George C. Miller Brick Co. v. Stark Ceramics, Inc.

9 Misc. 3d 151
CourtNew York Supreme Court
DecidedMay 18, 2005
StatusPublished
Cited by1 cases

This text of 9 Misc. 3d 151 (George C. Miller Brick Co. v. Stark Ceramics, Inc.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
George C. Miller Brick Co. v. Stark Ceramics, Inc., 9 Misc. 3d 151 (N.Y. Super. Ct. 2005).

Opinion

OPINION OF THE COURT

Kenneth R. Fisher, J.

In 1995, plaintiff George C. Miller Brick Co., Inc., a distributor of brick and tile products, commenced this antitrust action under the Donnelly Act (General Business Law § 340 et seq.) against a supplier, defendant Stark Ceramics, Inc., seeking treble damages based on allegations of bid rigging and price fixing in April 1991 in connection with the award of a contract for [153]*153structural glazed facing tile on a construction project at the Albion Correctional Facility. The matter has been bifurcated for trial, the court (Stander, J.) having previously ordered separate trials on the issues of liability and damages.

Before the court are two motions brought by Miller. The first motion seeks an order (1) prohibiting Stark from putting on evidence or argument for the purpose of “explaining away” the response to interrogatory No. 18 (c); (2) prohibiting Stark from advising the jury that damages for a Donnelly Act violation are trebled; and (3) allowing evidence during the liability portion of the trial of Miller’s termination as a distributor of Stark’s products. The second motion seeks an order reconsolidating the trial.

Background

Miller was Stark’s exclusive distributor in the Rochester area. John H. Black Co. was Stark’s exclusive distributor in the Buffalo area, which includes the Albion Correctional Facility. This action is based on allegations that, after Miller was awarded the prison contract, it was pressured by Stark to relinquish the contract and to withdraw its bid so that, upon a rebidding, Black would be awarded the contract. Miller, fearful of losing its distributorship, cooperated with Stark on the condition that Black fix its price at $109,000. Upon the rebidding, Miller then followed Stark’s direction and submitted a bid six percent higher. After Black was awarded the contract, it demanded that Stark pay it $4,000, representing the difference between Miller’s original bid and Black’s subsequent bid. Stark made the payment to Black and then terminated Miller’s distributorship, allegedly because it blamed Miller for having to make the payment to Black. Miller claims damages arising from the loss of the contract and the termination of its distributorship.

Previously, it was determined by the Fourth Department that the action, as pleaded, alleges a vertical price-fixing scheme that is a per se violation of the Donnelly Act (Miller Brick Co. v Stark Ceramics, 2 AD3d 1341, 1343 [2003]; see Business Elecs. Corp. v Sharp Elecs. Corp., 485 US 717, 735-736 [1988]). The only remaining allegation of concerted action under the act involves a conspiracy between Miller, itself, and Stark,1 distinguishing this case from Monsanto Co. v Spray-Rite Serv. [154]*154Corp. (465 US 752 [1984], reh denied 466 US 994 [1984]). Although the only remaining allegation of concerted action involves Miller and Stark, there is an actionable wrong under the Donnelly Act because Miller alleges it was coerced to participate in the illicit scheme (see Simpson v Union Oil Co. of Cal., 377 US 13 [1964], reh denied 377 US 949 [1964]; Isaksen v Vermont Castings, Inc., 825 F2d 1158, 1162-1163 [7th Cir 1987], cert denied 486 US 1005 [1988]; Ring v Spina, 148 F2d 647 [2d Cir 1945]; Rochez Bros., Inc. v North Am. Salt Co., Inc., 1994 WL 735932, *3, 1994 US Dist LEXIS 19421, *7 [US Dist Ct, WD Pa, Nov. 2, 1994]).2 Moreover, the “in pari delicto” defense is not applicable to private antitrust actions such as this (see Perma Life Mufflers, Inc. v International Parts Corp., 392 US 134, 140 [1968], overruled on other grounds by Copperweld Corp. v Independence Tube Corp., 467 US 752, 765-766 [1984]; see also Bindit Corp. v Inflight Adv., 285 AD2d 309, 314 [2001]). A private antitrust action

“may be barred on the grounds of the plaintiff’s own culpability only where (1) as a direct result of his own actions, the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress, and (2) preclusion of suit would not significantly interfere with the effective enforcement of the [antitrust laws] and protection of the . . . public” (Bateman Eichler, Hill Richards, Inc. v Berner, 472 US 299, 310-311 [1985]).

Each of these holdings is explained below.

Vertical Restraint of Trade and Defendant’s Monsanto Argument

In view of the implication in defendant’s motion papers and its express position at oral argument that it will be entitled to a directed verdict at the end of plaintiffs case, and particularly in view of the court’s remarks during oral argument that acceptance of defendant’s Monsanto argument might indeed entitle it to judgment as a matter of law, the court finds it necessary to elucidate the effect of the Appellate Division’s decision that this is, indeed, a vertical restraint of trade case, and to dispel any misconception. The following is also necessary to provide the [155]*155backdrop to the discretionary rulings below. Restraints imposed by agreement between competitors are denominated as horizontal restraints while those imposed by agreement between firms at different levels of distribution are vertical restraints (see Business Elecs. Corp. v Sharp Elecs. Corp., 485 US 717, 730 [1988]). It is beyond dispute that the alleged restraint in this case is vertical since it involves a restraint imposed by agreement between a supplier and a distributor.

Under the Sherman Act, a vertical restraint of trade is not illegal per se unless it includes some agreement on price or price levels (485 US at 735-736). “Without an agreement as to a specific minimum price or price level, a vertical restraint is unlawful only if it fails a rule of reason analysis” (Euromodas, Inc. v Zanella, Ltd., 368 F3d 11, 21 [1st Cir 2004]).

Commentary to the New York Pattern Jury Instructions suggests that the rule is otherwise under the Donnelly Act. The commentary clearly indicates that vertical price fixing is not a per se violation of the Donnelly Act but is subject to the rule of reason standard (2 NY PJI3d 532 [2005]). The cases cited in the comment, however, do not support that proposition. The issue in Anheuser-Busch, Inc. v Abrams (71 NY2d 327 [1988]) concerned the authority of the Attorney General under the Donnelly Act to investigate vertically imposed exclusive territorial dealerships (71 NY2d at 331). The other case involved allegations of price discrimination, not price fixing (State of New York v Mobil Oil Corp., 38 NY2d 460, 463 [1976]).

In this case, there are allegations of vertical price fixing. When the matter was before the Fourth Department in December 2003, the issue was raised whether the per se standard or the rule of reason standard was applicable. The Fourth Department rejected defendant’s contention that the rule of reason standard applied and held that “the per se standard is properly applied where, as here, price fixing is alleged” (2 AD3d 1341, 1343 [2003]). In support of that determination, the Court cited, among other things, the United States Supreme Court’s decision Business Elees. Thus, it is the law of the case that this is a per se violation case arising under the Donnelly Act.

Concerted Action

Neither the Sherman Act nor the Donnelly Act proscribe independent action (see Monsanto Co. v Spray-Rite Serv.

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