ohio, federal diversity jurisdiction does not lie. Accordingly, CDI’s counterclaim is dismissed without prejudice.