Stelwagon v. Tarmac

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
8-24-1995
Stelwagon v Tarmac
Precedential or Non-Precedential:
Docket 94-2004
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-2004
___________
STELWAGON MANUFACTURING COMPANY
Appellee,
vs.
TARMAC ROOFING SYSTEMS, INC.,
Appellant.
___________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 92-cv-01073)
___________
ARGUED MAY 16, 1995
BEFORE: COWEN, LEWIS, GARTH, Circuit Judges.
(Filed August 24, l995)
___________
Lawrence D. Berger (ARGUED)
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Attorney for Appellant
1
David A. Gradwohl (ARGUED)
Patrick J. Doran
Pelino & Lentz
1650 Market Street
One Liberty Place, 32nd Floor
Philadelphia, PA 19103
Attorneys for Appellee
___________
OPINION OF THE COURT
___________
LEWIS, Circuit Judge.
Appellant Tarmac Roofing Systems, Inc., ("Tarmac")
appeals a $1,423,392.50 judgment entered after a jury trial in
the United States District Court for the Eastern District of
Pennsylvania on appellee Stelwagon Manufacturing Company's
("Stelwagon") secondary line price discrimination and state
breach of contract claims.0 Specifically, the jury found that
Tarmac had discriminated against Stelwagon on the basis of price
in violation of section 2(a) of the Clayton Act (commonly
referred to as the Robinson-Patman Price Discrimination Act), 15
U.S.C. § 13(a) (1982),0 and, accordingly, that Stelwagon was
0
Secondary line cases involve discrimination affecting
competition among customers of the discriminating seller. Barr
Laboratories, Inc. v. Abbott Laboratories, Inc., 978 F.2d 98, 106
(3d Cir. 1992); J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909
F.2d 1524, 1526 (3d Cir. 1990).
0
Section 2(a) provides in pertinent part:
It shall be unlawful for any person
engaged in commerce, in the course of such
commerce, either directly or indirectly, to
discriminate in price between different
purchasers of commodities of like grade and
2
entitled to recover treble damages pursuant to section 4 of the
Clayton Act, 15 U.S.C. § 15(a).0 The jury also determined that
Tarmac breached an oral, exclusive distributorship agreement with
Stelwagon. Although we believe that Stelwagon established a
prima facie violation of the Robinson-Patman Act, we believe it
failed to present sufficient proof of actual antitrust damages
and is, therefore, precluded from recovering damages under the
Clayton Act. Accordingly, we will vacate the district court's
judgment insofar as it awards Stelwagon treble damages under
section 4 of the Clayton Act. We will, however, affirm with
respect to the breach of contract claim because we believe the
district court correctly concluded that the contract claim was
not barred by the Statute of Frauds.
quality, . . . where the effect of such
discrimination may be substantially to lessen
competition or tend to create a monopoly in
any line of commerce, or to injure, destroy,
or prevent competition with any person who
either grants or knowingly receives the
benefit of such discrimination, or with
customers of either of them. . . .
0
Section 4 of the Clayton Act provides:
[A]ny person who shall be injured in his
business or property by reason of anything
forbidden in the antitrust laws . . . shall
recover threefold the damages by him
sustained. . . .
3
I. BACKGROUND
Stelwagon is a wholesale distributor of roofing, siding
and related construction materials. Its principal customer base
consists of small to medium-sized roofing contractors located in
the Philadelphia, Pennsylvania, area. In early 1988, Stelwagon
entered into an oral, exclusive distributorship agreement with
Tarmac, a Wilmington, Delaware-based manufacturer of modified
asphalt products ("MAPs").0 Under the agreement, Tarmac agreed
not to sell its MAPs to any other distributors in the
Philadelphia area except for Roofer's Mart, Inc., a pre-existing
distributor.0 In return, Stelwagon promised to promote and
develop a market for Tarmac MAPs.
In 1988, Stelwagon began actively promoting Tarmac MAPs
as agreed. In order to build a demand for Tarmac's products,
Stelwagon refrained from acquiring any new lines of MAPs, and
ceased aggressive marketing of its other, non-Tarmac MAPs.
Stelwagon sold Tarmac MAPs without incident in the relationship
0
MAPs are polyester or fiberglass mats applied by torch or
hot asphalt which are sold by the roll and principally used to
cover flat roofs.
0
Tarmac insists that the terms of the contract provided for
sales to Stelwagon and one other distributor, and consequently,
if Roofer's Mart discontinued selling Tarmac MAPs, Tarmac could
sell to another distributor. This distinction is significant
because Roofer's Mart's Philadelphia warehouse burned down in
late 1989 and Tarmac began selling MAPs to Allied Roofing
Products ("Allied"), another Philadelphia distributor.
Because we believe that the evidence, viewed in the light
most favorable to the prevailing party, provides a rational basis
for the jury's factual finding that the terms of the contract
are, in fact, those terms that Stelwagon allege, we will not
disturb that finding. See Intermilo, Inc. v. I.P. Enterprises,
Inc., 19 F.3d 890, 892 (3d Cir. 1994).
