Citations
- 560 F. Supp. 760
Full opinion text
MEMORANDUM OPINION AND ORDER
JOSEPH H. YOUNG, District Judge.
The Judicial Panel on Multidistrict Litigation has consolidated the eight above-captioned actions for pretrial purposes and assigned them to this Court pursuant to 28 U.S.C. § 1407(a) (1976). These lawsuits include six actions brought by the Corporation Counsel of the District of Columbia and the attorneys general of Delaware, Maryland, Pennsylvania, Virginia, and West Virginia on behalf of their respective citizenry under the parens patriae provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. §§ 15c-15h (1976), and two private treble damage antitrust actions asserted pursuant to 15 U.S.C. § 15 (Supp. V 1981). All eight actions commonly allege violations of § 1 of the Sherman Act, 15 U.S.C. § 1 (1976), by the regional Toyota distributor for the mid-Atlantic states and various local Toyota dealers within the distributor’s region. Plaintiffs in all actions have named three common defendants (hereafter “Weisman defendants”): the distributor, Mid-Atlantic Toyota Distributors, Inc. (hereafter “MAT”), its corporate affiliate, Carecraft Industries, Ltd. (hereafter “Carecraft”), and the controlling individual behind both entities, Frederick R. Weisman (hereafter “Weisman”). Individual dealers comprise all of the remaining defendants in each action and appear only in those suits appropriate to their respective geographic locations.
The Court currently has before it numerous defense motions for summary judgment. After a full round of briefing, the Court heard oral argument on- the motions on October 28, 1982. The Court subsequently concluded that it needed certain additional information for full consideration of the issues raised, and the parties promptly provided the Court with appropriate stipulations as well as supplemental memoranda commenting on the legal significance of the submitted information. After careful consideration of the extensive record in this litigation, the Court grants the defendants’ motions to a limited extent and enters partial summary judgment in their favor on all claims grounded upon the so-called “Double Value Days” program. Fed.R.Civ.P. 56(d). The Court denies all other portions of the defense motions, but reviews certain principles of law which will govern the remainder of this litigation. In particular, the determination of § 1 liability may proceed under a “per se” standard, although not in the precise manner the plaintiffs have argued for. A fuller exposition of the scope of and basis for these rulings follows.
SUMMARY JUDGMENT STANDARDS IN ANTITRUST LITIGATION
Summary judgment is ordinarily appropriate when:
the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). The Fourth Circuit has amply elaborated upon this standard in an opinion which merits quotation at length:
It is well settled that summary judgment should not be granted unless the entire record shows a right to judgment with such clarity as to leave no room for controversy and establishes affirmatively that the adverse party cannot prevail under any circumstances, [sic] Neither should summary judgment be granted if the evidence is such that conflicting inferences may be drawn therefrom, or if reasonable men might reach different conclusions. 3 Barron & Holtzoff, Federal Practice & Procedure § 1234 (Rules ed. 1958). Burden [sic] is upon party moving for summary judgment to demonstrate clearly that there is no genuine issue of fact, and any doubt as to the existence of such an issue is resolved against him. 3 Barron & Holtzoff, Federal Practice & Procedure § 1235 (Rules ed. 1958).
In Kirkpatrick v. Consolidated Underwriters, 227 F.2d 228 (4th Cir.1955), this court repeated its holding in Pierce v. Ford Motor Co., 190 F.2d 910 (4th Cir. 1951), that summary judgment under Rule 56 should be granted only where it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law. This is true even where there is no dispute as to the evidentiary facts but only as to the conclusions or inferences to be drawn therefrom, and the “party opposing a motion for summary judgment is entitled to all favorable inferences which can be drawn from the evidence.” Cram v. Sun Ins. Office, Ltd., 375 F.2d 670, 674 (4th Cir.1967).
