the motion to dismiss and for summary judgment.
The first document is a letter from Leonard Tinnan (Tinnan),
WMI's Director of New Business Development, to Christy Bell
(Bell), Chem-Clear's Chairman of the Board, dated January 4, 1983
and concerning the preliminary injunction motion which Mr. Frank
filed in December, 1982 to prevent WMI from acquiring Chem-Clear.
Attached to the letter is a copy of a letter from Joseph Giffin
(Giffin), WMI's counsel, about the preliminary injunction motion
and a copy of the motion itself. Exhibit B to Plaintiff's Motion
for Rule 37 Sanctions. The second document is a memorandum from
Jim Koenig (Koenig) of WMI to Milo Harrison (Harrison), the
president of a WMI subsidiary, summarizing the pros and cons of
acquiring Chem-Clear and recommending that WMI not proceed with
the acquisition. Exhibit B to Plaintiff's Reply Memorandum in
Support of Rule 37 Motion. The third is a December 9, 1982
analysis by Harrison of the proposed acquisition of Chem-Clear
and includes a possible purchase price. Exhibit D to id. The
fourth document is an undated, unsigned memorandum setting forth
possible "approaches" to the acquisition of Chem-Clear, including
the acquisition of an interest in Chem-Clear's Chicago facility.
Exhibit F to id. The fifth is a more detailed analysis of
"approach" # 4, the acquisition of only the Maryland and
Pennsylvania Chem-Clear sites. Exhibit G to id. The sixth is
Chem-Clear's internal 1983 forecast and is dated December 27,
1982. Exhibit H to id.
Mr. Frank noticed Tinnan's deposition on May 13, 1983 and
attached a broad request for the production of documents pursuant
to Fed.R.Civ.P. 34. Exhibit A to Plaintiff's Motion for Rule 37
Sanctions. Tinnan produced several documents but did not produce
any of those listed above. On May 24, Mr. Frank noticed the
depositions of Dean Buntrock (Buntrock), WMI's president and
chairman of the board, and of Harrison, and attached document
requests identical to that which accompanied Tinnan's notice of
depositions.*fn2 WMI objected to the Buntrock deposition but the
court ordered on June 2, 1983 that it go ahead. The court allowed
Mr. Frank's counsel to ask Buntrock about WMI's proposed
acquisitions of Chem-Clear facilities outside the market relevant
to this suit. The court did not, however, order the production of
documents. Neither the parties nor the court discussed the
production of documents at the June 2nd hearing.
The Buntrock and Harrison depositions proceeded on June 6, 1983
but neither produced any documents. Mr. Frank presented a motion
to compel production of the requested documents on June 8, 1983.
WMI objected to producing documents relating to the acquisition
of the facilities outside the relevant market and filed an
affidavit by Giffin in connection with that objection. The court
ordered the documents to be produced and WMI has complied with
that order. Mr. Frank filed its motion for sanctions because WMI
did not produce the six documents listed above until after the
June 8 hearing.
Mr. Frank cannot secure sanctions under Fed.R.Civ.P. 37(b).
That rule provides for sanctions for failure "to obey an order to
provide or permit discovery. . . ." The only order this court
entered with respect to the production of documents is the June
8 order with which WMI complied.
Fed.R.Civ.P. 37(d) allows the court to impose sanctions absent
disobedience of a court order. The court may do so if a party
fails to make a written response to a proper Rule 34 request
within 30 days. Charter House Ins. Brokers v. New Hampshire Ins.,
667 F.2d 600, 604 (7th Cir. 1981). WMI produced the documents
from Harrison's and Buntrock's files within thirty days of the
request on May 24. WMI did not produce some of those from
Tinnan's until sometime after June 13. WMI thus violated Rule
37(d) unless it made a "written response" with respect to
the Tinnan documents not produced before June 13.
WMI's only such written response before turning over the
documents June 15-17 was Giffin's affidavit of June 6, 1983.
Exhibit I to Plaintiff's Motion for Rule 37 Sanctions. That
affidavit concerns only WMI's objections to the production of
documents which relate to WMI's proposed acquisition of
Chem-Clear's facilities in Pennsylvania and Maryland. Id. It does
not address WMI's failure to produce documents which relate to
the proposed acquisition of any interest in Chem-Clear's Chicago
facilities. As to those documents, therefore, WMI made no
"written response" to the request for the Tinnan documents until
after June 13.