4
until early 1989, when Stelwagon became aware of sales made to
several of its competitors in violation of the agreement.0 At
around the same time, Stelwagon also learned that Tarmac was
selling MAPs to two competitors -- Standard Roofing Company
("Standard") and Celotex Corporation ("Celotex") -- at
preferential prices. Stelwagon first complained to Tarmac about
these sales, and eventually brought this action in February 1992.
At the close of Stelwagon's case, and again at the
close of all evidence, Tarmac moved for judgment as a matter of
law. Both of these motions were denied and the case was
submitted to the jury, which rendered a verdict in Stelwagon's
favor on both the price discrimination and breach of contract
claims, and awarded damages in the amount of $2,272,000.0 The
district court trebled the antitrust damages under section 4 of
the Clayton Act, and entered judgment for Stelwagon in the amount
of $3,816,000. Tarmac renewed its motion for judgment as a
matter of law and, alternatively, for a new trial. The district
court denied the motions, but granted Tarmac's request for a
remittitur based on a finding that "the damages awarded by the
jury in this case are unsupported by the evidence and are grossly
excessive." Stelwagon Manufacturing Company v. Tarmac Roofing
Systems, Inc., 862 F. Supp. 1361, 1369 (E.D. Pa. 1994). The
0
Stelwagon first became aware of Tarmac's sales to Sellmore
Roofing in Philadelphia, and later learned that Tarmac was
selling MAPs to BJ Supply Company and Allied Roofing Co., one of
Stelwagon's principal competitors in Philadelphia.
0
The jury awarded Stelwagon $1,500,000 in damages for breach
of contract and an additional $772,000 for the antitrust
violation.
5
district court reduced the damages award for breach of contract
to $74,242, and likewise reduced the antitrust damages to
$450,383.50. After trebling the Robinson-Patman damages, the
district court entered judgment for Stelwagon in the amount of
$1,423,392.50. This appeal followed. We have jurisdiction under
28 U.S.C. § 1291.
On appeal, Tarmac challenges the district court's
denial of its post-trial motions. Specifically, Tarmac claims
that the judgment should be reversed because Stelwagon failed to
present sufficient evidence to (1) establish a prima facie
Robinson-Patman violation; (2) prove actual antitrust injury; and
(3) support the award of damages under the Clayton Act. Tarmac
also argues that Stelwagon's breach of contract claim is barred
by the statute of frauds.0 Our review of the district court's
denial of Tarmac's motion for judgment as a matter of law is
plenary. Intermilo, Inc. v. I.P. Enterprises, Inc., 19 F.3d 890
(3d Cir. 1994). The legal foundation for the factfinder's
verdict is reviewed de novo while the factual findings are
reviewed to "determine whether the evidence and justifiable
inferences most favorable to the prevailing party afford any
rational basis for the verdict." Id., quoting Bhaya v.
Westinghouse Elec. Corp., 832 F.2d 258, 259 (3d Cir. 1987).
II. THE ROBINSON-PATMAN CLAIM
0
In the alternative, Tarmac raises various trial errors
which it argues require reversal. Because of our decision on the
merits, however, we need not reach the remainder of Tarmac's
claims.
6
By its terms, the Robinson-Patman Act is a prophylactic
statute and does not require that the alleged discrimination must
in fact have harmed competition. J. Truett Payne Company, Inc.
v. Chrysler Motor Corporation, 451 U.S. 557, 561 (1981). Instead,
a violation is established upon a showing that "the effect of
such discrimination may be substantially to lessen competition."
Id. For the purposes of the Robinson-Patman Act, price
discrimination means nothing more than a difference in price
charged to different purchasers or customers of the
discriminating seller for products of like grade or quality.
Feeser, 909 F.2d at 1532; see also F.T.C. v. Annheuser-Busch,
Inc., 363 U.S. 536, 549 (1960). Price discrimination standing
alone, however, is not illegal per se. Feeser, 909 F.2d at 1532;
O. Hommel Co. v. Ferro Corp., 659 F.2d 340, 346 (3d Cir. 1981).
Rather, in order to establish a prima facie violation of section
2(a), "a reasonable possibility of harm, often referred to as
competitive injury, must be shown." Feeser, 909 F.2d at 1531.
7
A. Competitive Injury
1.
We note initially that as a prerequisite to
establishing secondary line injury, a plaintiff must "first prove
that, as the disfavored purchaser, it was engaged in actual
competition with the favored purchaser(s) as of the time of the
price differential." Best Brands Beverage, Inc. v. Falstaff
Brewing Corporation, 842 F.2d 578, 584 (2d Cir. 1987). Moreover,
to satisfy this "competitive nexus" requirement, it "must be
shown that, as of the time the price differential was imposed,
the favored and disfavored purchasers competed at the same
functional level, i.e., all wholesalers or all retailers, and
within the same geographic market." Id. at 585.
