Opinion
Civil Action No. 01cv4826 (DRD).
January 20, 2005
Terry L. Trantina, Esq., STERN KILCULLEN, Roseland, NJ, Thomas F. Campion, Esq., DRINKER BIDDLE REATH LLP, Florham Park, NJ, Attorneys for Plaintiff.
Jay B. Itkowitz, Esq., Donald A. Harwood, Esq., Craig M. Notte, Esq., ITKOWITZ HARWOOD, Newark, NJ, Attorneys for Defendants.
OPINION
This action arises out of a business relationship gone sour. Plaintiff Vernon Walden, Inc. ("Plaintiff," "Vernon Walden" or "VWI") brought this action alleging breach of contract against defendants Lipoid GmbH ("Lipoid-Germany") and Lipoid AG ("Lipoid-Switzerland"), tortious interference against Lipoid-Switzerland and defendant Lipoid USA, L.L.C. ("Lipoid-California"), and violations of the Robinson-Patman Act against Lipoid-Germany and Lipoid-California.
Presently before the court are Defendants' and Plaintiff's cross-motions for partial summary judgment. More specifically, Defendants and Plaintiff assert that they are entitled to partial summary judgment with respect to Plaintiff's Robinson-Patman Act claims. Defendants also seek partial summary judgment dismissing Plaintiff's tortious interference claims against Lipoid-California and striking Plaintiff's breach of contract claims insofar as it claims damages beyond September 30, 2004. Defendants appeal the October 21, 2004 decision of Magistrate Judge Susan J. Wigenton denying Defendants leave to supplement further the deposition testimony of Andreas Kolodziej, a representative of Lipoid-Germany. In addition to opposing Defendants' motions and appeal, Plaintiff asks the court to strike certain affirmative defenses and to grant its motion for partial summary judgment declaring that the Supplement did not eliminate Plaintiff's exclusive rights under the Representation Agreement. For the reasons set forth below, the court will deny Defendants' motion for partial summary judgment; grant in part, and deny in part, Plaintiff's motion for partial summary judgment; and affirm Judge Wigenton's order dated November 19, 2004.
In its brief, Plaintiff stipulated to the dismissal of its tortious interference claim against Lipoid-Switzerland; all other claims remain contested.
I. BACKGROUND
A. Facts
Vernon Walden is a New Jersey subchapter S corporation with its principal place of business in Mendham, New Jersey. Vernon Walden sells specialty chemicals to manufacturers in the pharmaceutical market and in the health food, nutritional and dietetic markets in the United States and Canada. Defendant Lipoid-Germany is a German corporation that manufactures phospholipid and lecithin products. During the course of the parties' relationship, Vernon Walden sold phospholipid and lecithin products manufactured by Lipoid-Germany to end-user customers in the United States and Canada that used these chemical compounds in combination with others to manufacture products ranging from pharmaceuticals to dietetic and health food products.
In late 1988 or early 1989, Vernon Walden and Lipoid-Germany entered into an oral agreement whereby Vernon Walden had the exclusive right to market and sell all of the phospholipid products of Lipoid-Germany. Vernon Walden claims that as the market for phospholipids grew, it became dissatisfied with an oral arrangement and requested a written contract to memorialize their relationship. On or about July 26, 1996, Vernon Walden and Lipoid-Germany entered into a written agreement (the "Representation Agreement"), the final version of which was drafted by Lipoid-Germany. As set forth in the Representation Agreement, the parties "agreed there will be a mutual exclusivity arrangement between LIPOID and VWI. VWI will be the exclusive representitive [ sic] in North America for LIPOID with the [ sic] regard to all their Phospholipids. . . . LIPOID agrees to sell product in North America exclusively through VWI." The Representation Agreement included two paragraphs concerning the parties' exchange of information and the monitoring of customers' credit:
2. LIPOID will support VWI with all information, as requested, on a timely basis, data sheets, analytical information, samples, status reports on deliveries, pertinent information relative to the business.
3. VWI will keep LIPOID informed on activities in the U.S.A. and Canada including prospective customers, regulatory information, status of projects customers may be involved in regarding Phospholipids.
VWI will provide information on competition to LIPOID as acquired.
It will be the responsibility of VWI to maintain surveillance of the customers [ sic] accounts receivable. To monitor the credit situation on these customers and to the best of our [ sic] ability, see to it that the credit risks for LIPOID are minimized.
VWI is to continue to arrange for the transfer of funds to Lipoid's bank account on a timely basis subsequent to the collection of invoice payments from customers.
The Representation Agreement specified that Vernon Walden's commission would be "10% based on the ex works Ludwigshafen price excluding tax and duty." The commission would continue to be calculated on this basis if Lipoid-Germany "decided to start a company in [ sic] USA."
The termination provision, which was provided in paragraph five of the Representation Agreement, stated:
This agreement will be valid until June 1st, 1999 and will continue for an indefinite time thereafter unless either party decides to terminate this agreement for just cause. In that instance, 3 months notice will be required prior to the end of this agreement.
Under certain conditions LIPOID has the right to terminate without cause;
a) LIPOID has the right to terminate this agreement at any time, if VWI is sold to another party whom LIPOID does not approve.
b) LIPOID has the right to terminate this agreement at any time, if there is a change in management of VWI which LIPOID does not approve.
Point two in the "Addenda" section, which appears immediately below the signatures of the parties, notes that the date should read September 1st, 1999 instead of June 1st, 1999.
Vernon Walden placed purchase orders with Lipoid-Germany until 1997, when Lipoid-Switzerland, a corporate affiliate of Lipoid-Germany, was created under the laws of Switzerland. Lipoid-Germany thereafter directed Vernon Walden to place its orders through Lipoid-Switzerland. Lipoid-Germany continued to manufacture and ship the products ordered by Vernon Walden.
Plaintiff has stipulated that Lipoid-Switzerland is the agent of Lipoid-Germany.
On June 30, 1998, the parties amended the Representation Agreement by entering a Supplement to the Representation Agreement (the "Supplement" and, together with the Representation Agreement, the "Agreement"). The Supplement included the following provisions:
1) The duration of the above agreement [i.e., the Representation Agreement] will be prolonge [sic] until sept. [sic] 30th 2004.
The other item of point 5 will be unchanged.
