Pastore v. Bell Telephone Co. of Pennsylvania ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
5-13-1994
Pastore, et al v. The Bell Telephone Company
Precedential or Non-Precedential:
Docket 93-3556
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
________________
NO. 93-3556
_______________
GARY L. PASTORE, an individual;
NATIONAL SECURITY SYSTEMS CORPORATION,
a Pennsylvania corporation,
Appellants
v.
THE BELL TELEPHONE COMPANY OF PENNSYLVANIA,
a Pennsylvania corporation; BELL ATLANTIC CORPORATION,
a Delaware corporation; RONALD DONALDSON,
ROBERT S. FADZEN, JR.; RAYMOND J. WICKLINE;
GEORGE CALDWELL
_______________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 92-00923)
_______________
Submitted Under Third Circuit LAR 34.1(a)
May 2, 1994
Before: SLOVITER, Chief Judge, HUTCHINSON,
and SEITZ, Circuit Judges
(Filed: May 16, 1994)
_______________
John R. Orie, Jr.
Orie & Zivic
Pittsburgh, PA 15219
Attorney for Appellants
Richard B. Tucker, III
Jeffrey J. Leech
Diane Hernon Chavis
Tucker Arensberg, P.C.
Pittsburgh, PA 15222
Attorney for Appellees
Bell Telephone Co. of Pennsylvania;
1
Bell Atlantic Corp.; Ronald Donaldson;
Raymond J. Wickline; George Caldwell
Ralston S. Jackson
Odermatt & Jackson
Pittsburgh, PA 15219
Attorney for Appellee
Robert S. Fadzen, Jr.
OPINION OF THE COURT
SLOVITER, Chief Judge.
Gary Pastore and National Security Systems Corporation
(NASSCO), plaintiffs-appellants, appeal from the entry of summary
judgment in favor of defendants-appellees Bell Atlantic
Corporation, its subsidiary, Bell Telephone Company of
Pennsylvania, and four individual employees on plaintiffs'
attempted monopolization claim under section 2 of the Sherman
Act, 15 U.S.C. § 2 (Supp. IV 1992).
I.
FACTS AND PROCEDURAL HISTORY
The facts in this case are, for the most part, not in
dispute. Pastore established NASSCO in early 1986 to install a
sophisticated custom-designed access control communications
security network (CDACCSN) for Bell of Pennsylvania, which
awarded it a contract for thirty of its facilities. Bell of
Pennsylvania told Pastore that it planned to order the same
system for all of its 800 facilities if this pilot project was
successful and that it might extend to as many as 4,000
facilities in other subsidiaries of Bell Atlantic.
2
The pilot project was timely completed and Bell of
Pennsylvania officials expressed satisfaction with NASSCO's
performance. Thereafter, they repeatedly asked NASSCO to
surrender the computer source codes and specific proprietary
information and technical designs relating to the CDACCSN which
NASSCO declined to do, but because Bell of Pennsylvania insisted
on some guarantees in the event of NASSCO's bankruptcy, NASSCO
agreed to deposit in escrow the requested proprietary
information.
Nonetheless, Bell of Pennsylvania ceased doing business
with NASSCO and told NASSCO in March 1990 that a project for a
Pittsburgh facility had been placed "on hold." In December 1990,
Pastore was informed that a security system had been installed by
an entity entitled Integrated Access Systems in the Monroeville
Revenue Accounting Center, although the site was within the
network of facilities to be installed and serviced exclusively by
NASSCO. Other already-approved projects which were part of the
first planned phase involving installation of the CDACCSN
statewide were not carried forward, while none of the work
planned for the second or third phase was initiated.
Plaintiffs filed this action in the District Court for
the Western District of Pennsylvania alleging that defendants
attempted to monopolize the relevant market in violation of
section 2 of the Sherman Act1, as well as under a variety of
1
Section 2 provides:
Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other
3
pendent state law tort and contract theories.2 Defendants moved
to dismiss for failure to state a claim under the Sherman Act.
The district court issued an order converting the motion to
dismiss into a motion for summary judgment as to the Sherman Act
claim only. After granting plaintiffs two extensions for further
discovery, the court granted the summary judgment motion, holding
that the plaintiffs had produced no evidence of a dangerous
probability of the defendants monopolizing the relevant market,
and dismissed the pendent state law claims without prejudice.