Tarmac claims that Stelwagon failed to show the
requisite competitive contact with either Standard or Celotex
and, as a result, did not establish a prima facie violation of
the Robinson-Patman Act. Specifically, Tarmac argues that
Stelwagon was not in competition with Standard because Standard
operated its business outside of the geographical area where
Stelwagon's principal customer base was located, and that
Stelwagon was likewise not in competition with Celotex because
the two companies did not operate at the same functional level,
i.e., that they did not compete at the same distribution level
because Celotex is a manufacturer and Stelwagon a distributor.
The district court rejected these contentions and concluded that
the record contained sufficient evidence to support a finding
8
that both Standard and Celotex were in head-to-head competition
with Stelwagon. We agree.
Standard is a distributor of roofing products and its
customer base is similar to that of Stelwagon's. Although
Standard is located in Trenton, New Jersey, there was evidence
that Standard employed salespeople in Philadelphia and that it
shipped directly to its Philadelphia customers from south Jersey.
There was additional evidence that Standard was a principal
competitor of one of Stelwagon's Philadelphia locations as well
as Stelwagon's Camden, New Jersey location. In our view, this
evidence was sufficient to support a finding of competitive
contact between Stelwagon and Standard.
With respect to Celotex, we, too, reject the argument
advanced by Tarmac that the weight of the evidence supports the
conclusion that Celotex was not in competition with Stelwagon.
The basis of Tarmac's argument, as mentioned above, is that the
two companies were not operating at the same functional level and
were, therefore, not competing customers for purposes of the Act.
See F.T.C. v. Fred Meyer, Inc., 390 U.S. 341, 348-49 (1968).
It is undisputed, however, that the MAPs sold by
Celotex, under its own private label, were, in fact,
"manufactured," that is, made, by Tarmac. It is also uncontested
that the MAPs Tarmac produced for Celotex were identical to those
Tarmac sold to Stelwagon except that they did not bear the Tarmac
label. Although there was evidence that tended to support
9
Tarmac's characterization of Celotex as a manufacturer,0 the fact
that there were conflicts and contradictions is of little
significance, since the resolution of such inconsistencies is
peculiarly within the province of the jury. In our view, the
record as a whole contains sufficient evidence to support the
jury's finding, in the first instance, as well as the district
court's conclusion thereafter, that Celotex "was in economic
reality acting on the same distribution level as Stelwagon."
Stelwagon, 852 F.2d at 1368.
2.
Once the existence of a competitive relationship has
been established, "[i]njury to competition is usually shown in
either of two ways: proof of lost sales or profits, Falls City
Industries [Inc. v. Vanco Beverages, Inc., 460 U.S. 428, 434-35
(1983)]; Rose Confections, Inc. v. Ambrosia Chocolate Co., 816
F.2d 381 (8th Cir. 1987), or under the Morton Salt test, proof of
a substantial price discrimination between competitors over
time." Feeser, 909 F.2d at 1535. In this case, the district
court concluded that "[t]he record . . . contains evidence that
would support a jury finding of harm to competition under either
method." Stelwagon, 862 F. Supp at 1368. We thus turn to the
specific evidence Stelwagon presented at trial to determine
0
For example, there was testimony from witnesses for both
parties that Celotex was widely thought of and referred to as a
manufacturer. In addition, there was evidence that,like a
manufacturer, Celotex sold the private label MAPs to distributors
who, like Stelwagon, sold MAPs to contractors and homeowners.
10
whether the record is indeed sufficient to support a finding of
competitive injury.
(a) Substantial Price Discrimination Over Time
It is undisputed that a differential existed between
the prices Tarmac charged Stelwagon for its MAPs and the prices
Tarmac charged Standard and Celotex. In addition, Stelwagon
presented evidence that showed the price differential was
substantial and that it was in effect for several years. From
this evidence, we believe the jury was entitled to infer harm to
competition for, as the Supreme Court stated in Morton Salt, "we
believe [it is] self-evident [] that there is a ``reasonable
possibility' that competition may be adversely affected by a
practice under which manufacturers and producers sell their goods
to some customers substantially cheaper that they sell like goods
to the competitors of these customers." Morton Salt, 334 U.S. at
50-51. Because the amount and degree of the price discrimination
are significant factors to be considered when determining whether
a price differential is substantial, Feeser, 909 F.2d at 1538, we
will first address the evidence in this case that pertains to the
issue of substantiality.
Stelwagon presented a report submitted by its expert,
Dr. Martin Perry.0 The report, insofar as it concerned the
substantiality of the price differentials, was based on Dr.
Perry's examination of Tarmac's invoices on sales of MAPs
0
The district court qualified Dr. Perry as expert "in the
general field of economics and specifically in the field of price
discrimination, damages flowing therefrom, as well as damages
flowing from breach of distribution agreements." App. at 476.