As we stated in American Fid. & Cas. Co. v. London & Edinburgh Ins. Co., 354 F.2d 214, 216 (4th Cir.1965):
“Not merely must the historic facts be free of controversy but also there must be no controversy as to the inferences to be drawn from them. It is often the case that although the basic facts are not in dispute, the parties nevertheless disagree as to the inferences which may properly be drawn. Under such circumstances the case is not one to be denied on a motion for summary judgment.”
Phoenix Savings and Loan, Inc. v. Aetna Casualty & Surety Co., 381 F.2d 245, 249 (4th Cir.1967).
In light of this strict standard, it is not surprising that some courts have traditionally demonstrated a marked reluctance towards summary disposition of complex antitrust cases. See, e.g., Norfolk Monument Co., Inc. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 704, 89 S.Ct. 1391, 1393, 22 L.Ed.2d 658 (1969); Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); Morrison v. Nissan Motor Co., Ltd., 601 F.2d 139, 141-42 (4th Cir.1979). See generally 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2732.1 at 313-31 (2nd Ed.1983). As Justice Clark said for the majority in Poller:
summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised. Trial by affidavit is no substitute for trial by jury. * * *
Poller, 368 U.S. at 473, 82 S.Ct. at 491. On the other hand, the Supreme Court has indicated that some limits exist upon this judicial reluctance:
To the extent that petitioner’s argument can be interpreted to suggest that Rule 56(e) should, in effect, be read out of antitrust cases and permit plaintiffs to get to a jury on the basis of the allegations in their complaints, coupled with the hope that something can be developed at trial in the way of evidence to support these allegations, we decline to accept it. While we recognize the importance of preserving litigants’ rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence to support the complaint.
First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968). Accord National Electrical Contractors Association, Inc. v. National Constructors Association, 678 F.2d 492, 497 (4th Cir.1982). See generally 2 P. Areeda & D. Turner, Antitrust Law ¶ 316 (1978) (suggesting broader appropriateness of summary judgment). Nevertheless, summary disposition remains a highly elusive goal in cases such as the present one which contain allegations of § 1 conspiracy dependent upon divination of subjective intent. Neel v. Waldrop, 639 F.2d 1080, 1084 (4th Cir.1981).
REVIEW OF THE UNDISPUTED FACTS AND DISPUTED ALLEGATIONS
This case centers around the antitrust implications of two sets of multiple individual agreements between MAT and its dealers regarding a package of accessories for 1980 model Toyotas. Featuring “Polyglycoat” brand sealant products, the package of accessories (hereafter “protective package”) included rustproof shielding, paint sealant, interior (textile or vinyl) sealant, souldshielding (undercoating), and membership in the “Cross Country Motor Club.”
The parties do not dispute the facial elements of the individual contracts within each set of agreements. In the first group of agreements, solicited by MAT under its “Total Concept Protective Program” (hereafter “Total Concept Program”), each dealer individually contracted with MAT to have the protective package applied to all of the 1980 Toyotas the dealer ordered, at a cost to the dealer of $113.90. The protective package on cars furnished under the Total Concept Program had a suggested retail price of $533.90 listed on the “sticker” which the Monroney Act, 15 U.S.C. §§ 1231-1233 (1976), requires automobile manufacturers and distributors to attach to all new vehicles.
In the second set of agreements, entered into as part of the distributor’s “Double Value Days” program, many dealers individually contracted with the distributor to reduce the price on all Toyotas containing the protective package by the full suggested retail price of $533.90. In consideration, the distributor would rebate to the dealer the entire wholesale price of $113.90. This retail discount did not actually appear on the Monroney sticker. Instead, the participating dealer agreed to inform the customer of the $533.90 discount at the time the dealer initially showed the customer the car (i.e., the dealer agreed not to wait and see if perhaps the customer would take the car without the discount).
While these bare contractual terms appear to be conceded by all parties, the import of these individual agreements when cumulated is hotly disputed. Asserting that far more exists to these two aggregations of contracts than meets the eye, the plaintiffs allege that defendants used these agreements as the convenient vehicle for a massive price-fixing conspiracy. The defendants counter that these agreements were discrete, atomized, and designed to promote interbrand competition in the retail automobile market. To consider fully these divergent contentions, let alone attempt to resolve them, one must first appreciate the independent interest the Weisman defendants had in promoting the sale of the components of the protective package.