2) If LIPOID established [sic] an [sic] own company in the USA, Vernon Walden would be the distributor of LIPOID products in the countries mentioned in our agreement dated on 26.07.1996.
On or about October 6, 2000, RR Beteiligungsgesellschaft ("RR") and Peter Rohde entered an agreement (the "Lipoid-California Agreement") "to form a joint company in the USA" to develop the North American market for all lecithin-based products for dietary use and for nutritional supplements as well as commercial products for comparable uses, beginning business activities on October 1, 2000. The Lipoid-California Agreement provided that RR would own 75% and Peter Rohde would own 25% of Lipoid-California. Peter Rohde and Michael Schneider, a managing director of Lipoid-Germany at that time, were named as joint managers of Lipoid-California. The Lipoid-California Agreement stated that Lipoid-Germany's products would be provided to Lipoid-California at "transfer prices. . . . not exceed[ing] the production costs by more than 10%."
RR Beteiligungsgesellschaft later became RR Verwaltungs GmbH, but essentially it was the same company and controlled by the same person, Dr. Herbert Rebmann. (Tr. Kolodziej Dep. at 12:15-17, 14:20-15:16.)
By fax dated October 20, 2000, Lipoid-Switzerland informed Vernon Walden that "Lipoid" would be forming a joint venture entity to sell its phospholipid products in the United States and Canada. Between September 2000 and March 2001, Vernon Walden continued to place orders with Lipoid-Switzerland. In March 2001, Lipoid-Germany and Lipoid-Switzerland informed Vernon Walden that they would no longer accept purchase orders directly and that Vernon Walden would have to place its orders through Lipoid-California. Vernon Walden thereafter began placing purchase orders through Lipoid-California, although it expressed dissatisfaction with having to place its orders with its alleged competitor. According to Defendants, Lipoid-California commenced its sales to the United States on or about February 2001; Plaintiff claims that Lipoid-California began making sales and placing orders as early as December 2000.
The parties are in apparent agreement that Lipoid-Switzerland was acting as an agent of Lipod-Germany.
The bylaws of Lipoid-California (the "Bylaws") stated that the Board of Managers would initially have three positions. Like the Lipoid-California Agreement, the resolution dated October 26, 2000 specified that Peter Rohde and Michael Schneider were each elected to serve as manager; the evidence does not indicate who, if anyone, filled the third position on the Board of Managers. In another resolution dated October 26, 2000, Peter Rohde was named as the president, secretary and chief financial officer of Lipoid-California, which were the three official positions initially created in Article III of the Bylaws. Pursuant to § 3.3 of the Bylaws, subject to the supervisory powers, if any, given to the Board of Managers or to the chairman, the president was also designated as the general manager and chief executive officer and had the obligation to "perform all the duties commonly incident to that office." Although the Bylaws provided for the election of a chairman, there is no evidence that a chairman was, in fact, elected.
Ownership structure of Defendants
The respective shares of Lipoid-Germany and Lipoid-Switzerland are owned by the same corporation, Lipoid Verwaltungs GmbH, which is owned and controlled by Dr. Herbert Rebmann through his holding company, RR. At all relevant times, RR owned 75% of Lipoid-California, and PSI-Precious Smart Ingredients, Inc. ("PSI") owned 25%. PSI was a company owned and formed by Peter Rohde for the purpose of forming Lipoid-California.
B. The claims
Plaintiff's Robinson-Patman Act Claims
Plaintiff alleges that Defendants violated §§ 2(a) and (f) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §§ 13(a), 13(f). Lipoid-Germany allegedly violated § 2(a) by charging Plaintiff a substantially higher price than it charged its alleged competitor, Lipoid-California, for products of like grade and quality. Lipoid-California allegedly violated § 2(f) by knowingly participating in and receiving the benefit of Lipoid-Germany's price discrimination.
Plaintiff's Tortious Interference Claim
It is undisputed that Lipoid-California had knowledge of the existence of the Agreement between Vernon Walden and Lipoid-Germany. Vernon Walden alleges that Lipoid-California induced Lipoid-Germany to breach the Agreement by: (1) selling and distributing its products to Lipoid-California, which would then resell to customers in the United States and Canada, in violation of the Agreement's exclusivity provision; (2) providing Plaintiff's confidential information to Lipoid-California; (3) selling its products to Lipoid-California at prices significantly below those available to Plaintiff; and (4) requiring Plaintiff to purchase its products only through Lipoid-California.
Plaintiff's Breach of Contract Claims
Vernon Walden alleges, inter alia, that Defendants Lipoid-Germany and Lipoid-Switzerland materially breached the Agreement by: (1) selling and distributing phospholipid and lecithin products to Lipoid-California for resale to customers in the United States and Canada, thereby allegedly violating the exclusivity provision; and (2) prematurely terminating the Agreement. Defendants seek partial summary judgment dismissing the breach of contract claims to the extent that Vernon Walden claims damages beyond September 30, 2004, which Defendants assert was the end date of the Agreement. Plaintiff seeks partial summary judgment declaring that the Supplement did not eliminate its exclusive right to distribute Lipoid-Germany's phospholipid products in the United States and Canada.
Plaintiff's other breach of contract claims, which are not presently before the court, are: (1) helping to establish Lipoid-California; and (2) providing Lipoid-California with Plaintiff's confidential and proprietary information.
In late 2000 or early 2001, Lipoid-California began marketing and offering for sale certain phospholipid and lecithin products, manufactured by Lipoid-Germany, to the dietetic/health food market in the United States. Vernon Walden alleges that Lipoid-Germany's decision to sell its products through Lipoid-California violated the exclusivity provisions of the Agreement, which Defendants claim was no longer in effect pursuant to the Supplement. Vernon Walden notified Lipoid-Germany and Lipoid-Switzerland that it considered the sales through Lipoid-California to be material breaches of the Agreement. Lipoid-Germany sent Vernon Walden a notice of termination of the Agreement on September 14, 2001. This action commenced shortly thereafter.