Plaintiffs filed this timely appeal.
II.
DISCUSSION
A.
Additional Discovery
Throughout their brief, plaintiffs argue that summary
judgment was inappropriate because they did not have adequate
time for discovery. As this court has previously noted, we
review a claim that the district court has prematurely granted
summary judgment for abuse of discretion. See Radich v. Goode,
886 F.2d 1391, 1393 (3d Cir. 1989). If a party believes that
person or persons, to monopolize any part of the trade
or commerce among the several States, or with foreign
nations, shall be deemed guilty of a felony . . . .
15 U.S.C. § 2.
2
The twelve count complaint included claims for defamation,
promissory estoppel, anticipatory breach of contract, breach of
contract, breach of duty of good faith, common law fraud and
deceit, tortious interference with contractual and business
relations, tortious bad faith and unfair dealing, interference
with prospective economic advantage, and intentional infliction
of emotional distress.
4
s/he needs additional time for discovery, Fed. R. Civ. P. 56(f)
specifies the procedure to be followed,3 and explicitly provides
that the party must file an affidavit setting forth why the time
is needed. Plaintiffs concede, however, that they did not submit
an affidavit. This concession is usually fatal, because by not
filing "a Rule 56(f) affidavit, [they have] not preserved [their]
objection to [their] alleged inability to obtain necessary
discovery." Falcone v. Columbia Pictures Indus., Inc., 805 F.2d
115, 117 n.2 (3d Cir. 1986).
Plaintiffs contend that their brief opposing the
defendants' motion for summary judgment constructively meets Rule
56(f)'s affidavit requirement. In the past we have rejected such
arguments because "Rule 56(f) clearly requires that an affidavit
be filed. 'The purpose of the affidavit is to ensure that the
nonmoving party is invoking the protection of Rule 56(f) in good
faith and to afford the trial court the showing necessary to
assess the merit of a party's opposition.' An unsworn memorandum
3
Federal Rule of Civil Procedure 56(f) provides:
Should it appear from the affidavits of a party
opposing the motion [for summary judgment] that the
party cannot for reasons stated present by affidavit
facts essential to justify the party's opposition, the
court may refuse the application for judgment or may
order a continuance to permit affidavits to be obtained
or depositions to be taken or discovery to be had or
may make such other order as is just.
(emphasis added).
5
opposing a party's motion for summary judgment is not an
affidavit." Radich, 886 F.2d at 1394 (citations omitted).4
Even if we were to regard the request in plaintiffs'
brief opposing the defendants' motion for summary judgment that
the court "belay [summary judgment] until a more complete factual
record is developed," Plaintiff's Supplemental Memorandum of Law
in Opposition to Motion for Summary Judgment, Docket No. 33 at
13, as the functional equivalent of a Rule 56(f) affidavit, see
St. Surin v. Virgin Island Daily News, Inc., No. 93-7553, 1994 WL
131201 at *3 (3d Cir. Apr. 15, 1994), the district court did not
err in considering defendants' motion for summary judgment
because plaintiffs did not specify "what particular information
is sought; how, if uncovered, it would preclude summary judgment;
and why it has not previously been obtained." Dowling v. City of
Philadelphia, 855 F.2d 136, 140 (3d Cir. 1988).
Plaintiffs stated in their brief in the district court
that a deposition of defendant Fadzen would demonstrate specific
intent to monopolize. They claimed that Fadzen "may be a source
of information not only as to specific intent but as to the
product and the market as well, given his involvement with
vendors and knowledge of software." Docket No. 33 at 12 n.11.
Even assuming that plaintiffs were referring to the defendants'
4
Plaintiffs claim that the circumstances in this case are
"somewhat similar" to Miller v. Beneficial Management Corp., 977
F.2d 834, 846 (3d Cir. 1992), where we held that the plaintiff's
reliance on a Magistrate Judge's order waiving the Rule 56(f)
affidavit requirement permitted this court to review the district
court's termination of discovery, but we see no similarity (and
plaintiffs have not articulated any) other than the fact that in
neither case was an affidavit properly filed.