The court hesitates to punish WMI severely for the delay.*fn3
"It is well settled that a district judge should tailor the
choice of sanction to the severity of the misconduct." Charter
House Ins. Brokers v. New Hampshire Ins., 667 F.2d at 605. The
document request was a broad one and WMI was only a few days
late. Furthermore, Mr. Frank would be no better off if WMI had
complied with the rules and produced the documents on June 12.
The documents still would not have been available for the
depositions. Under these circumstances the court chooses to
impose no sanctions.
Mr. Frank is nevertheless entitled to ask Tinnan, Buntrock, and
Harrison about the documents that were produced after their
depositions. The court grants Mr. Frank thirty days to do so.
Those depositions are to be limited strictly to questions about
the documents produced by WMI after the previous depositions. The
court further directs the parties to file transcripts of these
limited depositions with the clerk of the court within 45 days.
B. Motions to Dismiss and for Summary Judgment
The court treats WMI's motions for summary judgment and to
dismiss together as a motion for summary judgment. See
Fed.R.Civ.P. 12(b). WMI "has the burden of clearly establishing
the non-existence of any genuine issue of fact that is material
to a judgment in [its] favor." Cedillo v. International Assn. of
Bridge and Structural Iron Workers, Local Union No. 1,
603 F.2d 7, 10 (7th Cir. 1979). When the court enters summary judgment for
a defendant it "is, in effect, concluding that based on the
evidence upon which the plaintiff intends to rely at trial, no
reasonable jury could return a verdict for the plaintiff." Weit
v. Continental Illinois Bank and Trust Co., 641 F.2d 457, 461
(7th Cir. 1981), cert. denied, 455 U.S. 988, 102 S.Ct. 1610, 71
L.Ed.2d 847, reh. denied, 456 U.S. 938, 102 S.Ct. 2001, 72
L.Ed.2d 461 (1982).
1. Count I
Mr. Frank brings Count I under § 7 of the Clayton Act,
15 U.S.C. § 18. Count I seeks primarily divestiture of WMI's
interests in the Grand Rapids, Fort Wayne, and Chem-Clear
facilities, as well as divestiture of WMI's transportation
operations. Second Amended Complaint ¶¶ 46-48. Count I also seeks
treble damages. The court discusses Mr. Frank's entitlement to
damages under the Clayton Act in its discussion of Count II.
Section 16 of the Clayton Act provides in relevant part:
Any person, firm, corporation, or association shall
be entitled to sue for and have injunctive relief, in
any court of the United States having jurisdiction
over the parties, against threatened loss or damage
by a violation of the antitrust laws, including
[§ 7 of the Clayton Act], when and under the same
conditions and principles as injunctive relief
against threatened conduct that will cause loss or
damage is granted by courts of equity. . . .
15 U.S.C. § 26. The United States Court of Appeals for the Ninth
Circuit has held that
divestiture is not a form of "injunctive relief" within the
meaning of § 16. ITT Corp. v. GTE Corp., 518 F.2d 913, 920 (9th
Cir. 1975). The Seventh Circuit took note of the ITT decision but
refused to decide the question in Ohio-Sealy Mattress
Manufacturing Co. v. Sealy, Inc., 669 F.2d 490, 496 (7th Cir.),
cert. denied 459 U.S. 943, 103 S.Ct. 257, 74 L.Ed.2d 201 (1982).
No private plaintiff has ever secured divestiture. See 3 Von
Kalinowski, Antitrust Laws and Trade Regulation, § 15.02[b].
The legislative history of § 16 establishes that Congress did
not intend to make divestiture available to private plaintiffs.
See ITT Corp. v. GTE Corp., 518 F.2d at 920-924; accord, NBO
Industries Treadway Co., Inc. v. Brunswick Corp., 523 F.2d 262,
278 (3rd Cir. 1975), vacated on other grounds sub. nom. Brunswick
Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 97 S.Ct. 690, 50
L.Ed.2d 701 (1977). Mr. Frank seeks to overcome this obstacle by
arguing that divestiture is a necessary remedy in today's economy
because "corporations, like WMI are so large that they can
acquire smaller corporations with a phone call and a check drawn
from general funds." Def.Mem. at 48 (footnote omitted). Since
Congress could not have foreseen this contingency in 1914, Mr.
Frank argues, this court should not allow Congressional intent to
circumscribe the remedies available under the Clayton Act. The
Third Circuit has noted, in passing, its agreement with this
analysis. NBO Industries v. Brunswick Corp., 523 F.2d at 278.
It is not this court's prerogative to update the Clayton Act.
Congressional intent, as determined from the language of the
statute and its legislative history, is the court's sole concern.
