Clarkwestern Dietrich Bldg. Sys. L.L.C. v. Certified Steel Stud Assn., Inc.

2017 Ohio 1091

• Court: Ohio Court of Appeals
• Decided: March 27, 2017
• Docket: CA2016-05-098
• Status: Published

Opinion

[Cite as Clarkwestern Dietrich Bldg. Sys. L.L.C. v. Certified Steel Stud Assn., Inc., 2017-Ohio-1091.]

IN THE COURT OF APPEALS

TWELFTH APPELLATE DISTRICT OF OHIO

BUTLER COUNTY

CLARKWESTERN DIETRICH BUILDING : SYSTEMS, LLC d.b.a. CLARKDIETRICH, : CASE NO. CA2016-05-098 Plaintiff-Appellant, : OPINION - vs - 3/27/2017 : CERTIFIED STEEL STUD ASSOCIATION, INC., et al., :

Defendants-Appellees. :

CIVIL APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS Case No. CV2013-10-2089

Frost Brown Todd LLC, Matthew C. Blickensderfer, Stephen R. Hernick, 3300 Great American Tower, 301 East Fourth Street, Cincinnati, Ohio 45202 and Cohen & Grigsby, P.C., Anthony Cillo, Barbara Scheib, Fridrikh V. Shrayber, 625 Liberty Avenue, Pittsburgh, PA 15222-3152, for plaintiff-appellant

Taft Stettinius & Hollister LLP, Daniel R. Warncke, Kim K. Burke, John B. Nalbandian, Aaron M. Herzig, 425 Walnut Street, Suite 1800, Cincinnati, Ohio 45202-3957 and Fox Rothschild LLP, Jeffrey M. Pollock, Robert J. Rohrberger, 997 Lenox Drive, Bldg. 3, Lawrenceville, NJ 08648-2311, for defendant-appellee, Ware Industries, Inc.

RINGLAND, J.

{¶ 1} This is an appeal from a decision of the Butler County Court of Common Pleas,

in which the trial court granted summary judgment to appellees for claims involving the Ohio

Valentine Act. For the reasons detailed below, we affirm. Butler CA2016-05-098

{¶ 2} Structural and nonstructural steel framing products are used to frame

commercial buildings because the International Building Code ("IBC") requires

noncombustible framing materials. This dispute centers on certain nonstructural steel

framing ("NSSF") products that provide framing for drywall.

{¶ 3} Clarkwestern Dietrich ("Clark Dietrich") is a joint venture formed by

Clarkwestern Building Systems L.L.C. and Dietrich Industries, Inc. Both companies

manufacture NSSF products for use in commercial construction. For purposes of continuity,

we will refer to the joint venture as Clark Dietrich. While some background information is

necessary to accurately detail the dispute between the parties, we may dispense with an

exhaustive description of the specific technology and science behind the NSSF products and

instead focus on the issues relevant to the Valentine Act claim.

{¶ 4} As previously noted, all NSSF products must comply with the IBC. IBC

compliance may be demonstrated in a variety of ways. For example, a manufacturer may

apply to an accredited code evaluation company and request independent proof of the

product's code compliance. Alternatively, a manufacturer can also seek to have its products

certified under a trade association's certification program.

{¶ 5} The dispute here arises between Clark Dietrich and the Steel Stud

Manufacturing Association ("SSMA"). The SSMA is a voluntary trade association that

represents approximately 85 percent of industry volume. Clark Dietrich was a member of the

SSMA, as are numerous other firms also named as defendants in this action.

{¶ 6} Traditionally, NSSF products are manufactured from prime steel with a "G40"

coating, which is a zinc-based coating that provides corrosion protection. In 2010, Clark

Dietrich produced NSSF products through an innovative "cold reduction" process.1 This

1. While this court is aware that the entities were distinct at the time, that fact is not material to the outcome of the case and for purposes of continuity will use the term Clark Dietrich. -2- Butler CA2016-05-098

process utilized less expensive secondary steel and provided other significant cost

advantages based on the amount of steel required for each product. To meet applicable IBC

requirements, Clark Dietrich applied an additional proprietary coating which, Clark Dietrich

contends, will provide corrosion resistance equal or better than the standard G40 coating.

