Colorado Pump & Supply Company, a Colorado Corporation v. Febco, Incorporated, a Corporation

472 F.2d 637
CourtCourt of Appeals for the Tenth Circuit
DecidedFebruary 7, 1973
Docket72-1204
StatusPublished
Cited by52 cases

This text of 472 F.2d 637 (Colorado Pump & Supply Company, a Colorado Corporation v. Febco, Incorporated, a Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Colorado Pump & Supply Company, a Colorado Corporation v. Febco, Incorporated, a Corporation, 472 F.2d 637 (10th Cir. 1973).

Opinions

BREITENSTEIN, Circuit Judge.

In this private antitrust suit the issues are whether actions of defendants-appellees Febeo, Incorporated, and Thompson Pipe & Steel Company violate the federal antitrust laws. The district court held for the defendants and dismissed the action. We affirm.

Febeo manufacturers lawn and turf equipment. Thompson and plaintiff-appellant Colorado Pump & Supply Company are competing wholesale distributors of such equipment in the Colorado area. An important item is the control [639]*639device for sprinkling systems. Until January 16, 1967, Thompson, Colorado Pump, and other distributors purchased from Febeo and received a 50% discount. Colorado Pump had a franchise agreement with Rainbird, a competitor of Febeo, and limited its Febeo purchases to controllers. The trial court found that other controllers on the market were competitive with, and satisfactory substitutes for, the Febeo controllers.

On the mentioned date Thompson and Febeo made a written agreement whereby Thompson became the exclusive Feb-eo distributor in a geographically defined area. Thompson received a 50/10% discount on package quantities and 50% on broken package quantities. Other contract provisions will be discussed later. After the agreement, Feb-eo refused to sell directly to Colorado Pump which could, and did, purchase Febeo products from Thompson at a 35% discount on parts and 40% discount on complete line equipment. These were the same discounts given all other distributors and jobbers by Thompson.

With the 35% discount Colorado Pump could not make a profit on sales of controllers and discontinued handling the Febeo controller with a resulting loss in business. The complaint alleged that Colorado Pump lost $150,000 in profits; that the actions of Febeo and Thompson violated §§ 1, 2, and 14 of Title 15 U.S.C.; and that Colorado Pump is entitled to treble damages. Trial to the court was had on the issue of liability, with damages reserved for later consideration. The court miade findings of fact and concluded that Febeo and Thompson had not violated the federal antitrust laws.

The contract between Febeo and Thompson authorizes Thompson “to sell within the following territory [here follows a description including Colorado and some adjacent area].” Title to the purchased products passes to Thompson at Febco’s shipping point. Colorado Pump says that these contract provisions are a per se Sherman Act violation because a manufacturer has imposed vertical restrictions as to territory on a product, title to which has passed from the manufacturer to the distributor.

Prime reliance is placed on United States v. Arnold, Schwinn & Co., 388 U. S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249, which Colorado Pump says establishes the rule that if the producer passes dominion and title to the distributor, territorial restrictions imposed by the producer are per se violative of the antitrust laws. In Schwinn, the Court commented that the producer had been “firm and resolute” in its insistence upon the limitations and that firmness “was grounded upon the communicated danger of termination.” 388 U.S. at 372, 87 S.Ct. at 1862. We agree with the Second Circuit that the holding in Schwinn was predicated on the “firm and resolute” insistence on compliance. Janel Sales Corp. v. Lanvin Parfums, Inc., 2 Cir., 396 F.2d 398, 406, cert. denied 393 U.S. 938, 89 S.Ct. 303, 21 L.Ed. 2d 275.

Our case is different from Schwinn. We have no explicit contract restriction. Nothing in the contract forbids, or even touches on, sales by Thompson outside of the territory. The trial court found, and we agree, that the contract “contained no resale restrictions with regard to whom Thompson could sell or at what price.” Further, no “firm and resolute” action of Febeo insisted upon observance of any territorial restriction. The Manager of the Irrigation Division of Thompson testified that although Thompson had not made sales outside of the allocated territory, it was not prohibited from doing so. The Manager of Febeo testified that “there was no authorization or no restriction to my knowledge” on Thompson sales outside of the territory. Our situation is a far cry from that considered in Schwinn.

The contract provision with which we are concerned is no more than a description of a primary marketing territory and as such is not a per se violation. Plastic Packaging Materials, [640]*640Inc. v. Dow Chemical Co., E.D.Pa., 327 F.Supp. 213, 225; see also Janel Sales Corp. v. Lanvin Parfums, Inc., 2 Cir., 396 F.2d 398, 406, cert. denied 393 U.S. 398, 89 S.Ct. 303, 21 L.Ed.2d 275. Contrary to Colorado Pump’s assertion, Interphoto Corp. v. Minolta Corp., S.D.N.Y., 295 F.Supp. 711, aff’d 2 Cir., 417 F.2d 621, did not hold that a per se violation could be found on the basis of a mere contractual provision. In that case, the court found that Minolta had persistently advised its distributor against unwanted incursions into restricted areas. 295 F.Supp. at 720. The record before us is devoid of any suggestion that Febeo had even admonished Thompson to confine its sales to the described territory.

In our opinion the attacked contract provision is not a per se Sherman Act violation. When coupled with the other evidence in the record, it shows no violation. A manufacturer may select the customers to whom he will sell so long as his conduct has no monopolistic or market control purpose. New Home Appliance Center v. Thompson, 10 Cir., 250 F.2d 881, 884. Here we have no price fixing and no evidence of market control. The trial court found that the marketing of lawn and turf equipment “is highly competitive on a national and regional basis.” We have nothing more than a vertical confinement of sales to a selected customer of a product which is competitively available from others. This is not enough to establish a Sherman Act violation. Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 9 Cir., 416 F.2d 71, 76, cert. denied 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755, and cases there cited.

Under the contract, Thompson was obligated to “maintain adequate inventories of products and parts which will enable Distributor to offer for sale a complete line of said products and service them after installation.” Colorado Pump argues that this is an impermissible tying arrangement in that the requirement that the complete line be stocked is tied to the right to acquire the desirable Febeo controller. A tying arrangement is an agreement by a party to sell a product but only on the condition that the buyer also purchases a different (or tied) product or at least agrees that he will not purchase that product from any other supplier. Northern Pac. R. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545.

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Bluebook (online)
472 F.2d 637, Counsel Stack Legal Research, https://law.counselstack.com/opinion/colorado-pump-supply-company-a-colorado-corporation-v-febco-ca10-1973.