Petition — Michelin Tire Corp. v. Bostick Oil Co.

s

83-268 ae

AUG 18 1923

No. ‘aw: =

IN THE

Supreme Court of the United States

OCTOBER TERM. 1953

MICHELIN TIRE CORPORATION,

COMMERCIAL DIVISION,

Petitioner

v.

BOSTICK OIL COMPANY, INC.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FOURTH CIRCUIT

FLETCHER C. MANN

J. BRANTLEY PHILLIPS, JR.

QO. DOYLE MARTIN

NATALMA M. McKNEW

Attorneys for Petitioner

217 East Coffee Street

Greenville, South Carolina 29601

$03) 242-6440

QUESTIONS PRESENTED

1. Docomplaints by some dealers to a manufacturer about a

competing dealer's pricing policies, coupled with later termina-

tion of the dealer relationship between the manufacturer and the

subject dealer, permit an inference of conspiracy between the

complaining dealers and the manufacturer, in violation of Section

1 of the Sherman Act, 15 U.S.C. § 1?

2. Is a manufacturer's marketing program subject to anti-

trust scrutiny under the standard of per se illegality, rather than

the rule of reason, based upon the program's possible use as a

means of monitoring dealer pricing and its possible use as a

barrier between dealers and customers in pricing matters?

INDEX

Opinions Below. .......

Jurisdiction.

Statutory Provision Involved

Statement of the Case ...

Reasons tor Granting the Writ

Conclusion ........

Appendix A—Opinion of the United States

Court of Appeals for the Fourth Circuit

Appendix B—Order ot the United States

Court of Appeals for the Fourth Circuit

on Petition tor Rehearing.

Appendix C—Opinion of the United States

Distnet Court tor the District of

South Carolina.

Appendix D—Statement of Corporate Affiliation

Appendix E—Certiticate of Service

Pave

tw

to

\-1

AUTHORITIES

Cases: Page:

Battle v. Lubrizol Corp.,

673 F.2d 984 (Sth Cir. 1982) ........... AB nn Bah oh

Battle v. Lubrizol Corp.,

F 2d (Sth Cir. 1983) (en bane) .........

Blankenship v. Herzfeld,

OE Pe Cae (Peet Aa BO) Sas ts ace le ss canals

Borger v. Yamaha International Corp..,

Oe Fe See Be GT sac Se een eka ee ae

Broadcast Music, Inc. v. Columbia

Broadcasting System, Inc., 441 U.S. 1 (1979)... 5, 7,

Bruce Drug, Inc. v. Hollister, Inc..

ee ee Oe CA es PE chee e see eas

Davis-Watkins Co. v. Service Merchandise,

686 F 2d 1190 (6th Cir. 1952), petition for cert. filed

sub nom., Service Merchandise Co., Inc. v. Amana

Refrigeration, Inc., 31 U.S.L.W 3535 (U.S. Jan. 15,

See A CES Ge oe els oe vce er acee eee aman

Filco v. Amana Refrigeration, Inc.

F 2d (9th Cir. 1983)..... Bet er ed phy age

Girardi v. Gates Rubber Co.,

662 F.2d 935 (2d Cir. 1981).............

D. B Rice Tire Company v. Michelin Tire Corp ,

$53 F Supp. 750 D Md. 1980), affd

63S F2d 15 4th Cir 1981)

Roesch, Inc vs Star Cooler Corp .

671 F2d 1168 Sth Cir 1982)

Roesch, Inc vt Star Cooler Corp

Fld Sth Cir 1983) en banc

Schuimmer t Sony Corp of America.

677 Fld 946 2d Cir 192

Sports Center Ine cv Riddell, Ini

673 Fld TS Sth Cir 19S2

vue

uN

bh

Spray-Rite Service Corp. v. Monsanto Co.,

684 F 2d 1226 (7th Cir. 1982), cert.

granted U.S. 103 S$. Ct. 1249 (1983),

EJ. Sweeney & Sons, Inc. v. Texaco, Inc.,

637 F2d 105 (3d Cir. 1980). .

Tose v. First Pennsylvania Bank, N.A.,

648 F 2d $79 (3d Cir. 1981)..........

Venture Technology, Inc. v. National Fuel Gas Co.,

685 F 2d 41 (2d Cir. 1982)

Federal Statutes:

15 U.S.C. $1, Sherman Act §$1.....

BO Ui Aa Oe oe ee ees

28 U.S.C. § 1337

28 U.S.C. § 1254

vt

Seite wae Me

.. passim

to ty to

Supreme Court of the United States

OCTOBER TERM, 1953

MICHELIN TIRE CORPORATION,

COMMERCIAL DIVISION,

Petitioner

BOSTICK OIL COMPANY, INC.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FOURTH CIRCUIT

The Petitioner, Michelin Tire Corporation, Commercial

Division, respectfully prays that a wrt of certioran issue to

review the judgment and opinion of the United States Court of

Appeals for the Fourth Circuit entered in the proceedings

on March 14,1983.

OPINIONS BELOW

The opinion of the Court of Appeals for the Fourth Circuit

is reported at 702 F 2d 1207 and is reproduced as Appendix A to

this Petition.

to

The opinion of the District Court for the District of South

Carolina, entered September 17, 1981, is unpublished. It is

reproduced as Appendix C to this Petition.

JURISDICTION

The judgment of the Court of Appeals Appendix A infra)

was entered on March 14, 1953. A timely petition for rehearing

was denied on May 23, 1983, with Judges Russell, Widener, Hall

and Chapman voting in favor of rehearing (Appendix B infra).

The jurisdiction of this Court is invoked pursuant to 28 U.S.C.

§ 125411).

STATUTORY PROVISION INVOLVED

This action involves Section 1 of the Sherman Act, 15

USC. $1, which provides

Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or com-

merce among the several States. or with foreign

nations, is hereby declared to be illegal

STATEMENT OF THE CASE

Michelin Tire Corporation, Commercial Division | Michelin),

markets its tires and tubes in the United States through

independent dealers who contract with Michelin to pro-

vide retail sales and service. Michelin and Bostick Oil Company,

Inc. | Bostick) entered into the first of four, one-vear sales agree-

ments, by which Bostick became a dealer in passenger and truck

tires, in May of 1974. In Apml 1975, Michelin informed Bostick

that it had elected not to renew the truck tire portion of the

existing agreement when it expired in May of 1975. Bostick

thereafter filed this action, stating five causes of action, two of

which alleged violations of Section 1 of the Sherman Act, 15

U.S.C. $1. Junsdiction in the District Court was based upon 25

U.S.C. $§ 1337 and 1332. The case was tied in July and August,

1951, resulting in a divected verdict in Michelins favor

As to Bostick’s Sherman Act § 1 claim, the District Court

concluded that Bostick had failed to produce cogent evidence to

support a finding of conspiracy. Although there was evidence of

widespread complaints by other Michelin dealers about Bostick,

the District Court found there was no evidence to connect those

general complaints with Michelin's decision not to renew Bostick

as a dealer. The Court wrote:

Indeed, all of the evidence is to the contrary... As

conceded by plaintiff's counsel, this [the fact that there

was no response by Michelin to complaints about

Bostick} is in contrast to the finding of D. B. Rice Tire

Company v. Michelin Tire Corp., 483 FSupp. 750

D. Md. 1980), aff'd 638 F2d 15. The essential causal

connection between complaints and the action taken by

defendant, which was present in Rice and in Girardi v

Gates Rubber Co., 325 F2d 196 (9th Cir. 1963). is

absent here On the state of this record, no con-

spiracy or combination can be found. \App. C p. A-35)

Absent a causal connection between complaints and non-

renewal, the District Court held that no Section 1 contract,

combination or conspiracy in restraint of trade could be found.

The Court observed, “Mere complaints do not a conspiracy

make.” and explained its reasoning thusly:

Common sense tells us that complaints from buyers and

sellers about each other and about their competitors are

to be expected in the marketplace... . They are, in

fact, “rational market behavior.” . . . The unsolicited

behavior of other dealers therefore cannot serve as the

basis for Section 1 liability. Mere complaints cannot

support an inference of conspiracy. (App. C p. A-35)

(Citations omitted. )

The District Court further concluded that the evidence

could not support a finding of a per se illegal restraint of trade

on Michelin's part. The National Account Program, on which

Bostick rested its argument of per se illegality, operated neither

as a price maintenance device nor as a customer restriction. The

only conclusion which a factfinder might draw from the evidence

presented by the plaintiff, according to the District Court, was

that “Michelin did not intend to, could not and did not control the

prices of tires sold to National Account customers under the

National Account Program.” On this record no per se illegal price

maintenance scheme could be found.

The Court of Appeals reversed both findings and held:

1. A showing of a manufacturer's receipt of complaints

about a dealer, coupled with the dealer's later non-

renewal by the manufacturer, supports an inference

of an illegal conspiracy to restrain trade under

Section 1 of the Sherman Act. App. A., p. A-11

Michelin's vertically-imposed National Accounts

billing program may constitute a per se illegal

price maintenance scheme based on its potential

to insulate dealers from customers in pricing

matters and the opportunity it may present for

Michelin to monitor dealers’ sales tactics and polli-

cies..App. A, p. A-16)

Following the Order of the Court of Appeals on March 14.

1983, Michelin filed a Petition and Supplemental Petition tor

Rehearing, and Bostick filed a response. On May 23, 1983. the

Court entered its Order denving Michelin's Petitions, with

Judges Russell, Widener, Hall and Chapman noting their dissent

to the denial.

te

REASONS FOR GRANTING THE WRIT

This case presents two unusually strong reasons for granting

the writ of certiorari.

First, in adopting a position on Section | proof of conspiracy

which disregards the necessary causal connection between com-

plaints and non-renewal, the Fourth Circuit has adopted an

extreme, minority position which is in direct and irreconcilable

conflict with the majonty position adopted by the Courts of

Appeal tor the First, Second, Third, Fifth, Sixth, Eighth, Ninth

and Tenth Circuits. Only the Seventh Circuit adheres to the

ue

position adopted by the Fourth Circuit here, Spray-Rite Service

Corp. v. Monsanto Co., 684 F 2d 1226 (7th Cir. 1982), cert.

granted, 103 S. Ct. 1249 (1983), and that decision is currently

under review by this court.

Second, in concluding that Michelin's National Account Pro-

gram may constitute a per se illegal restraint, the Fourth Circuit

is in conflict with the decision of this Court in Broadcast Music,

Inc. v. Columbia Broadcasting System, 441 U.S. 1 (1979).

Either reason presents a significant ground for review by this

Court, in combination, they are compelling.

I.

In this case, the Court of Appeals concluded that “proot of

termination following competitor complaints is sufficient to sup-

port an inference of concerted action.” (App. A p. A-11) Even in

the absence of evidence to demonstrate that complaints moti-

vated Bostick's non-renewal as a Michelin dealer, the Fourth

Circuit concluded that an inference of conspiracy was supporta-

ble. This holding represents the extreme minority position,

shared only by the Court of Appeals for the Seventh Circuit.

The majority rule, specifically adopted by the Courts of

Appeal for the First, Second, Third, Fifth, Sixth, Eighth, Ninth

and Tenth Circuits, and now rejected by the Fourth Circuit, is

that a manufacturer's knowledge of complaints, coupled with

termination, will not support an inference of conspiracy under

Section 1 of the Sherman Act. Instead, there must be specific,

probative evidence that the complaints caused or contributed to

the dealer's termination or non-renewal. A review of relevant

decisions among the Courts of Appeal demonstrates the weight of

precedent supporting the majority view:

First Circuit: In Bruce Drug, Inc. v. Hollister, 658 F.2d

$53 (1982), the Court held, “The mere existence of complaints

inasupplier's files. . . is insufficient. . . to sustain the inference

that a dealer was terminated because of them, or because of a

conspiracy. ”

Second Circuit: In H. L. Moore Drug Exchange v

Eli Lilly & Co., 662 F.2d 935 (1981), the Court declared, “Even

where a termination follows the receipt of complaints. . ., there

is no basis for inferring the existence of concerted action, absent

some other evidence of a tacit understanding or agreement with

the complainants). The Court reached the same conclusion in

Venture Technology, inc. v. National Fuel Gas Co., 655 F.2d 41

1952), Schwimmer v. Sony Corp. of America, 677 F2d 946

1982), and Borger v. Yamaha International Corp., 625 F.2d

390 | 1980).

Third Circuit; The landmark case in the Third Circuit is

E. J. Sweeney & Sons, Inc. v. Texaco, Inc. , 637 F 2d 105( 1980), in

which the majority rule was enunciated. The Court's position was

reinforced in Tose v. First National Pennsylvania Bank, 648 F.2d

879 (1982).

Fifth Circuit; The Fifth Circuit made its position on this

issue clear in Sports Center, Inc. v. Riddell, Inc., 673 F.2d 786

(1952), and echoed the majority rule.

Sixth Circuit: The majority rule was adopted by the Sixth

Circuit in Davis-Watkins Co. v. Service Merchandise, 686 F.2d

1190 | 1982).

Eighth Circuit: A dichotomy which arose from two panels

adopting opposite standards on the same day (Compare Roesch,

Inc. v. Star Cooler Corp., 671 F.2d 1165 (1982) (majority rule)

with Battle v. Lubrizol Corp. , 673 F.2d 984 (1982) (minority rule),

has now been resolved in favor of the majority rule, by rehearing

en banc decisions in both cases filed July 12, 1953.

Ninth Circuit: In Filco v. Amana Refrigeration, Inc.,

F 2d (1983), the Court of Appeals for the Ninth Circuit

recently concluded, “competitor complaints plus termination

is not sufficient evidence to raise an inference of unlawtul

conspiracy or combination. To rule otherwise would subject

manufacturers to vexatious litigation because every terminated

discounting distnbutor probably could point to complaints

made by his competitors. ”

Tenth Circuit: The Second Circuit's decision in Borger v

Yamaha International Corp., supra, formed the basis tor the

Tenth Circuit's adoption of the majority rule in Blankenship v.