11
manufactured at its plant in Chester, Pennsylvania. App. at 77.
The invoices, which included the date of sale, distributor,
product name, number of rolls and price charged, covered a period
from 1987 through late 1991 and included sales of six types of
Tarmac MAPs to Stelwagon and seven other distributors which, at
the time, resold MAPs in the Philadelphia area.0 App. at 81-82.
According to the expert report, between 1988 and 1991,
Standard received prices ranging from 5 to 20 percent lower than
the prices charged to Stelwagon and, during this same period,
Celotex received prices which ranged from 10 to 25 percent lower
than the prices Tarmac charged to Stelwagon. App. to 88-93 and
108-122. With respect to APP 4S, the Tarmac product which
accounted for 40.4 percent of the total unit sales of all
products included on the invoices, Standard received a 12.5
percent discount relative to the price paid by Stelwagon, while
Celotex received a discount of at least 10 percent. App. 81 and
90-91. Based on these figures, we believe the price differential
Tarmac offered Standard and Celotex only can fairly be
characterized as substantial.0
0
Of the seven distributors, we are concerned only with sales
to Standard and Celotex for the purposes of this appeal.
0
Another compelling factor considered by courts in
determining competitive injury in secondary line cases is the
duration of the price discrimination. Feeser, 909 F.2d at 1539.
Generally, the longer the duration, the more likely injury will
be found. Id., citing Rose Confections, 816 F.2d at 385 (two
years); Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1041 (9th Cir.
1987) (four years). In our view, the four-year period analyzed
by Dr. Perry's report establishes the requisite duration of price
discrimination and further supports an inference of competitive
injury.
12
Because we agree with the district court that Stelwagon
offered sufficient proof of a substantial price difference over
time, which alone suffices to establish a violation of the
Robinson-Patman Act, we need not address the issue of whether
Stelwagon presented sufficient proof of lost sales or profits
insofar as such evidence pertains to establishing a violation of
the Act.0
B. Antitrust Damages
As we stated in Feeser, "[d]emonstrating competitive
injury as part of a prima facie case suffices to support
injunctive relief and implicates further examination of a
plaintiff's entitlement to treble damages under section 4 of the
Clayton Act," Feeser, 909 F.2d at 1531; however, to recover such
damages, "a plaintiff must establish cognizable injury
attributable to [the] antitrust violation and some approximation
of damage." J. Truett Payne, 451 U.S. at 561. In other words, a
plaintiff must prove a causal connection between the price
discrimination and actual damage suffered.0 Feeser, 909 F.2d at
0
As discussed below, we do not believe Stelwagon offered
sufficient evidence of lost sales or profits to prove actual
antitrust damages, and is therefore not entitled to treble
damages under section 4 of the Clayton Act.
0
The Supreme Court has described these two requirements
collectively as "antitrust injury":
Plaintiffs must prove antitrust injury,
which is to say injury of the type the
antitrust laws were intended to prevent and
that flows from that which makes defendants'
acts unlawful. The injury should reflect the
anticompetitive effect either of the
violation or of anticompetitive acts made
possible by the violation. It should, in
13
1539, citing Perkins v. Standard Oil Co., 395 U.S. 642, 648
(1969). Traditionally, however, antitrust plaintiffs have not
been held to an unduly rigorous standard of proving antitrust
injury. J. Truett Payne, 451 U.S. at 565. Because
damage issues in these cases are rarely
susceptible to the kind of concrete, detailed
proof of injury which is available in other
contexts[, t]he [Supreme] Court has
repeatedly held that in the absence of more
precise proof, the factfinder may "conclude
as a matter of just and reasonable inference
from the proof of defendants' wrongful acts
and their tendency to injure plaintiffs'
business, and from the evidence of the
decline in prices, profits and values, not
shown to be attributable to other causes,
that defendants' wrongful acts had caused
damage to the plaintiffs." Bigelow v. RKO
Pictures, Inc., [327 U.S. 251, 264 (1946)].
See also Eastman Kodak Co. v. Southern Photo
Materials Co., 273 U.S. 359, 377-79 (1927);
Story Parchment Co. v. Patterson Parchment
Paper, Co., 282 U.S. 555, 561-566 (1931).
J. Truett Payne, 451 U.S. at 565-66, quoting Zenith Radio Corp.
v. Hazeltine Research, Inc., 395 U.S. 100, 123-124 (1969).
Although the proof requirements of section 4 are "less than
stringent," Feeser, 909 F.2d at 1540, there must be some direct
evidence of injury to support an award of damages. See id.; S&W
Construction and Materials Co., Inc. v. Dravo Basic Materials
Co., Inc., 813 F. Supp. 1214, 1221 (S.D. Miss. 1992); Chrysler
short, be "the type of loss that the claimed
violations . . . would be likely to cause."
