author: PRICE, District Judge.

text:
    D & R DISTRIBUTING CO., INC., Plaintiff, v. CHAMBERS CORPORATION, Amana Refrigeration, Inc., R & K Distributors, Inc., Rangaire Corporation, Defendants.
    No. CV F 80-297-EDP.
    United States District Court, E.D. California.
    Sept. 6, 1984.

      James Duryea, Jr., San Francisco, Cal., for plaintiff.
    James K. Barnum, Stammer, McKnight, Barnum & Bailey, Fresno, Cal., Max L. Gillam, Latham & Watkins, Los Angeles, Cal., Robert W. Jordan, Baker & Botts, Dallas, Tex., for defendants Chambers Corp. and Rangaire Corp.
    Severson, Werson, Berke & Melchoir, San Francisco, Cal., Rain, Harrell, Emery, Young & Doake, Dallas, Tex., for defendant R & K Distributors, Inc.
   MEMORANDUM DECISION AND ORDER

PRICE, District Judge.

The parties to this action filed multiple motions before the Magistrate, as follows:

1. The motion of defendant R & K Distributors for summary judgment. Timely objections to the Magistrate’s recommendation were filed. The Court reviews this motion de novo.

2. Plaintiff’s motion for summary judgment on its price fixing claim. The Magistrate’s recommendation was objected to; hence, the Court reviews de novo.

3. Defendant Chambers’ motion for summary judgment on plaintiff’s antitrust claims. Timely objections were filed to the Magistrate’s recommendations; hence, the Court reviews the matter de novo.

4. Defendant Amana’s motion for summary judgment on plaintiff’s antitrust claim. Timely objections to the Magistrate’s recommendations were filed. The Court reviews the matter de novo.

5. Defendant Chambers’ motion for summary judgment on plaintiff’s pendent state causes of action. Neither the plaintiff nor the defendants filed timely objections to the Magistrate’s recommendations. The Court reviews the Magistrate’s recommendations under the clearly erroneous standard.

The Magistrate, although hearing the motions at different times, filed the majority of his recommendations simultaneously. Each motion was addressed separately, although there is a demonstrable relationship among the motions.

I

PLAINTIFF’S COMPLAINT

Plaintiff’s complaint alleges the following facts which do not appear to be contested:

D & R Distributing (hereinafter D & R) is a California corporation engaged in the wholesale distribution of major kitchen household appliances. It also owns and operates retail appliance stores in Modesto and Fresno. From an unspecified date in 1954, and continuing until October 1, 1980, Chambers Corporation (hereinafter Chambers) a Delaware corporation, and a wholly owned subsidiary of Rangaire Corporation (hereinafter Rangeaire) sold Chambers brand household cooking appliances pursuant to an agreement that was at least partially in writing, and contained a standard form “Franchise Agreement.” The complete terms of this agreement are the subject of one of the pending motions.

Prior to the 1973 agreement, D & R had been Chambers’ exclusive distributor for Stanislaus, Merced, Fresno, Madera, Kern, Kings and Tulare Counties (the San Joaquin Valley). The 1973 agreement expanded D & R to the whole of Northern California.

The 1973 agreement was terminated October 1, 1980, by Chambers.

Amana Refrigeration (hereinafter Amana), an Iowa corporation, sells Amana brand household and refrigeration appliances nationwide.

R & K Distributors (hereinafter R & K), is a California corporation, which distributes, on a wholesale level, built-in appliance products of various manufacture, including those of Chambers, Rangaire Corporation (hereinafter Rangeaire), a Texas corporation. Rangaire is a building contractor, produces and sells limestone and lime products, and owns all of Chambers’ stock. It is not clear from the First Amended Complaint whether Rangaire manufactures and sells appliances independent of its ownership of Chambers.

We turn to the motions.

II

THE MOTIONS OF R & K FOR SUMMARY JUDGMENT

The motions of R & K can be properly considered independently of the other motions before the Court.

As pointed out above, the distributorship arrangement between D & R and Chambers was terminated by Chambers on October 1, 1980. R & K is accused by D & R with legal responsibility for this event.

Plaintiff now seeks damage from R & K on account of this termination on the grounds of antitrust violations and a pendent state tort claim.

First, plaintiff claims that its distributorship was terminated by Chambers in violation of the Sherman Antitrust Act “pursuant to and in furtherance of a combination and conspiracy between defendant Chambers Corporation and defendant R & K to unreasonably restrain and unlawfully tie the sale of Chambers brand products with complimentary dominant cooking appliance products, including Jenn-Air and KitchenAid, and pursuant to a combination and scheme to engage in a discriminatory pricing system.”

As to the pendent state claim, plaintiff claims that R & K interfered with plaintiff’s “prospective economic advantages” under its distributorship agreement with Chambers Corporation by making misrepresentation about the capabilities and intentions of R & K as a prospective distributor of Chambers’ products, which induced Chambers Corporation to terminate plaintiff’s distributorship.

R & K’s presentation has refuted plaintiff’s allegations and all reasonable inferences that might be drawn therefrom. When pressed, at deposition or through other discovery devices, for the production of evidence to support these allegations, plaintiff’s officers and witnesses have conceded that none exist, save and except an in-house memoranda developed by defendant Chambers’ personnel, and distributed only among Chambers’ personnel. Presumably, this memorandum was the principal source of information relied upon by the Chambers’ executives to choose R & K as the successor distributor to plaintiff. Assuming, without deciding, that such doeument would be admissible against R & K under one of the many exceptions to the hearsay rule, we analyze that document to determine its probative effect on the issues tendered by R & K’s motion.

“Advantages Of Having R & K As Chambers Distributor:

1. Strong position as true distributor of premium priced products — KitchenAid and Jenn-Air.
2. Excellent financial position requiring no factory assistance in warehousing inventory.
3. Strong professional sales force, 11 field salesmen and 50 demonstrators. Experienced management.
4. Over 300 established dealers, long term and loyal.
5. Nationally recognized prestigious distributor who would influence other desirable distributors we would like, such as:
REMCO-Federated — Chicago and Davenport
W.D. Alexander — Atlanta
Dean Distributor — Portland
Domestic Supply — Seattle
Elm Distributors — Denver
Jack Riggs is committed to using his considerable influence to help Chambers secure powerful distributors throughout USA.
6. R & K is committed to opening branch operations in Sacramento and Fresno.
7. R & K is largest Jenn-Air distributor in country and is on record as being committed to Chambers regardless of future moves by Jenn-Air.
8. Experience in selling premium priced cooking equipment, having been large Corning distributor before merger with Amana.
9. Highly professional in their relationship with dealers as shown in exhibits, i.e., franchise agreements, etc.
10. Very promotional with in-house capability. This proposal represents the very best opportunity to improve our market position to date. We suggest a meeting with the R & K organization in San Francisco between our top management and R & K, at the earliest possible date. R & K is prepared to begin as a full operating distributor on October 1, 1980.”

Plaintiff first argues that this document supports the inference that R & K made false and fraudulent misrepresentations to Chambers’ officials. He points to paragraph 3 concerning the available R & K personnel. As previously indicated, the record indicates clearly that the contents of paragraph 3, as well as other reference R & K’s capabilities, represents the interpretation of the Chambers’ employees who prepared the memorandum rather than reflecting statements by R & K officers and other employees.

However, for this analysis, even if we assumed that plaintiff’s arguments are correct, and further that R & K officers and employees made such statements, would this create a triable issue of fact which would entitle the plaintiff to go to trial?

[I] It is the Court’s view that the antitrust elements of this ease are controlled by A.H. Cox & Co. v. Star Machinery Co., 653 F.2d 1302 (9th Cir.1981). There, as here, plaintiff Cox was displaced by defendant distributor Star as the exclusive distributor for truck cranes in the Seattle area which were manufactured by the defendant R & K Products. There, as here, plaintiff sued the replacement distributor as well as the manufacturer, who had replaced plaintiff, on antitrust grounds.

In affirming defendant’s motion for summary judgment, the circuit court stated:

... The economic impact resulting from a change in distributors is not altered merely because the dealer initiated contact or actively sought the change, provided the manufacturer ultimately makes the decision based on its independent business judgment. Appellant has advanced no evidence of dealer coercion here, and therefore the attempt to cast this arrangement in horizontal terms must fail.
Under the foregoing principles, appellant cannot prevail because it has failed to adduce any evidence of anticompetitive effect or intent which would distinguish this dealer substitution case from the myriad of decisions upholding changes in distributors. That one distributor will be hurt when another succeeds in taking its line will be axiomatic in some markets, as it was here, but the intent to cause that result is not itself prohibited by the antitrust laws. The intent proscribed by the antitrust laws lies in the purpose to harm competition in the relevant market, not to harm a particular competitor.

A.H. Cox & Co. v. Star Machinery Co., supra, at 1307.