Herzfeld, 661 F.2d 840 (1981).

In support of its conclusion in this case, the Fourth Circuit

cited Spray-Rite Service Corp. v. Monsanto Co., supra, a strik-

ingly similar case, now before this Court on writ of certiorari to

the Seventh Circuit. The issue presented in both this case and

Spray-Rite is crucial to antitrust conspiracy cases: Will evidence

of a manufacturer's receipt of complaints against a distributor,

coupled with that distributor's later termination or non-renewal,

suffice as evidence of a contract, combination or conspiracy in

restraint of trade for purposes of Section | of the Sherman Act,

notwithstanding the absence of evidence to establish a causal

connection between complaints and non-renewal? The answer

must be no. As the Court observed in E. J. Sweeney & Sons, Inc.

v. Texaco, Inc., supra, at 257-255:

It would be inequitable to hold that the mere receipt of

the complaint creates an inference of a combination

between the recipient and the complainant. The recipi-

ent of the complaint cannot help receiving the com-

plaint and it would be unfair, without additional

evidence of the existence of the conspiracy, to hold him

liable for something over which he has no control.

This issue, one of central importance to Sherman Act Sec-

tion 1 cases, and the subject of sharp division among the Courts

of Appeal, warrants determination by this honorable Court.

In Broadcast Music, Inc. v. Columbia Broadcasting System,

441 U.S. 1 (1979), this Court warned against the hazards of

woodenly applying the rule of per se illegality under Section | of

the Sherman Act to business arrangements which might be

characterized as “price fixing.” The Court wrote:

(I]n characterizing this conduct under the per se rule,

our inquiry must focus on whether the effect and

the purpose of the practice is to threaten the proper

operation of our predominantly free market economy—

that is, whether the practice facially appears to be one

that would always or almost always tend to restrict

competition and decrease output. . .

Here, the Court of Appeals concluded that Michelin's

National Account marketing program could be per se illegal

under Section | of the Sherman Act solely because it may insulate

dealers from customers in pricing matters and may give

Michelin an opportunity for monitoring dealers’ sales tactics

and policies (App. A p. A-16). The Court of Appeals has con-

cluded that if a marketing program merely has the potential to act

as a resale price maintenance device, it may be per se illegal.

There has not vet been any attempt to address the actual opera-

tion of the program in the marketplace, nor has there been any

discussion of the purpose of the program. The Fourth Circuit has

in fact ignored the standards set forth by this Court in its Broad-

cast Music decision.

CONCLUSION

The issues raised in this case are the subject of dissention

among the circuits and are central to antitrust cases. By granting

this Petition, the Court may both settle a material disagreement

amoug the Circuits and announce the extent to which the realities

of the marketplace should be recognized in antitrust litigation.

For these reasons, the Petitioner respectfully submits that this

Court should grant the Petition for a Wnt of Certiorari.

Respectfully submitted,

Fletcher C. Mann

J. Brantley Phillips, Jr.

O. Dovle Martin

Natalma M. McKnew

Attorneys for Petitioner

Michelin Tire Corporation,

Commercial Division

Leatherwood, Walker, Todd & Mann

217 East Coffee Street

Post Office Box 2245

Greenville, South Carolina 29602

(S03) 242-440

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. S1-1985

Bostick Oil Company, Ine.,

Appellant,

Vv

Michelin Tire Corporation, Commercial Division,

Appellee

Appeal from the United States District Court for the District

of South Carolina, at Columbia. Robert W. Hemphill, Senior

District Judge.

Argued December 9, 1982 Decided March 14, 1983

Before WINTER, Chief Judge, PHILLIPS, Circuit Judge, and

BUTZNER, Senior Circuit Judge.

Robert E. Staton (Michael H. Quinn, Quinn, Brown, Staton &

Boyle on brief) for Appellant, O. Doyle Martin (Natalma M.

McKnew, Leatherwood, Walker, Todd & Mann, James M

Micali, Assistant General Counsel on briet) for Appellee.

A-2

WINTER, Chief Judge:

Bostick Oil Company, Inc., (Bostick) brought this private

antitrust suit under various federal and state statutes when the

Michelin Tire Corporation, Commercial Division, (Michelin)

terminated Bostick’s contract as a distributor of Michelin truck

tires. At the close of Bostick’s evidence at trial, the district court

granted Michelin's motion for a directed verdict on the causes of

action then remaining:' attempt to monopolize under § 2 of the

Sherman Act, 15 U.S.C. § 2; contract, combination or conspiracy

in restraint of trade, in violation of § 1 of the Sherman Act, and,

untair or deceptive trade practices violating the South Carolina

Untair Trade Practices Act, § 39-3-20(a), Code of Laws of South

Carolina 1976. Bostick appeals only from the judgment entered

against it on its state law claim and on its two theories of the § |

Sherman Act violations,’ asserting that sufficient evidence was

introduced to warrant submission of these issues to the jury. We

agree, and therefore reverse and remand for a new trial. Because

of our disposition of this appeal, we need address only brietly an

evidentiary issue also raised by Bostick.

In reviewing the grant of a motion for directed verdict under

Rule Sta), Fed. R. Civ. P, we view all evidence presented by

By consent of the parties. a clain tor breach of contract and a counterclaim tor abuse

of process had been dismissed with prejudice pmor to trial

‘Michelin maintains that only one theory of 8 1 liability. regarding Bostick » termina

ton as a result of pressure on Michelin from complaints by competing distributors was

presented in the pleadings and at trial. so that Bostick should now be foreclosed trom

arguing that the evidence also supports finding Michelin liable for a resale price main

tenance arrangement Although there may have been some imprecision below as to

whether Bostick presented two separate theonmes or merely two types of evidence in

support of a single theory. it is apparent from the distnet courts memorandum opinion

that the resale price maintenance theory was argued by Bostick as a distinct basis for

lability Where the evidence as developed provides a basis for recovers not covered

strictly by the pleadings the pleadings are treated as conforming to the evidence Keete

Bros ¥ Teamsters Local Union No 542. 562 Fld 298 Whand nll 4Cir 1977) Rule

sb) Fed KR Cie P to dispel any doubt. Bostick formally moved to amend the

pleadings at oral argument. as itis allowed todo See generally 6 Wright & Miller Federal

Practice and Procedure Civil § LA94 We theretore consider both & | theones

A-3

Bostick, the nonmoving party, in the light most favorable to it,

drawing all reasonable inferences in Bostick’s favor, Ard vy.

Seaboard Coast Line Railroad Company, 487 F.2d 456, 457

(4 Cir. 1973), without weighing the credibility of witnesses, Old

Dominion Stevedoring Corp. v. Polskie Linie Oceaniczne,

386 F.2d 193, 197 (4 Cir. 1967).

Bostick was at one time a small, family-owned oil concern

based in Estill, South Carolina, which began shifting its focus to

tire sales in 1967. By 1974, Bostick was offering for sale a wide

range of passenger car tires and some truck tires. In April 1974,

Bostick contacted Michelin, seeking to become an authorized

distributor. Michelin, the marketing division of the Michelin Tire

Corporation, was then expanding distribution of its radial tires

and related products through numerous distributorship arrange-

ments. ' Responding to the inquiry, Michelin, sent its district truck

tire sales manager to Estill to survey Bostick’s operation and

prepare a dealership application. The Michelin representative

noted, among other items, the type of tire service available from

Bostick. Bostick’s application was approved, and it entered the

first of four successive one-year standard form Dealer Sales

Agreement (DSA) contracts with Michelin on May 29, 1974,

authorizing it to sell both passenger and truck tires.

Beginning sometime in 1975 with the employment of an

experienced truck tire saleswoman, Bostick shifted the vast

majority of its Michelin business into truck tire sales. During its

first calendar year as a Michelin dealer, Bostick sold approxi-

mately $38,000 in truck tires and $39,000 in passenger tires

of that brand.‘ For the calendar year 1976, Bostick’s gross sales of

truck and light truck tires had soared to slightly over $1, 100,000

A more detailed chromele of the French tire manufacturers expansion into the

Amenean market can be found in Donald B Rice Tire Company + Michelin Tire

Corporation, 453 F Supp. 70. 752-53.D Md 1980). aff'd, 635 Fld 15.4 Cir. cert

dened, 454.0 S S64 1951)

These figures actually represent Bostick s purchases of Michelin tires through the

end of 1974, but they are indicative of its sales By its method of operation. Bostick bought

from Michelin those tires for which it had orders, rather than carrving a large stock

Company president Joe Bostick estimated each figure in the $40 000 range when testifying

trom memory

A-4

as compared to $936,827 in passenger tire sales, according to a

memorandum written by Michelin's corporate sales manager for

the Eastern United States. By the end of April 1978, its last fiscal

vear as a Michelin dealer, Bostick had sold approximately

$2,000,000 worth of Michelin truck tires during the preceding

twelve months. The initial impetus for this shift to truck tire

sales, according to company president Joe Bostick, came trom

Michelin's local sales representative during 1974 and 1975, as

well as the enticing quantity discounts and commissions built

into Michelin's pricing structure.

In expanding its business, Bostick employed the practice of

“drop-shipping’, i.e., transferring the tires to the purchaser by

taking an order and having tires shipped directly, without

providing an initial mounting or other service. Although one

provision of the Dealer Sales Agreement required Bostick to

maintain facilities sufficient to “enabl [e the} Dealer to sell and

service Michelin Products in a first class manner’, Bostick intro-

duced the testimony of several major truck fleet-owning cus-

tomers to explain that such purchasers usually maintained their

own service facilities, Joe Bostick also testified that his company

maintained a service arrangement with a mechanic in Estill, and

had received virtually no complaints about a lack of service from

customers during the period it was a Michelin dealer.

Bostick’s primary method of expanding sales was

through its aggressive price cutting and rebating of commissions

and quantity discounts to its customers, Until the summer of 1977,

Michelin offered dealers truck tires at a basic price of 22 percent

off of the manufacturer's suggested list price. From this “net

billing price,” Bostick or any dealer was able to subtract up to an

additional 9 percent for a quantity purchase, another 2 percent

discount for early payment to Michelin, and a further 2 percent

discount if certain shipping arrangements were made.’ Thus,

Bostick was able to give as much as a6 percent discount to the

There was also the potential for a 5 percent calendar year bonus if sales reached a

certain volume During the penod until mid 1977) Bostick apparently) never reached the

requisite volume. its allegation that a quantity bonus was earned but unpaid was in part

the subject of one of the claims not at issue in this appeal

A-5

purchaser off of the “net billing price” and still sell at a gross

profit; in effect, Bostick could buy a tire listed by the manutac-

turer as worth $100 for approximately $65, offering it for as low as

approximately $73.30, while a dealer taking no advantage of

discounts would have to sell the tire for $83.30 for a comparable

total return on each unit sold.”

Bostick’s sales practices provoked complaints by various

competing Michelin dealers to field and district level personnel

of the tire company. One general manager of a Charleston, South

Carolina, Michelin dealer during the period 1974 to 1978 testi-

tied that he had complained to Michelin of Bostick s “coming into

the Charleston area and selling truck tires at prices much below

what we were selling them for.” Three other South Carolina

Michelin dealers testified to having complained to Michelin per-

sonnel about Bostick’s low prices forcing them to decrease their

profit margins to compete; one stated that he preferred buying

trom Bostick as a wholesale supplier because in small quantities it

proved cheaper and more convenient than buying directly from

Michelin. Several of these dealers on cross-examination gave

some support to Michelin's contention that Bostick’s lack of

service facilities resulted in their having to provide service to

Michelin tire owners who had bought the product elsewhere.

But one of the dealers explained that the cost of the tire did not

reflect the cost of future service, for which the customer was

charged separately as provided, and that service had become

for that dealer “a big key to our growth” representing approxi-

mately 50 percent of his total business volume.

Internal Michelin memoranda, and testimony of Michelin

personnel at various levels, showed that numerous such com-

plaints were passed along to middle and upper-level manage-

“Of course. tor a comparable percentage markup based on the cost of the tire 1 ¢

approumately 7S percent), the other dealer would have charged roughly $44.00) In

addition. the discount pnee available to Bostick may have been better still the evidence

was unclear whether the additional discounts were taken from the assumed $75 net billing

prnee. from the $100 list pnee or trom the net price to Bostick after each prior discount was

figured The figures used here as examples reflect the most conservative manner of

caloulating the discount

A-6

ment, as well as being originated by Michelin field and sales

representatives themselves. As early as August 1975, a field

representative s monthly report to management quoted Bostick s

discount pricing and noted that another dealer “will not meet this

price.” By the spring of 1976, complaints about Bostick had

reached Jean Pierre Dulevrie, Michelin's vice-president. in

charge of sales, prompting him to send a corporate sales manager

ithe Michelin official immediately below Duleyrie) to talk

directly with Joe Bostick in April 1976. Though the actual

motivation behind the meeting and its contents were much in

dispute at trial, the outcome was a renewal of Bostick’s dealer-

ship for 1976-77 and possibly a promise by Bostick to expand

service facilities. The complaints by competitors and Michelin

sales personnel nonetheless persisted during the remainder

of Bostick’s distributorship.

Shortly before the May 29 renewal date of Bostick’s dealer-

ship contract in 1977, Michelin's district manager approached

Joe Bostick to explain the company s proposal to enroll Bostick in

a ‘National Accounts” program. Various large-volume purchasers

designated “national accounts” were billed and their accounts

collected centrally through Michelin, while distributors such as

Bostick continued to pertorm the actual selling and delivery of

tires for which they were paid a commission. Participation in the

program required disclosure of customer lists to Michelin, and

loss of the ability in the first instance to quote a price for the tires.