The Magistrate Judge's Decision
In May 2004, Defendants terminated their relationship with counsel, Fox Rothschild, LLP, and retained present counsel, Itkowitz Harwood, to represent them in this action. During Fox Rothschild's tenure, Defendants, through their designated Rule 30(b)(6) witness Andreas Kolodziej, were deposed on September 11 and 12, 2003, and February 27, 2004. Subsequent to each of these depositions, transcripts were provided to Mr. Kolodziej for review. Mr. Kolodziej, through Fox Rothschild, submitted errata sheets concerning these depositions and swore to their accuracy.
By letter dated August 12, 2004, Defendants, through Itkowitz Harwood, submitted another set of errata sheets (the "supplemental errata sheets") to Plaintiff's counsel, who objected to Defendants' submission. Plaintiff argues that the supplemental errata sheets were submitted in an untimely manner under Rule 30(e) and months after each of Defendants' three Rule 30(b)(6) depositions already had been changed and certified by Defendants' designated witness, Mr. Kolodziej, as true and correct. Defendants argue, inter alia, that Plaintiff is impermissibly attempting to undo the parties' course of conduct throughout the litigation, which has allegedly permitted late service of errata changes. Defendants also argue that no prejudice results from permitting submission of the supplemental errata sheets because their submission does not eliminate the prior deposition testimony. Rather, the supplemental errata sheets stand beside the original answers and are subject to cross-examination at trial. The parties appeared on the record before Magistrate Judge Wigenton on October 21, 2004, which resulted in an order dated November 19, 2004 ruling that the supplemental errata sheets may not be submitted. In addition to noting that the supplemental errata sheets were untimely, Judge Wigenton also expressed concern that the errata sheets previously submitted by Fox Rothschild had already indicated that the depositions were accurate. Judge Wigenton noted that the cases cited by Defendants did not have a factual situation analogous to the facts here, namely, that in this case Defendants are seeking to submit second supplemental errata sheets after they had already affirmed that the deposition testimonies were, in fact, accurate.
II. DISCUSSION
A. Summary Judgment Standard
Summary judgment will be granted if the record establishes that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). Rule 56(c) imposes a burden on the moving party simply to point out to the district court that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Once the moving party has met this burden, the burden then shifts to the non-moving party. She "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Moreover, she may not simply "replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit." Lujan v. National Wildlife Federation, 497 U.S. 871, 888 (1990) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). Rather, she must "set forth specific facts showing that there is a genuine issue for trial." Rule 56(e).
At the summary judgment stage, the court's function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Id. at 247. In determining whether there exists a material issue of disputed fact, however, the facts and the inferences to be drawn from the facts are to be viewed in the light most favorable to the nonmoving party. Pollock v. American Tel. Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986).
B. Robinson-Patman Act Claims
Defendants and Plaintiff have cross-moved for partial summary judgment on Plaintiff's § 2(a) claim against Lipoid-Germany and its § 2(f) claim against Lipoid-California. Concerning § 2(a), the points of contention between Plaintiff and Lipoid-Germany are: (1) whether Vernon Walden was a "purchaser" or merely a sales agent of Lipoid-Germany; (2) whether Lipoid-California was part of a single entity with Lipoid-Germany or a "different purchaser" to which "sales" were made; (3) whether a competitive nexus between Vernon Walden and Lipoid-California has been shown — i.e., (a) whether at least "two contemporaneous sales" were made to Vernon Walden and Lipoid-California and (b) whether Vernon Walden and Lipoid-California were competing at the same functional level; and (4) whether certain affirmative defenses should be stricken.
The parties briefed the issue of competition at the same functional level within their discussions of the "two contemporaneous sales" issue. Together, these two issues comprise the two prongs of inquiry into whether competitive injury has been shown. See Stelwagon Mfg. Co., 63 F.3d at 1271.
The Robinson-Patman Act is intended to protect competition by forbidding unequal pricing to customers absent true economic reason for price differences. E.g., Feeney v. Chamberlain Mfg. Corp., 831 F.2d 93, 95-96 (5th Cir. 1987) (citations omitted). Pertinent portions of § 2(a) of the Robinson-Patman Act read as follows:
It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof . . . and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered . . . [and] nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: And provided further, That nothing herein contained shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned. 15 U.S.C. § 13(a). A price discrimination within the meaning of § 2(a) is merely a price difference. FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 549 (1960). Price discrimination requires at least two completed and contemporaneous sales by the same seller at differential prices to different purchasers. E.g., Edward J. Sweeney Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 119 (3d Cir. 1980) (citations omitted). Price discrimination alone, however, is not illegal per se. Stelwagon Mfg. Co. v. Tarmac Roofing Systems, Inc., 63 F.3d 1267, 1271 (3d Cir. 1995) (citation omitted). In order to establish a prima facie violation of § 2(a), Plaintiff must show a reasonable possibility of harm — i.e., competitive injury. Id. Here, Plaintiff alleges a secondary-line violation, claiming that the seller's price discrimination adversely impacts competition among its customers. See Reeder-Simco GMC, Inc. v. Volvo GM Heavy Truck Corp., 374 F.3d 701, 707 (8th Cir. 2004) (defining primary-line, secondary-line, and tertiary-line violations of the Robinson Patman Act).
Plaintiff alleges that Lipoid-California knowingly induced or received a discriminatory price in violation of § 2(f) of the Robinson-Patman Act, which provides: "It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section." 15 U.S.C. § 13(f). Liability under § 2(f) is limited to the situation where a case against a seller under § 2(a) can be established. Great A P Tea Co., Inc. v. FTC, 440 U.S. 69 (1979). Therefore, Plaintiff must establish a cause of action against the seller, Lipoid-Germany, under § 2(a) in order to establish a cause of action against the alleged purchaser, Lipoid-California, under § 2(f). See Seaboard Supply Co. v. Congoleum Corp., 770 F.2d 367, 370 (3d Cir. 1985).
(1) Vernon Walden — "purchaser" or agent?
The first issue is whether Vernon Walden was Lipoid-Germany's sales agent or a purchaser of Lipoid-Germany's products. Because § 2(a) prohibits price discrimination between "different purchasers," preferences granted to a legitimate sales agent are not actionable under the Robinson-Patman Act because there is no sale to the agent. Seaboard Supply Co. v. Congoleum Corp., 770 F.2d 367, 373 (3d Cir. 1985) (citations omitted). Consequently, Vernon Walden could maintain a Robinson-Patman Act claim if it were a purchaser but not if it were merely a sales agent.