To the Court’s mind, these principles are determinative of the instant case. Accordingly, it is the decision of the Court to follow the Magistrate’s recommendation and to grant R & K’s motion for summary judgment on the antitrust theory.

The Magistrate, in his recommendation, did not address the plaintiff’s alternate state theory of tortious interference with a prospective economic advantage. Accordingly, the Court considers this theory of recovery de novo, reviewing the mass of supporting and opposing material proffered by the parties.

The tort of interference with prospective advantage consists of intentional and improper methods of diverting or taking business from another which are not within the privilege of fair competition. 4 Witkin, Summary of California Law (8th Ed.1974) § 392 at p. 2643. There are five essential components to the tort: (1) an economic relationship containing the probability of future economic benefits accruing to the plaintiffs, (2) defendant’s knowledge of the existence of that relationship, (3) defendant’s intentional commission of acts designed to disrupt the relationship, (4) actual disruption thereof and (5) damages proximately caused thereby. Olivet v. Frischling (1980) 104 Cal.App.3d 831, 837, 164 Cal.Rptr. 87.

The critical issue in this tort is whether the interference was justified. In determining this question we must observe an important distinction between interference with a contract and interference with relationships which can be disturbed without a breach of contract. In the case of interference with a contract, it is well established that a person is not justified in inducing a breach of contract simply because he is in competition with one of the parties to the contract and seeks to further his own economic advantage at the expense of the other. See Olivet v. Frischling, id., n. 1. On the other hand, with the tort of prospective advantage (where inducing a breach of contract is not involved) the law recognizes a more extensive privilege to interfere for the sake of competition. Shida v. Japan Food Corp. (1967) 251 Cal.App.2d 864, 866, 60 Cal.Rptr. 43.

Plaintiff and defendant agree that liability in this case turns on whether or not the defendant R & K engaged in “improper means” to persuade Chambers to switch to R & K as the distributor. See Shida v. Japan Food Corp., id. The use of improper means of persuasion, i.e., fraudulent misrepresentations, would obviate any privilege of fair competition.

In support of its summary judgment motion, defendant introduced deposition testimony that the Chambers Marketing Plan for Northern California was prepared by Mr. Adams and Mr. Pruitt of Chambers, and more importantly, testimony of these two gentlemen that the representations alleged to have been made by defendant R & K were in fact never made. Mr. Adams and Mr. Pruitt testified that the statements which form the basis of plaintiff’s allegations against R & K were due to a poor choice of words on the part of Chambers and the statements contained in them, attributable to R & K, were, in fact, never made.

Defendant R & K also submitted deposition testimony of Mr. J. Riggs that he never made any statement to Chambers regarding using his influence to help Chambers secure powerful distributors. (Depo. J. Riggs, Vol. II, 164:24-28.) However, as to the other representations, Mr. Riggs testified that he does not recall whether or not he made such representations to Chambers. (Depo. of J. Riggs, Vol. II 163:15-16, 25.)

Plaintiff contends that defendant has not met its summary judgment burden in that it has not submitted any evidence of its motive or purpose in wooing Chambers. However, it is clear that the movant may discharge its burden by demonstrating that if the case went to trial there would be no competent evidence to support a judgment for the plaintiff, Doff v. Brunswick Corp., 372 F.2d 801, 805 (9th Cir.1967).

The critical deficiency in plaintiffs case on the pendent state cause of action is its lack of any evidence that the defendants committed any acts which were not justified under the general principles of competition. On the basis of the facts developed by the respective parties in support and in opposition to R & K’s motion for summary judgment, the case is similar to Shida v. Japan Food Corp, supra. There, as here, an exclusive distributorship for a food item was granted to the plaintiff by the manufacturer, said distributorship specifically to be renewable on an annual basis. During the seven successive renewals, plaintiff increased its production by approximately 400 percent. At the behest of defendant, plaintiffs manufacturer did not renew its contract with the plaintiff. In reversing the bench judgment for the plaintiff, the appellate court stated:

In the case at bench it appears from the findings of the trial court that the award of damages rests exclusively upon the assumption that it was an actionable wrong to induce Waimanalo Ko-Ko Company not to renew its agreement with plaintiff. There is no finding that defendant used any improper means to persuade Waimanalo, or that any illegal restraint of competition was created, or that defendant had any purpose beyond the obvious objective of advancing its own interest as a competitor.

Shida v. Japan Food Corp, supra, at 867.

It should be noted that the instant motions for summary judgment are before the Court only after extensive discovery has been undertaken. This is not a case wherein the plaintiff has not had ample opportunity to probe all of the hidden recesses of its corporate opponents in order to discover evidence from which inferences favorable to its position might be drawn. It is not been able to develop even a scintilla of such evidence.

With the antitrust claims against R & K removed from the action, an alternate ground for granting R & K judgment on the pendent state claims is lack of jurisdiction in this Court, once the federal claims are gone. We have two California corporations proceeding against each other on a state cause of action which is not so interwoven with the remaining issues to cause the Court to retain its discretionary jurisdiction.

III

CHAMBERS AND RANGAIRE’S MOTION FOR SUMMARY JUDGMENT

A. Plaintiffs Claims Based Upon Defendants’ “Refusal to Deal”

Paragraphs 22 and 22A are the basis of plaintiffs allegations in this regard. They read:

“In August, 1980, defendant Chambers Corporation refused to deal and terminated plaintiff as the exclusive direct purchaser and primary distributor of Chambers brand products in Northern California and Western Nevada pursuant to and in furtherance of a combination and conspiracy between defendant Chambers Corporation and defendant R&K Distributors, Inc. to unreasonably restrain and unlawfully tie the sale of Chambers brand products with complimentary dominant cooking appliance products, including Jenn-Air and Kitchen Aid, and pursuant to a combination and scheme to engage in a discriminatory pricing system. Said combination and conspiracy violates Section 1 and 2 of the Sherman Act, 15 U.S.C. 1,2.” (Paragraph 22)
“On or about August 15, 1981, defendant Chambers Corporation refused to deal with, and terminated plaintiff as the exclusive factory distributor in Northern California and Western Nevada for Chambers brand products. Said refusal to deal and termination was accompanied by anticompetitive intent. Said refusal to deal and termination produced anti-competitive effects. Said refusal to deal violates Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.” (Paragraph 22A)

The moving defendants invite us to assume the truth of these allegations and to grant their motion as a matter of law.

The defendant then cites the usual compilation of distributorship cases to buttress its position. The plaintiff, on the other hand, cites cases that have at their nexus strong evidence of price fixing [Lessig v. Tidewater Oil Co. 327 F.2d 459 (9th Cir.1964)], refusal to deal as formerly after acquisition of a competitor [California Steel and Tube v. Kaiser Steel Corp., 650 F.2d 1001 (9th Cir.1981)], where the evidence established an anti-competitive effect or purpose [Fount-Wip, Inc. v. Reddi-Wip, 568 F.2d 1296 (9th Cir.1978), and Program Engineering v. Triangle Publication, 634 F.2d 1188 (9th Cir.1981) ]. Thus, the plaintiff does not meet defendants’ legal contentions that Chambers’ unilateral refusal to deal with D & R, without more, does not state a claim under the Sherman Act.

B. Plaintiffs Allegation That Chambers’ Refusal to Deal was Accompanied by “Anti-Competitive Intent” and Produced “Anti-Competitive Effects. ” (Paragraph 22A, Plaintiff’s Amended Complaint.

Sierra Wine and Liquors v. Heublein, Inc., 626 F.2d 129, 133 (9th Cir.1981), states the rule to be:

“Nor is United liable for violation of Sherman § 1. A manufacturer which switches distributorships violates antitrust laws only if ‘the refusal to deal, manifested by a combination or conspiracy, is so anticompetitive, in purpose or effect, or both, as to be an unreasonable restraint of trade.’ Alpha Distrib. Co. of Cal., Inc. [v. Jack Daniel Distillery ] 454 F.2d [442] at 452. See Mutual Fund Investors v. Putnam Management Co., 553 F.2d 620 (9th Cir.1977); Joseph E. Seagram & Co., Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 77-78 (9th Cir.1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970). Again, ‘combination or conspiracy’ is a necessary condition of liability, and the district court was correct in finding, on the facts before it, that there was neither.”

On the other hand, California Steel and Tube v. Kaiser Steel Corp., supra, at 1003-1004, teaches that:

“A unilateral refusal to deal may violate the Sherman Act if it is accompanied by anti-competitive acts or purpose. Times-Picayune v. United States, 345 U.S. 594, 625, 73 S.Ct. 872, 889, 97 L.Ed. 1277 (1953). Such a refusal may constitute an unreasonable restraint of trade even if it is justified by legitimate business reasons. Program Engineering, Inc. v. Triangle Publications, Inc., 634 F.2d 1188, 1195 (9th Cir.1980).”