6
market power, the issue relevant here, it would be insufficient
under Rule 56(f). Such an amorphous allegation fails to explain
what plaintiffs expected to discover, how it applied to their
case and why they could not obtain that information elsewhere.
The district court granted summary judgment in this
case because the defendants had not entered the relevant market
and thus had no market power. Plaintiffs have not explained on
appeal why information as to any entry by Bell of Pennsylvania
was available only through Fadzen nor what other attempts
plaintiffs made to discover this information. It is not readily
apparent, for example, why Pastore himself was unable to submit
an affidavit with such information. We therefore decline to
reverse the district court's decision to consider the summary
judgment motion, when plaintiffs failed to move beyond mere
generalities in their attempt to delay that consideration.
B.
Standards for Summary Judgment
We review the districts court's decision to enter
summary judgment de novo, applying the same standard as the
district court. Once the moving party has carried the initial
burden of showing that no genuine issue of material fact exists,
see Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986), the
nonmoving party cannot rely upon conclusory allegations in its
pleadings or in memoranda and briefs to establish a genuine issue
of material fact. Instead, it "must make a showing sufficient to
establish the existence of every element essential to his case,
based on the affidavits or by the depositions and admissions on
7
file." Harter v. GAF Corp., 967 F.2d 846, 852 (3d Cir. 1992). It
is true, however, that "[i]nferences should be drawn in the light
most favorable to the non-moving party, and where the non-moving
party's evidence contradicts the movant's, then the non-movant's
must be taken as true." Big Apple BMW, Inc. v. BMW of North
America, Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied,
113 S. Ct. 1262 (1993).
Although we have stated in the past that summary
judgment should be used sparingly in antitrust litigation because
of the fact-intensive nature of such claims, see Harold Friedman,
Inc. v. Kroger Co., 581 F.2d 1068, 1080 (3d Cir. 1978), more
recently we have taken note that "many courts, including the
Supreme Court, have . . . held defendants entitled to summary
judgment in antitrust cases," and that despite the "factually
intensive" nature of antitrust cases "the standard of Fed. R.
Civ. P. 56 remains the same." Town Sound & Custom Tops, Inc. v.
Chrysler Motors Corp., 959 F.2d 468, 481 (3d Cir.) (in banc)
(citations omitted), cert. denied, 113 S. Ct. 196 (1992). In
fact, the Supreme Court has recently affirmed that there is no
"special burden . . . [for] summary judgment in antitrust cases."
Eastman Kodak Co. v. Image Technical Servs., Inc., 112 S. Ct.
2072, 2083 (1992).
C.
Dangerous Probability of Achieving Monopoly Power
The Supreme Court has recently restated the necessary
elements to state a claim under section 2 of the Sherman Act.
"[T]o demonstrate attempted monopolization a plaintiff must prove
8
(1) that the defendant has engaged in predatory or
anticompetitive conduct with (2) a specific intent to monopolize
and (3) a dangerous probability of achieving monopoly power."
Spectrum Sports, Inc. v. McQuillan, 113 S. Ct. 884, 890-91 (1993)
(citing 3 Phillip Areeda & Donald F. Turner, Antitrust Law ¶ 820
at 312 (1978)).
The district court granted summary judgment based on
the failure of the plaintiffs to meet the "dangerous probability"
requirement, and this is the only issue before us on appeal.
Determining whether a "dangerous probability" exists requires
"inquiry into the relevant product and geographic market and the
defendant's economic power in that market." Spectrum Sports, 113
S. Ct. at 892.
The plaintiffs have the burden of defining the market.
See Tunis Bros. Co., Inc. v. Ford Motor Co., 952 F.2d 715, 726
(3d Cir. 1991), cert. denied, 112 S. Ct. 3034 (1992). Plaintiffs
claim that the relevant market is the very narrow one of the
CDACCSN itself, see Appellants' Brief at 15 ("the NASSCO product
. . . constitute[s] the relevant market"),5 and that they
themselves hold a monopoly over the CDACCSN. Id. at 14-15
("NASSCO possessed monopoly power as to this product market").
Indeed, plaintiffs vigorously assert that the CDACCSN was a
unique system that was incomparable to all others then or since
5
At other times plaintiffs have argued the market should be "dial
up, computer driven remotely-monitored card-access security
systems in the geographic region served by Bell Atlantic."