Continuation as a Michelin dealer was not made expressly condi-

tional on joining the National Accounts program, by the stated

terms, a dealer could continue to sell to some accounts as betore

and list others as National Accounts in any desired mix.

Michelin explained, through cross-examination, that the Na-

tional Accounts pricing structure proved capable of giving a

dealer an advantage over the regular distribution terms. A Na-

tional Accounts customer was billed by Michelin at a 20 percent

discount off the list price; the dealer who delivered the tire from

his stock was credited by Michelin at 22 percent off suggested list

price and was paid a 12 percent commission on each National

A-7

Accounts tire sold. Thus the dealer could rebate a substantial

part of the commission to the National Accounts customer and in

effect reduce the price of the tire below that of a direct sale from

the dealer. Bostick, as an aggressive seller, eventually gave from

half to all of the commission back to its National Accounts cus-

tomers in the form of rebates. Michelin officially did not disclose

the price it charged the customer, although the suggested price

list apparently was easily obtainable from customers.

Despite the eventual attractiveness of National Accounts

sales to Bostick, Joe Bostick testified that he personally had felt

“intimidated” into joining the National Accounts program during

meetings near dealership renewal time in 1977." In support

of this contention, Bostick introduced the recommendation in the

April 1977 monthly report of Michelin district manager Elroy

Earl “Pete” Christensen, Jr. to “management” that Bostick not be

renewed as a dealer. During April and May, Christensen, despite

frequent contact, refused to answer Joe Bostick’s inquiries as to

whether or not the dealership would be renewed. On May 25,

1977, with Michelin representatives still seeking to enroll Bostick

in the National Accounts program, the dealership legally expired.

On June 7, 1977, Bostick made its first sale through the National

Accounts program, and actual dealership renewal followed on

June 14. Contemporaneously, Christensen noted in a semi-

annual June 1977 planning report to management that encour-

agement from Michelin representatives to larger purchasers to

participate in the National Accounts program “should help a great

deal in the area where dealers are wholesaling and dropping off.”

In actual practice, much of the financial relationship between dealer and

Michelin was accomplished through accounting for tires bought’ and “sold” on each

company s books The record does not reflect clearly at what point cash actually flowed

between the companies. but the practical effect on Bostick » credit with Michelin was

as desorbed here

‘Michelin has argued before us that Joe Bostick s testimony was “incredible given his

business acumen While that may well be the case. we think, as we explain more fully

below that the issue remains one of many tor resolution by the jury For the most part

moreover, Bostick s subjective feeling of intimidation is of little relevance as there is

sufficient objective evidence from which a jury could conclude that as a matter of fact

dealership renewal was being held up until Bostick acquiesced in jomnng the National

Accounts program

A-S

A preceding portion of the same memorandum identified Bostick

as “the most pressing problem” in the district and expressed

optimism over Bostick’s recent willingness to enter the National

Accounts program.

Michelin's enthusiasm over Bostick’s National Accounts par-

ticipation soon waned. Christensen's July 1977 report expressed

concern over Bostick’s solicitation of existing customers for

National Accounts treatment and noted that Bostick had begun

giving rebates as high as 15 percent on purchases program.

Internal memoranda were also directed to management com-

plaining that Bostick was purchasing tires from a Canadian source

and selling them through the National Accounts program, the

Michelin corporate sales manager informed district: manager

Christensen that although “we can do nothing lega!ly” about the

practice “you will ask him kindly not to do so.”

Complaints about Bostick’s merchandising tactics continued

to be reported to Michelin management throughout 1977-75.

Finally, for reasons that are the central subject of this dispute.

Michelin representatives notified Bostick in April 1975, that its

truck tire dealership would not be renewed in May, although

continuation of passenger and light truck tire distributorship was

offered. Bostick refused the limited dealership offer and instead

brought this suit on May 26, 1975

Bostick asserts claims under § | of the Sherman Act on

essentially two distinct but related theories. The first is that

Bostick was eventually terminated as a dealer because Michelin

heeded the complaints of Bostick’s competitors, who were

threatened by Bostick’s ability to undersell them. The alternative

theory is that the National Accounts program was a resale price

maintenance scheme, and to entorce it Michelin terminated

Bostick, a dealer who continued effectively to lower the

manufacturer-imposed minimum price for its customers. The

interrelationship of the two is shown by perhaps a third view, that

Michelin's pressing Bostick to join the National Accounts pro-

gram was a less drastic attempt at satistving the competing deal-

A-9

ers complaints which failed to curb Bostick’s price cutting,

ultimately requiring Bostick’s termination. For all these claims,

of course, Bostick must introduce sufficient evidence upon which

a jury would be warranted in finding a “contract, combination,

or conspiracy as a prerequisite to § 1 liability. 15 U.S.C. $1,

compare United States v. Parke, Davis & Co. , 362 U.S. 29/1960),

with United States v. Colgate & Co., 250 U.S. 300(1919). If such

is found, it must be one which is unreasonably “in restraint of

trade.” Continental T.V., Inc. v. GTE Sylvania Incorporated, 433

U.S. 36 (1977). The district court believed one or the other

element was lacking in plaintiffs case for each theory and so

granted Michelin a directed verdict. We discuss each theory and

the necessary elements seriatim.

A.

Michelin argues strenuously that mere complaints do not a

conspiracy make, and cites to us cases for this proposition. See,

e.g.. H. L. Moore Drug Exchange v. Eli Lilly and Company, 662

F 2d 935 (2 Cir. 1981), cert. denied, DS. comm, ee oo Gl.

176 (1982), Roesch, Inc. v. Star Cooler Corporation, 314 F. Supp.

$90(E.D. Mo. 1981), aff'd, 671 F.2d 1168 (5 Cir. 1982).* Were this

a proper case, we might well agree with this unstartling principle.

In this case, however, the evidence elicited at trial showed more

than just uninfluential competitors’ complaints “standing alone’,

HL. Moore Drug, supra, 662 F 2d at 941.

Antitrust civil conspiracy or combination” has traditionally

been inferred © ‘from a course of dealing or other circumstances’ ”

in which the determinative facts are “what the parties actually

did” rather than whether an express agreement existed. Parke,

Davis, supra, 362 U.S. at 43-44, Eastern States Retail Lumber

Dealers Assoc. ¥. United States, 234 U.S. 6001914), Albrecht v

"Roesch, however holds in conflict with Battle» Lubnmzol Corp | 673 Fld 94

S$ Cir 1982). which was decided the same dav The Eighth Circuit granted rehearing in

bane in both cases on May 21. 1982. and heard arguments in October 1952. Decision is

currently pending

"There is no contention that a contract was entered into between Michelin and other

dealers regarding Bostick in regard to this first theory

A-10

The Herald Co., 390 U.S. 145, 149-50 (1965). As we noted in

Hester v. Martindale-Hubbell, Inc., 659 F.2d 433, 436 (4 Cir

1981). cert. denied, U.S . 102 S. Ct. 1489 (1952), the

courts, being “ ‘sensitive to the realities of the marketplace’

have extended the concept of concerted activity far beyond the

classic case of actual agreement to engage in a common course of

conduct.” Contrary to what the district court believed, that

Michelin did not expressly inform complaining dealers that it

would terminate Bostick at their behest cannot be determinative.

In an analogous case we recently addressed the basis upon

which the trier of fact could be permitted to find ” ‘the requisite

degree of involvement of other parties to infer a conspiracy

under United States v. Parke Davis & Co.” Donald B. Rice Tire

Company v. Michelin Tire Corporation, 635 F 2d 15, 16 4 Cir.),

cert. denied, 454 US. 5641951) (citation omitted). In Rice, we

affirmed the district court's finding of a “combination” despite

the absence of any formal manutacturer-dealers agreement, or

even of evidence that rival dealers had ever been consulted by

Michelin following their complaints against Rice, like Bostick a

high-volume Michelin dealer eventually terminated. The evi-

dence at that tral showed:

Jean Pierre Dulevne, the Vice-President in charge

of sales, and the individual primarily responsible for the

nonrenewal decision conceded that complaints trom

Michelin sales personnel in other areas and from other

tire dealers about plaintiff's geographically extensive

and large-scale wholesaling activities contributed to the

decision. While Michelin sales personnel do not quality

as economically distinct entities with whom defendant

could conspire or contract, Fuchs Sugars & Syrups, Inc.

v. Amstar Corp., 602 F2d 1025 2d Cir. 1979), other

Michelin tire dealers do quality. Numerous other wit-

nesses testified that other tire dealers complained to

Michelin personnel about plaintiffs activities. In light

of this testimony, as well as Duleyrie's concession that

no other types of complaints from any sources about any

other aspects of plaintiff's business were received prior

A-1]

to the nonrenewal decision, it is apparent that a combi-

nation existed for the purposes of § 1 between Michelin

and some of its authorized dealers.

Rice v. Michelin Tire, supra, 483 F. Supp. at 754. The evidence

adduced in the instant case, as we have summarized it, was

quite similar.

As in Rice, the testimony of Mr. Duleyrie, Michelin's sales

vice president during the relevant time period, shows personal

knowledge of the complaints and discussions between Bostick

and Michelin's district manager leading up to the renewal deci-

sion in 1976. Speaking generally, Duleyrie admitted hearing of

complaints by other dealers about Bostick’s underselling them

“all the time.” although he characterized such complaints as

“everyday-type’ to which “our people are instructed not to pay

attention.” He also conceded, “I don't know of any instances

where Bostick was asked to perform service and failed to do it.”

Mr. Dulevrie’s knowledge of the complaints, and his direc-

tion of subordinates to take various actions in response, can also

be inferred from admitted knowledge of the situation and direc-

tives to local Michelin officials by the regional corporate sales

manager, who reported directly to and took orders from Mr.

Duleyrie. Michelin's own theory of the termination—that it was

merely responding to the disillusionment of other dealers stem-

ming from Bostick’s lack of service facilities—implicitly recog-

nizes that the termination was something more than a unilateralls

motivated action. Thus, even absent an express “concession”

from Mr. Duleyrie, a reasonable jury could find a“ ‘causal nexus”

between the complaints and the termination without speculating

about the involvement of rival dealers. Roesch v. Star Cooler,

supra, 514 F Supp. at SH. Indeed, the Seventh Circuit in a

highly lucid discussion of § 1 liability predicted upon termination

of a dealer has held “that proot of termination following competi-

tor complaints is sufficient to support an inference of concerted

When questioned about Bostick s lack of service facilities as a basis for termination

when other dealers without service tacilities were asserted|y allowed to continue Mr

Dulevine stated that we took exactly the same type of action that was taken in the Bostick -

cil case” un terminating Rice as a dealer

A-12

action.” Spray-Rite Service Corp. ¥) Monsanto Co., 684 F 2d

1226, 1238 7 Cir 1982). And we have previously found that a

termination even more unilateral in nature could constitute a § 1

violation if it evinces sufficient anticompetitive character. Osborn

v. Sinclair Refining Company, 286 F 2d $32, $37 (4 Cir. 1960),

cert denied, 366 U.S. 963 (1961)."

It is ultimately, then, a factual issue tor the jury to determine

whether Bostick was terminated to placate nval dealers objecting

to price-cutting, or instead for lack of service facilities as Michelin

claims.’ The question next to be considered is whether termina-

tion for either purpose ts 4 violation of § 1.

The answer is found in Rice, * where we said:

‘Michelin contends that to rule for Bostick we must necessanly embrace an expan:

sive reading of Girardi y Gates Rubber Company Sales Division, Inc. 325 F 2d 196.9 Cir

1983). and that Girardi has been sapped of precedential value by universal criticism

Neither is true Girardi perhaps can be read quite broadly as in eflect creating a

presumption of combination or conspiracy whenever distnbutors complaints are tollowed

by asuppher s termination of the distavored mv al distnbutor But we need not adopt such a

presumption here to require submission of the case to the jury in the tace of other

evidence, bevond bald complaints. upon which a causal connection between the competi

tors objections to pnce-cutting and the termination could be found) Also. those cases cited

as rejecting Girardi, see eg. Roesch» star Cooler, supra. 671 Fld at 1172. EB J

Sweeney & Sons. Inc vy Texaco. Inc 475 F Supp 243. 256 6 D Pa 1979 aff'd 637

Fld 105 3 Cir 1980) cert dened, 451 U5 911 1981) in actuality only onticize the

evpansive view of that case. while preserving the narrower point that such other evidence

as we tind here wall be enough to raise an issue of fact regarding § | concerted activity. And

the Seventh Circuit has refused to follow the stringent proof requirements set out in

Sweeney, see Spray-Rite supra, 654 F ld at 1238-39. while the authonty of Roesch is in

doubt pending the Eighth Circuits resolution ot its in banc hearing See supra note

Spray-Rite. supra. 654 Fld at 1239 07

Or tor that matter for a third reason as vet undisclosed by Michelin

‘Bostick does not challenge on appeal the service clause in his Dealer Sales Agree

ment as itself an unreasonable restraint of trade as did the plaintiff in Rice The distnet

court in Rice had found that detendant s evidence. in rebuttal to the plaintiff's evidence ot

4 honzontal combination among mval dealers. showed that Rice had underspent on

Michelin promotional activities and. although maintaining adequate service tacihities

had effectively shifted much of the tire sem ice und repair work it could have been expected

to perform on to other dealers 483 F Supp at 757-59 These serice and promotional

deticences therefore were found to create a free-nder problem. see eg GTE Sylva

mee supra 4430S at 55. justitving entorcement of Michelin s contractual requirements

and hence the termination of Rice But the reasonableness of the clause did not come into

question until a prima face case of a honzontal combination as the impetus to the

termination had first been shown

A-13

‘We think it is important to distinguish between a

conspiracy among dealers and their supplying manutac-

turer for the purpose of retail price maintenance that

would benefit the dealers and one involving the same

parties but redounding primarily to the benetit of the

manufacturer as a result of increased interbrand

competition. A restraint imposed by the former

conspiracy would be horizontal in nature and per se

illegal, while one imposed by the latter would be ver-

tical and analyzed under the rule of reason.