And, again:

“The elements required to establish a claim of attempt to monopolize in this circuit have been variously stated, but generally plaintiff must show: (1) specific intent to destroy competition, (2) predatory conduct directed to accomplishing that purpose, and (3) dangerous probability of success. Janich Bros., Inc. v. American Distilling Co., 570 F.2d 848, 853 (9th Cir.1977), cert. denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1978); Hallmark Industry v. Reynolds Metals Company, 489 F.2d 8, 12-13 (1973) cert. denied, 417 U.S. 932, 94 S.Ct. 2643, 41 L.Ed.2d 235 (1974). These elements need not be established independently.

The Court agrees with the defendants’ statement of the law. It is clearly the law of the Circuit that:

“ ‘It has been consistently held in this circuit that it is not a violation of the Sherman Act for a manufacturer to conspire with others to simply switch distributors at one of its exclusive francises and to cease doing business with the former dealer.’ Golden Gate Acceptance Corp. v. General Motors Corp., 597 F.2d [676] at 678; Marquis v. Chrysler Corp., 577 F.2d 624 (9th Cir.1978); Dreibus v. Wilson, 529 F.2d 170, 172-74 (9th Cir.1975); Bushie v. Stenocord Corp., 460 F.2d 116, 120 (9th Cir.1972); Alpha Distrib. Co. of Cal., Inc. v. Jack Daniel Distillery, 454 F.2d 442, 452 (9th Cir.1972); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd, 416 F.2d 71, 78 (9th Cir.1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970). That the termination of dealings may affect the entity refused is immaterial when the refusal is ‘for business reasons which are sufficient to the manufacturer in the absence of any arrangement restraining trade.’ Bushie v. Stenocord Corp., 460 F.2d at 119.

Chandler Supply Co. v. GAF Corp., 650 F.2d 983, 989 (9th Cir.1980).

Were this a case where the prior relationship had not been that of a distributor-supplier, D & R’s allegations in Paragraphs 22 and 22A may have been sufficient as a matter of law. Since we have already resolved the only conspiracy issue raised by the pleadings in D & R’s Sherman Act § 1 claims, the Court finds Chambers and Rangaire are entitled to summary judgment thereon.

C. D & R’s Sherman Act § 2 Claims.

At the outset, we note that defendants point to the Magistrate’s failure to address their motion as to D & R’s § 2 claims. Since we review the Magistrate’s recommendations de novo, this omission, if it did occur, is not material to our consideration.

Section 2 of the Sherman Act is violated when a refusal to deal is used as leverage to maintain or extend the trader’s monopoly power, or in an attempt to monopolize some part of the market place. 1 Von Kalinowski, Antitrust Laws and Trade Regulation ¶ 2.03(2)(a) at p. 2-31. D & R designates this claim as an attempt to monopolize.

The phrase “attempt to monopolize” means the employment of methods, means and practices which would, if successful, accomplish monopolization, and which, though falling short, nevertheless approach so close as to create a dangerous probability of it. Although the completed offense of monopolization under Section 2 only requires a general intent to do the acts leading to a monopoly, a specific intent to destroy competition or build monopoly is essential to liability. Knutson v. Daily Review, Inc., 548 F.2d 795, 813 (9th Cir.1976).

There are three necessary elements of an attempt to monopolize claim. The first is the presence of a specific intent to destroy competition or build a monopoly. Such an intent may be shown or inferred by the commission of a Section 1 violation (e.g., in Lessig v. Tidewater Oil Co, id., the court found Section 1 violation consisting of defendant’s resale price fixing and exclusive dealing). Alternately, such intent may be shown through proof of the specific intent to set prices or exclude competition in a portion of the market without legitimate business purpose. Hallmark Indus. v. Reynolds, 489 F.2d 8, 12 (9th Cir.1973). Second, the specific intent must be accompanied by either (1) predatory or anticompetitive conduct or a substantial claim of restraint of trade directed to accomplishing the unlawful purpose, or (2) sufficient market power to accomplish the unlawful purpose. Kintner, Federal Antitrust Law, § 13.4 at p. 425 and see Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919 (9th Cir.1980). Third, there must be causal antitrust injury. Cal. Computer Products v. Intern. Business Machines, 613 F.2d 727, 738 (9th Cir.1979).

Unilateral refusals to deal, in conjunction with these requisite elements, have been held to constitute an attempt to monopolize in violation of § 2 of the Sherman Act. See Kintner, Federal Antitrust Law, Vol. II § 10.25 at p. 148. D & R alleges all three in its amended complaint.

On a motion for summary judgment by a defendant on the ground that plaintiff has no valid claim, the defendant, as the moving party, has the burden of producing evidence, of the necessary certitude, which negatives the opposing party’s claim, regardless of where the ultimate burden of proof would lie at trial. National Industries v. Republic Nat. Life Ins. Co., 677 F.2d 1258, 1265 (9th Cir.1982) and generally, 6 Moore’s Federal Practice ¶ 56.15(3) at p. 56-480.

However, Chambers-Rangaire assert that they accept for purposes of the summary judgment motion that all of D & R’s factual assertions are true; that despite the truth of all the facts asserted by plaintiff, summary judgment should be granted, essentially, because plaintiff has failed, under any reasonable construction of the undisputed facts, to support a claim under Section 2 of the Sherman Act as a matter of law.

D & R’s Answer is predictable; it is the burden of the moving party to demonstrate the absence of a genuine issue as to any material fact, and since Chambers-Rangaire offer no evidence, D & R is entitled to the Court’s judgment on this point. This analysis overlooks the fact that ChambersRangaire rest not on what they can prove, but rather, on the basis that the facts marshalled by D & R on this issue are not sufficient, as a matter of law, to go to the jury.

The Court concurs with ChambersRangaire and grants their motion for summary judgment as to plaintiff’s claims based on § 2 of the Sherman Act.

IV

PRICE DISCRIMINATION CLAIMS

Plaintiff’s Robinson-Patman Act claim, 15 U.S.C. § 13 reads as follows:

“Beginning sometime in 1975, or earlier, the exact date being presently unknown to plaintiff, defendant sold built-in household cooking appliances of its own manufacture, which products were of like grade and quality to Chambers brand built-in household cooking appliances to Amana Corporation; Sears, Roebuck & Co.; and Roper Corporation, among others, at different and lower prices than the prices at which defendant sold the same products under the Chambers brand name to plaintiff. Said unlawful price discrimination violates Section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13.”

After reviewing the Magistrate’s recommendation and the evidence presented by the parties, it appears to this Court that the Magistrate was correct in determining that there is a genuine issue of fact regarding the question of “like grade and quality” which must go to the jury. However, this determination does not end the Court’s inquiry.

The defendant argues that even if the private label ovens sold to Amana were of “like grade and quality” as the Chambers-brand ovens, it is still entitled to summary judgment because the price differentials between the two types of ovens were not discriminatory. Alternately, defendants assert that even if the price differentials were discriminatory, they did not substantially injure, destroy or prevent competition. Finally, they contend that even if the price differentials were discriminatory and did substantially injure, destroy or prevent competition, they did not cause compensible injury to plaintiff and thus defendant is entitled to summary judgment on the price discrimination claim.

The defendants buttress their position by contending that had plaintiff requested the manufacture of the private label ovens it would have received them at the same price Amana did.

The resolution of this issue however turns on the resolution of the question of “like grade and quality” and since there is a factual issue remaining as to like grade and quality, the question of the price differentials being nondiscriminatory cannot be resolved at this stage of the proceedings. If for example the products are in fact of like grade and quality, then the private label arrangement is merely a facade behind which defendant hides so that it might charge different prices to different customers. The fact that plaintiff could have also benefitted from such a facade does not demonstrate that such an arrangement is not discriminatory as a matter of law.

Plaintiff must demonstrate at trial that the alleged price differential tended, substantially, to lessen or injure competition. Defendant argues that plaintiff’s answer to interrogatories in which plaintiff was asked what facts it relied on to establish that the price differentials substantially injured or lessened competition, is insufficient to prove injury to competition and thus defendant is entitled to summary judgment.

Plaintiff’s evidence shows that Mr. Watters, a research analyst of Chambers, testified both: 1) that he felt Chambers distributors were at a competitive disadvantage against Amana (Depo. 14:18-22), and 2) that they weren’t at a competitive disadvantage. (Depo. 13:11-18).

If the question of substantial injury of competition alone were the critical issue, summary judgment would be denied in light of the dispute as to whether or not such injury existed. However, the critical question in a third line injury case such as plaintiff alleges here is whether or not the favored purchaser (Amana Refrigeration) actually passed on part of the discount given it by Chambers to Amana West Coast. See Von Kalinowski, id., § 5.07[2],

Defendant argues that plaintiff “has simply adduced no evidence to support its conclusion that ... any lower price offered by Amana [Refrigeration] was the result of the price differentials upon which plaintiff bases its claim.” However, defendant does not point to any interrogatory or deposition in which such information was sought and not given by plaintiff.