Zenith Radio Corp. v. Hazeltine
Research[, Inc.], 395 U.S. [100,] 125
[(1969)].
Brunswick v. Pueblo Bowl-O-Mat, 429 U.S. 477, 489 (1977); see J.
Truett Payne, 451 U.S. at 489.
14
Credit Corp. v. J. Truett Payne Co., Inc., 670 F.2d 575, 581-82
(5th Cir. 1982).
Tarmac claims that Stelwagon failed to show it suffered
actual antitrust injury as a result of the price discrimination.
Specifically, Tarmac claims that Stelwagon fell short of proving
(1) that it actually suffered lost sales and profits; (2) that
any proven lost sales and profits were caused by Standard and/or
Celotex receiving favorable prices; and (3) the amount of the
sales and profits that Stelwagon lost. The district court,
however, found that "the testimony of Dr. Perry and the anecdotal
evidence of [Stelwagon's] customer's statements, admitted under
the state of mind hearsay exception, . . . establish[ed] that
[Stelwagon] actually lost sales to Celotex and Standard."
Stelwagon, 862 F. Supp. at 1368. For the reasons discussed
below, we disagree.
15
1. Anecdotal Evidence
The district court admitted -- under Federal Rule of
Evidence 803(3) (and over Tarmac's standing objection) -- the
hearsay testimony of Stelwagon employees about out-of-court
conversations with Stelwagon customers. Essentially, the
testimony was that the customers could and did purchase Tarmac
MAPs from Standard at prices lower than Stelwagon's prices.
Statements that are considered under the exception to
the hearsay rule found at Fed. R. Evid. 803(3),0 commonly
referred to as the "state of mind" exception, cannot be offered
to prove the truth of the underlying facts asserted. Grove Fresh
Distributors, Inc. v. New England Apple Products Co., Inc., 969
F.2d 552, 556 (7th Cir. 1992), citing Herman Schwabe, Inc. v.
United Shoe Machinery Corp., 297 F.2d 906, 914 (2d Cir. 1962).
The district court, in explaining its decision to allow the
anecdotal testimony, acknowledged the limited use of evidence
admitted under Rule 803(3): "statements of [a] customer as to
his reasons for not dealing with a supplier are admissible for
the limited purpose, i.e., the purpose of proving customer
motive, but not as evidence of the facts recited as furnishing
0
Federal Rule of Evidence 803(3) provides in pertinent part:
Then existing mental, emotional, or
physical condition. A statement of the
declarant's then existing state of mind,
emotion, sensation, or physical condition
(such as intent, plan, motive, design, mental
feeling, pain, and bodily health), but not
including a statement of memory or belief to
prove the fact remembered or believed . . . .
16
the motive."0 App. at 255, citing Feeser, 909 F.2d at 1535 n.11;
United Shoe Machinery, 297 F.2d at 906. Notwithstanding this
express acknowledgement, it is clear from the district court's
opinion disposing of Tarmac's motion for judgment as a matter of
law, that the court considered the customer statements for a
purpose beyond which they were originally, and properly,
admitted:
Stelwagon [] introduced . . . the anecdotal
evidence of its customer statements, admitted
under the state of mind exception, see Fed.
R. Evid. 803(3); J.F. Feeser, 909 F.2d at
1535 n.11; Kraft Foods, Inc. v. BC-USA, Inc.,
840 F. Supp. 344, 348 (E.D. Pa. 1993), to
establish that it actually lost sales to
Celotex and Standard.
Stelwagon, 862 F. Supp. at 1368 (emphasis added).
Because the statements properly could not have been
admitted in the first instance as proof of the fact of the matter
asserted, we believe the district court's reliance on them as
proof of actual antitrust damages, in the form of lost sales, was
in error.0
0
As we stated in Feeser, "the reason why a customer was not
doing business with a particular seller is relevant in a lost
profits/sales inquiry and its causal connection to the pricing
practices of the alleged violator." Feeser, 909 F.2d at 1535
n.11. Although the customer statements at issue in this case
clearly were admissible as evidence of why the customers were not
purchasing Tarmac MAPs from Stelwagon, i.e., because they thought
they could get a better deal elsewhere, the statements were not
admissible as proof that Stelwagon's customers did, in fact,
purchase MAPs from one of Stelwagon's competitors.
0
We hasten to note that the district court's reliance on
Feeser in admitting the customer statements was misplaced.
Although in Feeser we concluded that the district court erred in
excluding similar anecdotal evidence, we did so in the context of
an appeal from a summary judgment proceeding. Our de novo review
of the depositions revealed that Feeser had offered sufficient
admissible evidence to meet the burden of the nonmovant at
17
2. Expert Evidence
The only other evidence offered by Stelwagon that
possibly could have supported a finding of actual injury was the
expert testimony and report of Dr. Perry. In essence, Dr.