Clark Dietrich refers to this product as G40 equivalent or "G40EQ."

{¶ 7} The development of the G40EQ product provided Clark Dietrich with a

competitive advantage because of the lower manufacturing cost. Thus, the G40EQ product

had a restraining effect on market prices and certain competitors of Clark Dietrich reduced

their prices on the traditional G40 NSSF products to compete with Clark Dietrich's new

G40EQ product.

{¶ 8} In 2010, the SSMA created an IBC compliance program for NSSF products.

The compliance program ultimately adopted certain requirements that negatively impacted

those SSMA members who utilized cold reduction and G40EQ products. Clark Dietrich, in its

brief, refers to those requirements as "sham standards" and alleges that the Board adopted

those requirements to benefit manufacturers who did not invest the resources to produce the

G40EQ products. Eventually, Clark Dietrich resigned from the SSMA because it would no

longer be able to produce the G40EQ products.

{¶ 9} Following Clark Dietrich's resignation, the SSMA released an industry letter

announcing that Clark Dietrich was no longer SSMA compliant and advised that Clark

Dietrich should be removed from SSMA member specifications.

{¶ 10} While Clark Dietrich's market share decreased after it left SSMA, the company

continued to sell G40EQ products. From 2011 to 2014, Clark Dietrich shipped 650,000 tons

of G40EQ product.

{¶ 11} Clark Dietrich filed this lawsuit against the SSMA and several individual

manufacturing members, alleging a variety of claims. This appeal deals solely with alleged -3- Butler CA2016-05-098

antitrust violations under the Ohio Valentine Act. The trial court granted summary judgment

in favor of SSMA, finding that Clark Dietrich failed to present evidence of an actionable claim

under the Ohio Valentine Act. Clark Dietrich now appeals the decision of the trial court,

raising a single assignment of error for review:

{¶ 12} THE TRIAL COURT ERRED BY GRANTING DEFENDANTS' MOTION FOR

SUMMARY JUDGMENT.

{¶ 13} In its sole assignment of error, Clark Dietrich argues the trial court erred by

granting summary judgment in favor of SSMA on the Valentine Act claim.

{¶ 14} This court reviews summary judgment decisions de novo. Ludwigsen v.

Lakeside Plaza, L.L.C., 12th Dist. Madison No. CA2014-03-008, 2014-Ohio-5493, ¶ 8.

Pursuant to Civ.R. 56(C), summary judgment is proper when (1) there are no genuine issues

of material fact to be litigated, (2) the moving party is entitled to judgment as a matter of law

and, (3) when all evidence is construed most strongly in favor of the nonmoving party,

reasonable minds can come to only one conclusion, and that conclusion is adverse to the

nonmoving party. Zivich v. Mentor Soccer Club, Inc., 82 Ohio St .3d 367, 369-70 (1998).

{¶ 15} The moving party bears the initial burden of informing the court of the basis for

the motion and demonstrating the absence of a genuine issue of material fact. Robinson v.

Cameron, 12th Dist. Butler No. CA2014-09-191, 2015-Ohio-1486, ¶ 9. Once this burden is

met, the nonmoving party has a reciprocal burden to set forth specific facts showing there is

some genuine issue of material fact yet remaining for the trier of fact to resolve. Id. In

determining whether a genuine issue of material fact exists, the evidence must be construed

in favor of the nonmoving party. Vanderbilt v. Pier 27, L.L.C., 12th Dist. Butler No. CA2013-

02-029, 2013-Ohio-5205, ¶ 8.

{¶ 16} The Ohio Valentine Act is patterned after the federal Sherman Antitrust Act

and the courts have interpreted the statutory language in light of federal construction of the -4- Butler CA2016-05-098

Sherman Act. R.C. 1331.01; C.K. & J.K., Inc. v. Fairview Shopping Center, 63 Ohio St.2d

201, 204 (1980). To establish a restraint of trade claim, a plaintiff must show both that there

was a combination of effort, economically or by action, and that such effort unreasonably

restrains trade in a relevant market. Szuch v. King, 6th Dist. Erie No. E-09-069, 2010-Ohio-

5896, ¶ 53, citing N.H.L. Players' Assn. v. Plymouth Whalers Hockey, 325 F.3d 712, 718 (6th

Cir. 2003).