The Court of Appeals in Seaboard Supply Co. examined several indicia of whether a particular defendant was an agent or purchaser. The factors to be considered include:
1. Whether the alleged purchaser acquired title to the goods;
2. Whether the alleged purchaser set the price at which goods are sold to customers;
3. Whether the alleged purchaser assumed the costs and risks of transit;
4. Whether the orders solicited by the alleged purchaser required the seller's approval;
5. Which party performed the billing to customers;
6. Whether customers' payments were made to the alleged purchaser or seller; and
7. Which party shipped the products to customers.
Seaboard Supply Co., 770 F.2d at 373 (noting that although defendant MRC was an agent, plaintiff Seaboard was a purchaser). There is no special definition of sale to be applied under the Robinson-Patman Act, but general laws of sale apply to determine whether the relationship of the parties was that of purchaser and seller. Loren Specialty Mfg. Co. v. Clark Mfg. Co., 241 F. Supp. 493, 498-499 (D. Ill. 1965), aff'd, 360 F.2d 913 (7th Cir. 1966), cert. denied, 385 U.S. 957 (1966). Although all factors should be considered, the most important factor is whether title was transferred to the purported purchaser. See id. at 499 ("For a sale to occur there must be a transfer of title"); see also Feeney, 831 F.2d at 96. The parties contend that these factors favor their respective and opposing positions.
The court finds that the following pertinent facts are uncontested:
2. Lipoid-Germany set the prices for phospholipid products to customers.
4. Orders apparently required the approval of Lipoid-Germany.
5. Depending on which party received the purchase orders, Lipoid-Germany, Lipoid-Switzerland, and Lipoid-California at various times all have billed Vernon Walden. Vernon Walden, in turn, billed customers.
6. Customers made payments to Vernon Walden.
7. Lipoid-Germany made drop shipments of products to end-user customers.
Items 2 and 4 weigh in favor of Defendants' characterization of Plaintiff as an agent, while items 5, 6, and 7 favor Plaintiff's claim that it was a purchaser.
Although item 2 facially favors Defendants, Vernon Walden explains that Lipoid-Germany set the prices because this was industry custom and therefore is not probative of whether Vernon Walden was a purchaser. Defendants dispute this explanation as conclusory. Standing alone, this dispute over the relative import to attribute to this factor, however, is not material. See Matthews Conveyer Co., 135 F.2d at 77 (finding a contract for sales where, inter alia, the purchaser received commissions from seller, who set the prices).
The fact that Lipoid-Germany made drop shipments to end-user customers does not weigh in favor of finding that Plaintiff was an agent because a drop shipment is a three-party transaction which masks the fact that there are actually two transactions, the sale from the seller to its purchaser and the resale from the purchaser to its customer. Steelcase, Inc. v. Dir., Div. of Taxation, 13 N.J. Tax 182, 193 (N.J. Tax Ct. 1993). See also Black's Law Dictionary 497 (6th ed. 1990) ("Shipment of goods directly from manufacturer to dealer or consumer rather than first to wholesaler, though wholesaler still earns profit because he took order for such.").
The parties contest the remaining factors — i.e., which party had title and assumed the risks of loss in transit. Lipoid-Germany contends that the language of the Representation Agreement indisputably established a principal-agent relationship — more specifically, the use of "representative" and "commission" in the Representation Agreement, the exclusivity and non-compete provisions, and the provision that Vernon Walden would keep Lipoid-Germany apprised of "competition." Lipoid-Germany also argues that it absolutely controlled Vernon Walden, did not permit Vernon Walden to warehouse its products, and retained the right of possession, including that of recall.
Plaintiff contests Defendants' argument with the following arguments and facts. First, Plaintiff asserts that it was invoiced for each shipment and that nothing in the Agreement or the parties' course of dealing contradicts the fact that it was a purchaser. Plaintiff further argues that its customs entry forms, purchase orders, and Defendants' invoices all contradict Defendants' argument that it was an agent; in particular, the use of international shipping terms such as "F.O.B. Ludwigshafen," "cip," "cif," and "ex works." Finally, Plaintiff refers to Defendants' Answer to the Third Amended Complaint and Counterclaim and Defendants' answers to interrogatories, which contained the following admissions and allegations by Defendants:
"Free on board," or "F.O.B.," is a delivery term which, inter alia, establishes the contractual arrangements in which the title is transferred between seller and buyer and the point where transportation responsibility is shifted from seller to buyer. F.O.B. "means that title to property passes from the seller to buyer at the designated FOB point." Berisford Metals Corp. v. S/S Salvador, 779 F.2d 841, 843 (2d Cir. 1985) (citing 10 WILLISTON ON CONTRACTS, § 1079A, at 94 n. 6 (3d ed. 1967)). For example, if terms are F.O.B. origin, title of goods passes to the buyer at point where the shipment originates. See www.usda.gov/da/smallbus/CCC6.htm. This is an important, and often negotiated, aspect of the purchase agreement because whoever holds title in transit is responsible for damages and losses and the filing of claims. See http://www.umich.edu/~purch/purch/glossary.html.
"CIP," or "Carriage Insurance Paid To," means that the seller delivers the goods to a carrier and must pay the cost of carriage to bring the goods to the named destination. The buyer bears all risks and any additional costs occurring after the goods have been so delivered. The seller has to procure insurance against the buyer's risk of loss or damage to goods during the carriage. See http://www.iccwbo.org/incoterms/preambles/pdf/CIP.pdf.
"CIF," or "Cost, Insurance and Freight," means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. BLACK'S LAW DICTIONARY 242 (6th ed. 1990). The seller owns goods until they are loaded on vessel; selling price includes all costs so far plus cost of ocean marine insurance. See http://www.lectlaw.com/def/c002.htm.
"Ex works" means from the factory and requires the seller to deliver goods at its own place of business. All other transportation costs and risks are assumed by the buyer. See http://www.investopedia.com/terms/e/exw.asp.
· Vernon Walden took title to and had the exclusive right to purchase and resell on a commissioned basis all of the phospholipid and lecithin products of Lipoid-Germany to customers in the United States in Canada. (Third Am. Compl. ¶ 11, Answer Third Am. Compl. Countercl. ¶ 11.)