Perry's testimony with respect to Stelwagon's lost sales and
profits mirrored the conclusions published in his report, which
summarizes the methodology used to estimate Stelwagon's losses as
follows:
In order to forecast the lost sales of MAPs
by Stelwagon as a result of the price
advantage of other distributors, we begin
with the year 1988 when Stelwagon first
successfully introduced Tarmac's products in
the Philadelphia metropolitan area. But for
the price advantage of other distributors, we
assume that Stelwagon's sales of MAPs would
have followed a pattern similar to
Stelwagon's sales of other products
(excluding MAPs). . . . For this reason, we
use Stelwagon's sales of other products to
forecast the sales of MAPs. . . . From this
forecast, we then calculate the lost sales of
MAPs in the years following 1988. These lost
sales can be converted into lost profits by
applying Stelwagon's markup on these
products.
App. at 96; see also App. at 479-481, 491-93.
In other words, based on the assumption that but for
Tarmac's price discrimination, Stelwagon's sales of MAPs would
have tracked its sales of non-modified products, Dr. Perry
summary judgment. Feeser, 909 F.2d at 1535. Presumably, Feeser
would have been able to produce the customers themselves at
trial. Accordingly, the rule in this circuit is that hearsay
statements can be considered on a motion for summary judgment if
they are capable of being admissible at trial. Petruzzi's IGA
Supermarkets, Inc. v. Darling-Delaware Company, 998 F.2d 1224, 12
34 n.9 (3d Cir. 1993), citing Feeser, 909 F.2d at 1542.
18
concluded that Stelwagon lost $257,000 in profits as a result of
Tarmac's illegal pricing policy. App. at 501.
Tarmac's challenge to Dr. Perry's testimony and report
is twofold: first, Tarmac argues that the expert evidence should
have been excluded because it was "speculative, not based on
actual facts and data, and [because] any probative value [was]
substantially outweighed by [its] prejudicial effect."
Appellant's Br. at 43. Second, Tarmac claims that the expert
evidence "did not constitute a ``legally sufficient evidentiary
basis' for the judgment rendered below." Appellant's Br. at 33.
Although we do not agree with Tarmac's contention that the
district court erred in admitting Dr. Perry's testimony, or in
failing to strike the testimony in response to a motion by Tarmac
at the conclusion of the direct examination, we do agree that,
standing alone, the expert's opinions, as reflected in his
testimony and report, are insufficient to support the finding of
actual damage.
Significantly, Dr. Perry's analysis failed to
sufficiently link any decline in Stelwagon's MAPs sales to price
discrimination. The sales may have been lost for reasons apart
from the price discrimination -- reasons that Dr. Perry's
analysis apparently did not take into account. For example, the
evidence showed that Stelwagon had higher overhead costs than its
competitors. In addition, there was undisputed evidence that
Stelwagon experienced other business complications during the
relevant time period. In 1988, for example, Stelwagon terminated
19
a vice-president, two territorial managers and three key
employees for their part in an embezzlement scheme.
We recognize, of course, that "[i]f some of
[plaintiff's] injury was attributed to the price discrimination,
[the defendant] is responsible to that extent." Falls City, 460
U.S. at 437; Feeser, 909 F.2d at 1537. In this case, however,
the only evidence directly linking the Robinson-Patman violation
to any decline in sales and profits Stelwagon may have
experienced is the anecdotal testimony of Stelwagon employees
that, as discussed above, should not have been admitted as proof
of lost sales' profits. Not only did Stelwagon fail to offer any
documentary evidence as to the effect of the discrimination on
resale prices, it also failed to identify a single lost
customer.0 As a result, Stelwagon's claim for damages under
section 4 of the Clayton Act must fail. See Feeser, 909 F.2d at
1540 (proof requirements of section 4 are satisfied by direct
evidence of lost sales, evidence that the substantial price
discrimination reflected in the resale prices of Feeser and the
favored competitors directly resulted in Feeser losing certain
sales and losing profits on others, and expert report outlining
the magnitude of the price difference).
0
In Feeser, upon which the district court relied in
admitting and crediting the customer statements, we expressly
noted that "[t]he evidence we find most persuasive is that of the
customers of Feeser, corroborating the sales personnel's
testimony, that the reason Feeser lost sales was because its
prices for Serv-A-Portion products were not competitive". Feeser,
909 F.2d at 1537.
20
Having concluded that Stelwagon failed to present any
direct evidence of lost sales or profits caused by the
discriminatory pricing, we will reverse the district court's
judgment insofar as it concludes that the record contains
sufficient evidence to support an award of damages under section
4 of the Clayton Act.0
III. BREACH OF CONTRACT CLAIM
In addition to the Robinson-Patman claim, Stelwagon
brought a state action for breach of contract based primarily on
Tarmac's MAPs sales to one of Stelwagon's principal competitors,
Allied Roofing, in violation of the exclusive, distributorship
agreement between the parties. Tarmac argues that enforcement of
the contract is barred by the statute of frauds because the
agreement was never reduced to writing and because none of the
statute's exceptions apply. Specifically, Tarmac argues that the
district court erred in concluding (1) that Stelwagon established
a waiver of the statute by a showing of custom in the industry,
and (2) that the performance exception removed the
distributorship contract from the statute's protection.