Finally, defendant argues that even if the discriminatory price differentials substantially injured competition, it is entitled to summary judgment because such price discrimination did not cause compensible injury to plaintiff. A private treble damage plaintiff “must make some showing of actual injury attributable to a violation of the Robinson-Patman Act. J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1981).

However, plaintiff’s answer to Chambers interrogatories indicates that plaintiff lost sales to its retail dealer customers including nine specified customers due to the discriminatory price differentials allowed by defendant. If such loss of sales is true, plaintiff will have sufficiently met its damage requirements for a § 2(a) violation. See Allen Pen Co. v. Springfield Photo Mount Co., 653 F.2d 17, 22 (1981).

Consequently, defendant’s motion for summary judgment as to plaintiff’s Robinson-Patman Act claim is denied.

V

PLAINTIFF’S MOTION BASED ON DEFENDANT CHAMBERS-RANGAIRE EXCLUSIVE DEALING ARRANGEMENT

Paragraph 19 of plaintiff’s amended complaint alleges:

“Beginning sometime in 1977 and continuing until August 15, 1980, defendant Chambers Corporation coerced plaintiff into contracts, combinations and conspiracies to prevent competition in the manufacture, distribution and sale of products manufactured and sold by actual and/or potential competitors of defendant Chambers Corporation and/or defendant Rangaire Corporation. By said unlawful contracts, combinations and conspiracies, plaintiff was coerced, on threat of termination and refusal to deal, to refrain from purchase of household cooking appliances other than Chambers brand products for wholesale distribution by plaintiff. Said contracts, combinations and conspiracies violate Section 1 and Section 2 of the Sherman Act, 15 U.S.C. 1, 2.”

Paragraph 20 of plaintiff’s amended complaint alleges:

“Beginning sometime in 1973 and continuing up to October 1, 1980, defendant made sales of Chambers brand household cooking appliances to plaintiff on the condition, agreement and understanding that D & R Distributing would commit itself not to purchase or deal at wholesale in household cooking appliances of any manufacturers of kitchen appliances or any other actual or perceived competitor of Chambers Corporation and/or defendant Rangaire Corporation. Defendant thereafter policed the exclusive dealings arrangement by requiring and inducing plaintiff to refuse to distribute at wholesale any household cooking or other appliances other than Chambers brand products, and further, by extracting commitments that plaintiff would forbear from becoming the exclusive distributor for household appliance products other than Chambers brand products. Said unlawful contreact [sic] violates Section 1 of the Sherman Act, 15 U.S.C. 1, and Section 3 of the Clayton Act, 15 U.S.C. 14.”

Plaintiff asserts that paragraphs 19 and 20 allege alternative substantive antitrust rules: # 19 alleges a group boycott by plaintiff and defendants against competitors of defendants; #20 alleges an exclusive dealings arrangement between itself and defendant whereby plaintiff would refrain from distributing products of defendant’s competitors.

In support of its contention that paragraph 19 alleges a traditional group boycott, per se violation of the antitrust laws, plaintiff directs the court’s attention to its response to defendant’s interrogatory no. 3(g), wherein plaintiff explains its per se allegations to the defendant:

“The violation set forth in paragraph 19 constitutes a per se violation of the Sherman Act. The enlistment by Chambers Corporation, through coercive threats, of a third party, here the plaintiff, in an agreement not to trade with a manufacturer who competes with Chambers Corporation’ comprises a boycott, condemned under the Sherman Act. [citations] Traders may not exclude or inhibit a competitor trying to enter or compete in a market by coercing or inducing a customer not to deal with the competitor, [citations] Under the facts recited above, and incorporated herein by this reference, Chambers Corporation enlisted and induced plaintiff, an independent entity, on threat of termination, not to trade with competitors of Chambers Corporation, namely, Kelvinator Company, Gray and Dudley, and Roper Corporation.”

It is evident from plaintiff’s papers in opposition to the summary judgment motion and plaintiff’s responses to interrogatories that paragraph 19 is aimed at two injuries: (1) a group boycott against defendant’s manufacture-competitors and (2) loss of business from competing manufacturers.

Defendant’s challenge to the first type of injury, viz., the group boycott involving plaintiff and defendant raises a question of standing. Standing is a question of law to be decided by the court. John Lenore & Co. v. Olympia Brewing Co., 550 F.2d 495 (9th Cir.1977).

The Ninth Circuit has established the “target area” formula for determining standing. Under this doctrine, one who is only incidentally injured by a violation of the antitrust laws, “the bystander who was hit but not aimed at,” cannot recover against the violator. Karseal Corp. v. Richfield Oil Corp., 221 F.2d 358, 363 (9th Cir.1955).

It appears clear to this court that D & R Distributing does not have standing to assert the injuries of defendant’s competiting manufacturers.

The second injury plaintiff complains of in ¶ 19 is its own loss of business from competing manufacturers, specifically, Kelvinator Company, Gray and Dudley and Roper Corporation, allegedly caused by defendant’s exclusive dealing arrangement. However, this injury is more appropriately and clearly encompassed in ¶ 20.

Accordingly, the Court orders summary judgment for Chambers-Rangaire as to Paragraph 19 of plaintiff’s amended complaint.

Paragraph 20 of plaintiff’s amended complaint alleges an exclusive dealing arrangement between itself and defendant in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and Section 3 of the Clayton Act, 15 U.S.C. § 14. Plaintiff has withdrawn its assertion of a violation of the Clayton Act. It now proceeds only on its alleged § 1 of the Sherman Act violation.

In order to succeed with its § 1 claim at trial, plaintiff must demonstrate that an exclusive dealing arrangement exists, and that the performance of such an arrangement or contract will foreclose competition in a substantial share of the relevant product and geographic markets. Antitrust Adviser, 2d Ed. § 2.3 at p. 85 and see Twin City Sportserv., Inc. v. Charles O. Finley & Co., 512 F.2d 1264, 1274-1275 (9th Cir.1975) (although Court addresses § 3 of Clayton Act, it is equally applicable to § 1 of the Sherman Act).

Essentially, defendant’s argument is as follows: 1) plaintiff has failed to establish the existence of an exclusive dealing arrangement; 2) even if plaintiff has established an exclusive dealing arrangement, it has failed to adequately define the relevant market; but, 3) even if plaintiff has established the exclusive dealing arrangement and has adequately defined the relevant markets, it has failed to “adduce(d) any evidence that the alleged exclusive dealings arrangement or any other alleged restraint of trade had an adverse effect upon a substantial portion of the relevant market.

Initially, the Court notes that the defendants have failed to introduce any evidence regarding the existence or nonexistence of an exclusive dealing arrangement for the time period involved in this lawsuit. Defendant’s evidence to the effect that defendant thought that plaintiff would be unable to handle its large distribution area if it took on other manufacturers’ products or the fact that in the past plaintiff did in fact distribute products for other manufacturers adds nothing to the question of the existence or abuse of an exclusive dealing arrangement. The defendants have failed to demonstrate that there is no genuine issue as to the existence or nonexistence of this critical fact.

Next, defendant argues that plaintiff has failed to adequately define the relevant markets. However, plaintiff’s answers to interrogatories indicate that the relevant geographic market is Northern California and the relevant product markets are 1) electric built-in ovens, 2) electric built-in cooktops, and 3) 42-inch gas built-in cook-top surface units. Defendant may believe that to classify the product markets in the way in which plaintiff has done is “absurd”, but that is insufficient support for its summary judgment motion.

Finally, defendant is correct that at trial plaintiff must prove that the exclusive dealing arrangement foreclosed competition in a substantial share of the relevant markets. The court recognizes that the defendant could sustain its summary judgment burden by conclusively showing that all the material facts are in evidence and that under no interpretation of such facts could the plaintiff demonstrate the foreclosure of competition in a substantial share of the relevant markets. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). Before defendant would be entitled to summary judgment, however, it must demonstrate that all the evidence is in and with it, plaintiff cannot prove that competition in the relevant markets was foreclosed as a result of the alleged exclusive dealing arrangement. Defendant has not done this.

Accordingly, defendant’s motion for summary judgment as to plaintiff’s exclusive dealings claim as alleged in Paragraph 20 is denied.

VI

PLAINTIFF’S GROUP BOYCOTT CLAIMS

Paragraph 23 of plaintiff’s complaint states:

“Beginning sometime in November 1980, or eaerlier [sic], the exact date being unknown to plaintiff, defendant entered into and carried out contracts, combinations and conspiracies to restrain interstate trade and commerce in the relevant market by effectuation of group boycotts depriving plaintiff of Chambers brand products from interstate sources of supply including Acropolis Wholesale Lumber of Salt Lake City, Utah; Designer Kitchens of Pohoenix, [sic] Arizona; Shreiber Engineering of Los Angeles, California; and ADD Distributors of Omaha, Nebraska. Said contracts, combinations and conspiracies violate Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2.”