The Weisman Defendants: Structure and Interests
Counsel for the Weisman defendants have stipulated to the relevant facts concerning both the interrelationships among the Weisman defendants and their financial interest in the sale of the Polyglycoat products. For the entire time period relevant to this litigation, individual defendant Frederick R. Weisman owned and controlled numerous corporate entities through the Frederick Weisman Holding Company. The corporate subsidiaries of the holding company included both distributor defendant MAT and defendant Carecraft’s stipulated predecessor in interest Crown Atlantic Corporation (hereafter “Crown Atlantic”). Mr. Weisman served as president of both entities.
Crown Atlantic was MAT’s “port handling agent” in Baltimore, accepting the 1980 Toyotas off the ships from Japan and preparing them for distribution to the various local dealers. In particular, Crown Atlantic actually applied the Polyglycoat sealant products to the vehicles covered by the contracts in question. Crown Atlantic itself owned CPC Distributors, Inc. (hereafter “CPC”), a franchised distributor of Polyglycoat Corporation automotive products.
In summary, Weisman’s companies possessed distributional franchises for both Polyglycoat products and Toyotas. CPC exercised its Polyglycoat distributorship on a consignment basis, paying the Polyglycoat Corporation $42.00 for every vehicle equipped with the protective package. CPC in turn sold the package for a profit to Crown Atlantic, which applied the sealant components of the package and billed MAT $78.00 for product and labor. As previously mentioned, MAT would charge its dealers $113.00 per covered vehicle. When these transactions are consolidated, it becomes evident that Weisman, through his companies, received a 260% markup between the price paid Polyglycoat Corporation and the price charged the local Toyota dealers for the protective package.
Defendants’ Potential Motivations for Entering Into the Agreements
With the Weisman defendants’ Polyglycoat interests plainly in view, one can more readily appreciate the multiple potential incentives which may have prompted the contracts in question. As will be elaborated upon later, the incentives actually motivating the defendants to bargain together will play a crucial role in several liability issues. The Court of course does not presently rule on which motivations actually controlled, but merely review the possibilities open to the ultimate trier of fact.
Three alternative incentives may have motivated the Weisman defendants. The plaintiffs assert that the driving force behind the Weisman defendants’ initiation of these programs was a desire to sell more Toyotas. It does not appear to be disputed that MAT had had a relatively poor market penetration vis-a-vis other Toyota regional distributors during the late 1970’s. As MAT received a constant profit margin per wholesale sale regardless of the ultimate retail price, its revenues were almost completely dependent upon the volume of retail sales as opposed to the price obtained in those sales. According to a market study performed for MAT in 1979 by the management consulting firm Harbridge House, MAT had become trapped in a “viscious cycle” of declining regional sales volume:
1. The regional dealers extracted too high a profit per car sold and hence depressed total retail sales;
2. The national Toyota importer employed a formula for allocating the available imports among the various regional distributors which penalized distributors with slower turnover rates and higher inventories;
3. The proportionately fewer imports allocated to MAT under this formula reduced dealer confidence that MAT could satisfy their needs should they switch to a high volume, low profit per car strategy; and
4. The dealers therefore saw no reason to switch from their low volume, high profit per car approach.
The Harbridge House report recommended that MAT attempt to reduce the dealer profit per car, but recognized that the individual dealers would probably take a dim view of this proposal unless MAT provided them with credible assurances that it could actually fill the increased orders that such an approach would produce.