638 F2d at 16. On the authority of Rice, we conclude that a

finding of per se violation of § 1 would result from a factual

determination that the termination was in furtherance of compet-

itors’ desires to eliminate a price-cutting rival. Com-Tel, Inc. v.

DuKane Corp., 669 F 2d 404, 411-13, 6 Cir. 1982), Klor’s, Inc. v.

Broadway-Hale Stores, Inc., 359 U.S. 207 (1959), United States

v. General Motors Corp., “54 US. 127 (1966). While we are not

unmindful that a per se label should not be mechanically applied,

Broadcast Music, Inc. v. Columbia Broadcasting System, Ine.,

441 U.S. 1, 9.1979), National Electrical Contractors Assoc., Inc.

v. National Constructors Assoc. , 678 F 2d 492, 500 (4 Cir. 1982),

where the facts support a finding that competing distributors

provoked a manufacturer to eliminate one of their number as a

marketplace competitor, there is no need to proceed to the more

finely tuned “rule of reason” analysis that is proper when con-

sidering manufacturer-imposed vertical restrictions like the tire

service requirement in Rice

Of course, it is possible that the jury will reject Bostick’s

proof and instead find that termination occurred for the reasons

Michelin claims. Michelin has yet to put on its proof, and had, by

cross-examination, only begun to draw out evidence to support

its defense. In Rice, by way of illustration, Michelin eventually

failed to convince the trier of fact of the applicability of two of the

three explantions for viewing the termination as a vertically

imposed manufacturers restraint promoting competition against

A-l4

other tire brands.’ Only the ‘free nder’ justification was proven,

4 justification vet to emerge as applicable here: although some

rival dealers’ dissatisfaction with Bostick apparently stemmed

from the perception thet.Bostick’s minimal service facilities

allowed it a cost advantage, at least one dealer claimed a benetit

from an expansion in the service portion of his business.

Whether provision of Michelin service paid for itself or even

produced a profit tor other dealers will be a matter the parties

will be free to explore at a new trial. We find only that the evi-

dence so far submitted rendered the court's grant of a directed

verdict erroneous.

B.

Analysis of the National Accounts program presents no prob-

lem in finding the concerted action element of a § 1 violation, as

the program itself was a contractual agreement between Michelin

and various of its dealers including Bostick. More difficult is the

issue of whether the program operated as an unreasonable re-

straint of trade. The district court reasoned that the program fell

short of a per se illegal resale price maintenance arrangement,

see, e.g., Parke, Davis, supra, 362 U.S. 29, for two reasons: | 1)

the program was voluntary in that dealers could join or not, or

only partially, and remain dealers, and (2) no minimum resale

price was set by Michelin given that Bostick could effectively

‘In Rice. the distnet court considered whether Michelin s actions fell within any of

the three rationales discussed in GTF Sylvania, supra, 433 US) at 35-56. as justifying

restnetions or pohoes enhancing competition among different product manutacturers

interbrand” at the expense of lessened competition among dealers of the same brand

‘intrabrand”) These rationales were 1) inducing aggressive retailers to become dealers

to enhance the manutacturers likelihood of successful entry into a new market 2

stemming the free nder etlect. see eupra note 13. and 3) assuming direct manutacturer

oversight of quality and satety to lessen product lability exposure Ln affirming Rice, we

noted caretully that such actual positive benetits must be shown before a restraint imposed

by a manutacturer is accorded the deterence of a ‘rule of reason analysis, 638 F ld at 16

*In addition. the program appears to be the kind of arrangement in which no single

dealer can be sufficiently assured of not losing a competitive advantage in jomung unless

competing dealers also youn To this extent there ts an additional element of combination

involved. see Albrecht, supra, S90 US 145) one which goes “bevond mere announce

ment of (the manufacturers) pohey and the sieple refusal to deal” allowed under the

doctrine announced in Colgate. supra 250U 8 WOO Parke Davi pra W2U S ate

A-15

alter the final sales “price” by rebating to his customers. Were

these two salient features of the National Accounts program

uncontestably true, we would agree with the district court that a

central billing program by a manufacturer is not per se illegal

under the Sherman Act." See Ohio-Sealy Mattress Manufac-

turing Co. v. Sealy, Inc., 585 F.2d $21 (7 Cir. 1978), cert. denied,

440 U.S, 930 (1979), cf. B.M.L. v. C.B.S., supra, 441 U.S. 1. But

the evidence so far presented permitted a contrary finding.

The voluntariness of the program in a formal sense was not a

proper basis for the granting of a directed verdict when Bostick

had introduced sufficient evidence of Michelin's efforts to pres-

sure it into joining the program unwillingly. Such evidence can be

found in the simultaneous refusal of Michelin to disclose its

intention to renew or terminate the dealership while vigorously

promoting the virtues of the National Accounts program, the

delay in formalizing renewal past the usual May 29 anniversary

until mid-June in 1977, after Bostick had made its first sale

through the National Accounts program and had begun to express

an interest in participating; and to some degree Joe Bostick’s own

account of feeling “intimidated” by Michelin representatives at

pre-renewal meetings where the possibility of termination for

failure to join the National Accounts program was assertedly

conveved to him.’ Moreover, although large-volume customers

were ostensibly free to choose to join the program and dealers

free to solicit national accounts for business, Michelin soon be-

came critical of Bostick’s active promotion of itself as a National

Accounts dealer.

As to Michelin’s lack of control over the ultimate sales price,

the evidence is not at all clear that Michelin anticipated the

availability of an “end run” around the central pricing and billing

system directly to the customer through rebates by Bostick. Even

Kecause of the posture of this case we are not called upon to determine whether the

potential for resale price maintenance of a central pneing and billing system is justified as

in effect creating a new “product. see.e gg. BM IL vy CBS. supra, 41 US. 1, or as

promoting interbrand competition through economies of scale in a manner that cannot be

achieved through less restrictive alternatives, see e 2. GTE Sylvama, supra, 4330S 36

“See supra note %

A-16

if the potential for dealer rebating was perceived in advance,

Michelin personnel showed considerable disenchantment with

Bostick's continued price-cutting. That Bostick was eventually

able to turn the program to its advantage once enrolled does not

imply that its participation was not initially urged as a means of

dampening its ability to discount. The record reveals frustration

and attempts by Michelin during 1977-75 to exert indirect

pressures on Bostick to curtail its sales practices. A jury could

reasonably conclude that the nonrenewal in May 1975 was a

last resort by Michelin to bring a maverick into line and make

the National Accounts program as enforced an effective barrier

to dealer price competition.

Accordingly we conclude that proof of an illegal resale price

maintenance arrangement does not rest upon a showing that the

National Accounts program in its structure on paper restricts

market pricing if in practical effect the “coercive potential of

summary termination” keeps discounting dealers in line.

Greene v. General Foods Corp., 517 F.2d 635, 655 (5 Cir. 1975),

cert. denied, 424 U.S. 942 (1976). Price maintenance schemes

have been consistently condemned as per se illegal, Arizona vy.

Maricopa County Medical Society, U.S. SOUS LW.

4687 (1982), Albrecht, supra, 390 U.S. 145, Kiefer-Stewart Co. v.

Seagram & Sons, 340 U.S. 211 (1951), United States v. Trenton

Potteries, 273 U.S. 392 (1927), and are not saved by claims of

redeeming interbrand virtues when there is sufficient evidence

of their initiation at the instigation of honzontally competing

entities. United States v. Topeo Associates, Inc., 405 U.S. 396

(1972). Michelin, of course, is not generally a dealers collective

or joint venture of competitors. But in establishing a National

Accounts billing program involving review of dealers’ customer

lists, the setting of uniform prices to all participating customers,

the potential for insulation of the dealer trom the customer in

pneing matters, and an opportunity for monitoring dealers sales

tactics and policies in greater depth, it has taken on this role ot a

regulator of the honzontal competition among otherwise legally

distinet dealerships selling tires they legally own ° See United

‘Indeed the apparent justification tor Michelin acting as balling leartatvrise ton its

lealers is that womnt efforts in this area benefit dealers asa whole

A-17

States v. Sealy, Inc., 388 U.S. 350 (1967). If the cancellation of

Bostick is found to have been for the reasons claimed in this suit, a

violation of § 1 of the Sherman Act was committed.

c.

From the foregoing the outlines of a third view of the evi-

dence becomes clear without need for great elaboration. Even if

the National Accounts program itself was insufficient to consti-

tute a resale price maintenance arrangement, Michelin's insist-

ence on Bostick’s participation can be understood as a first at-

tempt to carry out the wishes of competing dealers. As Bostick’s

discounting continued, so did complaints. The ultimate cancel-

lation of only Bostick’s truck dealership was a more drastic second

step in an essentially horizontal effort to remove downward pres-

sure on Michelin truck tires. That Michelin offered to continue

Bostick as a passenger and light truck tire distributor could be

taken as signaling a desire to take steps strong enough to placate

other dealers but not so drastic as to lose itself a highly effective

dealer outright.” Viewing Michelin's entire course of dealing

with Bostick as a consistent two-stage progression, a jury could

find the termination in furtherance of a horizontal combination

with anticompetitive effect.”

*Michelin suggested at oral argument that Bostick’s various “Dr Tire) retail outlets

provided sufficient service facilities to satisty the Dealer Sales Agreement This may be

established on remand. evidence currently in the record is at best minimal on this point

and certainly inconclusive

“Further supporting this conclusion is the Supreme Courts observation in GTE

Sylvania, supra, 433. US at 56. that many economists have argued that manutacturers

have an economic interest in maintaining as much intrabrand competition as is consistent

with the efficent distnbution of their products Because the National Accounts program

dampens intrabrand pnce competition. which ws only then reisigorated by rebating. it

could follow that it was contrary to Michelin s interests standing alone to terminate an

eflective intrabrand competitor like Bostick The jury could thus unter that Michelin was

instead responding to the pressures trom Bostick » competitors who had more reason to

oppose strong intrabrand competition than Michelin especially dit doubted Michelin »

service related justiication in this case

A-18

III.

Bostick also urges that the facts underlying its Sherman Act

claims equally support a finding of liability under the South

Carolina Untair Trade Practices Act, § 39-5-10 et seq., Code of

Laws of South Carolina 1976. Specifically, § 39-5-20(a) provides:

Unfair methods of competition and unfair or de-

ceptive acts or practices in the conduct of any trade or

commerce are hereby declared unlawtul.

Bostick contends that a jury could have found that its nonrenewal

was “contrary to equity and good conscience, deTreville v.

Outboard Marine Corporation, 439 F 2d 1099, 1100 (4 Cir. 1971),

or, alternatively, that in dealing with Bostick, Michelin went

bevond a unilateral refusal to deal to seek compliance with an

anticompetitive price maintenance arrangement.” The district

court dismissed this count on a variety of grounds which we

consider in turn,

Most quickly disposed of is the district court's passing

suggestion that federal law preempted application of the South

Carolina Untair Trade Practices Act. This position is untenable,

and Michelin makes little effort to defend it here. Nothing in the

nearly century-old history of federal antitrust regulation is cited

to us to suggest that Congress has manifested a clear intent to

displace state regulation of unfair trade practices. See 1 P Areeda

& D. Turner, Antitrust Law 208 (1978) Cf) New York State

Dept. of Social Services vo Dublino, 413 U.S. 405, 413 1973),

Parker v. Brown, 317 U.S. 341, 351 (1943)

To the extent the district court relied on the inverse proposi-

tion, that the state law exempts from its coverage all federally

* Bostick advanced two other Untar Trade Practices Act based theonmes which are no

longer tenable in this case One was that Michelin trandulenth: induced Bostick to enter

the National Accounts program a clan identical to that dismissed with prejudice below

by agreement of the parties We think that Bostick is toreclosed trom reopening its fraud

cham under adiflerent heading here on appeal The other was that Michelin restricted the

termitery ofits dealers on to whom the product could be transterred Bostick however

tailed te offer any proetot thes aside trom perhaps a strained view of the petentual ot the

National Accounts prowram as 4 means of verve dealer customer oontact These

theories were property liscnissed

A-19

regulated conduct, the following language of § 39-5-40 governs:

Nothing in this article shall apply to:

2

id) Any challenged practices that are subject to, and

comply with, statutes administered by the Federal

Trade Commission and the rules, regulations and

decisions interpreting such statutes.

For the purpose of this section, the burden of

proving exemption from the provisions of this article

shall be upon the person claiming the exemption.

‘emphasis added). As Bostick points out, Michelin failed to raise

this defense in its answer. The above language appears to require

the party claiming exemption to raise § 39-5-40(d) affirmatively,”

such that the defense is untimely when first raised on motion for

directed verdict. Rule Sic), Fed. R. Civ. PR, Hardy-Latham v.

Wellons, 415 F.2d 674, 677 (4 Cir. 1965).

