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WINDY CITY ETC. v. CHARLES LEVY CIRCULATING CO.

September 24, 1982

WINDY CITY CIRCULATING COMPANY, INC., A CORPORATION; SPRING & FALL DISTRIBUTING COMPANY, INC., A CORPORATION; N & R SALES, INC., A CORPORATION; AND MAGAZINES UNLIMITED, INC., A CORPORATION, PLAINTIFFS,
v.
CHARLES LEVY CIRCULATING COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: McGARR, Chief Judge.

  MEMORANDUM OPINION AND ORDER

The plaintiffs in this action, Windy City Circulating Company, Inc. ("Windy City"), Spring & Fall Distributing Company, Inc. ("Spring & Fall"), N & R Sales, Inc. ("N & R"), and Magazines Unlimited, Inc. ("Magazines Unlimited"), are subdistributors of magazines and paperback books in the greater Chicago metropolitan area. The plaintiffs have filed a four-count amended complaint. The national distributor defendants*fn1 have brought this motion for summary judgment as to Counts II and III, the only counts of the complaint directed to them.

Count II alleges, inter alia, that these defendants, as national distributors of periodicals and other publications, refused to deal with the plaintiffs and conspired not to sell to the plaintiffs but to deal only with the defendant Charles Levy Circulating Co. ("Levy"), in contravention of sections 1 and 2 of the Sherman Act, 15 U.S.C. § 1 and 2. Count III alleges violations of sections 2(a), 2(c), 2(d) and 2(e) of the Robinson-Patman Act, 15 U.S.C. § 13(a), (c), (d) and (e) in that the national distributors discriminated in prices and other terms of sale, in connection with the sale of magazines, periodicals and paperback books, in favor of Levy and against the plaintiffs. Count III alleges further that this allegedly discriminatory conduct constitutes a combination or conspiracy to monopolize or attempt to monopolize in violation of sections 1 and 2 of the Sherman Act.

Briefly stated, the facts of this case are as follows. The plaintiffs are four subdistributors which purchased periodicals and other publications from Hammond News Agency, Inc., a wholesaler, and resold them to retail dealers. Early in 1981, Levy acquired all of the operating assets of Hammond News Agency, Inc. The plaintiffs continued to purchase from what is now a division of Levy known as the Hammond News Agency ("Hammond"). According to the complaint, Hammond will soon cease to operate as a distribution center of Levy and that business information presently contained in Hammond's computer system is being transferred to Levy's computer system.

The plaintiffs distribute periodicals and other publications to retail stores in areas that are also serviced by Levy. As of this time, two of the subdistributor plaintiffs, Windy City and Magazines Unlimited, have ceased doing business. The remaining two, N & R and Spring & Fall, are buying their product on a two-week credit basis.

Several of the national distributor defendants have filed briefs in support of their motion for summary judgment as to Counts II and III, while others have joined wholly or in part in these briefs. For the purposes of this motion, the court will consider these arguments together.

In addressing a motion for summary judgment, judgment should be granted when the plaintiffs are unable to adduce "significant probative evidence" to support essential elements of their claims. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968). This is true as much in antitrust cases as it is in any other type of litigation. See, e.g., Weit v. Continental Illinois National Bank & Trust Co., 641 F.2d 457, 464 (7th Cir. 1981), cert. denied, 455 U.S. 988, 102 S.Ct. 1610, 71 L.Ed.2d 847 (1982). Indeed, "the very nature of antitrust litigation would encourage summary disposition of such cases when permissible." Lupia v. Stella D'Oro Biscuit Co., 586 F.2d 1163, 1167 (7th Cir. 1978), cert. denied, 440 U.S. 982, 99 S.Ct. 1791, 60 L.Ed.2d 242 (1979).

The national distributor defendants offer several arguments in support of their motion for summary judgment with respect to Count II. They contend that three of the plaintiffs, Spring & Fall, N & R, and Magazines Unlimited, have neither requested nor demanded products from them; therefore, the plaintiffs have not and cannot properly allege a refusal to deal by the national defendants. Moreover, they assert that although there was some communication with Windy City, there has been no refusal to deal on the part of the defendants. The defendants maintain, further, that there is no evidence of any concerted decision or agreement by them not to deal with the plaintiffs nor is there evidence of a conspiracy to monopolize. These arguments will be addressed seriatim.

The plaintiffs do not refute this argument. They focus instead on the notion that refusal to deal is but one of the allegations set forth in Count II. They insist that the crucial aspect involves the alleged conspiracy by the national distributors in refusing to deliver products because the plaintiffs are in competition with Levy for retail sales accounts.

It is well established that a "firm demand and refusal" are necessary elements to establish an actionable refusal to deal. Products Liability Insurance Agency, Inc., v. Crum & Forster Insurance Co., 682 F.2d 660 (7th Cir. 1982); Gulliver Periodicals, Ltd. v. Charles Levy Circulating Co., No. 77 C 547 (N.D.Ill. June 3, 1981), slip op. at 4. Unless the antitrust claimant has actually sought to deal with someone and has been turned down, there can be no cognizable claim for refusal to deal. Only then may the court investigate allegations of conspiracy. See Cleary v. National Distillers & Chemical Corp., 505 F.2d 695 (9th Cir. 1974). Spring & Fall, N & R, and Magazines Unlimited have set forth no facts to substantiate their allegations of a refusal to deal. Their clains against the national distributor defendants must, therefore, be dismissed.

The national distributors also maintain that any communications that occurred between them and Windy City could not be construed as firm refusals to deal as provided under Cleary, 505 F.2d at 697. Windy City apparently sent letters to several of the national distributors seeking to do business with them. Each letter referred to the fact that Windy City's supplier, Hammond, had been purchased by a competitor of Windy City's, Levy, so as to place Windy City "on much less favorable terms" for purchasing products. Windy City noted that "[w]e need your products shipped to us direct [sic] on the same terms as . . . Levy . . . so that we have the same competitive nature in the same region." The letters ended with the statement that if there were no reply in ten days, Windy City would assume a refusal to deal.

The responses from the defendants varied to a degree, but the crux of each was essentially the same. In their letters, the national distributors noted their satisfaction with their present service but allowed for discussions on the possibility and feasibility of a future business relationship. Some even provided the names of contacts within their organizations. Rather than follow up on these letters, Windy City brought this action.

At best, this correspondence can be characterized as only preliminary negotiations between the parties. There was no firm offer, much less a refusal to deal. Preliminary negotiations, such as these, are insufficient to support an action for refusal to deal. See Cleary ...


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