· Phospholipid and lecithin products that were manufactured by Lipoid-Germany were sold by Vernon Walden. (Third Am. Compl. ¶ 14, Answer Third Am. Compl. Countercl. ¶ 14.)
· Lipoid-Germany agreed to pay Vernon Walden a commission based upon the "ex works" price of the products purchased by Vernon Walden. (Third Am. Compl. ¶ 15, Answer Third Am. Compl. Countercl. ¶ 15.)
· Vernon Walden marketed and purchased products for resale to customers in the United States. (Third Am. Compl. ¶ 50, Answer Third Am. Compl. Countercl. ¶ 50.)
· Defendants supplied phospholipid and lecithin products to Vernon Walden and sent invoices or billed Vernon Walden to obtain payment. (Countercl. ¶¶ 7-10.)
· Vernon Walden has not paid the invoices for products sold by Lipoid-Switzerland and Lipoid-California and purchased and resold by Vernon Walden. (Countercl. ¶ 11.)
· Vernon Walden resold the products it purchased from Lipoid-Switzerland. (Countercl. ¶ 15.)
· Vernon Walden has not paid Lipoid-Switzerland for the products it purchased. (Countercl. ¶ 21.)
· Vernon Walden withheld payments it owed to Lipoid-Switzerland and Lipoid-California for products it had purchased for resale. (Def. Lipoid-Germany's Answer to Pl.'s First Interrogs. ¶ 17; Def. Lipoid-Switzerland's Answer to Pl.'s First Interrogs. ¶ 18.)
· Vernon Walden purchased products from Lipoid-Switzerland which were manufactured by Lipoid-Germany. (Def. Lipoid-Switzerland's Answer to Pl.'s First Interrogs. ¶ 20.)
From a consideration of the evidence and a review of relevant caselaw, the court finds Defendants' arguments unavailing. First, an agency is not created merely because the contract is denominated as a "Representation Agreement" and Plaintiff is referred as a "representative." See Mathews Conveyer Co. v. Palmer-Bee Co., 135 F.2d 73, 80 (6th Cir. 1943) (finding that an agency was not created simply because the contract for sales was called an agency contract). Second, the use of the word "commission" in a contract for the sale of the seller's products is not controlling in determining whether the contract was one of sale or of agency because this was merely a way of adding a profit for the buyer, who sold to the public, and was an added incentive for the buyer to sell more of the seller's products. Id. at 81. The other provisions of the Representation Agreement mentioned by Defendants are not exclusively found in agency contracts. Third, Defendants' assertion that it absolutely controlled Plaintiff is conclusory and unsupported by the undisputed evidence that, for example, Plaintiff dealt directly with its customers in securing orders and directly billed its customers. Furthermore, "[o]ne may submit to a degree of control by another without being his agent." Mathews Conveyer Co., 135 F.2d at 81.
The undisputed evidence, taken as a whole, supports Plaintiff's assertion that it was a purchaser. First, Defendants have admitted and alleged that Plaintiff purchased products manufactured by Lipoid-Germany; in fact, Lipoid-Switzerland and Lipoid-California have made counterclaims demanding payment from Plaintiff. Second, the trade terms — F.O.B., CIP, CIF, ex works — used in the purchase orders and/or invoices all support Plaintiff's assertion that it acquired title upon delivery to the point of destination and bore the risks of loss in transit. The fact that Defendants may have carried an insurance policy is not inconsistent; for example, under CIP terms, the buyer bears the risk of loss even though the seller is required to procure insurance against that risk, and under CIF the cost to the buyer includes the cost of insurance and freight. Defendants challenge the significance of the INCO terms by highlighting the following excerpt from the Certification of James Borkan:
The terms, including price, stated in the Lipoid-Switzerland invoices were included to facilitate the movement of the Lipoid-Germany shipments through United States and Canadian customs, but were not required to establish as between Vernon and Lipoid-Switzerland or Lipoid-Germany the terms under which the phospholipid product was purchased and sold. The terms applicable to every Vernon order and every invoice from Lipoid-Germany and Lipoid-Switzerland were solely those set forth in the Representation Agreement.
(J. Borkan Certif. ¶ 2.) The excerpt, however, is inapposite with respect to whether the INCO terms had any significance for two reasons. First, the INCO terms are, by their very definitions, shipping or trade terms that are meant precisely "to facilitate the movement" of shipments through customs; their additional relevance in terms of determining which party has title and bears the risk of loss is not thereby rendered meaningless. Second, the Representation Agreement — brief and incomprehensive as it is — is silent as to shipping methods, which party has title to the products or bears the risk of loss. Therefore, even if "[t]he terms applicable to every Vernon order and every invoice from Lipoid-Germany and Lipoid-Switzerland were solely those set forth in the Representation Agreement," "solely" in this context could not mean that they were the only applicable terms to the exclusion of terms concerning issues that are not mentioned in the Representation Agreement. Here, because the Representation Agreement did not mention the terms under which the products, which are manufactured in Germany, would be shipped or transported to customers in the United States, the terms set forth in the Representation Agreement did not contradict or negate the applicability of the INCO terms which were used on the purchase orders and invoices. Therefore, the statement of James Borkan does not raise a genuine issue of material fact. The court concludes that the evidence — including the use of the INCO terms, the fact that Plaintiff dealt directly with its customers in securing orders, billed its customers, who then made payments to Plaintiff — shows that Plaintiff was acting on its own behalf in purchasing and reselling the phospholipid and lecithin products manufactured by Lipoid-Germany.