Even if considered properly raised as more akin to a defense

of failure to state a claim upon which relief can be granted and

hence timely, Rule 12(h)(2), Fed. R. Civ. P., this exemption is not

available to Michelin on the ground of its action being

“subject to, and complyling} with” FT.C, rules, regulations and

interpretations. No case has been pointed to of Federal Trade

Commission approval of the type and manner of dealer termina-

tion alleged here. Instead, some terminations are found lawtul,

others not, on a case-by-case basis. Compare Naiteh v. Ronson

Art Metal Works, Inc., 218 F.2d 202, 206 (10 Cir. 1954) (simple

refusal to deal not illegal), with Adolph Coors Company v. FT.C.,

497 F 2d L178, 1185-8610 Cir 1974), cert. denied, 419 U.S. 1105

1975) conduct going bevond a simple refusal to deal found illegal

where distnbutorship terminated for anti-competitive purpose)

* Dealing with a pendent state law claim. we look to state law tor guidance on whether

the detense us affirmative in nature Freemans Chevron Onl Company 517 Fld 201 204

Str 197 As Professor Day of the Camernsity of South Carolina School of Law has

commanved the procedural states of § 105-4000 Prot of an exemption i clearly an

affirmative detense Day The South Carolina | atau Trade Practices Act Sleeping Caant

wo Ulhisiwe Panaoras 1) 5S 0 Lo Bev 479 Wiow L47 19e2

A-20

Section 39-5-40 instead runs to activity given a blanket exemption

or endorsement by federal law

In State ex rel, McCleod v. Rhoades, 275 S.C. 104, 267

S_E.2d 539, 541 (1980), the South Carolina Supreme Court found

certain allegedly unfair stock trading practices to be within the

regulatory scheme of the Securities and Exchange Act of 1934 and

therefore exempted trom the Untair Trade Practices Act.“ By

contrast, where the less comprehensive Federal Motor Vehicle

Information and Cost Savings Act was asserted to have exempted

allegedly fraudulent automobile odometer setting practices from

state law coverage, the court found that “the Federal Act clearly

reveal(s) it was not intended to supersede or otherwise limit state

law remedies”. State ex rel. MeCleod v. Fritz Waidner Sports

Cars, Inc., 274 $.C. 332, 263 $.E.2d 354, 355 (1980).

Interpretation of the Act, though scant, indicates that the

exemption relates only to fields extensively governed by tederal

law, where federal preemption might otherwise already apply. As

discussed, we do not view the body of tederal antitrust law as

preemptive in this way, and therefore no exemption arises

merely by virtue of Michelin's asserting that its conduct | a

particular case might not be illegal under tederal law. Michelin

thus has tailed to carry its burden of proving an exemption under

§ 39-5-40

Looking then to the merits of Bostick s state law claim, we

conclude that the district court overly restricted the Act's cover-

age to only those practices which would be unlawtul under

§ Saul) of the Federal Trade Commission Act, 15 CSC

*Stretly speaking, Rhoades addressed only the exemption provided tor in & 395

4004 regarding “actions or transactions permitted under laws administered by any regula:

tory body | of the state or the United States. and not 40ed) claimed by Michelin Ay 404d

apparently has not been interpreted by the South Carolina Supreme Court: the treatment

ot the broader exemption of 40a) discussed in the text gives guidance on the scope of the

entire section [t follows that if the cause of action against Michelin is not exempted under

the broader view of actions permitted by other law it also tails to meet the stneter

demands of alleging acts subject to and complying with ontena set torth by the FTC itself

a regulatory body administering federal law

A-21

§ 45a 1." The Act instead states only that “the courts will

be guided by the interpretations given” to the federal FTC Act.

§ 39-5-20(/b) emphasis added). This language neither revokes

pre-existing South Carolina definitions of unfair or deceptive

trade practices, nor binds the Act to the scope of federal law

Pertinent, then, is our statement of South Carolina law applicable

to a claim of wrongful franchise termination:

Although some states may give full effect to broad

unilateral powers of termination, South Carolina,

whose law governs here, does not. It is settled law in

that state that regardless of broad unilateral termination

powers, the party who terminates a contract commits an

actionable wrong if the manner of termination is con-

trary to equity and good conscience. That standard ot

conduct is far more stringent than one forbidding only

actual fraud, and it may apply to an unconscionable

reason for termination as well as to the causing of need-

less injury in the course of termination.

deTreville v. Outboard Marine, supra, 439 F 2d at 1100 (citations

and footnote omitted). The principle that proof sufficient to sus-

tain a finding of fraud need not be prerequisite to establishing an

untair trade practice has been applied directly to the Act. State ex

rel. McCleod v. Brown, 294 $.E.2d 751, 783 ($.C. 1982).

Accordingly, evidence sufficient to withstand a motion for

directed verdict on the federal causes of action provides at least as

sufficient a basis for also requiring jury determination of the state

law clam. Moreover, there is no requirement in the Unfair Trade

Practices Act of a contract, combination or conspiracy as there is

under § l of the Sherman Act. It is therefore entirely possible that

*Indeed. read this way the Act truly would be redundant and, in some cases. possibly

in conthet with federal law) Instead. ‘the statutory mandate to follow tederal interpreta:

tons of the FTC Act indicates that state courts are now free to find methods acts or

practices not heretotore specttically declared unlawtul by the FTC of the tederal courts

prohibited by the UTPA Day. The South Carolina Untair Trade Practices Act

supranote 2) 335 © L. Rev at 452. quoting Murphys McNamara. Conn Supp IS)

IST a4 416 A ld 170 17404 1979 interpreting identical language in Connecticut »

Untair Trade Practioes Act

4-22

the jury could find Bostick to have been terminated in further-

ance of unfair or anticompetitive purposes—e.g., to harm its

business because of its role as a growing wholesale competitor ot

Michelin’s—without rendering a verdict duplicative of the fed-

eral claims. It is, of course, proper that the jury be instructed not

to award duplicative damages for violations of both the state and

federal statutes based upon precisely the same conduct. and the

defendant will be free to ask for an instruction to this effect But

dismissal of the Untair Trade Practices Act claim as a matter ot law

was incorrect here.

IV

Bostick contends that the district court committed revers-

ible error in excluding from evidence a memoranduin written by

Michelin's district manager on May 7, 1977, offered as plaintitls

Exhibit 42. The memorandum concerned plaintiff's sales activi-

ties and was prepared by detendant s district manager to set torth

his comments and recommendations for the use of his corporate

superior. The district court originally found admissible all but two

paragraphs of the memorandum,” and ruled that the exhibit

would be admitted if plaintiff agreed to delete those two para-

graphs. However, when detendant continued to press its objec-

tion, the district court ruled the entire document inadmissible on

a vaniety of grounds.

Even if admissible, we do not think that the ruling excluding

this evidence would be reversible error because the statements it

contains are largely cumulative of other evidence regarding the

distnct manager's reports and recommendations to detendant s

management. We would thus not consider the point were it not

that we order a retnal at which it is not unlikely that the exhibit

will be offered again.

In our view the memorandum is admissible as an admission

under rule SOL;di2'C) and D), Fed. Rules of Evidence, whether

or not unfavorable to defendant, provided that it is shown either

*The two paragraphs ruled inadmissible allegedly related solely to the sale of passen-

ger tires and were ruled irrelevant because the alleged antitrust svolations all related to the

sale of truck tires

A-23

‘a) that the district manager was authorized to make a statement

concerning the subject, orb) that the memorandum was made by

defendant's agent concerning a subject within the scope of his

agency during the existence of the agency relationship. If either

of those conditions is met, the district court, on retrial, should

admit the memorandum as an exhibit. The statement’s status as a

nonhearsay admission does not turn, as the district court be-

lieved, on proot that a company superior actually relied on the

memorandum. Of course, the admissibility of the memorandum

is subject to the limitations of Fed. R. Evid. 402 and 403, that it

be relevant and that its probative value not be substantially

outweighed by the danger of unfair prejudice, confusion of the

issues, etc. Thus the district court may properly require the

memorandum to be redacted either because portions are irrele-

vant or would result in the evils protected against by Rule 403, or

both. In that event, however, the elimination of the improper

material should be made by the district court without requiring

the plaintiffs agreement and the balance should be admitted.

REVERSED AND REMANDED.

A-24

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 51-1985

Bostick Oil Company, Inc., Appellant,

versus

Michelin Tire Corporation,

Commercial Division, Appellee

ORDER

The appellee's supplemental petition for rehearing and sug-

gestion tor rehearing en banc has been submitted to the court.

Upon the request for a poll of the court on the suggestion for

rehearing en banc, all of the judges voted against rehearing en

banc, except Judge Russell, Judge Widener, Judge Hall and

Judge Chapman, who voted in tavor of rehearing en banc

The panel considered the petition for rehearing as supple-

mented and is of the opimon that it should be demed.

It is ADJUDGED and ORDERED that the petition tor

rehearing and suggestion tor rehearing en bane are demed

Entered at the direction of Judge Winter tor a panel con-

sisting of Judge Winter, Judge Phillips and Judge Butzner

For the Court

» Wilham A Slate Il

(LERA

A-25

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

COLUMBIA DIVISION

BOSTICK OIL COMPANY, INC,

Plaintiff,

Us.

MICHELIN TIRE CORPORATION,

Commercial Division,

Defendant

CA. NO. 75-837-5

ORDER ON DEFENDANTS

MOTION FOR DIRECTED VERDICT

In this multiple-claim action, Bostick Oil Company, Ine.

(Bostick) seeks judgment against Michelin Tire Corporation,

Commercial Division (Michelin) for alleged violations of the

Sherman Act, Sections | and 2(15 U.S.C. $8 lL and 2)', the South

IS5USC $1. United States Code Annotated provides

$1 TRUSTS. ETC. IN RESTRAINT OF TRADE ILLEGAL PENALTY

Ever contract. combination in the form of trust of otherwise. or conspiracy. in

restraint of trade of Commerce among the several States. or with torergn nations os

declared to be legal Ever person who shall make any contract of engage in any

combination or conspiracy hereby declared to be legal shall be deemed guilty of a telony

and. on conviction thereat shall be punished by fine of not exceeding one millon dollars ut

acorporation. on id any other person one hundred thousand dollars or by umpmsonment

not exceeding three vears or by other sand puniwhments un the discretion of the court

SUSC 02) United States Code Annotated provides

$2 MONOPOLIZING TRADE 4 FELONY PENALTY

Every person whe shall monopolize of attempt to monopolize on combine or

conspire with any other person on perens to monopolize any part of the trade or

commerce among the several States or with torevn nations shall be deemed guilty of 4

felony and on comietion thereat shall be punished by fine not exceeding one millon

dollars ita corperation oon any other peren one handred thousand dollars on by

Imprisonment not exceeding three wears on by other said punishments on the lise retro

of the court

4-26

Carolina Untair Trade Practices Act (Code of Laws of South

Carolina Section 39-35-10 et seq., (1976)), fraud, and breach

of contract.’

Plaintiff filed its complaint in May, 1978, two days before

the noticed expiration of its vearly Dealer Sales Agreement with

Michelin and obtained a temporary restraining order (TRO) in

this Court requiring Michelin to continue doing business with

Bostick. Michelin immediately moved to modify the TRO be-

cause at that time Bostick was indebted to Michelin in the approx-

imate amount of $530,000, and the bond securing the TRO was

only $1,000. In response to the Court's Order conditioning con-

tinuance of the TRO on the bond being increased to $100,000,

and ordering payment of Bostick’s account with Michelin as it

came due, Bostick declined to tile the increased bond and advised

the Court that it would voluntarily abandon the TRO. Shortly

thereafter, Bostick ceased doing business with Michelin, but

requested and obtained permission to return a large volume of

truck and passenger tires to facilitate the payment on its account

with Michelin. In due course the account balance was paid.

Protracted discovery began in 1978 and ran the ordinary

course, this Court finally cutting off further pursuit approx-

mately two weeks betore tral. During the intervening pernod

there was the usual plethora of interrogatories, production of

documents, and depositions which have become the rule, rather

than the exception, in antitrust litigation

Since a major task in any antitrust litigation is sheperding the

real and imaginary claims and defenses into the fold so that a

disposition by tnal may begin, the Court endeavored to closely

monitor the progress of the case and conducted a number of

hearings, hoping to aid the parties in bringing the matter to tnal

on tts essential clams and defenses Pror to tnal, Michelin

sought and obtamed bifurcation ot lability and damages but

tailed un its efforts to have the Court strike Bostick » demand tor a

yur trial

The main thrust of planntiff. suit was antitrust

A-27

During the course of the trial, which began on July 27, 1981,

plaintiff called twelve of the twenty-three possible witnesses, and

read portions of the discovery depositions of fourteen others.

Plaintiff introduced into evidence certain tape recordings of

conversations with Michelin sales representatives gathered at

Estill by Joe Bostick’ without defendant's knowledge or prior

authorization. At the close of plaintiff's case, defendant moved for

a Directed Verdict pursuant to Rule 50 of the Federal Rules of

Civil Procedure. The Court thereafter required written memo-

randa pertaining to the motion from counsel, and oral arguments

were heard on August 5, 1981. For reasons which will be set forth

hereinafter, defendant's motion was/is granted as to the first,

second, third and fourth causes of action, denied as to the fifth

cause of action (alleging breach of contract). Prior to the filing of

this Order plaintiff and detendant consented to the dismissal with

prejudice of the fifth cause of action and the counterclaim, re-

spectively. The Court therefore does not address these causes

of action.

It is axiomatic that in considering a motion for directed

verdict pursuant to Rule 50(a) of the Federal Rules of Civil

Procedure, the Court must consider all the evidence presented

by the non-moving party in the light most favorable to that party.