Although, in general, the statute of frauds acts as a
bar to the enforcement of oral agreements, it is well settled
that such agreements may be taken out of the statute of frauds if
there is evidence to establish that the agreement was made. M.
Leff Radio Parts, Inc. v. Mattel, Inc., 706 F. Supp. 387, 394
0
Because of our conclusion on the issue of Stelwagon's
entitlement to damages under the Clayton Act, we do not reach
Tarmac's argument that the amount of damages is unsupported by
the evidence.
21
(E.D. Pa. 1988). This rule promotes the underlying purposes of
the statute of frauds: to prevent perjury and fraud, Simplex
Precast Industries, Inc. v. Biehl, 149 A.2d 121, 123 (1959), and
to prevent parties from escaping their legal obligations. M.
Leff Radio Parts, 706 F. Supp. at 394.
Stelwagon's contract claim survives Tarmac's statute of
frauds challenge based on the established doctrine that part
performance of an indivisible contract will take the whole
contract out of the statute of frauds. W.I. Snyder Corp. v.
Caracciolo, 541 A.2d 755, 779 (Pa Super. 1988). "We conclude it
is appropriate for Pennsylvania to follow the weight of authority
in this area and rule that part payment of an indivisible
contract takes the entire contract outside of the requirements of
the Statute of Frauds." Id.
We agree with the district court's conclusion that
Stelwagon's exclusive dealing agreement with Tarmac was
indivisible. Any other conclusion renders Stelwagon and Tarmac's
agreement meaningless. If the contract was divisible by time or
by shipments, Tarmac would only have obligated itself to deal
exclusively with Stelwagon so long as it chose to do so.0 Nor is
0
The lack of a definite date on which the agreement ends
does not determine Stelwagon's claim. 13 Pa. Cons. Stat. Ann.
§ 2204(c) preserves a contract even if one or more terms are
indefinite as long as there is a "reasonably certain basis for
giving an appropriate remedy." 13 Pa. Cons. Stat. Ann. § 2309(b)
states "Where the contract provides for successive performances
but is indefinite in duration it is valid for a reasonable time
but unless otherwise agreed may be terminated at any time by
either party." Tarmac has never argued that it terminated the
exclusive dealership arrangement nor that the four-year period of
exclusivity by Stelwagon was not reasonable.
22
there any way to limit the agreement by geographic area without
doing violence to the jury's conclusion that the exclusive
dealing agreement between Tarmac and Stelwagon covered the whole
Philadelphia area. Once Tarmac granted Stelwagon an exclusive
distributor contract, albeit orally, and acted on it, that
agreement could only be enforced as a whole or not at all.
Moreover, the record reflects more than sufficient
evidence of Tarmac's part performance. From 1988 to 1989, Tarmac
honored the exclusive distributor contract. Tarmac forbade
Sellmore Roofing, one of Stelwagon's competitors, from selling
Tarmac MAPs in Philadelphia after Stelwagon alerted Tarmac to
Sellmore's sales. Tarmac refused to sell MAPs to Bradco, a
Philadelphia roofing supplier, because of its contract with
Stelwagon. These performances validate Stelwagon's claim that an
exclusive distributor contract existed. Hence, Stelwagon's
contract claims should not be barred by the statute of frauds and
the jury's award of damages for that claim must be affirmed.0
IV. CONCLUSION
For the reasons set forth above, the district court's
denial of Tarmac's motion for judgment as a matter of law will be
affirmed insofar as it pertains to Stelwagon's breach of contract
claim. We will also affirm the district court's finding that
Stelwagon successfully proved that Tarmac's discriminatory
pricing scheme violated the Robinson-Patman Act; however, because
0
Because of our decision on the issue of part performance,
we need not address the parties' arguments with respect to usage
of trade.
23
we do not believe that Stelwagon offered sufficient proof of
actual antitrust damages, we will vacate that portion of the
district court's judgment that upholds the jury's award of
damages under section 4 of the Clayton Act, and remand the case
for entry of judgment consistent with this opinion.
_________________________
24
Stelwagon Manufacturing Co. v. Tarmac Roofing Supply, Inc., No. 94-2004.
GARTH, Circuit Judge, concurring,
I agree that Stelwagon's antitrust verdict cannot stand and that Stelwago
entitled to breach of contract damages. I write separately because I have some
differences with Judge Lewis with respect to his analysis regarding Celotex Corpora
I am also of the opinion that the issue of damages as it arose from Stelwagon's rel
with Standard should be explained. Those differences and that explanation do not c
a difference in result.
I.