{¶ 17} "Two approaches are used to determine whether a defendant's conduct

unreasonably restrains trade: the per se rule and the rule of reason." Id. As Clark Dietrich

abandoned its argument with respect to the per se rule on appeal, we will consider only the

rule of reason approach.

{¶ 18} The rule of reason approach requires the plaintiff to prove all of the following:

(1) that the defendants contracted, combined, or conspired; (2) that the contract,

combination, or conspiracy produced adverse anticompetitive effects (3) within the relevant

product and geographic markets; (4) that the objects of and conduct resulting from the

actions were illegal; and (5) that the conduct was a proximate cause of plaintiff's antitrust

injury. Island Express Boat Lines, Ltd. v. Put-in-Bay Boat Line Co., 6th Dist. Erie No. E-06-

002, 2007-Ohio-1041, ¶ 74, citing Care Heating & Cooling, Inc. v. American Standard, Inc.,

427 F.3d 1008, 1014 (6th Cir. 2005).

{¶ 19} As to the second prong, "[i]t is well-established that the purpose of the

Sherman Act and, by extension, the Valentine Act, is to protect competition and the market

as a whole, not individual competitors." Care Heating & Cooling, Inc. v. Am. Std., Inc., 427

F.3d 1008, 1014 (6th Cir.2005). The foundation of an antitrust claim is the alleged adverse

effect on the market. Id. Accordingly, an "[i]ndividual injury, without accompanying market-

wide injury, does not fall within the protections of the Sherman Act." Id. An antitrust claim

will not succeed if it is "based upon nothing more than injuries allegedly suffered by a -5- Butler CA2016-05-098

competitor, rather than on harm to competition in the relevant market." Baseball at

Trotwood, LLC v. Dayton Prof. Baseball Club, LLC, 113 F.Supp.2d 1164, 1172 (S.D.Ohio

1999).

{¶ 20} The trial court found that Clark Dietrich failed to prove harm to competition or

antitrust injury and therefore failed to prove all the elements of the Valentine Act claim. In so

doing, the trial court found:

* * * There is no evidence that Clark Dietrich was prevented from selling its EQ coated products or that customers were prevented from buying them. SSMA certification is not required to prove a product is IBC compliant, nor is it necessary to market and sell NSSF products. Clark Dietrich was free to counter the statements of the Defendants and to talk to and educate the architects and specifiers about EQ coated products and to request that the EQ coated products be added to the specifications. The fact that the architects or specifiers may choose to specify other products instead of Clark Dietrich's products does not create an antitrust violation. To the extent that the Defendants [sic] statements were false or misleading, Clark Dietrich may be able to prove other claims, but not an antitrust claim.

{¶ 21} Based on our review, we agree with the trial court's decision. The record does

not support an antitrust claim. In Consolidated Metal Products, Inc. v. American Petroleum

Institute, 846 F.2d 284 (5th Cir.1988), a manufacturer of oil well equipment sued the

American Petroleum Institute (API), alleging the API excluded it from the market by delaying

trade standard certification to its equipment. Similar to the present case, API was a

standard-setting body that granted manufacturers a license to display its monogram on the

manufacturer's equipment if the API found that the equipment satisfied its standards. Id. at

286.

{¶ 22} The plaintiff in Consolidated applied for, and was denied, a license to use

API's monogram and filed suit under the Federal Sherman Act. Id. at 288. The trial court

granted summary judgment on that claim and the Sixth Circuit affirmed. In so doing, the

-6- Butler CA2016-05-098

Sixth Circuit held that "a trade association that evaluates products and issues opinions,

without constraining others to follow its recommendations," does not violate the Sherman Act

by unfavorably evaluating a manufacturer's product. Id. at 292. The court noted that: (1) API

approval was not required by law and equipment was frequently sold without it, and (2)

consumers were in no way constrained from buying the plaintiff's products. Id. at 296. As a

result, the manufacturer was not excluded "in a real sense" from the market because it was

still free to sell its products and consumers were free to buy them. Id. at 292. The court

emphasized that manufacturers of equipment still had the ability, even without an API

monogram, to market the quality of their products. Id. at 296.

