White Bag Co. v. International Paper Co.

579 F.2d 1384
CourtCourt of Appeals for the Fourth Circuit
DecidedAugust 8, 1974
DocketNos. 74-1552, 74-1576
StatusPublished
Cited by23 cases

This text of 579 F.2d 1384 (White Bag Co. v. International Paper Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
White Bag Co. v. International Paper Co., 579 F.2d 1384 (4th Cir. 1974).

Opinion

HAYNSWORTH, Chief Judge:

We have for consideration the appropriateness of a preliminary, mandatory injunction requiring International Paper Company to deliver to White Bag Company monthly six hundred tons of multiwall kraft paper. The injunction was based upon a finding or conclusion that International had attempted to monopolize the multiwall bag market. We stayed the order of the District Court pending an expedited appeal, and, after full hearing, we conclude that the injunction was improvidently entered.

Among other things, International manufactures kraft papers, including multiwall papers. It also operates plants for the conversion of multi wall papers into bags for [1385]*1385use in packaging relatively heavy materials. A portion of its multiwall paper production goes to supply its own bag plants, but most of it is sold to other bag manufacturers.

There are many manufacturers of multi-wall paper bags. International is not the largest such converter, its sales of such bags accounting for only approximately nine per cent of such sales to the domestic market. International’s production of multiwall paper before conversion into bags accounts for 13.8 per cent of the domestic market, there being some twelve to fourteen producers of such papers.

White Bag is a paper processor and bag manufacturer, some fifty to seventy-five per cent of its business being the making of multi wall bags. Until recently, it had purchased approximately fifty percent of its requirements of multiwall kraft paper from International.

In early 1973, International had eleven customers for multiwall kraft paper. White Bag was one of them. Each was being supplied under long term written contracts. White Bag’s then current contract was for a three-year period ending May 31, 1973, with a provision for an automatic extension for an additional year unless one of the parties gave notice in advance of nonrenewal.

There began to develop a shortage in the supply of multiwall kraft paper, and there were limits to International’s productive capacity. The situation led International to undertake a general review of its long term commitments to sell such paper. Moreover, International was unhappy with the terms of its contract with White Bag. Negotiations between the parties had been conducted through a broker, to whom International was required to pay approximately $30,000 a year. In addition, the contract contained a price reduction provision in the event White Bag could purchase comparable paper more cheaply from others. On at least one grade International’s price was higher than that of some of its competitors, and price reductions had been extended to White Bag under that contractual provision.

In January 1973, and again in March, International gave White Bag written notice that the contract expiring May 31, 1973, would not be renewed for the additional option year. At the same time, White Bag was informed that International would continue to supply it on a monthly basis pending a possible negotiation of a term commitment.

In an effort to meet the increasing demand for its papers, International decided to reduce the number of grades it would offer to sell. To change a machine from one grade to another requires that the machine be stopped, and producing fewer grades was thought to contribute to longer runs and higher production from its paper machines. This decision was implemented on the production lines in July 1973, and contributed to a substantial increase in International’s production of multiwall kraft papers. Still, demand during 1973 increased more rapidly than International’s supply. During the fourth quarter of 1973 International was forced to reduce its committed shipments to all of its customers, including its own converting plants, by twelve per cent.

During 1973 International reviewed its relations with each of its eleven customers purchasing multiwall paper. A decision was made that it would continue long term commitments to six of its eleven customers and that it would sell to the remaining five to the extent that paper was available, but without a prior contractual commitment. The problems of brokerage and price preference entered into the decision that White Bag should not be one of the six with whom contractual commitments would be made. During 1973, International was considering whether, if its efforts to increase the productivity of its paper machines met with success, it could enter into a new term commitment to White Bag. There were discussions between representatives of the parties about it.

White Bag was advised in January 1974 that because of the heavy backlog of unfilled orders and persistent production problems, no long term commitment could be [1386]*1386made to it but that International would sell multiwall paper to it when it had such paper available.

Because of the situation, only superficially sketched here, the District Judge found that International acted with good business reason in giving notice of the nonrenewal of White Bag’s contract which would expire on May 31, 1973. There was similar good reason for including White Bag among those customers to whom International would not make additional long term commitments and to whom it would sell only when it had available paper.

Despite the finding of good reason for not continuing a long term commitment to White Bag and despite the fact that communications and conversations indicated that both parties understood that any long term commitment would be in writing, the District Court found that International had made an oral commitment to White Bag to supply it with six hundred tons of multiwall kraft paper each month, for a long but uncertain term, but concluded that the oral commitment could not be enforced because of the Statute of Frauds. However, it also concluded that International had attempted to monopolize the multiwall bag market, and, on the basis of that finding, it entered a preliminary mandatory injunction requiring International to deliver to White Bag six hundred tons of multiwall paper each month.

We find no basis in the record for a conclusion of an attempt to monopolize.

International had not increased its bag conversion capacity, and its share of the multiwall bag market had declined slightly over the preceding five years. The increases in paper production it was able to achieve went to its customers competing with it in the bag manufacturing business, not to enlarge its own production of multi-wall bags. There is no suggestion that any merger or acquisition was contemplated; there was no conspiracy or action in concert with anyone else, and there is nothing else to indicate that there may be a substantial increase of International’s nine per cent share of the multiwall bag market.

Nevertheless, and despite its finding that everything that International did was in its legitimate business interest, the District Judge found an attempt to monopolize. It recognized that International’s nine per cent of the market was insufficient for an actual monopolization, but it rested its finding of an attempt to monopolize upon four factors:

1. It found that International had increased its supply of multiwall paper to certain of its customers, who were its competitors in the multiwall bag business. The fact that International used its increased production of paper to supply its customers in the multiwall bag business, rather than to increase its own proportion of the multi-wall bag market, cannot support a finding of an attempt to monopolize either the bag or the paper market.

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Bluebook (online)
579 F.2d 1384, Counsel Stack Legal Research, https://law.counselstack.com/opinion/white-bag-co-v-international-paper-co-ca4-1974.