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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1983
- **Citation:** 464 U.S. 894

## Text

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

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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

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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. I

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0268%3A1. Public record. Not legal advice.