Memorandum of Law in Response to Defendants' Motion to Dismiss,
Docket No. 11 at 6-7 n.2; see also App. at 24 (Complaint)
("remotely monitored security devices").
9
on the market. App. at 110 (Pastore Affidavit) ("As late as
1990, it was believed that the system was unprecedented and
unique . . . . Since 1990 other suppliers have advertised
similar features . . . . However, NASSCO is not aware of any
installation which duplicates all of the unique features of the
NASSCO system installed at Bell of PA.").6
For purposes of the matter before us, we hold
plaintiffs to their own contention, see Edward J. Sweeney & Sons,
Inc. v. Texaco, Inc., 637 F.2d 105, 117 (3d Cir. 1980) (plaintiff
bound by relevant market analysis proposed to district court),
cert. denied, 451 U.S. 911 (1981), and we assume arguendo that
the plaintiffs have demonstrated this to be the appropriate
market definition.
Plaintiffs must thus show that the defendants possessed
"sufficient market power" to come dangerously close to success
within that market. Fineman v. Armstrong World Indus., Inc., 980
F.2d 171, 197 (3d Cir. 1992), cert. denied, 113 S. Ct. 1285
(1993); Barr Labs., Inc. v. Abbot Labs., 978 F.2d 98, 112 (3d
Cir. 1992). There is no simple formula: factors to be reviewed
"include the strength of the competition, probable development of
the industry, the barriers to entry, the nature of the anti-
6
See also Pastore Affidavit, Docket No. 21 at 6 ("At the time of
the misconduct by Bell, to the best of my knowledge, NASSCO was
the only supplier of such an integrated access control
product."); Plaintiffs' Br. in Opposition to Motion for Summary
Judgment, Docket No. 22 at 5 n.3 ("This is not an instance of a
superior product among inferior competing products. It is an
instance of a product without competitors."); Plaintiffs'
Supplemental Memorandum of Law in Opposition to Motion for
Summary Judgment, Docket No. 33 at 3 ("the NASSCO product
constituted a unique product without parallel or substitute").
10
competitive conduct, and the elasticity of consumer demand." Id.
at 112. Most significant, however, is the defendants' share of
the relevant market. See id. (collecting cases). Indeed, a pair
of the leading antitrust commentators state that "it is clear
that the basic thrust of the classic rule is the presumption that
attempt does not occur in the absence of a rather significant
market share." Areeda & Turner, supra, ¶ 831 at 336.
The defendants have submitted an affidavit which states
they are not "engaged in the businesses of (i) remotely
monitoring security alarms or (ii) the manufacture, sale or
provision of equipment used to remotely monitor alarms or card
access security systems." App. at 70. The plaintiffs offer no
evidence that the defendants have entered the CDACCSN market.
Indeed, they have confined their discussion to defendants' future
entry into the market. See, e.g., App. at 24 (Complaint)
(defendants are "intent upon entering); App. at 119 (Pastore
Affidavit) ("in the event that Bell Atlantic is determined to
enter into the alarm monitoring market"); Memorandum of Law in
Response to Defendants' Motion to Dismiss, Docket No. 11 at 2
(defendants are "poised to enter"). Thus, it is clear that the
defendants presently have no share of the CDACCSN market.7
7
Plaintiffs' position as to the only specific facility that they
did not install, the one at the Monroeville Revenue Accounting
Center, is unclear. Even if this system was "pirated" from
NASSCO, see Pastore Affidavit, Docket No. 21 at 9-10 (defendants
"were simultaneously meeting with another contractor, using
NASSCO's engineering design for the MRAC"); Plaintiffs' Br. in
Opposition to Motion for Summary Judgment, Docket No. 22 at 12
("an unsuccessful effort by defendants' to mimic the NASSCO
product and install and implement that pirated technology at
[MRAC]"), there is no evidence that the defendants attempted to
11
Without any share in the relevant market as described by
plaintiffs, there can be no inference that defendants hold
sufficient economic power in that market to create a dangerous
probability of monopoly. See Nuemann v. Reinforced Earth Co.,
786 F.2d 424, 428 (D.C. Cir.), cert. denied, 479 U.S. 851 (1986);
see also Fineman, 980 F.2d at 201.