{¶ 23} The Consolidated decision has been followed by a number of courts.

Schachar v. Am. Acad. of Ophthalmology, Inc., 870 F.2d 397 (7th Cir.1989). In Schachar,

the plaintiffs were ophthalmologists who performed a surgical procedure labeled

"experimental" by the National Advisory Eye Council. Id. The American Academy of

Ophthalmology endorsed the Council's position and issued a press release advising

physicians and patients not to use the procedure until more research had been completed.

Id. The plaintiffs alleged that the press release was part of a conspiracy to restrain trade. Id.

{¶ 24} The Seventh Circuit held that there was no violation of the Sherman Act

because there was no enforcement device that operated to restrain trade. Id. at 400. None

of the plaintiffs were prevented from doing the procedure or sanctioned for performing it. Id.

at 398. The court characterized the challenged action as "warfare among suppliers and their

different products," not as restraint, but as competition. Id. at 399.

Consolidated Metal Products, Inc. * * * holds that when a trade association provides information (there, gives a seal of approval) but does not constrain others to follow its recommendations, it does not violate the antitrust laws. We agree. An organization's towering reputation does not reduce its freedom to speak out. Speech informed, hence affected, demand for radial keratotomy, but the plaintiffs had no entitlement to consumers' favor. The -7- Butler CA2016-05-098

Academy's declaration affected only the demand side of the market, and then only by appealing to consumers' (and third- party payors') better judgment. If such statements should be false or misleading or incomplete or just plain mistaken, the remedy is not antitrust litigation but more speech – the marketplace of ideas.

Id. at 399-400 (citations omitted).

{¶ 25} More recently, this analysis was followed in Santana Products, Inc. v. Bobrick

Washroom Equipment, Inc., 401 F.3d 123 (3d Cir.2005). In Santana, a toilet partition

manufacturer sued its competitor, Bobrick, alleging that Bobrick gave architects false

information about Santana's products to coerce or convince architects to specify Bobrick's

product rather than Santana's product. Id. at 127-128. There was no dispute that the

defendants in the case informed customers that Santana's products posed a safety hazard.

Id. at 132.

{¶ 26} However, in affirming summary judgment in favor of the defendant on the

antitrust claims, the Third Circuit found that the manufacturer was not excluded "in a real

sense" from the market because Santana was still free to sell its products and consumers

were still free to buy them. Id. at 133. The architects made the ultimate decision on which

products to specify and jockeying over specifications is a valid form of competition. Id. "If

such statements should be false or misleading or incomplete or just plain mistaken, the

remedy is not antitrust litigation." Id. at 134. Absent an enforcement device that restrained

trade and prevented plaintiff from selling or customers from buying its products, there is no

antitrust violation.

{¶ 27} In contrast, Clark Dietrich relies on several cases, including Allied Tube &

Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S. Ct. 1931 (1998), to argue that

private standard-setting organizations may be held liable for enacting anticompetitive

standards. However, Allied Tube is distinguishable. Here, the relevant standard is the IBC

-8- Butler CA2016-05-098

and approval of the SSMA was one method of showing compliance with the IBC. Unlike the

situation in Allied Tube, the SSMA does not set, adopt, or enforce the industry standard.

Furthermore, the court in Allied Tube was specifically determining whether Noerr immunity

applied to a private organization and does address antitrust liability governing such

organizations:

Although we do not here set forth the rules of antitrust liability governing the private standard-setting process, we hold that at least where, as here, an economically interested party exercises decision making authority in formulating a product standard for a private association that comprises market participants, that party enjoys no Noerr immunity from any antitrust liability flowing from the effect the standard has of its own force in the marketplace.

Id. at 509-510.2 While it is true that private standard-setting organizations may be liable for

enacting anticompetitive standards, Clark Dietrich does not cite any analogous case to

support its position based on these particular facts.

{¶ 28} The trial court found a number of undisputed facts related to the Valentine Act.