E. J. Sweeney & Sons, Inc. v. Texaco, Inc., 478 F Supp. 243: E.D.

Pa. 1979), aff'd 637 F 2d 105, cert. denied __. US. ‘April

20, 1981), Ard v. Seaboard Coastline Railway Company, 487 F 2d

456 4th Cir. 1973). The party opposing the motion is entitled to

the benetit of every inference which reasonably may be drawn in

his tavor Collins ve) Craven, 52 FR.D. 146 4th Cir 1971),

Westinghouse Electne Corp) cv CX Processing Laboratones,

Inc, 5323 F2d 66S 9th Cir 1975) However “it an antitrust

plaintift does not present enough evidence within his case-

in-chiet to support a reasonable finding in his tavor, a district

court has a duty to direct a verdict m tavor of the opposing party ”

Chisholm Brothers Farm Equipment Co cv International

Harvester Co | 498 F2d 1137 at 1139 Sth Cir 1974) cert

demed 419 US) 1023) Roesch. Inc Star Cooler Corp

Joe Bostick was President of Bostick Ohl Company at the the

A-28

F Supp _ 1981-1 Tr. Cas. © 64119(E.D. Mo. 1951). A mere

scintilla of evidence will not avoid a directed verdict. The non-

moving party must introduce such relevant evi lence as a reason-

able mind would accept as adequate to support a conclusion in his

favor. Westinghouse Electric Corp. v. CX Processing Laborato-

ries, Inc., supra; California Computer Products v. IBM Corp.

613 F2d 727 (9th Cir. 4979), Collins v. Craven, supra

Considered in the: light most favorable to the plaintiff, and

affording the plaintiff the benefit of every reasonable inference.

the evidence presented by Bostick is insufficient as a matter of

law to withstand the defendant's motion tor a directed verdict on

the first four causes of action, alleging antitrust violations, untair

trade practices, and traud. In reaching this conclusion, the Court

has not weighed the credibility of witnesses. Old Dominion

Stevedoring Corp. v. Polskie Linie Oceaniczne, 386 F.2d 193 4th

Cir. 1967).‘ Rather, this Court has considered all of the evidence

presented and has concluded that it offers the jury no more than

conjecture and speculation on which to base a decision, and the

responsibility is thereby shifted to the presiding judge. A di-

rected verdict for defendant on the first four causes of action

therefore is compelled under the standards enunciated above.

FACTUAL BACKGROUND

Viewed in the light most favorable to plaintiff, and affording

it the benefit of every reasonable inference, the record supports

the facts hereinafter detailed.

Bostick Oil Company was a family-owned fuel oil business

until about 1967 when it began selling tires. Thereafter, the

concentration of its business shifted from oil to tires and accesso-

nes, through a progression of representing one or two tire com-

panies to a point of selling a large variety of tires, including brands

manufactured or distributed by Falls made by Cooper, Goodrich,

“When the evidence ts such that without werghing the credibility of the witnesses

there can be but one reasonable conclusion as to the verdict: the Court should deter-

mine the proceeding by nonsuit, directed verdict or otherwise in accordance with the

appheable practice. without submission to the jury. or by judgment notwithstanding

the verdict [197]

A-29

Uniroyal, Goodyear, Firestone, Bridgestone, General, Hood,

Jetson, and various other major or independent manufacturers.

Bostick's primary method of sales was by telephone, route truck

sales, or traveling sales people. Defendant Michelin Tire Cor-

poration, Commercial Division, is the corporate sales arm of

Michelin Tire Corporation, which also has a manufacturing divi-

sion. In 1974, Bostick and Michelin entered into their first of

successive one-vear Dealer Sales Agreements (DSA), and each

vear from 1974 through 1977, a new agreement was executed as

the previous one expired. Each of the tour agreements clearly

provided for expiration at the end of the one-year term, and each

was for a variety of Michelin tires and tubes (passenger, light

truck, truck and off-the-road).

Bostick, historically, had concentrated its sales efforts in

passenger tires. In mid-1975, however, Bostick entered into a

sales arrangement with an aggressive sales person, Betty Wilkin-

son, who had gained considerable experience selling truck tires,

Michelin and other brands, as a sales person for Crane Tire

Company in Danville, Virginia. She commenced selling large

numbers of Michelin truck tires through Bostick, and enjoved

considerable success because she, and Bostick, were willing to

sell the tires at or near the dealer net billing price, which is the

base price a Michelin dealer must pay for the tires, exclusive of

applicable discounts. At that time, dealer net billing on truck

tires was 22% off the suggested retail price.

A significant issue in this action was a dealer's obligation to

provide service. Paragraph 2(a) of each of the Dealer Sales

Agreements signed by Bostick and Michelin provided in part:

Dealer shall vigorously and aggressively promote

the retail sale of Michelin Products and shall render

prompt, workmanlike and courteous service with

respect to Michelin Products including all services

to which a purchaser of a Michelin Product from any

authorized Michelin source may be entitled.’

‘Plaintiff's witnesses testified this was in other contracts with dealers and dealers

called to testify told of the outlay in personnel and equipment needed to meet this

obligation of the contract

A-30

In 1974, when Bostick first became a Michelin dealer, Bostick

promised Frank Rendine, a Michelin field representative, that

truck tire service capabilities would be developed at the Estill

location. In early 1976, however, it came to Michelin's attention

that Bostick was not servicing the truck tire accounts it was

selling. Michelin representatives Ward Johnson and Jay Radford

met with President Joe Bostick on April 16, 1976 tor the specific

purpose of explaining the service requirements of the Dealer

Sales Agreement. When Joe Bostick told Radford and Johnson

that the “had no intention” of servicing the truck tires he sold,

these Michelin representatives advised Bostick that the agree-

ment to be executed in May 1976 would not include truck tires,

because Bostick was not servicing his truck tire customers. Joe

Bostick adjourned the meeting for a short period, then returned

with two attorneys who represented Bostick Oil Company. As

plaintiff's witnesses at trial, these attorneys confirmed Radtord’s

testimony. When Joe Bostick was told that Bostick Oil would not

he renewed as a truck tire dealer in 1976 unless he promised to

service the truck tires he sold, he promised compliance. Based

upon his assurance that service capabilities would be developed

and implemented, the DSA was renewed for both passenger and

truck tires for 1976-77

In the summer of 1977, Bostick sales people began selling

heavily through the Michelin National Accounts Program. This

program, designed to meet the needs of large national fleets, is a

method whereby Michelin dealers may deliver tires to a large

user, following which the user is billed directly by Michelin and

the dealer is paid a commission tor handling the transaction.

Michelin also credits the dealer with the National Account price

of tires previously purchased from Michelin and subsequently

delivered to the National Account. In 1977, Michelin's price to

the National Account was 20% off suggested retail price, and the

commission to dealers was 12% of the transaction price. The

Program is entirely voluntary, and any dealer who elects not to

participate is nevertheless free to sell directly to a customer who

is a designated national account. Similarly, national account cus-

tomers may decide voluntarily whether to buy through or apart

A-31

from the National Account Program. The choice is one in which

Michelin takes no part. The dealer and the purchaser decide what

type of sale will take place, leaving the price to the dealer to

negotiate with the customer as he wishes.

Through the National Account Program, Bostick was able to

increase the number of its customers, largely because the Pro-

gram provided Bostick with an additional 12% commission which

could be rebated to the customer in whole or in part to increase

sales. If Bostick followed its usual dealer net billing practice, i.e..

selling at 22% off suggested retail, it could offer a National

Account a 2% advantage by direct sale over the existing 20%

discount the user received for National Account participation

Therefore with an additional 12% National Account commission

paid Bostick by Michelin, Bostick could and did, further enhance

its competitive position by additional concessions of this 12%

commission to National Account users.” For example, Bostick

rebated 8%, 12% and as much as 15% in order to obtain the

business from trucking companies. Whereas Bostick might

through a direct sale give a customer a 22% discount plus another

4% off the discounted price, depending on the number of tires

sold, through the National Accounts Program the customer

would receive a 20% discount from Michelin plus a rebate (dis-

count) of up to 8% from Bostick, thus realizing a larger discount

through the latter sales program. In sum, a dealer, here Bostick,

had larger discounts (points) available to it for price competition

by participating in the Michelin National Accounts Program.

Obviously, it could keep these gross profits to operate its busi-

ness, or give them away to trv to obtain more business. Bostick

chose to give them away.

At the beginning of 1978, Michelin representatives urged

Bostick to participate in a promotional incentive bonus (PIB)

“In the normal course of its business with Michelin a dealer, including Bostick, after

purchasing at 22% below suggested retail, could earn a Quantity Shipping Allowance

of up to 9%. a Year End Volume Bonus of up to 5%. a cash discount of 2% and a freight

allowance of 2% These discounts, and Bostick s 12% National Account commission

could also be used by Bostick or any other dealer for voluntary price concessions in

the market

Joe Bostick testified at tnal he would give S& rebate to certain large accounts

A-32

program, in which Bostick could qualify for an additional bonus at

the end of 1978 by (1) meeting an advertising quota for the first

half and the second half of the vear and (2) purchasing a quantity

of Michelin tires in excess of the preceding years sales, e.g., an

increase of 10% would vield a bonus of 1%, a 20% increase

resulted in a 2% bonus, etc., up toa maximum 3% bonus. Bostick

participated in the program until it was not renewed in May of

1978 and had qualified up to that time for at least the 1% bonus,

having purchased a sufficient quantity of tires and having met its

first half advertising quota. Bostick thereafter voluntarily re-

turned tires to reduce its debt due Michelin. When the returned

tires were deducted, Bostick’s volume of purchases fell below the

amount necessary to qualifv for the PIB program. Plaintiff con-

tends Michelin knew of the possibility that it would not renew

Bostick in 1978, but the testimony clearly indicates the non-

renewal decision was not made until April of 1978. Plaintiff failed

to show either a causal connection between the non-renewal and

Bostick s participation in the PIB program or even offer an expla-

nation why Bostick gave up its existing qualification for at least

the 1% bonus. Bostick argues that its non-renewal made qualiti-

cation under the program impossible, because it would be unable

to meet the second six month advertising quota. Radford, how-

ever, testified that if Bostick had not returned the tires, the one

percent bonus would have been paid and this was not denied. In

any event, Bostick’s voluntary return of tires to reduce its indebt-

edness to Michelin mooted plaintiffs argument.

In April of 1975, Michelin's representatives advised Bostick

its Dealer Sales Agreement in 1978 would not include truck tires.

Bostick at that time declined to sign the Dealer Sales Agreement

for passenger and light truck tires. After conferring with attor-

neys over a period of a month, during which time Joe Bostick

made some of the recordings previously mentioned, Bostick

instituted this action and simultaneously executed and forwarded

to Michelin a Dealer Sales Agreement relating only to passenger

and light truck tires. Michelin refused to sign an agreement on

passenger tires because of the institution of this action, and the

litigation proceeded. The claim involving the refusal of Michelin

A-33

to contract with Bostick on passenger and light truck tires was the

subject of the fifth cause of action which the parties acknowledge

is to be dismissed by this Order, together with Defendant's

counterclaim, with prejudice.

THE MONOPOLY CLAIM

Liability under Section 2 of the Sherman Act (15 U.S.C. § 2)

is founded on a showing of | 1) specific intent to control prices or

destroy competition, i.e., specific intent to monopolize, (2) anti-

competitive or predatory conduct, and (3) a dangerous probabil-

ity of success, including proof of the relevant market and

assessment of the actor's power in that market. Finally, the

plaintiff must prove both the fact and amount of damage.’ In order

to withstand the defendant's Motion for Directed Verdict, the

plaintiff must offer sufficient evidence to allow a jury to find facts

or draw inferences sufficient to establish each of these elements.

Bostick has not elicited any such evidence.

The specific intent required by the statute is an intent to

control prices or destroy competition, it is, in fact, an intent to

monopolize the market. Hunt-Wesson Foods, Inc. v. Ragu

Foods, Inc., 627 F.2d 919 (9th Cir. 1980), cert. den. U.S

_ 101 S.Ct. 1369. In some cases, the requisite specific intent

can be inferred from egregiously anti-competitive or predatory

conduct, and the requisite conduct in turn can be interred from a

showing of specific intent. Gough v. Rossmoor Corp., 385 F 2d

381 (9th Cir. 1975), cert. den. 440 U.S. 936. Such is not the

case here

Here, there is clearly insufficient direct or circumstantial

evidence of the requisite intent, and proof of predatory or anti-

competitive conduct sufficient to establish or support an infer-

ence of intent 1s similarly lacking. The National Account

Program, on which the plaintiff bases its argument as to intent,

was entirely voluntary and did not prohibit the dealer from

‘See Note supra

*In view of this Court » Order of May 7. 1981 granting bifurcation. the issue of act and

amount of damage are mentioned only and are not discussed. but the Court indicated that

df plaintiff proved its case of lability. the fact of damage would be pursued

A-34

selling to any customer he desired. Moreover, the dealer could

sell a designated national account customer directly or under the

National Account Program. The choice was the dealer's and the

customer's. The National Account Program, finally, did not fix the

price of tires to the customer, since the dealer who elected to use

the National Account Program might choose (as Bostick did) to

rebate part or all of his commission and credits” to the customer,

and the dealer selling a national account customer outside of the

program could sell individually at his own price. This is in con-

tract with the situation described in Greene v. General Foods

Corp., 317 F.2d 635 (5th Cir. 1975), cert. denied 420 U.S. 929.

The Michelin National Account Program is not anti-competitive

or predatory conduct. Ohio-Sealy Mattress Manufacturing Co. v.

Sealy, 585 F 2d 821 (7th Cir. 1975), cert. denied 440 U.S. 930. The

program did not deprive any dealer, including Bostick, of the

ability to set his own prices. To inter specific intent from such

evidence would be to place inference on inference on inference

and would be contrary to the facts established by Bostick as part of

its own case.

Proof of a dangerous probability of success requires a show-

ing of the relevant market and significant power on the Detend-

ants part in that market. United States v. E.l. DuPont de

Nemours & Co (Cellophane), 351 U.S. 377 (1956). Unibrand

Tire © Product Co , Inc. v. Armstrong Rubber Co., 429 F Supp.

470 W. DN.Y. 1977), Mullis e. ARCO Petroleum Corp. , 502 F 2d

290 (7th Cir. 1974), George R. Whitten, Jr, Inc. v. Paddock Pool

Builders, Inc. , 508 F 2d 547 (Ist Cir. 1974), cert. denied 421 U S.