Even though consideration of the above indicia of sale would indicate that Vernon Walden is a purchaser, Defendants introduce a further hurdle against such a conclusion. Defendants argue that, as a matter of law, a claim of secondary-line price discrimination can be made only where the plaintiff is an actual purchaser from the party charged with the price discrimination, Lipoid-Germany. To support this contention that only direct purchasers can allege a Robinson-Patman Act claim, Defendants cite Klein v. Lionel Corp., 237 F.2d 13 (3d Cir. 1956), which held that a retailer who purchased a manufacturer's products for resale from jobbers or middlemen, and who was in competition with retailers to whom the manufacturer sold directly, could not claim protection under the Robinson-Patman Act. Plaintiff cannot, Defendants allege, maintain its Robinson-Patman Act claims because, once Plaintiff began placing orders with Lipoid-California, Plaintiff did not purchase products directly from Lipoid-Germany, the party charged with the discriminatory pricing. Plaintiff, on the other hand, argues that the language of § 2(a) prohibits both direct and indirect price discrimination, and that Klein has been limited or overruled by Perkins v. Standard Oil Co., 395 U.S. 642 (1969) and FTC v. Fred Meyer, Inc., 390 U.S. 341 (1968). Moreover, Plaintiff argues that its Robinson-Patman Act claims are actionable, regardless of whether Klein is good law, because it claims that it has purchased both directly and indirectly from Lipoid-Germany. As discussed below, the court finds that Plaintiff and Lipoid-California purchased directly from Lipoid-Germany at a reasonably contemporaneous time. Therefore, the court need not address the issue of whether Klein is still good law and, if so, whether it bars Plaintiff's Robinson-Patman Act claims.
(2) Lipoid-California — sale to favored purchaser or intracompany transfer?
The second issue is whether Lipoid-California and Lipoid-Germany were a single economic entity such that transactions between them were merely intracompany transfers — which would not be subject to Robinson-Patman liability — rather than "sales" at discriminatory prices in favor of Lipoid-California, which would be subject to Robinson-Patman liability. Whether sales were made to at least two different purchasers has been an issue where transactions have occurred between a parent corporation and its wholly owned subsidiary, e.g., Security Tire Rubber Co. v. Gates Rubber Co., 598 F.2d 962, 965 (5th Cir. 1979), cert. denied, 444 U.S. 942 (1979), or between sister companies that are wholly owned and controlled by the same person, see General Supply Deck Floor Underlayment Co., Inc. v. Maxxon Southwest, Inc., Civil Action No. 3:00-CV-2745-G, 2001 U.S. Dist. LEXIS 18938 (N.D. Tex. Nov. 19, 2001). Neither the relationship of a parent and its subsidiary nor of sister companies owned by the same individual describes the relationship between Lipoid-Germany and Lipoid-California. Nevertheless, the reasoning used to analyze these transactions are instructive for the purpose of determining whether sales were made to a favored purchaser, Lipoid-California.
"Sister corporation" has been defined as two corporations having common or substantially common ownership by the same shareholders. See Black's Law Dictionary 1387 (6th ed. 1990) (citing Battelstein Inv. Co. v. United States, 302 F. Supp. 320, 322 (S.D. Tex. 1969)).
Courts have been split as to whether a parent's transfers to its wholly-owned subsidiary may be considered separate sales to a favored customer for Robinson-Patman Act purposes. Compare Danko v. Shell Oil Co., 115 F. Supp. 886 (E.D.N.Y. 1953) (finding that a subsidiary may be a purchaser from its parent within the meaning of § 2(a)) and Brewer v. Uniroyal, Inc., 498 F.2d 973 (6th Cir. 1974) (emphasizing that, in determining whether a seller-purchaser relationship exists, the critical factor is the exercise of domain and control over the subsidiary by the parent) with Security Tire Rubber Co. v. Gates Rubber Co., 598 F.2d 962, 965 (5th Cir. 1979) (holding that transfers from a parent to its wholly owned subsidiary can never be considered separate sales to a favored customer) and Caribe BMW, Inc. v. BMW AG, 19 F.3d 745, 749 (1st Cir. 1994) (holding that a parent and its wholly owned subsidiary amount to a "single seller"). Although the trend among courts decidedly has favored the bright line approach in Security Tire and Caribe, see Stephen Calkins, Copperweld in the Courts: The Road to Caribe, 63 ANTITRUST L.J. 345 (1995), even the court in Security Tire nevertheless noted that there must be some showing of a lack of control by the parent and arm's length dealings between parent and subsidiary in order to find that transactions between them are not sales. Security Tire, 598 F.2d at 967 n. 3 (explaining that court would reach same decision in this case even under the Danko theory). Like transfers between a parent and subsidiary, sales between sister companies have been considered intracompany transfers where the seller and buyer operated under the authority of one individual, had the same officers, and were owned essentially by the same individual who exercised authority. General Supply Deck Floor Underlayment Co., Inc. v. Maxxon Southwest, Inc., Civil Action No. 3:00-CV-2745-G, 2001 U.S. Dist. LEXIS 18938, at *9 (N.D. Tex. Nov. 19, 2001). Transfers between sister companies cannot be considered "sales" if they have a unity of interest and are part of the same enterprise. Id. The test is whether Lipoid-Germany exercised dominion and control over Lipoid-California such that they shared a unity of interest.
The parties dispute the degree of control exerted by Dr. Herbert Rebmann over Lipoid-California. In his Reply Affidavit, Dr. Rebmann asserts that Lipoid-Germany and Lipoid-California were "commonly owned by entities completely controlled, and more-than-majority owned, by [himself]." Dr. Rebmann also claims that he had final say on all management and policy decisions of Lipoid-California. As evidence that corporate formalities were disregarded, Dr. Rebmann and Defendants cite the fact that Lipoid-Germany permitted Lipoid-California to use the trademarked Lipoid name, and that Lipoid-California was not compensated for inventory that was sent back to Germany when Lipoid-California was terminated in 2003, allegedly a unilateral decision by Dr. Rebmann. Defendants also cite the fact that Dr. Michael Schneider was a director and manager of both Lipoid-Germany and Lipoid-California, as well as an employee of Lipoid-Germany.
Plaintiff, on the other hand, presents the affidavit of Peter Rohde as well as the Operating Agreement and Bylaws of Lipoid-California to refute Defendants' claim that Dr. Rebmann completely controlled Lipoid-California and to show that the ownership interest of Peter Rohde was more than de minimis. First, Plaintiff argues that because only two of the three positions on the Board of Managers was filled — one by Rohde and the other by Dr. Schneider — pursuant to the Operating Agreement, management decisions could be made only by mutual agreement of both managers, one of which, namely Rohde, was not controlled by Dr. Rebmann. Plaintiff also points to the fact that Rohde held all officer positions, i.e., president, secretary and treasurer/CFO, and that, under the bylaws, Rohde had all day-to-day management authority, including pricing. Plaintiff also cites a provision in the bylaws which states that subject to supervisory powers given to the Board, if any, the president became the general manager and CEO and had all powers commonly held by that position. Finally, Plaintiff refers to the deposition of Defendants' Rule 30(b)(6) witness, Andreas Kolodziej, who testified that Lipoid-California was free to fix its prices, and Lipoid-Germany had no influence.
