Zidell Explorations, Inc. v. Conval International, Ltd.

719 F.2d 1465
CourtCourt of Appeals for the Ninth Circuit
DecidedNovember 10, 1983
DocketNos. 82-3511, 82-3541
StatusPublished
Cited by8 cases

This text of 719 F.2d 1465 (Zidell Explorations, Inc. v. Conval International, Ltd.) 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
Zidell Explorations, Inc. v. Conval International, Ltd., 719 F.2d 1465 (9th Cir. 1983).

Opinions

CHOY, Circuit Judge:

This antitrust and breach of contract suit arose out of the termination by a supplier of one of its distributors. The jury found for the plaintiff distributor and the plaintiff was awarded in excess of $5 million in damages. Defendants appeal, contending that the trial court improperly took from the jury the resolution of certain material issues and gave improper instructions on the issues left for the jury to decide. As we agree with at least some of defendants’ contentions, we reverse and remand.

I. Statement of Facts

Appellants Conval Corporation (“Con-val”) and The Lunkenheimer Company (“TLC”)1 are brother-sister corporations, both wholly owned subsidiaries of Condec Corporation. Appellant Conval International, Limited (“CIL”) is a wholly owned subsidiary of Conval. All are involved in the sale of cast steel industrial valves under the Lunkenheimer brand name. CIL handled the sale of foreign-made valves, while TLC handled the sale of domestic valves within the United States.

Appellee Zidell is the nation’s largest distributor of foreign-made industrial valves. In March 1978, CIL and Zidell discussed a proposal to make Zidell the exclusive distributor of foreign-made Lunkenheimer valves. The valves were manufactured under license by Energoinvest, a Yugoslavian company, and imported into the United States by CIL. Under the proposed exclusive distributorship agreement, Zidell agreed to buy a minimum of $5 million per annum of valves from CIL. Prices were to be negotiated concurrently with and in relationship to price changes made by Energoinvest. There was some evidence that CIL attempted to avoid disclosing the existence of the agreement to TLC, the manufacturer of domestically produced Lunkenheimer valves. The imported valves were priced about 40% lower than their domestic counterparts, and CIL apparently feared that TLC would view the Zidell agreement as a threat to its sales of domestic Lunkenheimer valves. CIL sold several orders of valves to Zidell at what CIL calls “distress” prices. It now contends that those prices were not intended to be the regular prices under the agreement, but were merely intended to clear a large backlog of inventory. Through July 1978, CIL actively aided Zidell in its efforts to market the foreign-made valves.

[1468]*1468In July 1978, after complaints from TLC’s distributors, officers of TLC began to protest the Zidell agreement, citing the damaging effect of marketing foreign-made valves on domestic valve sales. Following these protests, CIL wrote to Zidell claiming that Zidell had never returned a signed copy of the exclusive distributorship agreement. Zidell presented CIL a copy of the signed agreement and a forwarding cover letter dated June 12, 1978, and CIL agreed to honor the contract.

However, a series of disputes soon ensued. CIL refused to honor several orders placed by Zidell, claiming that Zidell was attempting to place those orders at “distress” prices that were no longer in effect. CIL presented Zidell with a new price list, but Zidell insisted that the old prices were to govern until CIL actually faced price increases from Energoinvest. After rejecting several large orders placed by Zidell, CIL charged that Zidell was not ordering at the minimum $5 million level stipulated in the contract and attempted to terminate the contract. Zidell tried to obtain foreign-made Lunkenheimer valves directly from Energoinvest, but found that CIL had demanded that Energoinvest make no such sales. When Energoinvest refused to produce certain large valves ordered by Zidell through CIL, CIL did not seek to compel Energoinvest to perform or attempt to deliver substitute goods; it simply refused to honor the contract with Zidell. Zidell began to withhold payment to CIL in an effort to force CIL to honor its orders.

In December 1978, CIL notified Zidell that it would be terminated as exclusive distributor effective January 31, 1979. Upon CIL’s termination of Zidell, CIL and TLC worked jointly to establish a distribution network for foreign-made Lunkenheimer valves. The foreign-made valves were distributed through basically the same channels as were the domestic valves. Still anxious to purchase Lunkenheimer valves, but unwilling to pay what it considered to be “extraordinarily high” prices quoted by CIL, Zidell attempted to purchase the valves through European traders. Zidell found the European traders unwilling to deal because of restrictions in their contracts with Energoinvest.

Zidell then brought the present action in the United States District Court for the District of Oregon, charging CIL with breach of contract and all defendants with conspiracy to violate the antitrust laws. The jury returned a special verdict, finding that Condec Corp., Conval, CIL, and TLC had engaged in a combination or conspiracy in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. The jury found antitrust damages of $2,972,357. The jury was instructed that CIL breached its contract with Zidell, and the parties stipulated that the amount of damages would be the same as the antitrust damages. After post-verdict motions, the district court ordered a remittitur to which Zidell agreed, and on June 16, 1982, entered an amended judgment in the amount of $5,155,746.77.

II. Capacity to Conspire

Defendants first assert that the district court erred in instructing the jury that they were capable of conspiring to violate the antitrust laws although they were all owned by Con val. We agree.

In Murray v. Toyota Motor Distributors, Inc., 664 F.2d 1377, 1379 (9th Cir.), cert. denied, 457 U.S. 1106, 102 S.Ct. 2905, 73 L.Ed.2d 1314 (1982), this court held that the question of capacity to conspire is one of fact, and that it was reversible error to take the issue from the jury if reasonable minds could differ as to its resolution. Here, Con-val, CIL, and TLC are all subsidiaries of Condec Corp., and there is evidence indicating that all of the defendants were publicly held out as parts of a single business entity known as the Condec Flow Control Group. If the jury found that the Group in fact could be viewed realistically as a single economic entity, it would be justified in concluding that the defendants were incapable of § 1 conspiracy. General Business Systems v. North American Phillips Corp., 699 F.2d 965, 980 (9th Cir.1983); Thomsen v. Western Electric Co., 680 F.2d 1263, 1266-67 (9th Cir.), cert. denied, - U.S. -, 103 S.Ct. 348, 74 L.Ed.2d 387 (1982); [1469]*1469Las Vegas Sun, Inc. v. Summa Corp., 610 F.2d 614, 617-18 (9th Cir.1979), cert. denied, 447 U.S. 906, 100 S.Ct. 2988, 64 L.Ed.2d 855 (1980); Harvey v. Fearless Farris Wholesale, Inc., 589 F.2d 451, 455-57 (9th Cir. 1979).

Zidell argues that defendants waived their right to have the jury decide this issue, pointing to the following colloquy at trial:

THE COURT: Well, you know that I’m going to be the one that decides whether or not these companies are single economic entities and are capable of conspiring. You know that I’m going to decide that and not the jury, don’t you?
MR. HILLIARD: Well, if that be the case, that’s fine, Your Honor. Then this is testimony you should hear.

(Tr. at 1005.) Mr.

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