Cf. United States v. Agrillo-Ladlad, 675 F.2d 905, 907-911 (7th
Cir.), cert. denied, 459 U.S. 829, 103 S.Ct. 66, 74 L.Ed.2d 67
(1982) (discussing Congressional intent with respect to 18 U.S.C. § 844(j));
see generally 2A Sutherland, Statutes and Statutory
Construction § 45.05, at 16 (4th ed. 1972).*fn4 While the word
"injunctive relief" in § 16 of the Clayton Act may be ambiguous,
the legislative history is not: injunctive relief excludes
divestiture. ITT Corp. v. GTE Corp., 518 F.2d at 920-924. Mr.
Frank's policy arguments miss this crucial, fundamental point.
The Court dismisses Count I's prayer for divestiture.
2. Count II
Counts I and II seek treble damages for, and Count II seeks a
permanent injunction against, WMI's alleged pattern of
acquisitions in violation of § 7 of the Clayton Act. Second
Amended Complaint ¶ 48 at 19, ¶ 51 at 23. Mr. Frank alleges
specifically that WMI has unlawfully acquired interests in
Chem-Clear, the Grand Rapids and Fort Wayne facilities, and waste
disposal sites in Wisconsin, Michigan, and Missouri.*fn5 WMI
argues that Mr. Frank has no standing to challenge the alleged
acquisitions and that it has acquired no "assets" in the Grand
Rapids or Fort Wayne facilities or Chem-Clear. WMI also contends
that Mr. Frank is not entitled to injunctive relief.
Mr. Frank has standing to sue for damages under the antitrust
laws. Mr. Frank is a consumer of disposal services and the
facilities in question are within the relevant geographic market.
See Second Amended Complaint ¶¶ 20-21 at 6, ¶ 29 at 9. Mr. Frank
further alleges that it "will in the future, as it has in the
past, be forced to pay monopoly prices for disposal and
treatment. . . ." Id. at ¶ 45 at 18. These facts alone give Mr.
Frank standing to sue for damages from a diminution of
competition in the waste disposal market. Reiter v. Sonotone
Corp., 442 U.S. 330, 99 S.Ct. 2326,
60 L.Ed.2d 931 (1979).*fn6 WMI does not contend that Mr. Frank
is an indirect purchaser of disposal services or that Mr. Frank's
alleged injury is remote. Yet these are the only limitations on
the treble damages remedy. Blue Shield of Virginia v. McCready,
457 U.S. 465, 473-478, 102 S.Ct. 2540, 2546-2548, 73 L.Ed.2d 149
WMI also takes far too narrow a view of the reach of the
Clayton Act. Section 7 "is primarily concerned with the end
result of a transfer of a sufficient part of the bundle of legal
rights and privileges from the transferring person to the
acquiring person to give the transfer economic significance and
the proscribed adverse economic `effect'." United States v.
Columbia Pictures Corp., 189 F. Supp. 153, 182 (S.D.N.Y. 1960).
"[Assets] is not a word of art, nor is it given a built-in
definition by statute. . . . As used in this statute, and
depending upon the factual context, `assets' may mean anything of
value." Id. (footnote omitted); see also United States v. ITT
Continental Baking Co., 485 F.2d 16, 20 (10th Cir. 1973), rev'd
on other grounds, 420 U.S. 223, 95 S.Ct. 926, 43 L.Ed.2d 148
(1975) (holding that a "sales agreement" between a bakery company
and a competing bakery was an indirect acquisition violative of
an FTC order based on § 7 of the Clayton Act).
A broad, pragmatic view of the statutory language is consistent
with the Congressional purpose that § 7 be "a prophylactic
measure, intended `primarily to arrest apprehended consequences
of intercorporate relationships before those relationships could
work their evil. . . .'" Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U.S. at 485, 97 S.Ct. at 695 (quoting United States v.
E.I. Du Pont de Nemours and Co., 353 U.S. 586, 597, 77 S.Ct. 872,
879, 1 L.Ed.2d 1057 (1957)); see also H.R.Rep. No. 1191, 81st
Cong. 1st Session at 8-9, reprinted in 7 E. Kintner, Federal
Antitrust Laws and Related Statutes (1980), at 3468 (reporting on
1950 amendments to the Clayton Act) (the Clayton Act "covers not
only purchase of assets or stock but also any other method of
acquisition, such as, for example, lease of assets. It forbids
not only direct acquisitions but also indirect
acquisitions. . . ." (emphasis added). The economic significance
of the relationship, rather than its size or form, is the
Mr. Frank has made a sufficient showing with respect to WMI's
acquisition of an interest in the Grand Rapids facility. WMI has
treated the site as its own. In early 1983, WMI brought waste to
Grand Rapids for which it incurred a "debt" of $30,802.