1004. The plaintiff has conceded that the geographical market

encompasses the entire United States. There is an absence of

proot, however, as to the relevant product market.

Bostick attempted to argue that Michelin radial tires consti-

tute a product market in and of themselves. Not only has Bostick

failed to introduce evidence sufficient for submission of this

"The amount credited to a dealer such as Bostick on the National Account sale was

often greater than the pnce at which it purchased the tire If a pnce increase were

instituted between the time Bostick purchased and sold a tire to a National Account, for

instance, Bostick would be credited at the new. higher price

A-35

issue to the jury but the Court has serious doubts that, under

normal circumstances, a single brand can constitute a relevant

product market. Almost every court considering the issue has

rejected a single brand product market. H & B Equipment Co

v. International Harvester Co., 377 F.2d 239 (5th Cir. 1975S),

Carlo C. Gelardi Corp. v. Miller Brewing Co., 421 F Supp. 237

D NJ. 1976), Ron Tonkin Gran Turismo, Inc. v. Fiat Distribu-

tors, Inc., 637 F.2d 1376 9th Cir. 1951). Whether or not a single

brand product market is possible as a matter of law, however, the

evidence presented by Bostick simply cannot support the conten-

tion that Michelin tires are so unique or superior that they are ina

market by themselves. Plaintiff's expert, George Edwards, testi-

tied that Michelin tires, like other manufacturers’ radials, are

often used on the same vehicle with less expensive bias ply tires.

As the Supreme Court stated in the Cellophane decision, the

relevant product market is defined in terms of functional inter-

changeability, cross-elasticity of demand, and cross-elasticity of

supply. According to the evidence and testimony, Michelin sells

only radial tires. The evidence Bostick elected to introduce,

however, shows that trucking companies use many brands, not

simply Michelin, and that cost factors influence the decision to

use one brand of tire versus another. Moreover, Bostick’s expert

gave his opinion that at least 50% of the truck tires now in use are

bias ply tires. Neither the “preference” of truck drivers for

Michelin tires, nor the fact that Michelin tires are generally

higher priced than other brands can support a finding of a

relevant product market consisting of Michelin tires alone.

Acme Precision Products, Inc. v. American Alloys Corp., 454

F 2d 1237 (Sth Cir. 1973), Twin City Sportserv, Inc. v. Charles O

Finley © Co., 512 F2d 1264 9th Cir. 1974). No juror could

conclude on the basis of Bostick’s evidence that Michelin is

immune to competition. Quite the contrary, Henry Hay, plain-

tiffs witness, stated that competition is even stronger in the

marketplace now than it was in 1975. Plaintiff has produced no

evidence to support the delineation of any other product market

Bostick’s failure to introduce sufficient evidence on which a

jury could make a reasonable determination of the relevant prod-

A-36

uct market is fatal to its cause. Mullis v. ARCO Petroleum Corp,

supra, Gough v. Rossmoor Corp., supra; (LC Pertpherals

Leasing Corp. v. IBM Corp., 455 FSupp. 423 N.D. Cal.

1978), affd 636 F2d 1188, Spectrofuge Corp. v. Beckman

Instruments, Inc., 575 F2d 256 5th Cir. 1978S). cert. denied

440 U.S. 939, Acme Precision Products, Inc. v. American Alloys

Corp., supra; Bendix Corp. v. Balax, Inc., 471 F2d 149 7th Cir.

1972), cert. denied 414 U.S. $19. Had there been sufficient

evidence on which a jury could rationally determine the relevant

product market, Bostick offered no evidence as to Michelin s

market share or power in any market. Absent such a showing, the

jury could not determine that there existed a dangerous probabil-

ity of successful monopolization.

Plaintiff having failed to introduce evidence sufficient to

permit a jury to find the requisite specific intent, relevant market

and market power, defendant's Motion for Directed Verdict on

the first cause of action must be granted.

THE CONSPIRACY TO RESTRAIN TRADE

In order to prove a Sherman Act Section 1 conspiracy or

combination in restraint of trade, plaintiff must establish: (1) the

existence of a conspiracy or combination, (2) a restraint on trade,

(3) conduct amounting to a per se illegality or an unreasonable

restraint of trade, and (4) fact and amount of damage. | In order to

determine whether or not a restraint is reasonable, plaintiff must

address such factors as the relevant market involved | both

geographical and product), defendant's market power in that

market, the presence or absence of competition in the market,

the effect of restraint on the market, and the goal and breadth of

the restraint. Here, Bostick’s proof does not afford a sufficient

evidentiary basis to find the presence of any of the necessary

elements.

The evidence of conspiracy is non-existent. Bostick argues

In view of this Court s Order of May 7 1981 bifureating the major issues of liability

from those of damage. the issue of fact and amount of damage are mentioned only and are

not discussed

A-37

that “complaints about Bostick received by Michelin personnel

permit an inference that Michelin entered into a conspiracy with

the complaining dealers and that Bostick’s nonrenewal was the

fruit of that conspiracy. The record simply cannot support that

contention, *

In its recent monumental opinion granting the defendants

summary judgment in Japanese Electronic Products Litigation

Zenith Radio Corp. v. Matsushita Electric Industrial Co. ), ——

F Supp. 484 CCH Tr. RR‘ Extra Ed.) April 9, 1981 E.D. Pa.

1981), at 42, the Court emphasized that the statute requires “a

conscious commitment to acommon scheme designed to achieve

an unlawful objective. The Court of Appeals for the Sixth Circuit

made a similar statement in Elder-Beerman Stores Corp. v.

Federated Department Stores, Inc. , 459 F.2d 138 6th Cir. 1972)

at page 140: “In order to establish the existence of a conspiracy it

is absolutely essential to prove that there was an agreement

between the named conspirators (no conspirators were named in

the complaint). . . the conspiracy is complete on the forming of

the agreement and the performance of at least one overt act in

tutherance thereof.” (Citations omitted, emphasis in original. |

Mere complaints do not a conspiracy make.’ One of the

depositions read in the record as part of the plaintiffs case

John F Haugh, pages 47-45) described the complaints in the

following manner:

_ It's fairly routine in the business of calling on

customers that one customer will complain about

others

*A review of the testimony shows that James Bo McCrary user Transportation and

Sales Manager for Dairyvmen. Inc at Stone Mountain. Georgia, was recommended to

Bostick by Frank Rendine, Sales Manager ot detendant John Tupper complained about

Bostick s methods but no action was pursued of taken All witnesses called by plaintiff

under Rule 611 testified the complaints were usual and no action was taken on them

The cases are legion so holding Carr Electones Corp ce Sony Corp of Amenca

472 FSupp 9 ND Cal 1979. Oreck Corp ct Whirlpool Corp | 639 F ld 75 2d Cir

1980) AG Rogers Merck © Co. 495 FSupp 5 ED Tenn 198) Michelman t

Clark-Schwebel Fiber Glass Corp . 4 F ld 1036 ld Cir 1976) cert denwed 429

US SSS

4.38

So, it pretty much becomes like water off a duck ’s

back after a while. You might just listen to it, svmpa-

thize, and move on to your business.”

Common sense tells us that complaints from buyers and sellers

about each other and about their competitors are to be expected

in the marketplace. Carr Electronics Corporation v. Sony Cor-

poration of America, 472 FSupp. 9 \N.D. Cal. 1979), Oreck

Corp. v. Whirlpool Corp., 639 F.2d 75 (2d Cir. 1980); A. G.

Rogers Co. v. Merck & Co., Inc., 498 FSupp. 3 (E.D. Tenn.

1980). They are, in fact, “rational market behavior.” E. G. Swee-

ney & Sons, Inc. v. Texaco, Inc., supra. The unsolicited behavior

ot other dealers theretore cannot serve as the basis for Section |

liability. Mere complaints cannot support an inference of conspir-

acy. It is significant that the plaintiff has attempted to confirm a

single non-renewal into an antitrust suit. Plaintiff apparently

recognizes its own right not to renew the contract, but does not

recognize defendant's right to do the same.

Moreover, Bostick has produced no evidence which would

justify a jurv’s conclusion that whatever complaints occurred

prompted Michelin's decision not to renew Bostick as a Michelin

dealer. Indeed, all of the evidence is to the contrary. Mr.

MeMillan. plaintiff's witness, stated, “There was no response’ to

his complaints about Bostick. As conceded by plaintiff's counsel,

this is in contrast to the finding of D. B. Rice Tire Company v

Michelin Tire Corp., 483 F Supp. 750 .D. Md. 1980), aff'd. 635

F 2d 15. The essential causal connection between complaints and

the action taken by detendant, which was present in Rice and in

Girardi v Gates Rubber Co., 325 F2d 196 (9th Cir. 1963), is

absent here. The evidence elicited by Bostick can lead to no other

conclusion but that Michelin's decision not to renew Bostick was

based on Bostick’s failure to develop the service capabilities it

promised in 1974 and specifically agreed to again in 1976. Cer-

tainly, none of the evidence supports the conclusion that Bostick’s

wholesaling activities or price cutting had any causal connection

whatsoever with Michelin's failure to renew the Dealer Sales

A-39

Agreement with Bostick. On the state of this record, no conspir-

acy or combination can be found. '

Similarly, the record will not support a finding of any per se

illegal restraint of trade. There is a total failure of proof of any

causal connection between the complaints received by Michelin

and the decision not to renew the business relationship between

Michelin and Bostick, and nothing in the record supports the

claim that price was a motivating factor in the determination not

to renew Bostick made by Michelin's decision makers.

Nor can the evidence as to the operation of Michelin's Na-

tional Accounts Program fill this fatal void, for two reasons. First,

the Program was entirely voluntary. Second, it did not act as a

price control device. As mentioned earlier, the evidence, viewed

in the light most favorable to Bostick, shows that Michelin's

National Account Program was designed for the benefit of the

large fleet users. Michelin billed the National Account directly,

in 1977 the amount being 20% off of the suggested retail price

The selling dealer, in this case Bostick, received (in 1977) a 12%

commission for completing the sale. But, Michelin's invoice to

the user did not represent, strictly speaking, the “price” of the

tire to that user. Joe Bostick testified that he rebated at least 6% to

$% to customers under the National Account Program. “In some

instances, I gave away the full 12%. Michelin did not say ves or

no. I could save a lot of money by the National Account.” This

leads to the inevitable conclusion that Michelin did not intend to,

could not and did not control the prices of tires sold to National

Account customers under the National Account Program. De-

spite the fact that the National Account was billed directly by

Michelin, the price was affected by the rebate given by the dealer

to that customer. A dealer could elect to sell under the National

Account Program or not to sell under the program. Furthermore,

a National Accounts Directory was available to every Michelin

dealer, and every dealer was free to compete for any customer in

the National Accounts Program to accomplish tire sales, either

“CH sagnificance here is the attempt to make an antitrust suit out of defendant s talure

renew Joe Bostick testified on cross-examination Christensen detendent s agent) didn t

sav he would renew [| had the meht to renew | had the mght not to san the contract

A-40

within or outside of the National Accounts Program. Thus, the

Program did not prohibit intrabrand competition between deal-

ers. The freedom to select customers remained despite their

designation as national accounts. The record cannot support a

declaration that the National Accounts Program operated either

aS a price maintenance device or as a customer restriction, °

Plaintiff also argued that the service requirement in the

Dealer Sales Agreement was a per se illegal restraint of trade. In

support of this contention, Bostick introduced the testimony of

several tire dealers who maintained full service capabilities.

Their testimony, however, does not support the claim that the

service requirement was a method of restraining trade in any

way. Rather, the entire testimony was to the effect that Michelin,

with its concern for safety and the consumers tire cost per

mile of operation, had the concept of a complete service effort

from the time the tire was sold until the casing was discarded

Nothing in the record suggests that any other concern was

addressed through Michelin's full service requirement. The

critical importance of providing service is uncontradicted.

Messrs. Hay, Tupper and Dunlap, as well as others among

plaintiff's witnesses, explained the necessity of servicing truck

tires to ensure their pertormance.

The Court has concluded that evidence of a per se illegality

is lacking. In so doing, it is evident that Bostick has failed to

offer evidence which could rationally lead to the conclusion that

any customer or territorial restraints existed. Neither the Nation-

al Accounts Program nor the service requirement limited Bostick

to certain customers or territones. Simply stated, nothing in the

record can justify the jury finding the existence of a restraint on

trade. Golden Gate Acceptance Corp. v. General Motors Corp.,

597 F2d 676 (9th Cir, 1979). Even if such a restraint were

present, however, the lack of evidence as to any motivation for

the restraint other than service would compel a finding of reason-

ableness. Continental TV v. GTE Sylvania, 433 U.S. 36 (1977),

There is absolutely no evidence of any resultant restraint on interbrand competi

thon Le anvthing, the evidence suggests that the National Accounts Program encouraged

interbrand competition by making tires available tor sale to the eet user ata lower price

A-41

D. B. Rice Tire Co. v. Michelin Tire Corp., supra; World-Wide

Volkswagen v. Autobahm Motors Co., F Supp. . 1980-

$1 Tr. Cas. © 63601 (S.D. N.Y. 1980),

All of the evidence elicited by Bostick on this cause leads

ineluctably to the conclusion that Michelin unilaterally and

reasonably decided not to continue doing business with

Bostick because of Bostick’s intentional and continuing breach of

Paragraph 2(a) of the Dealer Sales Agreement. On the basis of this

record, the jury could not conclude nor could the Court allow to

stand any finding, that there existed an unreasonable restraint of

trade in the relevant market."

SOUTH CAROLINAS UNFAIR TRADE PRACTICES ACT

In the third cause of action, plaintiff claims Michelin violated

the South Carolina Untair Trade Practices Act, § 39-5-20(a), Code

of Laws of South Carolina, 1976, which provides:

Unfair methods of competition and unfair or de-

ceptive acts or practices in the conduct of any trade or

commerce are hereby declared unlawtul.