Because evidence submitted by the parties has raised a genuine issue as to whether Lipoid-Germany or Dr. Rebmann exercised dominion and control over Lipoid-California, Plaintiff's and Defendants' cross-motions with respect to whether "sales" were made to Lipoid-California will be denied.
(3) Competitive nexus
The third issue is whether Plaintiff has shown that a competitive nexus existed between itself and Lipoid-California. E.g., Stelwagon Mfg. Co. v. Tarmac Roofing Systems, Inc., 63 F.3d 1267, 1271 (3d Cir. 1995). First, Plaintiff must show that it was engaged in actual competition with the favored purchaser, Lipoid-California, as of the time of the price differential; in other words, that two contemporaneous sales were made. Id. Second, Plaintiff must show that, as of the time the price differential was imposed, the favored and disfavored purchasers competed at the same functional level, i.e., all wholesalers or all retailers, and within the same geographic market. Id. (citation omitted). See also Reeder-Simco GMC, Inc. v. Volvo GM Heavy Truck Corp., 374 F.3d 701, 709 (8th Cir. 2004) (citation omitted). The parties dispute whether Plaintiff has shown the required competitive nexus.
(a) "Two contemporaneous sales"?
The issue is whether Lipoid-Germany made at least "two contemporaneous sales" at different prices to Vernon Walden and Lipoid-California. E.g., Crossroads Cogeneration Corp. v. Orange Rockland Utilities, Inc., 159 F.2d 129, 142 (3d Cir. 1998) (citations omitted). The contemporaneity requirement does not require that two sales be made at precisely the same time and place, but merely requires that the sales were made reasonably contemporaneous in time. Reeder-Simco GMC, Inc., 374 F.3d at 710 (citation omitted). Although courts have not adopted any specific test for determining whether a given time interval is reasonable, the inquiries have been fact intensive and have shared an emphasis on the importance of changing market conditions. 3-37 ANTITRUST LAWS TRADE REGULATION § 37.03 (noting that factors — such as the character of the seller's industry, the nature of the seller's product, and the length of time that elapses between the two sales — affect the price sensitivity of products) (citations omitted); see also Krug v. Int'l Tel. Tel. Corp., 142 F. Supp. 230, 235 (D.N.J. 1956). If the product market is characterized by very rapid price changes, then the nearer in time the sales must be made in order to prove price discrimination. If there is no evidence that changing market conditions are a factor in the way the seller established the price favoring one purchaser over another, less contemporaneity is required. If there are any lapses in time between the dates of the disfavored purchaser's purchase and that of the favored purchaser, the party refuting its adversary's claim that the sales were reasonably contemporaneous must show more than that the time lapse could have theoretically explained the price differences. See Reeder-Simco GMC, Inc., 374 F.3d at 711.
Here, Lipoid-California's first purchase of products from Lipoid-Germany, for resale in the United States, occurred on or about February 23, 2001. Defendants allege that Plaintiff's final purchase of products from Lipoid-Germany occurred on or about January 8, 2001, while Plaintiff argues that its final purchase from Lipoid-Germany occurred on or about March 5, 2001. Defendants argue that the March 5 transaction cannot be considered a contemporaneous sale because the goods were rejected by the end-user customer, and a credit note was issued for the product. Under Defendants' assertions, the time lapse between the two purchases was approximately six weeks; if Plaintiff's allegations were true, the time lapse was approximately two weeks.
The court is not persuaded by Defendants' argument that a sale did not occur on or about March 5 merely because the goods were returned and the customer was credited. Plaintiff was not a prospective purchaser with respect to the March 5 sale, as Defendants suggest. See Shaw's, Inc. v. Wilson-Jones Co., 105 F.2d 331, 333 (3d Cir. 1939) (finding that one who seeks to purchase or who goes into the market-place for the purpose of purchasing is not a purchaser under the Robinson-Patman Act). Rather, Plaintiff was an actual purchaser and an actual sale occurred on or about March 5. There was a purchase of specific goods, not an offer to sell unidentifiable products; and there was a sale with price, conditions and terms agreed on, not an offer waiting for an acceptance. Aluminum Co. of Am. v. Tandet, 235 F. Supp. 111, 114 (D. Conn. 1964) (finding that plaintiff had "status" to sue under Robinson-Patman Act because a consummated sale had occurred). Here, the March 5 transaction included an offer and acceptance, as well as payment and delivery of the products purchased. The fact that Lipoid-Switzerland issued a credit for the rejected products does not alter the fact that a sale had already been made; in fact, it supports the basic definition of a sale as being a contract by which a seller, in consideration of payment, transfers to the buyer title and possession of property. Black's Law Dictionary 1337 (6th ed. 1990) (emphasis added).
A mere two-week time lapse between the February 23 and March 5 sales by Lipoid-Germany renders the sale reasonably contemporaneous; Defendants have not presented conflicting evidence that they were not, and the opinion cited by Defendants — Grandstaff v. Mobil Oil Corp., Civil Action No. 78-512-A, 1978 WL 1458, *13 (E.D. Va. Dec. 7, 1978) — is inapposite because the alleged competitors in that case were prospective purchasers, unlike here. The evidence offered by the parties is more analogous to the sales-to-sales comparisons that plaintiff offered as evidence, and defendant failed to rebut, in Reeder-Simco GMC, 374 F.3d at 710 (noting that four sets of comparative sales were between one and four months apart). Because Defendants have failed to show that the price differences were attributable to changes in market condition or cost during the time lapse, partial summary judgment will be granted for Plaintiff and denied to Defendants with respect to the "two contemporaneous sales" requirement.
(b) Competition at the same functional level?