Deposition of Louis Vanderstel (Vanderstel Dep.) II at 47. Yet
someone at WMI told Vanderstel that "they were intercompany bills
and [WMI] didn't pay intercompany bills." Id. Furthermore,
Cascade apparently still owes CSSI $2.1 million and CSSI may have
the right to take immediate possession of the site. Vanderstel
Dep. I at 24, 83, 105. Cascade cannot hope to pay the debt unless
it reopens but CSSI closed the facility in March, 1983.
Vanderstel Dep. II at 61, 38. Mr. Frank may be able to prove that
WMI's acquisition of interests in Grand Rapids violates § 7.
WMI's interest in Fort Wayne could also be economically
significant. WMI retains a right of first refusal to purchase a
50% or greater interest in the Clinton Street facility. That
facility is large enough to be a competitive force in the market.
Compare Deposition of Thomas Hanchar (Hanchar Dep.) at 11 with
Deposition of Greg Valocchi (Valocchi Dep.) at 8. Its
profitability depends on expansion and both CSSI and Continental
had plans to expand it. Deposition of Lee Archambeau (Archambeau
Dep.) at 40-41; Hanchar Dep. at 16. The
expansion will require a considerable infusion of capital,
Archambeau Dep. at 90-91, and the Hanchar family has been unable
to raise it. Hanchar Dep. at 16. WMI's right of first refusal
prevents WMI's competitors from buying the site and expanding it.
That could be WMI's purpose in holding the right. Mr. Frank
understandably has difficulty in presenting direct evidence of
WMI's purpose, but WMI offers no evidence of a legitimate
business purpose for the right of first refusal. In any event,
"summary procedures should be used sparingly in complex antitrust
litigation where motive and intent play leading roles. . . ."
Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473,
82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962).*fn7
Chem-Clear presents a closer but nevertheless similar
situation. Chem-Clear's $140,000 debt to WMI may constitute an
economically significant "asset" because Chem-Clear is in
financial straits. See Deposition of Carl Cording (Cording Dep.)
I at 12, 17, 21, 37-38. WMI's status as a substantial creditor
could give it appreciable power over Chem-Clear's actions.
Cording described the debt as "two fairly significant bills," id.
at 26, and was sufficiently concerned about them that he
"prevailed upon [WMI] to stay away from those bills for a while,"
id. at 27. WMI did not press for collection while it and
Chem-Clear negotiated WMI's proposed takeover of Chem-Clear.
Cording Dep. II at 22. Mr. Frank is entitled on this record to an
opportunity to prove the economic significance of WMI's creditor
interest in Chem-Clear.
Mr. Frank has also adequately supported the injunctive relief
claims of Count II. Mr. Frank "need only demonstrate a
significant threat of injury from an impending violation of the
antitrust laws or from a contemporary violation likely to
continue or recur." Zenith Corp. v. Hazeltine, 395 U.S. 100, 130,
89 S.Ct. 1562, 1580, 23 L.Ed.2d 129 (1969) (citations omitted).
If, for example, Mr. Frank is able to prove that WMI's creditor's
interest gives WMI significant control over Chem-Clear, then that
interest would be a "contemporary violation" of the Clayton Act.
See p. 867, supra. That violation would create a significant risk
of harm to Mr. Frank because it takes a substantial portion of
the waste it hauls to Chem-Clear facilities. See Cording Dep. II
at 43. Similarly, if Mr. Frank can prove the economic
significance of WMI's interests in the Fort Wayne and Grand
Rapids facilities, those also would be contemporary violations of
the Clayton Act. That WMI acquired and holds them is itself
evidence that they are "likely to continue," and the harm to Mr.
Frank is the danger of higher prices. Mr. Frank's claim for
injunctive relief must stand.
3. Count III
Mr. Frank brings Count III under Section 1 of the Sherman Act,
which prohibits combinations or conspiracies in restraint of
trade. 15 U.S.C. § 1. Mr. Frank alleges that WMI conspired with
Chem-Clear in early 1983 to raise prices for waste disposal.
Second Amended Complaint at ¶¶ 31, 42 at 24. Mr. Frank also
alleges that WMI conspired with its subsidiaries, CSSI and CRRI,
to close the Grand Rapids and Fort Wayne facilities. Id. at ¶¶
30, 32 and 23-24. Count III seeks treble damages and a permanent
injunction. Id. at ¶ 54 at 26.