A group boycott is a restraint which generally is the means used for effectuating a concerted refusal to deal. Horsley, Per se Illegality and Concerted Refusals to Deal, 13 B.C. Indus. & Com.L. Rev. 484 (1972), found at n. 500 in Kintner, § 10.28 p. 155. An essential element to a group boycott claim is concerted action. Kintner: Federal Antitrust Law, Vol. II, at §§ 10.27-10.38.

The concerted action alleged by plaintiff was between C & R and each participant listed in paragraph 23 of plaintiff’s complaint, viz., Acropolis Wholesale Lumber of Salt Lake City, Designer Kitchens of Phoenix, Shreiber Engineering of Los Angeles, and ADD Distributors of Omaha.

Initially, defendants C&R argue that all the alleged participants to the group boycott claim, in their respective depositions, have stated that they chose not to do business with plaintiff because of business reasons, i.e., insufficient profit, and not due to any group boycott intentions or actions on the part of defendants C&R. Defendants’ position is that since there is no concerted action and more importantly, no genuine issue of fact as to the existence of any concerted action, plaintiff’s group boycott claim must fail and the court should grant summary judgment.

However, plaintiff has introduced evidence demonstrating that a factual question regarding the existence of concerted action among Chambers and at least one of the participants designated in paragraph 23 of his complaint exists.

Gary Bateman, the employee of the owner of Acropolis Wholesale Lumber and the one who is responsible for its purchasing, testified in his deposition that the vice-president of Chambers Corp. called and asked if a particular shipment ordered by Acropolis was intended for delivery to California and if so, Chambers Corp. wanted Bateman to know that two prior attempts to place such an order had already been made, and, although Chambers could not prevent Acropolis from making any such sale and delivery, it would prefer that Acropolis not make the particular shipment. (Deposition of Gary Bateman, 78:5-88.) On the other hand, Gary Bateman also testified that Dick Paras, the manager of Acropolis Wholesale Lumber, decided not to make the sale because, in addition to freight charges and the hassle with Chambers, no money would really be made on the sale. (Deposition of Gary Bateman, 111:9-13.)

The Court concludes that plaintiff has demonstrated a genuine issue of material fact, sufficient to withstand the motion for summary judgment, as to whether Acropolis Wholesale Lumber of Salt Lake City, Utah, was involved in “concerted action” with defendant or made a legitimate business decision.

Defendant next posits that the per se rule of unreasonableness is not applicable in the instant case because the alleged group boycott is pursuant to a vertical restraint which would be governed by the Rule of Reason analysis.

Defendant argues that since plaintiff declared that it was proceeding with a per se casé and not a rule of reason, once it is determined that a per se analysis is not applicable, plaintiff cannot choose to proceed with a rule of reason analysis. Defendants cite no authority for this proposition. There are cases where the court of appeals declined to proceed with a rule of reason analysis based on a stipulation to such effect between the parties and not any established rule of law. Plaintiffs would not be precluded from proceeding with their claim under a rule of reason analysis were the per se rule deemed to be inapplicable.

The law regarding concerted refusals to deal, or group-boycotts, is currently unsettled. One court discussing group boycotts noted “to state that the law concerning group boycotts and Section 1 of the Sherman Act lacks consistency would be to understate the truth by a wide margin.” Cullum Electric and Mechanical Inc. v. Mechanical Contractors Assn., 436 F.Supp. 418 (1976), aff'd 569 F.2d 821 (4th Cir.1978). Conduct identified as a group boycott is no longer automatically considered as per se illegal, at least by the lower courts. Kintner, id. § 10.31 at p. 169. Some courts will examine whether the parties involved in the concerted refusal to deal are horizontally or vertically integrated, applying the rule of per se illegality to the former and the rule of reason to the latter. See cases cited in Ron Tonkin Gran Turismo v. Fiat Distributors, 637 F.2d 1376, 1381-1388 (9th Cir.1981).

The classification of agreements as between horizontally integrated businesses, i.e., agreements between competitors at the same level of market structure such as among manufacturers, or among distributors), and agreements between vertically integrated businesses i.e., agreements between persons at different levels of the market structure such as manufacturers and distributors, is however not always sufficiently informative or conclusive. See, e.g., Cernuto Inc. v. United Cabinet Corp., 595 F.2d 164 (3rd Cir.1979) [agreement typically vertical, i.e. between a manufacturer and its distributor, judged by per se rule of illegality because, where agreement initiated by distributor the restraint was primarily horizontal in nature in that one customer is seeking to suppress its competition by utilizing the power of a common supplier and for purpose of controlling prices.]

Commentators in the field of antitrust law suggest that courts analyze the reasons underlying the concerted refusals to deal to determine whether they are exclusionary or anticompetitive and whether the particular practice in question is at least potentially reasonably ancillary to joint, efficiency-creating economic activities. Antitrust Advisor, 2d Ed., Supp. § 1.32 at pp. 36-46 and cases cited therein. The basic inquiry should be whether there is some plausible likelihood that the arrangement at hand has an efficiency-creating potential. If it does, it should be analyzed under the rule of reason. If not, per se illegality is appropriate. Antitrust Adviser, id., Supp. at p. 47.

After reviewing the papers in support of and in opposition to defendant’s motion for summary judgment, this Court concludes that the defendants have failed to submit sufficient evidence from which a determination as to whether the per se rule of illegality or the rule of reason should be applied to the instant case can be made. Accordingly, defendant’s motion for summary judgment on that issue is denied.

VII

PLAINTIFF’S PRICE FIXING CLAIM AGAINST DEFENDANTS CHAMBERS AND AMANA REFRIGERATION

Paragraph 18 of plaintiff’s First Amended Complaint alleges:

Beginning on January 5, 1977 and continuing at least to the time this complaint was filed, Chambers Corp. and Amana Refrigeration entered into and carried out a contract, combination and conspiracy to fix, stabilize, peg, control and regulate prices on sales of self-cleaning pyrolytic electric built-in wall ovens and other built-in kitchen appliance products sold under Amana and Chambers brand names. Said contract, combination and conspiracy unreasonably restrained interstate trade and commerce in California and in the U.S. in violation of Section 1 and Section 2 of the Sherman Act, 15 U.S.C. §§ 1, 2.

Plaintiff’s theory is that defendants Chambers Corporation and Amana agreed to an exchange of distributor price lists with the intent of fixing prices.

Generally, the mere compilation and dissemination of pricing information among competitors does not constitute a per se violation of the Sherman Act. United States v. United States Gypsum Co., 438 U.S. 422, 441, 98 S.Ct. 2864, 2875, n. 16, 57 L.Ed.2d 854, 872, n. 16 (1978), United States v. Container Corp., 393 U.S. 333, 89 S.Ct. 510, 21 L.Ed.2d 526 (Fortas concurring) (1969), Krehl v. Baskin Robbins Ice Cream Co., 664 F.2d 1348, 1357 (9th Cir.1982), Rutledge v. Electric Hose & Rubber Co., 327 F.Supp. 1267, 1272 (C.D.Cal.1971), and see discussion in Kintner, Federal Antitrust Law, Vol. II, §§ 10.2-10.14. However, an exchange of price information coupled with a restriction of output or otherwise specific actions designed to achieve a uniformity of prices among competitors would constitute a per se violation of the Sherman Act. United States v. American Linseed Oil Co., 262 U.S. 371, 43 S.Ct. 607, 67 L.Ed. 1035 (1923), Krehl, id., and Morton Salt Co. v. United States, 235 F.2d 573, 576-577 (10th Cir.1956), and United States v. Citizens National Bank, 422 U.S. 86, 113, 95 S.Ct. 2099, 2115, 45 L.Ed.2d 41, 62 (1975).

Defendants correctly point out that mere price similarity, when faced with identical or similar products involving similar costs necessarily requiring somewhat similar prices, standing alone, would be too insubstantial a foundation to support an inference of an unlawful price fixing conspiracy. See Krehl, supra, at p. 1357, n. 22. This clearly falls short of the type of conduct accompanying price information exchange which courts have found to be per se illegal. See, e.g., United States v. American Linseed Oil Co., supra. However, the ultimate test is not only what the actual effect is on prices, but whether such agreements interfere with "the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.” Plymouth Dealers’ Ass'n. of No. Cal. v. United States, 279 F.2d 128, 132 (4th Cir.1960).

Plaintiff relies on its evidence of an agreement between Chambers/Rangaire and Amana to exchange prices as the sole justification for concluding that defendants committed a per se violation of the Sherman Act. This is clearly not the law and plaintiff fails, as a matter of law, in its attempt at summary judgment. The Court concludes that the Magistrate was correct in denying plaintiff’s cross-motion for summary judgment.