The States assert that the protective package provided MAT with an opportunity to break out of this “vicious cycle.” Central to their argument is the assumption that automobile consumers base their purchasing decisions as much on the perceived “deal” or “bargain” they are getting as on the absolute price they actually pay. By adding a set of accessories to a Toyota with a wholesale price of $133.00 but with a suggested retail price on the Monroney sticker of $533.00, MAT supposedly gave its. dealers $420.00 worth of room to “bargain” with. The dealer could discount from the suggested retail price and increase the “deal” a buyer perceived he was receiving without reducing the dealer’s original profit margin on the car. The defendants generally agree with plaintiffs’ assertion that the programs were designed to increase Toyota sales. However, defendants prefer to stress the alleged intrinsic value of the protective package itself as the means by which the protective package could generate those sales.
In addition to the plaintiffs’ position, the record reveals two alternative possible motivations for the Weisman defendants. One is that the Weisman defendants were motivated not by a desire to sell more Toyotas to the public but by a desire to sell more Polyglycoat products to the Toyota dealers. The record reveals potential evidence that:
1. Weisman had attempted for several years to get the dealers to order Polyglycoat products;
2. The chief executive officer of MAT consistently opposed programs involving Polyglycoat products but Weisman regularly overruled him;
3. Weisman assumed greater personal control of MAT at the time the protective package programs were initiated;
4. After meeting with his subordinates, Weisman personally initiated the protective package programs at issue here; and
5. After institution of the program, MAT continued to be reluctant to implement it as fully as Crown Atlantic’s representative desired.
Such evidence might support an inference that Weisman had decided that the potential increased profits for his Polyglycoat distributorship would outweigh any potential losses feared by his Toyota distributorship and that hence the program should go forward despite the misgivings of MAT itself.
The third and perhaps most plausible alternative motivation for the- Weisman defendants was that they hoped to increase both Toyota and Polyglycoat sales. Significant documentary evidence in the record exists to this effect.
Alternatives also exist as to what financial considerations allegedly impelled the individual dealers to join the Total Concept program. A dealer might have been tempted to use the higher suggested retail price as a device to maximize per car profits even further. Conversely, a dealer might have concurred in MAT’S assessment of the need to increase sales volume and utilize the full opportunity for discounting which the accessory profit spread would provide. The dealers themselves intimate that the protective package afforded them an opportunity for what would be in effect price discrimination. They could charge the uncomplaining buyer the full $533.00 but use the discount potential to secure the wavering buyer who balked at the full price. In this manner, they could perhaps increase both per car profits and sales volume.
The Alleged Barrier to Utilizing Polyglycoat Products: Dealer Atomization
In spite of the potential incentives reviewed above, relatively few Toyotas were sold with Polyglycoat products in the years preceding the initiation of the protective package programs in September, 1979. Plaintiffs assert, and defendants vigorously dispute, that the dealers were previously reluctant to order cars with the sealants because consumers did not like the products and other Toyota dealers selling cars without the sealants would be able to undercut them. The record does contain documents expressly stating that certain dealers did not care for the Polyglycoat products because of “competitive” reasons. As a Vice-President of Rosenthal Toyota, Inc., wrote to MAT, “We are in a very competitive market in the Greater Washington area and these port installed options will not allow us to be able to compete with the other Toyota dealers.” The record also contains potential evidence that MAT incurred its dealers’ wrath by attempting to force Polyglycoat products upon them. Supposedly prompting complaints to the national importer, these “coercive” tactics also allegedly provoked a charge by the Maryland Motor Vehicle Administration that MAT had violated the express language of Md.Trans.Code Ann. § 15-207(b)(2) (Michie 1977), by attempting to “coerce [a] dealer to order or accept delivery of ... accessories for a vehicle ... that is not required by law or by the dealer’s franchise or that was not ordered voluntarily by the dealer.”
Defendants strongly claim that fears of competitive disadvantage did not prompt the dealers to reject Polyglycoat products, and point to significant deposition testimony to that effect. However, this only raises the genuine issue of fact which a court cannot resolve on summary judgment. For purposes of the present motion, it is sufficient that the record suggests that evidence might well be introduced at trial which would allow the trier of fact to conclude that the dealers had largely avoided Polyglycoat products before September, 1979 because of competitive concerns.
Overcoming The Atomization: The Total Concept Program
Supposedly unable t