Chem-Clear raised its prices in early 1983. See Valocchi Dep.
at 28-31. At approximately the same time, WMI eliminated a
"quantity discount" at its Chicago facility. Affidavit of Thomas
Tomaszewski at 2. Mr. Frank alleges that WMI and Chem-Clear
conspired to institute these "parallel" price increases.
An allegation of parallel pricing does not by itself state a
claim under the Sherman Act. Quality Auto Body, Inc. v.
Allstate Ins. Co., 660 F.2d 1195, 1201 (7th Cir. 1981), cert.
denied, 455 U.S. 1020, 102 S.Ct. 1717, 72 L.Ed.2d 138 (1982).
Parallel behavior and evidence of an opportunity to conspire,
such as the negotiations between WMI and Chem-Clear, also does
not suffice. Weit v. Continental Illinois Bank and Trust Co., 641
F.2d at 462. Mr. Frank adds only evidence that WMI and Chem-Clear
exchanged information with respect to the "price structure" of
the Chicago market. Cording Dep. II at 23. "However, when the
plaintiff . . . relies on circumstantial evidence alone, the
inference of unlawful agreement rather than individual business
judgment must be the compelling, if not the exclusive, rational
inference." Weit v. Continental Illinois Bank and Trust Co., 641
F.2d at 463. Count III's price-fixing claim, at least on the
present record, fails under this standard.
Chem-Clear's president denied any agreement about prices and
termed the idea "absurd." Cording Dep. II at 65. Chem-Clear's
Chicago manager also denied any agreement to fix prices. Valocchi
Dep. at 39-40. Valocchi further explained that Chem-Clear raised
prices in Chicago because it was not covering costs, and that
even at the new higher prices it was losing money. Id. at 28-31.
WMI's elimination of its quantity discount has a similarly
justifiable business explanation. Apparently no one but Mr. Frank
brought in enough waste to qualify for it and even Mr. Frank took
advantage of it only twice. Def. Reply Mem. at 15-16; Deposition
of Richard Grad (Grad Dep.) I at 52. The discount simply was
serving little or no commercial purpose.
Mr. Frank has conducted almost eleven months of vigorous
discovery. Yet the inference of an unlawful agreement between WMI
and Chem-Clear is far from compelling. The court hesitates to
enter summary judgment on this claim, however, because Mr. Frank
is entitled to some additional limited discovery concerning WMI's
dealings with Chem-Clear. See p. 864, supra (regarding documents
produced after relevant depositions). The court cannot ignore the
possibility, however slight, that the additional testimony will
be sufficient to keep the price-fixing claim in the case. The
court will reconsider summary judgment on the price-fixing claim
upon the completion and filing of those depositions.
b. CSSI and CRRI
Mr. Frank alleges that WMI conspired with its own subsidiaries,
CSSI and CRRI, to restrain trade by forcing the closure and/or
bankruptcy of the Grand Rapids and Fort Wayne facilities. Second
Amended Complaint ¶¶ 30, 32 at 23-24. A preliminary question is
under what circumstances a parent corporation can "conspire" with
its subsidiaries. The United States Supreme Court is currently
reconsidering this issue. Copperweld Corp. v. Independence Tube
Corp., ___ U.S. ___, 103 S.Ct. 3109, 77 L.Ed. 1365 (1983). Any
ruling by this court would be premature.
WMI does not dispute that its agents participated in the
subsidiaries' decisions with respect to the two facilities. The
closure of the Grand Rapids site obviously restrains trade
because one facility, possibly a competing one, is absent from
the market. The effect of WMI's right of first refusal on the
market is less clear but the record contains sufficient evidence
for the court to infer that its purpose and effect may be to
restrain commerce. See p. 866, supra. Assuming WMI can conspire
with its subsidiaries, Mr. Frank is entitled to a chance to prove
4. Count IV
Mr. Frank brings Count IV under § 2 of the Sherman Act, which
prohibits monopolizing or attempting to monopolize any part of
the trade or commerce "among the several States." 15 U.S.C. § 2.
To prove its allegations, Mr. Frank must establish:
(1) a specific intent to monopolize, i.e. to gain the
power to control prices or to exclude competition in
a line of commerce, . . . (2) predatory or
anti-competitive acts engaged in to further the
purpose to monopolize, and (3) a dangerous
probability of success in the relevant
market which requires evidence that the defendant had
sufficient market power to have been reasonably able
to create a monopoly.
Lektro-Vend Corp. v. Vendo Corp.,