As the parties do not dispute these facts, we will summarize them below:

In most cases, specifications for commercial building projects are developed by design professionals, i.e., architects or specification writers contracted by the architects. These specifications detail the products and materials acceptable for use on a particular construction project.

The specifications may list manufacturers, code requirements, industry groups, or in some cases may list a particular company's products.

Companies in the industry are free to lobby or work to persuade architects and specifiers to educate them about products and to persuade them to include the company's products in job specifications.

The SSMA is a voluntary trade organization and membership in

2. The Noerr doctrine shields certain political actions from the Sherman Act, recognizing that the antitrust laws, "tailored as they are for the business world, are not at all appropriate for application in the political arena." E. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523 (1961); See United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585 (1965). -9- Butler CA2016-05-098

the SSMA is not required in order to sell NSSF products.

There are competitors in the industry who are not members of the SSMA.

The SSMA has a certification program that allows manufacturers to demonstrate that their products are compliant with the IBC.

SSMA membership and the SSMA compliance program are not necessary to manufacture products that comply with the IBC and are not the only way to show compliance with the IBC.

In 2010, SSMA created a task force to develop an IBC compliance program. The draft program did not contain an elongation requirement relating to the rigidity of steel. Instead, the draft program contained a coatings standard that G40EQ products would satisfy.

Upon submission of the draft to the SSMA Board of Directors, an elongations requirement and more restrictive coatings standards were adopted. The new elongation requirement would not affect members using prime steel, but would affect those using secondary steel and the processes utilized in the production of G40EQ products.

SSMA members were required to comply with the new standards. Therefore, Clark Dietrich resigned in March 2011 and formed an alternative trade association. At the time of their resignation, Clark Dietrich has a combined market share of 46%.

{¶ 29} As in Consolidated and Schacher, this matter involves a trade association that

adopted standards unfavorable to the complaining party. Here, Clark Dietrich complains that

the "sham standards" adopted by the SSMA amounted to a violation of the Valentine Act. In

support of its position, Clark Dietrich presented the testimony of its expert, James Kearl. In

his deposition, Kearl acknowledged that Clark Dietrich was not prevented from selling its

G40EQ products and customers were not prevented from purchasing them. In addition,

Kearl noted that SSMA certification was not required to prove that the product was IBC

compliant. Rather, Kearl's position is that there was an antitrust violation because:

(1) If Clark Dietrich had been granted this certification it could have competed effectively with rivals,

- 10 - Butler CA2016-05-098

(2) As the innovative technology was produced at a lower cost, Clark Dietrich would have had a higher margin of return on its product,

(3) Clark Dietrich's competitors would invest in this technology to also achieve the higher margin of return,

(4) Therefore, the failure to grant this certification was an injury to competition because the industry did not adopt technology that would ultimately lower the cost of the innovative technology

{¶ 30} We have reviewed the record, including the testimony of Clark Dietrich's

expert, Kearl, and conclude the trial court did not err by granting summary judgment in favor

of SSMA. Aside from being speculative, Kearl's testimony does not raise any genuine issue

of material fact as to the Valentine Act claim. There is no evidence that Clark Dietrich was

prevented from selling its G40EQ product or that customers were prevented from purchasing

those products on the open market. While it is undisputed that the standards adopted by the

SSMA prevented Clark Dietrich from manufacturing its G40EQ products as an approved

SSMA product, such action does not amount to a restraint on trade. As addressed earlier,

SSMA certification is not required to prove that the product is IBC compliant, nor was it a

requirement that Clark Dietrich be a member of the association. Similar to Santana, Clark

Dietrich was free to continue selling its G40EQ products and educate architects and

specifiers about the benefit of their products. As noted by the court in Consolidated, "[a]

plaintiff does not have a claim under the rule of reason simply because others refuse to

promote, approve, or buy its products." Consolidated, 846 F.2d at 293.

{¶ 31} As a result, we find the trial court did not err by granting summary judgment on

the Valentine Act claim. Therefore, Clark Dietrich's sole assignment of error is without merit

and is hereby overruled.

{¶ 32} Judgment affirmed.

S. POWELL, P.J., and M. POWELL, J., concur. - 11 -