VIII

DEFENDANT CHAMBERS MOTION RE PRICE FIXING

However, the court notes that defendants, in support of their motion for summary judgment on plaintiff’s price fixing claim, introduce evidence that one of Amana’s executives responsible for setting the price of its ovens never examined or perused Chambers’ price list, but, rather, fixed the price of its ovens by determining the cost of production and then adding a percentage profit figure to this amount. (Affidavit of George Tolbert). However, Mr. Tolbert’s superiors to whom he sent his final prices for approval have not declared that they never saw the Chambers’ price list or used it in finally determining Amana’s price structure. Although defendant’s counsel argues in its brief that Chambers’ executives and departments responsible for price setting used the same procedure and did not examine Amana’s price list, there is no evidence of this presented to the Court for its consideration.

Rather, Mr. O.E. Pritchard, the Cost Manager for Chambers and the person who was responsible “for determining the standard cost of production of ovens sold by Chambers to its regional distributors under the Chambers brand states that, “I was periodically requested by my superiors at Chambers to determine the standard cost of [the ovens in question] for use in determining the price to be charged by Chambers for such ovens.” Then, in his affidavit, Mr. Newton of Chambers testified that Mr. Hill or Mr. Grimes of Chambers determined what percentage of profit Chambers wanted to receive on its ovens. Nowhere does Chambers introduce evidence that the price list of Amana was not used or considered in effecting Chambers’ own prices.

All inferences to be drawn in a summary judgment motion must be drawn in favor of the non-moving party. The movant must make a showing that makes it quite clear what the facts are as established by the evidence, and that excludes any real doubt as to the existence of any genuine issue of material fact. 6 Moore’s, ¶ 56.15[3], at pp. 56-466 — 56-473. If the executives at Chambers who are responsible for establishing and finalizing the price to its distributors, in fact, examined and considered Amana’s price lists in determining their own prices, the jury would be entitled to decide that an agreement to regulate, stabilize or otherwise fix prices did in fact exist. Such an inference by the fact finder would entitle plaintiff to a “per se” finding of antitrust liability.

Defendants argue, alternately, that even if the plaintiff prevails on the issue of liability, plaintiff has presented no evidence of injury in fact, or, alternately, any evidence from which plaintiff’s damage might be computed.

The antitrust plaintiff may recover three types of damages: (1) Its increased costs, (2) lost past profits, and (3) reduction in the value of his business. Antitrust-Treble Damages — Injury, 16 A.L.R.Fed 14, 19. Of course, double recovery is not allowed, id. In the instant case, it appears that plaintiff seeks to recover its increased costs in the form of overcharges for the fixed-price items, or, alternately, its lost net profits measured by the “before and after” method.

Defendant posits that there is only one proper type of recovery — that of increased costs measured by the amount of overcharge for the fixed item. Although this is generally considered the most simple method of fixing damages, (Antitrust Adviser, 2d Ed., § 12.50 at p. 899) it is not the exclusive remedy. See Washington State Bowling Prop. Ass’n v. Pacific Lanes, Inc., 356 F.2d 371, 379 (9th Cir.1966), cert. denied 384 U.S. 963, 86 S.Ct. 1590, 16 L.Ed.2d 674, and 16 A.L.R.Fed. at p. 19.

Commonly, the increased cost damages involve a price overcharge. Where illegal price fixing results in an artificially high price, those who pay the fixed price may recover the difference between the fixed price and the price which would otherwise have prevailed absent the illegal price fixing. 16 A.L.R.Fed. 19; Chattanooga Foundry and Pipe Works v. Atlanta, 203 U.S. 390, 396, 27 S.Ct. 65, 66, 51 L.Ed. 241 (1906); and Thomsen v. Cayser, 243 U.S. 66, 88, 37 S.Ct. 353, 360, 61 L.Ed. 597 (1917). And, although determining what the price would have been absent a conspiracy may require some speculation. A wrongdoer should not be permitted to invoke the uncertainty created by his own wrong and use it to preclude a plaintiff’s recovery. National Constructors v. National Elec. Contractors, 498 F.Supp. 510, 518, 538 (D.Md.1980).

Recovery of lost profits is measured in any of three ways: The “before and after” method, the “yardstick method,” or the “sales projection” method. 16 A.L.R.Fed. 20. Plaintiff states that it has chosen the “before and after” method.

The “before and after” method compares two periods of time in the antitrust claimant’s business — the period during which his business suffered from the antitrust violations, and a previous or subsequent period free from the effect of the antitrust violations. Specifically, the claimant is awarded the difference between, (1) his net profits during a period either before the antitrust violations began or after they had ceased and their effects had ended, and (2) his net profits during the period of the antitrust violations. Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652 (1946), and 16 A.L.R.Fed. 21. The period used for comparison with the damage period must be a fair measure of the claimant’s profits. 16 A.L.R.Fed., id. The Ninth Circuit has held that the before and after method of measuring damages may be used only where there has been some showing that the market conditions in the two periods were similar but for the impact of the violation. Pac. Coast Agri. Export Ass’n. v. Sunkist Growers, Inc., 526 F.2d 1196, 1206-1207 (9th Cir.1975).

Plaintiff asserts that the “starting point for computing the overcharge extracted from plaintiff and other direct purchasers during the period of the price fix” is the 41.5% profit margin of Chambers and the 26% profit margin of Amana. Plaintiff then correctly points out the relevant inquiry: “The issue then is to determine what the price in a free and open market would have been but for the artificial price-fix imposed on the market by Chambers and Amana.”

First, the margin of profit received by defendants, while relevant, is not determinative. Plaintiff would need to demonstrate that, at a minimum, the margin of profit was appreciably different during the period of antitrust violation than during the periods of no antitrust violation. Plaintiff says nothing more than is mentioned above. Nor, in its answers to interrogatories, does plaintiff do more than to mention what the range of profit margin of defendants was — without indicating any specific time period for purposes of comparison.

More importantly, the difference between the price charged to plaintiff and defendants’ marginal cost of production, without more, is not necessarily relevant nor necessarily indicative of what the “overcharge” was. Granted, in a free, ideally competitive market, often prices will not be much greater than the marginal cost of production. And true, in some monopoly cases, the fact that prices are much greater than the marginal cost of production is some indication of control over prices. However, it is necessary to know more than defendants’ mere marginal cost of production. One can be competitive and still be able to charge more than the marginal cost of production — assuming the market will bear it.

In summary, defendants’ position is that all of plaintiff’s evidence, as demonstrated by its answers to interrogatories, fails to present evidence of damages.

Implicit from the facts given in plaintiff’s answers regarding the issue of damages is that the “free market, non-fixed price” during the antitrust violation period is evidenced by the price Chambers sold the relevant products to Amana, which price is less than it sold the same products to D & R.

Granted, plaintiff could have given more complete answers to defendants’ interrogatories, but for purposes of this summary judgment motion, in view of the fact that all inferences must be drawn in plaintiff’s favor, plaintiff has some evidence of injury and some evidence from which the jury could calculate the amount of damages.

Plaintiff does not mention its use of the “before and after” method of calculating damages in its answers to interrogatories.

Accordingly, it is ordered that:

1. Plaintiff’s Motion for Summary Judgment on the Sherman Act claims is denied, and

2. Defendant Chambers’ and Amana’s Motions for Summary Judgment on the plaintiff’s price fixing claims are likewise denied.

Counsel for the moving defendants are to prepare and lodge with the Court separate judgments consistent with this Memorandum Decision and Order and lodge the same within twenty (20) days of the date of this Order. Counsel for the plaintiff shall have twenty (20) days to object to the form of such judgments.

      . See Gonzales v. Harris, 514 F.Supp. 991 (D.C.1981).

      . R & K’s original motion was entitled "Motion to Dismiss Amended Complaint.” It is based on Fed.R.Civ.P. 12(b)(2), (6). It should be noted that R & K was named in the First Amended Complaint for the first time. R & K’s original motion was denied. R & K then filed the instant motion for summary judgment.

      . See the Court’s comments concerning the Chambers in-house memorandum, supra, which analysis is equally relevant here.

      . The Court adopts a "compartmentalized” approach to this motion,

      . We have already dealt with the claim of conspiracy between Chambers and R & K. (See part I, supra.)


source: Caselaw Access Project

author: ORRICK, District Judge.

license: Public Domain

text:
    George SOUSA and Jacqueline Sousa, Plaintiffs, v. OCEAN SUNFLOWER SHIPPING CO., LTD., Neptune Leo Shipping Corporation, and Kurushima Dockyard Co., Ltd., Defendants.
    No. C-83-5329 WHO.
    United States District Court, N.D. California.
    Sept. 24, 1984.
    Eugene A. Brodsky, Jarvis, Miller, Brodsky, & Baskin, Inc., San Francisco, Cal., for plaintiffs.
    John Hays, George L. Waddell, James R. Walsh, Dorr, Cooper & Hays, San Francisco, Cal., for Kurushima.
    John A. Flynn, Graham & James, San Francisco, Cal., for Ocean Sunflower & Neptune Leo Shipping.
   OPINION AND ORDER

ORRICK, District Judge.

