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L&W/LINDCO PRODS. v. PURE ASPHALT CO.

April 17, 1997

L&W/LINDCO PRODUCTS, INC., Plaintiff,
v.
PURE ASPHALT COMPANY, Defendant.



The opinion of the court was delivered by: DENLOW

TO: THE HONORABLE ELAINE E. BUCKLO

 UNITED STATES DISTRICT COURT

 REPORT AND RECOMMENDATION

 I. BACKGROUND FACTS

 In 1950, Robert Lindquist ("Lindquist") began a business, originally known as L&W Products and now known as Lindco, to market asphalt-based sealants for concrete burial vaults ("sealants"). *fn1" Lindco purchases and re-sells sealants, identified by specific product numbers, to funeral homes and other end-users. (Comp. P 3-7). Lindquist owns and operates Lindco and is Lindco's sole employee. (Comp. P 42). Beginning in 1960, Lindco contracted with Pure Asphalt to manufacture a line of burial vault sealants for Lindco. (Comp. P 12). Pure Asphalt, besides manufacturing sealants to Lindco's specifications, also manufactures and sells its own line of sealants and other asphalt products. (Comp. P 19).

 Lindco and Pure Asphalt are among a small number of firms engaged in the provision of asphalt products to the domestic burial vault industry. For a Chicago-area firm, the specific submarket for these asphalt products is primarily located within the midwestern and southeastern United States. The submarket consists of concrete vault manufacturers, plus some monument companies, cemeteries, and mausoleums. As of January, 1996, Lindco's share of this submarket was between 15-35%. Pure Asphalt's share of this submarket was at least 5-10%. (Comp. P 16-19).

 By agreement with Pure Asphalt, Lindco maintained a supply of its product labels, bills of lading, and invoices at the Pure Asphalt premises, as well as a sign identifying the location as Lindco's. Lindco stored its products on the Pure Asphalt premises, and had its products picked up or shipped to customers directly from these premises. (Comp. PP 20-21).

 In 1993 through 1995, Lindco and Pure Asphalt discussed the possibility of Pure Asphalt buying Lindco. Lindquist discussed with John Francis Sr., President and owner of Pure Asphalt, an offer to sell Lindco to Pure Asphalt for $ 300,000 payable over ten years. (Comp. P 23). In mid-1995, Pure Asphalt requested and received from Lindco copies of Lindco's financial statements and other documents showing Lindco's profits and customer base. Meanwhile, John Francis Sr. assured Lindco that Pure Asphalt would continue to do business with Lindco in the future as it had in the past. (Comp. P 24).

 In late 1995, the majority interest in Pure Asphalt was acquired by John Francis Sr.'s grandsons, Jack and Mike Francis. On January 24, 1996, Lindquist met with Jack and Mike Francis at the Pure Asphalt premises to discuss the relationship between the companies. During the meeting, Mike Francis stated to Lindquist that Pure Asphalt planned to take over all of Lindco's business immediately and completely, and Pure Asphalt would only consider paying $ 10,000-$ 15,000 for his business. Lindquist was given 48 hours to think it over, and if Lindco did not agree, Pure Asphalt would begin soliciting Lindco's customers for the purpose of taking over Lindco's business. (Comp. PP 25- 28).

 Subsequently, Pure Asphalt terminated its relationship with Lindco. Shortly thereafter, Pure Asphalt sales personnel began contacting Lindco's customers by phone, saying variously that Lindco was out of business or going out of business, and that the customers should buy their former Lindco products directly from Pure Asphalt. Pure Asphalt sent letters to Lindco customers communicating that Lindco had been Pure Asphalt's representative and that Lindco elected to terminate the relationship. (Comp. PP 29-33).

 Pure Asphalt also began to market to Lindco's customers the identical line of sealants which had been conceived and marketed by Lindco. Pure Asphalt began to ship these sealants to Lindco's customers, using Lindco's labels to identify the products, except that Pure Asphalt cut off those parts of the labels which identified the product as Lindco sealants. Pure Asphalt since January, 1996, has represented that it would sell its imitation Lindco sealant line of products to Lindco's retail customers at wholesale price, and in at least one case, has lowered its price to a Lindco customer to a level below that given to other Pure Asphalt customers. Pure Asphalt also ceased supplying Lindco with any of the products it had previously manufactured for Lindco. (Comp. PP 34-37). Lindco claims that the purpose of this action on the part of Pure Asphalt was to eliminate Lindco as a competitor and to attempt to monopolize the asphalt-based burial vault sealant submarket. (Comp. PP 38-41).

 II. MOTION TO DISMISS STANDARD

 In ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court accepts as true all well-pleaded facts and it draws all reasonable inferences in the light most favorable to plaintiff. Palda v. General Dynamics Corp., 47 F.3d 872, 874 (7th Cir. 1995). The issue on such a motion is not whether plaintiff will ultimately prevail, but whether it is entitled to offer evidence to support its claim. Pickrel v. City of Springfield, 45 F.3d 1115, 1118 (7th Cir. 1995). Complaints are to be read liberally, and the court may grant the motion only "if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which entitles him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957); Thompson v. Boggs, 33 F.3d 847, 852 (7th Cir. 1994). This rule applies with no less force to a Sherman Act claim. McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 246, 100 S. Ct. 502, 511, 62 L. Ed. 2d 441 (1980); Genser v. Int'l Brotherhood of Electrical Workers, Local No. 134, 522 F. Supp. 1153 (N.D.Ill. 1981).

 The Supreme Court has cautioned that because of the nature of most antitrust cases, summary procedures should be used "sparingly." Poller v. Columbia Broad. Sys., 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962). Nevertheless, if there is no reasonable prospect that the plaintiff can make out a cause of action from the events narrated in the complaint, "the heavy costs of modern federal litigation, especially antitrust litigation, and the mounting caseload pressures on the federal courts, counsel ...


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