I agree with the majority that proof of actual competition is critical to
of a Robinson-Patman second line price discrimination claim. Maj. Op. typescript a
As Judge Lewis' opinion states, actual competition requires proof of both functiona
geographic competition -- proof that "the favored and disfavored purchasers compete
the same functional level, i.e., all wholesalers or all retailers, and within the s
geographic market." Id. (quoting Best Brands Beverage, Inc. v. Fallstaff Brewing C
842 F.2d 578, 584 (2d Cir. 1987)).
I cannot agree however that Celotex competed with Stelwagon. Celotex sol
private label MAPs, which were manufactured by Tarmac, in various parts of the east
including Philadelphia. But unlike Stelwagon, Celotex sold to distributors, not to
roofing contractors. Thus, Celotex sold to Stelwagon's competitors, not Stelwagon'
25
customers. That is to say, Celotex operated at a different functional level than
Stelwagon, i.e. one functional level above Stelwagon.
Keenan, Stelwagon's President, testified that Celotex sold almost exclusi
other distributors and repeatedly offered to sell to Stelwagon. App. 299-300. Not
the 163 Celotex customers identified at trial was proven or even alleged to be a ro
contractor. App. 138-46.
Despite this evidence, Stelwagon claims that it competed with Celotex bas
Keenan's hearsay testimony that Celotex had once sold directly to Alper Roofing, a
contractor. App. 302-03.0 Keenan had previously testified that manufacturers occasi
sold directly to contractors for large jobs. App. 300. I cannot agree that eviden
one sale sufficed to permit the jury to conclude that Celotex competed on a general
with Stelwagon.
Nor does the record reveal that the price discount received by Celotex vi
§ 2(b) of the Clayton Act. See Texaco v. Hasbrouck, 496 U.S. 543, 571 (1990).0 The
0
I understand footnotes 16 and 17 to state that Keenan's hearsay testimony
admissible at trial for the limited purpose of showing motive only. If indeed Stel
had produced at trial the customer who made the statement to Keenan, that testimony
certainly have been admissible. Short of producing the actual declarant at trial,
however, Keenan's testimony was still hearsay and thus had to satisfy a hearsay exc
(here Fed. R. Evid. 803(3)). It was accordingly admissible but limited to proof of
motive.
Stelwagon introduced evidence that other contractors bought Celotex's pro
but Stelwagon did not produce evidence that those contractors purchased the MAPs di
from Celotex. The fact that a consumer may buy Dole canned goods from Foodtown does
mean that A & P, Foodtown's competitor, is also Dole's competitor.
0
In Texaco, Hasbrouck had purchased gasoline for his retail station at a price wh
exceeded that which Texaco had sold to two distributors. These distributors had th
to retail stations which they owned and to independent retail stations. 496 U.S. at
51. The Court concluded that the distributors' mixed functions, the evidence of
intentional price discrimination by Texaco, and the amount of the discount as compa
2
record here is devoid of evidence of Celotex's costs as compared with any price dis
received. There is no evidence of the prices Celotex charged its customers, and th
no evidence in the record that Celotex operated both as a distributor as well as a
supplier in Philadelphia. This failure of proofs distinguishes Stelwagon's claims
those discussed in Texaco. Hence, on this record, I could not hold that Celotex co
with Stelwagon.
Despite this disagreement with the majority, I concur in Judge Lewis' opi
that Stelwagon failed to produce evidence of actual competitive injury -- that is,
evidence of actual lost sales. I therefore agree that we must reverse Stelwagon's
antitrust verdict on that account.
Even if I had not concluded that Stelwagon had failed to prove actual ant
injury, I would still vote to reverse Stelwagon's verdict because Stelwagon failed
quantify its damages adequately. While the burden of proving damage in an antitrus
is reduced, see J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 565-67
the damages alleged must arise from whatever injury to competition has been demonst
Stelwagon's proof at trial established that Standard Roofing Supply compe
with Stelwagon only for sales out of Stelwagon's Comly (North Philadelphia) and Cam
New Jersey warehouses. Despite this, Stelwagon sought to quantify its damages only
respect to the combined sales of all six of its warehouses. Stelwagon never broke
its sales separately for the Comly and Camden locations. Given that Standard compe
only with those two warehouses, however, Stelwagon's combined sales figures could n
the actual costs incurred by the distributors sufficed to prove a price discriminat
claim. Id. at 572-73.
3
did not provide an adequate basis to quantify any damage which resulted from the fa
prices Standard received.
It would be impermissibly speculative to extrapolate from Stelwagon's ove
sales figures, which Stelwagon entered into evidence, the particular damage to Stel
that may have resulted from price discrimination at Stelwagon's Comly and Camden
locations.
II.
Having expressed my reservations about the majority's opinion as to wheth
Celotex competed with Stelwagon and the quantification of damages, I nonetheless re
same result as the majority has. Accordingly, I concur in the judgment reversing
Stelwagon's verdict on the Robinson-Patman claim and affirming Stelwagon's verdict
contract claim.
4