The question presented by the instant motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) is whether this Court may constitutionally exercise personal jurisdiction over defendant Kurushima Dockyard Co., Ltd. (“Kurushima”), a Japanese shipbuilder, whose only contact with this forum is that it designed a ship to be used by another company in trade between Japan and the United States west coast.

For the following reasons, the Court determines that Kurushima has not purposefully availed itself of the privilege of conducting activities in this forum. Because the moving defendant lacks minimum contacts with the forum the Court’s assumption of jurisdiction would violate due process, and hence the motion to dismiss is granted.

I

Plaintiff George Sousa is a longshoreman allegedly injured when he was struck by a water-tight door while ascending a ladder aboard the M.S. Tokyo Rainbow (“the vessel”). At the time of the accident the vessel was afloat in the navigable waters of Humboldt Bay, California. In March, 1988, Sousa and his wife filed a negligence and products liability action against Kurushima, the vessel’s Japanese designer and builder; its Japanese owners, Ocean Sunflower Shipping Co., Ltd.; and its charterer, Neptune Leo Shipping Corporation. Plaintiffs allege that the watertight door was negligently designed and located near the ladder. Plaintiffs and Kurushima’s co-defendants (hereinafter referred to as “co-defendants”) oppose Kurushima’s motion to dismiss.

Kurushima brings this motion asserting that the Court lacks personal jurisdiction over it. In support of the motion, Kurushima submitted the affidavit of Izumi Yanai, an officer of Kurushima and Manager of its Design Department, explaining that it is engaged solely in the shipbuilding business, and builds ships at two dockyards it owns in Japan. Kurushima, which has no officers, agents, employees, or representatives in the United States or California, has never built or converted any vessels or sold any vessels to anyone in this country, nor has it ever solicited or received any orders from the United States or California. Kurushima has no business communications with anyone in the forum, and its officers or employees have never visited this country on any business related to the vessel Tokyo Rainbow. Finally, Kurushima has never performed services, conducted operations, or possessed property in the country, or in any way looked to the laws of California or the United States for any privilege or protection. Affidavit of Izumi Yanai filed February 28, 1984.

Co-defendants, however, submitted the affidavit of the Executive Director of Tokai Shipping, the vessel’s original owner. The affidavit states that in 1974-1975 Tokai contracted with Kurushima for the building of a ship with certain major design changes from Kurushima’s “standard type of log carrier vessel.” These changes were made to enable the ship to carry Japanese steel to the United States west coast, including California. Among other things, Kurushima strengthened the vessel’s tank top, changed the vessel’s hatch covers, and changed the cargo gear. Tokai sold the vessel to Ocean Sunflower in 1982. Because of these design changes, co-defendants submit that Kurushima knew or should have known that the vessel would be calling at United States west coast ports, including those of California. Affidavit of Tamotsu Horibata, attached to defendant Ocean Sunflower’s memorandum of points and authorities in opposition to motion to dismiss, filed May 16, 1984.

The Court must decide if these facts, standing alone, are sufficient to invoke limited personal jurisdiction over Kurushima for purposes of this action.

II

To determine whether this Court has personal jurisdiction over Kurushima, it must first decide whether California’s long-arm statute potentially confers personal jurisdiction over the nonresident defendant, and second, whether the application of the statute is consistent with federal due process. See, e.g., Congoleum Corp. v. DLW Aktiengesellschaft, 729 F.2d 1240, 1241 (9th Cir.1984). In this case, § 410.10 of the California Code of Civil Procedure permits California courts to “exercise jurisdiction on any basis not inconsistent with the Constitution of this State or of the United States.” Thus, the state and federal limits are coextensive. Congoleum, supra, 729 F.2d at 1241. The Court, therefore, must now determine whether application of the statute is consistent with due process.

Due process requires that a defendant have certain minimum contacts with the forum such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). In Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1287 (9th Cir.1977), this circuit adopted the following criteria for evaluating the nature and quality of a defendant’s minimum contacts: (1) the nonresident defendant must perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one that arises out of or results from the defendant’s forum-related activities; and (3) the exercise of jurisdiction must be reasonable. Id. at 1287; see Cubbage v. Merchent, 732 F.2d 1476, 1478 (9th Cir.1984); Raffaele v. Compagnie Generate Maritime, 707 F.2d 395, 397 (9th Cir.1983). The party seeking to invoke jurisdiction has the burden of establishing that jurisdiction exists. Data-Disc, supra, 557 F.2d at 1285.

The Data-Disc “purposeful availment” requirement ensures that a “defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.” Hunt v. Erie Insurance Group, 728 F.2d 1244, 1247 (9th Cir.1984) (emphasis in original), quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980); see Rush v. Savchuk, 444 U.S. 320, 332, 100 S.Ct. 571, 579, 62 L.Ed.2d 516 (1980) (defendant must have judicially cognizable ties with forum). The focus of the minimum contacts analysis must be on the relationship among the defendant, the forum, and the litigation. Cubbage, supra, 732 F.2d at 1478.

The issue here is whether Kurushima purposefully availed itself of the privilege of conducting activities in California by redesigning its standard log-carrying vessel to carry steel that it knew would be destined for United States ports. To invoke jurisdiction, plaintiff and co-defendants, contend that Kurushima placed the vessel in the “stream of commerce” with the knowledge that it would call on United States west coast ports, including California. Kurushima argues that foreseeability alone is insufficient to invoke the Court’s jurisdiction. It maintains that it derives no benefits or protections from California, either by soliciting business or distributing its products there.

A

In Kurushima’s view, the facts here cannot be distinguished from those in World-Wide Volkswagen. In that case, an automobile distributor sold cars and parts to dealers in three northeastern states. An auto purchaser sought to invoke an Oklahoma court’s personal jurisdiction over the distributor on a products liability claim arising from an Oklahoma accident.

The Supreme Court, extensively discussing the “purposeful availment” due process requirement, discarded the notion that the “defective” automobile’s mobility had any bearing on the outcome of the personal jurisdiction question. World-Wide Volkswagen, supra, 444 U.S. at 296-97 n. 11, 100 S.Ct. at 567 n. 11. The Court also rejected the assertion that foreseeability of the auto’s use in Oklahoma controlled. “ ‘Foreseeability’ alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause.” Id. at 295, 100 S.Ct. at 566 (emphasis added). The Court did instruct that foreseeability is not wholly irrelevant, however.

“[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.”

Id. at 297, 100 S.Ct. at 567; see Cubbage, 732 F.2d at 1478 (if a defendant “purposefully availed” itself of the forum’s privileges it should foresee being haled into court there).

The Supreme Court found that the distributor did not directly or indirectly serve the Oklahoma market. It sold no cars to Oklahoma residents and solicited no business there. The Court contrasted a situation where a manufacturer or distributor seeks to serve a market for its products in other States. For example, a forum State would not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that “delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.” Id., 444 U.S. at 298, 100 S.Ct. at 567.

In Hedrick v. Daiko Shoji Co., Ltd., Osaka, 715 F.2d 1355 (9th Cir.1983), the Ninth Circuit applied the teachings of World-Wide Volkswagen to facts similar to those at bar. Hedrick involved an Oregon longshoreman injured by a defective wire splice while working aboard a Japanese-owned ship. The splice was manufactured by a Japanese corporation, Daiko, and was sold for use on ocean-going vessels serving world ports. On motion by the defendant, the district court dismissed plaintiff’s products liability claim against Daiko because the arrival of the splice in Oregon was “completely fortuitous.” Hedrick, 715 F.2d at 1356.

The Ninth Circuit based its reversal on the stream of commerce theory. Id. at 1358. The court noted that Daiko manufactured for a world-wide market, annually producing over 300,000 splices. It held that “Daiko performed a forum-related act when it produced a splice that it knew was destined for ocean-vessels serving United States ports, including those of Oregon.” Id.

Because the Supreme Court has rejected foreseeability as a due process criterion, the Court must closely examine the Hedrick court’s interpretation of World-Wide Volkswagen and the stream of commerce theory. Significantly, the Hedrick court misstated a crucial teaching of World-Wide Volkswagen. The circuit stated that a court may assert personal jurisdiction where a “defendant delivers its products into the stream of commerce with the expectation that they will reach the forum state." Hedrick, supra, 715 F.2d at 1358 (emphasis added). The Supreme Court actually held that a court does not exceed its power by asserting jurisdiction over a “corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state.” World-Wide Volkswagen, supra, 444 U.S. at 298, 100 S.Ct. at 567 (emphasis added). A discussion of the stream of commerce theory illustrates the significance of the slight change in language.

