Kentmaster Manufacturing Co., a California Corporation v. Jarvis Products Corporation, a Connecticut Corporation

146 F.3d 691, 98 Cal. Daily Op. Serv. 4445
CourtCourt of Appeals for the Ninth Circuit
DecidedJune 11, 1998
Docket96-56341
StatusPublished
Cited by12 cases

This text of 146 F.3d 691 (Kentmaster Manufacturing Co., a California Corporation v. Jarvis Products Corporation, a Connecticut Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kentmaster Manufacturing Co., a California Corporation v. Jarvis Products Corporation, a Connecticut Corporation, 146 F.3d 691, 98 Cal. Daily Op. Serv. 4445 (9th Cir. 1998).

Opinions

NOONAN, Circuit Judge:

Kentmaster Manufacturing Co. (Kentmas-ter), a California corporation, appeals the judgment entered on the pleadings by the district court in Kentmaster’s antitrust suit against Jarvis Products Corporation (Jarvis), a Connecticut corporation. Holding that Kentmaster’s own allegations undercut its case, we affirm the judgment of the district court.

ALLEGATIONS

We summarize from the complaint, accepting its allegations as true and quoting from it as appropriate:

Kentmaster manufactures, distributes, and sells specialty power tools and equipment in the slaughterhouse industry and provides the spare parts and services for the power tools and equipment it sells. Jarvis similarly manufactures, distributes, and sells specialty power tools and equipment in the slaughterhouse industry and supplies spares and services for what it sells. The equipment of each company includes a formidable assault arsenal: air knives, aiteh bone cutters, band saws, beef head-droppers, brisket saws, carcass band saws, de-horners, hock cutters, tongue bone cutters, and vacuum power units.

In the normal course of slaughterhouse operations the equipment lasts three to five years. Spares “are required continuously.” Spares are not interchangeable from one manufacturer to another but “are unique to the equipment.” Once a particular brand of equipment is in a slaughterhouse, plant managers “will generally continue purchasing new replacement equipment from the equipment’s manufacturer over another manufacturer, so as to avoid any possible disruption in their operations, and to continue using any spares ... left in stock.”

“Because of the highly specialized nature of the equipment and spares, and because a manufacturer must be able to offer a full line of equipment and spares, there are only a few companies who manufacture slaughterhouse equipment and spares in the United States. Of these Jarvis and Kentmaster comprise most of the sales in the markets described herein, Jarvis having an ever-increasing market share. Currently, Jarvis ‘sales’ represent approximately 80% of all sales of slaughterhouse equipment and spares. Kentmaster sells most of the remainder. Jarvis and Kentmaster each sell 100% of the spares for their respective equipment.”

In the last four years Jarvis has offered to replace, or has replaced, existing Kentmaster equipment with new Jarvis equipment “at no cost to the customer, or at predatorily low prices.” Jarvis has offered potential Kent-master customers free equipment provided they “agree to select Jarvis’ equipment and spares.” Jarvis has offered to equip, and has equipped, new slaughterhouses with equipment “at no cost, or at predatorily low prices, provided the customer cancels its pending orders with Kentmaster.” Jarvis discriminates in its prices, “giving the most favorable terms to current customers of Kentmaster, who agree to no longer operate Kentmaster equipment.” Jarvis has discriminated among customers by giving allowances other than for services rendered and has secretly given selected customers payments, allowances, services or privileges, to the injury of Kent-master and other competitors. Jarvis has announced to its customers and potential customers that it has “declared war” and will eliminate Kentmaster as a competitor.

Due to the wear and tear that slaughterhouse equipment must undergo and its continuous replacement, the sale of spares “is a highly profitable high volume business.” Like Kentmaster, Jarvis enjoys a monopoly position in the sale of its spares. Because of this monopoly power Jarvis is able “to give its equipment away, grant secret rebates, or charge predatorily low prices.” Prices charged by Jarvis for its spares “have had a steady and marked increase in the last few years.” Jarvis has used its sale of spares “as a means of offsetting and recouping losses [694]*694from predatorily low prices, secret rebates and[/]or product giveaways.”

PROCEEDINGS

On December 21, 1995, Kentmaster filed the present suit. Based on the foregoing allegations, Kentmaster charged Jarvis with conduct intentionally monopolizing or attempting to monopolize the United States market for the sale of slaughterhouse equipment and the United States market for spares, with anticompetitive effect on Jarvis’s competitors, the artificial increase of prices resulting in “high prices for slaughterhouse, equipment and spares,” the stifling of technological innovation and the unequal treatment of purchasers of the equipment, all in violation of section 2 of the Sherman Act, 15 U.S.C. § 2.

In its second claim for relief Kentmaster charged Jarvis with violation of section 16 of the Clayton Act, 15 U.S.C. § 15, and sought injunctive relief. In its third claim, Kent-master alleged violations of the Robinson-Patman Act, § 2(a) and (c), 15 U.S.C. § 13(a) and (c) by Janus’s discriminatory pricing of its equipment. Kentmaster’s fourth claim asserted violations of the California Unfair Practices Act, California Business and Professions Code § 17,045 et seq. Its fifth claim asserted unfair competition contrary to the same code, § 17,200. Its sixth claim alleged tortious interference with its contracts with slaughterhouses; its seventh alleged tortious interference with prospective economic advantage.

Under Fed.R.Civ.P. 12(b)(6), .Jarvis moved to dismiss for failure to state a claim. The district court ruled: “Defendant’s alleged practice of providing slaughterhouse equipment at little or no cost to customers as part of a system in which customers also purchase spare and replacement parts from Defendant at profitable prices is not anticompetitive. On the face of the Complaint, the Court can conclude that such alleged pricing practices (in which Plaintiff also engages) benefit customers and do not constitute antitrust injury.” The court found no federal cause of action. The court cited California law to find nothing actionable in the state causes of action, which the court characterized as Jarvis’s “soliciting a rival’s customers.” The court dismissed the complaint with prejudice. Kentmaster appeals.

ANALYSIS

Kentmaster’s description of its product is of a unit made up of equipment and of spares — a unit sold over a period where the purchaser of what might be called section A knows that eventually he will be buying complementary section B. No rational purchaser would look only at A’s price and suppose that he could have A without B. Since A will not work for long without B, and since no one else but Kentmaster makes B, the rational buyer of A must calculate the cost of B when he makes his initial purchase. Kentmaster alleges no special market imperfections, such as imperfect information, that would prevent consumers from accurately determining the total cost of A and B. According to Kentmaster’s allegations, only an idiot would think of the cost of A without taking into accoünt the cost of B.

Kentmaster’s description of Jarvis’s product is similar. No one can buy section C of the product without knowing that he must buy D. There is a single product, sold over time; the rationally-calculated price is the price of C and D together.

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Bluebook (online)
146 F.3d 691, 98 Cal. Daily Op. Serv. 4445, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kentmaster-manufacturing-co-a-california-corporation-v-jarvis-products-ca9-1998.