Plaintiffs argue that where there is high degree of
predatory conduct coupled with a transparent intent to
monopolize, the courts have required a less rigorous showing of
market power. They cite Otto Milk Co. v. United Dairy Farmers
Coop. Ass'n, 388 F.2d 789 (3d Cir. 1967), for this proposition,
but nothing in that case supports this view. In Otto Milk the
defendants argued that they were not liable because they did not
in fact have a monopoly and we simply held that an attempt claim
under Section 2 "does not require an actual monopoly of the
territory sought." Id. at 798.
Three sources relied upon by the plaintiffs do support
their position. A well-known 1956 law review article by
Professor Turner argued that if "defendants are attempting to
drive someone out of the market by foul means rather than fair,
there is ample warrant for not resorting to any refined analysis
as to whether . . . having taken over all the production of a
particular commodity, the defendants would still face effective
competition from substitutes." Donald F. Turner, Antitrust
market this system to others. The internal use at one site of
the NASSCO product is insufficient to indicate a dangerous
probability of achieving monopoly power.
12
Policy and the Cellophane Case, 70 Harv. L. Rev. 281, 305 (1956);
see also Edwin S. Rockefeller, Antitrust Questions and Answers 27
(1974) ("If a sufficiently evil intent can be shown--to destroy
or exclude a competitor, control prices, or coerce customers or
suppliers--the Court might not look for any relevant market
beyond the product immediately involved."). And the district
court in Rea v. Ford Motor Co., 355 F. Supp. 842, 876-77 (W.D.
Pa. 1973), rev'd, 497 F.2d 577 (3d Cir.), cert. denied, 419 U.S.
868 (1974), held that a finding of dangerous probability of
monopoly was unnecessary when overwhelming evidence of specific
intent to monopolize existed.
However, we reversed the district court in Rea and
noted that a showing of "a dangerous probability of achieving
monopolization in a relevant market" was necessary to prevail on
a section 2 claim. 497 F.2d at 590 n.28. More generally, the
principle proposed by the sources on which plaintiffs rely was
that adopted by the Ninth Circuit in Lessig v. Tidewater Oil Co.,
327 F.2d 459, 474-75 (9th Cir.), cert. denied, 377 U.S. 993
(1964), a decision this court rejected in Coleman Motor Co. v.
Chrysler Corp., 525 F.2d 1338, 1348 n.17 (3d Cir. 1975), and
again in Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d
105, 117 (3d Cir. 1980), cert. denied, 451 U.S. 911 (1981).
Further, the Supreme Court unanimously interred Lessig
in Spectrum Sports. In reversing a Ninth Circuit opinion which
relied on Lessig, it held that intent to monopolize alone "is not
sufficient[] to establish the dangerous probability of success
that is the object of § 2's prohibition of attempts." Id. at
13
890. It explained that the "law directs itself not against
conduct which is competitive, even severely so, but against
conduct which unfairly tends to destroy competition itself. . . .
Thus, this Court and other courts have been careful to avoid
constructions of § 2 which might chill competition, rather than
foster it. . . . For these reasons, § 2 makes the conduct of a
single firm unlawful only when it actually monopolizes or
dangerously threatens to do so. The concern that § 2 might be
applied so as to further anticompetitive ends is plainly not met
by inquiring only whether the defendant has engaged in 'unfair'
or 'predatory' tactics." Id. at 892 (citations omitted).
In any event, this is not the case in which we must
consider whether predatory actions by defendants may reduce the
amount of market share that is needed to show a dangerous
probability of success. Having shown no market share by
defendants, plaintiffs have nothing to couple with their alleged
predatory behavior.
Accepting everything the plaintiffs say as true, it is
ironic that they basically seek to protect their own monopoly
power in the field of dial-up, computer-driven remotely-monitored
card-access security systems by use of an antitrust suit. To the
extent that plaintiffs may have rights to the product of their
creativity and initiative, there are other legal doctrines to
protect them. On this record, the district court did not err in
holding that they have not shown enough to proceed further under
the Sherman Act.
III.
14
For the foregoing reasons we will affirm the judgment
and order of the district court.
15