B

The stream of commerce theory posits that by distributing a product nationally, a manufacturer has submitted voluntarily to the jurisdiction and laws of any state to which the product travels. See Note, The Long Arm Reach of the Courts under the Effect Test After Kulko v. Superior Court, 65 Va.L.Rev. 175, 179 (1979). Courts developed this theory to prevent manufacturers from insulating themselves from product liability suits merely by using distribution “middlemen” or by professing ignorance of the product’s ultimate destination. See DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 285 (3d Cir.), cert. denied, 454 U.S. 1085, 102 S.Ct. 642, 70 L.Ed.2d 620 (1981); American President Lines, Ltd. v. Metropolitan Stevedore Services, 567 F.Supp. 169, 171 (W.D.Wash.1983). Personal jurisdiction is reasonable because by increasing the distribution of its products through indirect sales within the forum, a manufacturer benefits legally from the protection provided by the laws of the forum state, as well as economically from indirect sales to forum residents. DeJames, supra, 654 F.2d at 285.

The Ninth Circuit employed this theory in Duple Motor Bodies, Ltd. v. Hollingsworth, 417 F.2d 231 (9th Cir.1969). There, the court held that a British defendant purposefully availed itself of Hawaii’s protections and privileges when it designed coach bodies to be sold to Hawaiians for use in Hawaii. The court did not consider it a burden on foreign trade “to require a manufacturer to defend his product wherever he himself has placed it, either directly or through the normal distributive channels of trade.” Id. at 235.

Thus, there is a decidedly “economic” rationale underlying the stream of commerce theory. Positioned at the start of the distribution system, a manufacturer purposefully conducts its activities to make its products available for purchase in as many forums as possible, thereby directly and indirectly serving a wide market. See Nelson v. Park Industries, Inc., 717 F.2d 1120, 1125 (7th Cir.1983). Because a manufacturer intends to serve a broad market, and because it derives direct economic benefit from serving that market, a manufacturer may be subject to a particular forum’s jurisdiction. Id. at 1126; see Insurance Co. of North America v. Marina Salina Cruz, 649 F.2d 1266, 1274 (9th Cir.1981) (Schroeder, J., specially concurring); Cannon v. Tokyu Car Corp., 580 F.Supp. 1451, 1454 (S.D.Miss.1984).

C

Using the stream of commerce theory, the Hedrick decision broadens personal jurisdiction to all forums where a manufacturer knows that its product arrives and is used, regardless of whether the manufacturer has sought to place the product there through a direct or an indirect marketing scheme. This position, rejected by the majority in World-Wide Volkswagen, was advocated by Justice Brennan in dissent:

“It is difficult to see why the Constitution should distinguish between a case involving goods which reach a distant State through a chain of distribution and a case involving goods which reach the same State because a consumer, using them as the dealer knew the customer would, took them there. In each case the seller purposefully injects the goods into the stream of commerce and those goods' predictably are used in the forum State.”

World-Wide Volkswagen, supra, 444 U.S. at 306-07, 100 S.Ct. at 584 (Brennan, J., dissenting) (emphasis added, footnote omitted).

Rejecting Justice Brennan’s position, the majority of the Court emphasized that it is the defendant’s conduct that must be analyzed. “[T]he mere ‘unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.’ ” Id. at 298, 100 S.Ct. at 567, quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958). The Court recently reaffirmed World-Wide Volkswagen, holding that “unilateral activity of another party or third person is not an appropriate consideration when determining whether a defendant has sufficient contacts with a forum” to justify personal jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, — U.S. -, -, 104 S.Ct. 1868, 1873, 80 L.Ed.2d 404 (1984). A forum’s jurisdiction is reasonable where a manufacturer seeks to serve “the market for its products” in the forum, World-Wide Volkswagen, supra, 444 U.S. at 297, 100 S.Ct. at 567, but not where a third party merely uses defendant’s product there. The reasoning in Hedrick is thus inconsistent with that of the Supreme Court.

The Third Circuit refused to apply the stream of commerce theory to facts indistinguishable from those at bar. In DeJames, supra, a longshoreman brought a negligence and strict liability action for injuries suffered on a ship anchored off New Jersey. The Japanese defendant, Hitachi, had converted the vessel in Japan from a bulk carrier to an automobile carrier for the vessel’s owner. Plaintiff argued that because Hitachi “manufactured” a ship capable of carrying automobiles, it should be amenable to process in any port where the ship docks and injury results.

After reviewing the theory’s underlying rationale, the DeJames court observed that Hitachi did not directly or indirectly “market” the vessel in New Jersey. DeJames, supra, 654 F.2d at 285. The court also found that Hitachi received no economic benefit from the forum:

“Hitachi receives no economic benefit, either direct or indirect, from residents of New Jersey. Although it could be argued that Hitachi receives some derivative benefit from the international market for Japanese cars and from the fact that the charterers of the vessel were permitted to unload cars in New Jersey, we believe that this attenuated benefit is insufficient to support the assertion of personal jurisdiction.”

Id. at 285. Accord Growden v. Ed Bowlin & Associates, Inc., 733 F.2d 1149 (5th Cir.1984).

D

These considerations apply with equal force to the case at bar. Kurushima sold the vessel in Japan to a Japanese customer who sold the vessel in 1982. Kurushima did not use the shipowner as a “distributor” to deliver its “product” into California for purchase there. Cf. Duple Motor Bodies, supra, 417 F.2d at 234-35. Kurushima does not derive any economic benefit from California. It may indirectly benefit from the international market for Japanese steel and United States lumber because this trade increases the demand for vessels capable of transporting these products. Such derivative economic benefits from the forum, however, will not support personal jurisdiction under a stream of commerce theory. See DeJames, supra, 654 F.2d at 285-86; World-Wide Volkswagen, supra, 444 U.S. at 299, 100 S.Ct. at 568.

Kurushima’s shipbuilding activities are conducted exclusively in Japan, apparently without the slightest inclination to develop a customer base in the United States. The record reveals only one contact with the forum — the arrival of the Tokyo Rainbow and the occurrence of an alleged injury. By modifying the vessel to enable it to carry steel to the United States and other world ports, Kurushima did not seek to serve the California market or to distribute its goods in California. See Insurance Co. of North America, supra, 649 F.2d at 1274 (Schroeder, J., specially concurring); cf. Raffaele, supra, (defendant purposefully injected its services into forum by negligently loading containers). Similarly, to the extent that the ship’s arrival in California was foreseeable, foreseeability is insufficient to invoke personal jurisdiction.

Kurushima has not sought to serve the California market by redesigning its standard vessel to carry steel. Plaintiff has pointed to no benefit or protection that Kurushima enjoys from the laws of this forum. The Court, therefore, finds that Kurushima has no constitutionally cognizable contacts with this forum.

Accordingly,

IT IS HEREBY ORDERED that defendant Kurushima’s motion for dismissal for lack of in personam jurisdiction is granted. On or before October 10, 1984, defendant Kurushima shall lodge with the Court a form of judgment approved as to form by the plaintiffs.

      . Kurushima's affidavit also discloses that since 1949 its employees have visited southern California twice: once in 1978 to investigate port conditions and once in 1983 to examine a cracked hull. Neither of these contacts relates to the present controversy.

      . Plaintiff also relies on Raffaele v. Compagnie Generate Maritime, S.A., 707 F.2d 395 (9th Cir.1983). Raffaele is inapposite because it involved a negligence claim to which the stream of commerce theory is inapplicable. The court found that defendant had purposefully availed itself of the benefits of conducting business in the forum, because (1) it had packed the containers that injured plaintiff, (2) the crates were marked as destined for the forum, and (3) defendant had by contract agreed to submit to the jurisdiction of any court in which the carrier of the crates might bring a recourse action. Id. at 397.

      . In Growden v. Ed Bowlin & Associates, Inc., 733 F.2d 1149 (5th Cir.1984), the court found no personal jurisdiction although defendant had more contacts with the forum than Kurushima has with this forum. The plaintiff in Growden brought a wrongful death diversity action against a Georgia corporation engaged in the resale of used aircraft. Plaintiff filed his suit in Louisiana, claiming the following jurisdictional contacts: (1) defendant advertised its business in two national publications; (2) delivery of the aircraft occurred in Louisiana, (3) defendant promised to pay for repairs to the alternator light on the plane; (4) defendant knew the plane would be based in Louisiana; and (5) the plane was paid for with checks drawn on a Louisiana bank. On the significance of defendant's knowledge that the plane would be based in Louisiana (the single factor on which plaintiff Sousa would base personal jurisdiction in this case), the Fifth Circuit held that such knowledge was "insufficient to support the exercise of jurisdiction.” Id. at 1152. The court noted that defendant had sent no written representations to the plaintiffs and that the mobility of the airplane "would preclude any certain knowledge that the plane would be used only in Louisiana.” Id.

      . Because the Court decides this case on the first Data-Disc criteria, it is not necessary to determine whether the plaintiffs injury arose from a forum-related act, or whether assumption of jurisdiction would be reasonable. However, even assuming that the redesign of the vessel was a “purposeful interjection” into this forum, plaintiff has made no showing that his injury arose from a part of the vessel that was redesigned to enable it to engage in a particular type of trade with California and the west coast. The water-tight door plaintiff complains of was not included in the description of modifications to the vessel set forth in co-defendants' affidavit in opposition.