Subsection (b) declares the Legislature's intent to have the state

act interpreted in conformity with § 5ia) of the Federal Trade

Commission Act (15 U.S.C. 45a) (1). Thus, an act or practice

which is lawtul under the federal statute is lawful under the state

act. To prevail, Bostick must not only prove the existence of a

pernicious practice, but also that the act or practice either re-

strained trade or was an incipient menace to it. Federal Trade

Commission v. Cement Institute, 333 U.S. 683 (1948), Federal

Trade Commission v. Markin, 391 F Supp. $65(D.C. Mich. 1974)

affd 532 F2d 541. Plaintiff has failed to offer evidence from

which a jury could rationally find any of the required elements.

Bostick alleges, but has failed to elicit testimony or evidence

proving or even tending to prove, (1) the non-renewal was con-

“Plaintiff's second cause of action also must fall for talure to offer sufficient evidence

to support the delineation of a relevant product market See first cause of action, upra

This is an independent ground on which the Court must rule in tavor of the defendant

on this cause

A-42

trary to equity and good conscience, (2) Michelin fraudulently

induced Bostick to enter into an advertising program and the

National Account Program, (3) Michelin took affirmative action to

secure compliance with its prices, and (4) Michelin restricted the

territory or persons to whom the product could be transferred.

Not only did Bostick fail to offer proof of the last two assertions,

but testimony offered as part of its case affirmatively established

to the contrary: (1) Michelin did not apply territorial restrictions

and (2) Michelin did not take anv action with regard to prices

charged by dealers. As to Bostick’s assertions that it was fraudu-

lently induced to participate in the advertising program and the

National Account Program, not only is there a total lack of sup-

porting evidence, but the record reveals that Bostick at all times

voluntarily and actively participated in the programs, the tea-

tures of which had been made clear to Bostick in written and oral

explanations.” Bostick’s decision to sell national accounts (listed

in published National Account directories made available to Mi-

chelin dealers) under the National Account Program or by direct

sales was an independent choice. Bostick’s attempts to have

purchasers designated as National Accounts, assuming the cus-

tomers were not already listed and otherwise qualified, was

entirely voluntary. As previously recognized, National Account

Programs have been upheld in other areas. Ohio-Sealy Mattress

Manufacturing Company v. Sealy, Inc., supra.

Lastly, did the non-renewal itself amount to an unfair trade

practice? No, because a unilateral refusal to deal cannot support

this cause of action, As the Court held in Naifeh ve) Ronson Art

Metal Works, 218 F 2d 202, at 206 (10th Cir, 1954) in construing

15 U.S.C.A. § 13(a):

. aS a private trader in interstate commerce, Ronson

not only could select its own customers but also could

refuse to sell its merchandise to anvone and by so doing

would in no way violate the antitrust laws. [tis settled

The advertising program was deseribed in the program brochure marked plaintiffs

Exhibit 62) The details of the National Account Program are set torth on Michelin »

brochure marked plaintiffs Exhibit LIS The National Account Program Directory was

marked plaintiffs Exhibit 132

A-43

law that a seller may either refuse to negotiate or may

cease doing business with a customer without running

afoul of the Act... .

Bostick has not elicited any evidence whatsoever supporting its

claim that Michelin refused to deal with Bostick in bad faith or

with anticompetitive motives. The only conclusion which can be

drawn from the evidence presented by plaintiff is that Michelin

unilaterally elected not to renew Bostick as a dealer for legitimate

business reasons, i.e., Bostick’s continuing breach of Paragraph

2\a) of the Dealer Sales Agreement. The federal act does not

prohibit such independent business judgments.

Although acts and practices which do not amount to full-

fledged Sherman Act violations may, nevertheless, constitute

unfair trade practices, Bostick has failed to offer or elicit any

evidence tending to show conduct even approaching that pro-

scribed by the Act. As previously pointed out, there was also a

lack of proof that any alleged act or practice either adversely

affected free competition or was an incipient menace to it. This

is equally determinative in concluding the directed verdict must

be granted as to the plaintiff's third cause of action. See Red

Diamond Supply, Inc. v. Liquid Carbonic Corporation, 637

F 2d 1001, at L008 (5th Cir. 1981).

An alternative basis for denying consideration of this claim is

jurisdictional, i.e., under South Carolina Code § 39-5-40id), this

Court is without jurisdiction to apply the South Carolina Unfair

Trade Practices Act. Bostick cannot maintain a claim under the

Act because the Act does not apply to the facts of this case. The

statute provides for an exemption from the Act's coverage for

“any challenged practices that are subject to, and comply with,

statutes administered by the Federal Trade Commission and

the rules, regulations and decisions interpreting the statutes.”

This exemption incorporates the legislative intent to limit the

Act to conduct which is solely or primarily intrastate, in clear

recognition of the duty upon the State of South Carolina to

avoid interference with interstate commerce, and in further

A-44

recognition of the supremacy clause of the Constitution (Article

VI, Clause 2).

Plaintiff acknowledged that its activities were in interstate

commerce and, indeed, its counsel conceded this in oral argu-

ment. This being so, the Federal Trade Commission statutes and

rulings would apply, to the exclusion of the state act, and the

decisions interpreting these laws recognize the right of a manu-

facturer to select its customers or to refuse to deal with a specific

customer. Johnson v. J. H. Yost Lumber Co., 117 F.2d 53, at 61

‘Sth Cir. 1941); Naifeh v. Ronson Art Metal Works, Inc., supra;

FTC v. Raymond Bros.-Clark Co., 263 U.S. 565 (1924).

This Court has carefully considered all the evidence

presented by Bostick and finds that the evidence clearly estab-

lishes that the acts and practices complained of here are subject

to and comply with the FTC Act (15 U.S.C. § 45(a) (1). This

Court is without jurisdiction to apply the state act and finds

the defendant has satistactorily established the exemption pre-

senbed by § 39-5-40(d). Therefore, defendant's Motion for a

Directed Verdict as to plaintiffs Third Cause of Action is also

granted on this additional ground.

The evidence presented as a part of Bostick’s case leads to

the inescapable conclusion that Michelin did not renew Bostick s

Dealer Sales Agreement in 1978 because of Bostick s continuous

and significant failure to develop the service capabilities it had

agreed to in the Dealer Sales Agreement. Michelin said the

reason for non-renewal was this persistent failure, and no

evidence was introduced tending to show otherwise. Every

Michelin dealer called by Bostick at tral provided service.

there was no evidence that anvone other than Bostick tailed to

provide service © Even George Edwards. plaintiffs expert.

“Because the Court has concluded that the South Carolina Act does not apply un thes

ase ittneed net and does net reach the constitutional sues cansed by the detendant

The absence of such prot was acknowledged by plamtifs counsel

The Court Did vou mtroduce any evidence that ans other dealer anowhere

dein ¢ give service’

Mr Staten No cour Honor

The ( ourt) There s a0 evidence on the record but that verice was geen fn

ever Michelin dealer (ou put on the stand on tomk a dlepesition

Mr Staton Hight wr

A-45

stated that service was very important in the tire industry.” The

evidence and testimony presented is susceptible of but one con-

clusion, that Michelin declined to continue dealing with Bostick

for compelling and legitimate business reasons. In World-Wide

Volkswagen Corp. v. Autobahn Motors Co., supra, a declaratory

judgment was sought by World-Wide as the exclusive distributor

of Volkswagen automobiles in New York, New Jersey and Con-

necticut to permit the non-renewal of Autobahn’s dealer fran-

chise. In addressing the validity of World-Wide’s requirement for

service training, the Court held:

We find that World-Wide's requirement that its

dealers’ service emplovees be specially trained in their

work was a reasonable requirement, that the policy was

uniformly applied to all dealers and was not arbi-

trarily imposed upon Autobahn. Autobahn’s failure to

maintain an adequate trained force of service person-

nel constitutes a factor justifying termination of its

franchise. See Garvin v. American Motors Sales

Corp., supra, 520.

When, as here, the testimony and evidence presented by the

plaintiff must lead to the conclusion that the business relationship

between the parties was terminated for a legitimate business

reason, this Court cannot allow the jury to engage in proposed,

but totally unsupported, speculation as to possible improper

reasons for non-renewal.

THE FRAUD CLAIM

Plaintiff's action for common law traud relates solely to ad-

vertising in 1978S. Bostick contends that in early 1978 Michelin

representatives, who allegedly should have known that Bostick

might not be renewed in 1975S, came to Bostick and urged its

participation in a bonus program which would call for Bostick to

engage in extensive advertising and to order a greater number of

"See Page S1 oof Edwards deposition confirmed by him on cross-e amination

At the trial Edwards admitted he was 4 researcher tor Bridgestone 4 competitive tire

manutacturer

A-46

tires than it had during the previous vear. Before being able to

fulfill the requirements of the program, the theory proceeds,

Bostick’s business relationship with Michelin was ended.

Either because of a concentration on the antitrust aspects of

this case, or because there was no proof available on this issue,

the common law fraud and deceit claim fails utterly. What little

evidence the plaintiff was able to offer on this cause cannot

withstand defendant's Motion tor Directed Verdict.

Under the South Carolina law, an action for fraud is based on

the presence of nine separate elements: a representation, its

falsity, its materiality; the author's knowledge of its falsity or

ignorance of its truth, the author's intent that it should be acted

upon by the person and in the manner reasonably contemplated,

the other party's ignorance of its falsity, his reliance on its truth,

his right to rely thereon, and, his consequent and proximate

injury thereby. Miller v. Premier Corp., 608 F.2d 973 (4th Cir.

1977) (applying South Carolina law), O'Shields v. Southern

Fountain Mobile Homes, Inc., 262 $.C. 276, 204 S.E. 2d 50

(1974), Lundy v. Palmetto State Life Insurance Co., 256S8.C. 506,

183 SE. 2d 335 (1971), Moye v. Wilson Motors, Inc., 254 8.C.

471, 176 SE. 2d 147 (1970). Even a failure to plead each of the

nine elements of fraud renders a complaint fatally detective

Warr v Carolina Power & Light Co , 237 S.C. 121, 115 S.E. 2d

799 (1960). Bostick’s amended complaint tails to allege all nine

elements of fraud as to a single course of conduct. The pleading

has commingled various alleged courses of conduct with various

traud allegations

Aside from a matter of pleading, as a matter of proof a party

must establish each element of traud by clear, cogent and con-

vineing evidence, and a talure to prove any one of the nine

elements is fatal to recovery, O Shields t Southern Fountain

Mobile Homes, Inc. supra

The record is silent on any representation made to Bostick

which was contrary to the terms set forth in the applicable pro-

gram documents. Furthermore. if the claim is that the fraud

related to future events. even the proof of this would not be

AAT

legally sufficient since a misrepresentation generally must relate

to an existing or pre-existing fact; fraud cannot be predicted on

untulfilled promises or statements as to future occurrences.

Miller v. Premier Corp., supra; Moye v. Wilson Motors, Inc.,

supra. If it is claimed that the fraud was contained in the written

program materials, then Bostick would be bound by the rule that

one cannot complain of fraud in the misrepresentation of the

contents of a written instrument when the truth could have been

ascertained by reading the instrument. Doub v. Weathersby-

Breeland Inc. Agency, 268 §.C. 319, 233 S.E. 2d 111 (1977).

Even if there were evidence tending to support Bostick’s

claim, which there is not, Bostick’s voluntary return of tires to

Michelin and resulting disqualification for even a one percent

bonus renders the point moot. Radford testified that Michelin

would not have let the second six-month advertising requirement

interfere with Bostick’s otherwise earned PIB bonus if Bostick

had qualified for the one percent in all other respects. It was

Bostick s own voluntary return of tires to reduce its indebtedness

to Michelin which prevented Bostick from qualifying under

the Program.

Again, the elements constituting fraud were not all pled, but

even if they had been, not a single element was proven, and this

claim fails as a matter of law. The defendant's Motion for a

Directed Verdict must be granted.

A-45S

CONCLUSION

Prior to the filing of this Order plaintiff and defendant con-

sented to the dismissal with prejudice of the fifth cause of action

and the counterclaim respectively. For the reason stated above,

this Court has concluded that the defendant's Motion for Di-

rected Verdict must be granted as to the first four causes of action.

To put defendant to the expense of defending claims so sparsely

supported by the evidence is not within the concept of justice.

AND IT IS SO ORDERED

ROBERT W. HEMPHILL

Senior United States District Judge

August 5, 1951 *

Nunc Pro Tune

Rock Hill, South Carolina

*Time for Appeal shall start running from September 14. 1951

A-49

APPENDIX D

STATEMENT OF CORPORATE AFFILIATION

Pursuant to Rule 28. Michelin Tire Corporation makes the

following disclosure:

Petitioner is an indirect subsidiary of Compagnie Generale

des Establissements Michelin, A French entity in the

nature of a commanditory partnership whose non-voting

stock is listed on the Paris Bourse (stock exchange’. This

entity does not do business in the United States nor are its

securities traded in the United States to the Appellee's

knowledge

A-50

APPENDIX E

CERTIFICATE OF SERVICE

This is to certify that three copies of the Petition for a

Writ of Certiorari to the U.S. Court of Appeals tor the Fourth

Circuit were served upon opposing counsel this 17th day

of August, 1983, by depositing in the U.S. Mail, with proper

postage affixed, addressed to:

Robert E. Staton, Esquire

Michael H. Quinn, Esquire

Quinn, Brown, Staton & Bovle

Post Office Box 73

Columbia, South Carolina 29202

All parties required to be served have been served.

>: 6h

-]. Brantley Phillips, Jr

Attorney tor Petitioner

217 East Cottee Street

Greenville, South Carolina 29601

$03) 242-6440