Plaintiff must show that it competed with Lipoid-California at the same functional level, i.e., as a purchaser and reseller of Lipoid-Germany's products to customers in the same geographic market. Stelwagon Mfg. Co., 63 F.3d at 1271 (citation omitted). Here, Defendants argue that Lipoid-California did not compete at the same functional level as Vernon Walden because Lipoid-California cannot be both the supplier of products to Vernon Walden as well as the allegedly favored purchaser and competitor of Vernon Walden. The court finds Defendants' argument unpersuasive. Lipoid-California and Vernon Walden competed in the United States as resellers of PS-type phospholipid products manufactured by Lipoid-Germany. At least two contemporaneous sales were made by Lipoid-Germany to Vernon Walden and Lipoid-California, on March 5 and February 23, 2001, respectively; these sales occurred before Vernon Walden began placing orders with Lipoid-California. The fact that Vernon Walden may have placed some orders with Lipoid-California does not change their roles as resellers. In at least one case, the Supreme Court has found a valid Robinson-Patman Act claim where two entities each had at least dual roles as distributor and retailer. See Texaco, Inc. v. Hasbrouck, 496 U.S. 543 (1990). The court will therefore deny Defendants' motion for partial summary judgment.
Because the court will deny Defendants' motion for partial summary judgment dismissing Plaintiff's § 2(a) claims, the court will also deny Defendants' motion for partial summary judgment dismissing Plaintiff's § 2(f) claims.
(4) Affirmative defenses to Robinson-Patman Act claims
Plaintiff moves to strike the following affirmative defenses to its Robinson-Patman Act claims: (a) the meeting competition defense; (b) the changing market conditions defense; (c) the functional discount defense; (d) the cost justification defense; and (e) the availability defense. For the reasons set forth below, the court will grant Plaintiff's motion for partial summary judgment striking these defenses.
(a) Meeting competition
Section 2(b) affords a seller the right to meet in good faith an equally low price of a competitor. Standard Oil Co. v. FTC, 340 U.S. 231, 247 (1951). Lipoid-Germany would have a valid meeting-competition defense if it can "show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor." Great Atlantic Pacific Tea Co. v. FTC, 440 U.S. 69, 82 (1979) (citing FTC v. A.E. Staley Mfg. Co., 324 U.S. 746, 759-760 (1945)). In Great A P, to justify its second bid at a lower price, the seller presented evidence that its customer had received a specific offer for a lower price from the seller's competitor. Id. at 83 (finding that seller had a meeting competition defense). On the other hand, the Court rejected a defendant's attempt to use the meeting competition defense where the evidence was limited to general statements of each witness's assumption or conclusion that the price discriminations were justified by competition. Corn Prods. Ref. Co. v. FTC, 324 U.S. 726, 741 (U.S. 1945). The Court has also found insufficient allegations of a general system of competition because the Robinson-Patman Act places emphasis on individual competitive situations. A.E. Staley Mfg., 324 U.S. at 753 (rejecting defendant's attempted meeting competition defense).
Here, Lipoid-Germany has not presented evidence that the lower prices to Lipoid-California were a good faith attempt to meet the lower prices of a competitor of Lipoid-Germany; it merely claims, without evidence of a specific competitive situation, that the prices were provided in part to meet the prices of other competitors in the market. The court finds Lipoid-Germany's attempted justification insufficient and will therefore strike the meeting competition defense.
(b) Changing market conditions
"[I]t is an absolute defense to a charge of price discrimination for a seller to prove, under § 2(a), that its price differential makes only due allowances for . . . price changes made in response to changing market conditions." E.g., Standard Oil Co. V. FTC, 340 U.S. 231, 241 (1951). Here, Defendants have not presented evidence of specific facts showing that changing market conditions accounted for the favorable transfer prices to Lipoid-California. Therefore, the court will strike the changing market conditions defense.
(c) Functional discount
Defendants invoke the functional discount defense, asserting that Lipoid-Germany benefitted from, and its costs were minimized by, Lipoid-California's willingness to market a broader array of phospholipid products to the nutritional market as well as the cosmetic market.
"Functional discount" may be defined as a discount "given to a purchaser based on its role in the supplier's distributive system, reflecting, at least in a generalized sense, the services performed by the purchaser for the supplier." Hasbrouck, 496 U.S. at 555 n. 11 (adopting definition suggested by the United States and the Federal Trade Commission). In Hasbrouck, the Court affirmed the lower courts' conclusion that there was no substantial evidence indicating that the discounts provided to favored purchasers constituted a reasonable reimbursement for the value to the supplier of their actual marketing functions. Id. at 562. Similarly in this case, Defendants have failed to connect the discount given to Lipoid-California with any cost savings that may have been enjoyed by Lipoid-Germany and attributable to Lipoid-California. Defendants cannot maintain the functional discount defense given the lack of evidence, and the court will dismiss this defense.
(d) Cost justification
The cost justification defense is harder to maintain than a functional discount defense. See Hasbrouck, 496 U.S. at 561 n. 18 (noting commentators' observations that the cost justification defense has proven difficult, expensive, often unsuccessful, and largely illusory in practice). To establish a cost justification defense, the seller has the burden of showing that the price reductions given did not exceed the actual cost savings. Id. "Conceived as a vehicle for allowing differential pricing to reward distributive efficiencies among customers operating at the same level, the cost justification defense focuses on narrowly defined savings to the seller derived from the different method or quantities in which goods are sold or delivered to different buyers." Id. (citation omitted). In this case, Defendants recite the same reason that they invoked for the functional discount defense — i.e., that Lipoid-California expressed a willingness to market certain products and to certain industries which Vernon Walden had allegedly refused. Defendants have not provided the "rigorous accounting" required to show that the price reductions given did not exceed the actual cost savings. See id. at 565. The court will dismiss the cost justification defense.
(e) Availability
If the challenged lower price was in fact — and not merely theoretically — made available to the allegedly disfavored purchaser, the seller cannot be held liable under § 2(a). Metro Ford Truck Sales v. Ford Motor Co., 145 F.3d 320, 326 (5th Cir. 1998) (citations omitted). Therefore, the availability defense would shield Defendants from § 2(a) liability if the allegedly lower prices offered to Lipoid-California were actually offered also to Plaintiff. The availability defense offers no shelter to defendants, however, merely for making products available to the allegedly disfavored purchaser using the same method of calculating price as previously used with that purchaser. Because this is precisely the argument that Defendants proffer here, their availability defense will be dismissed.
C. Tortious Interference Claims
For substantially the same reasons that the court will deny partial summary judgment with respect to whether "sales" or merely intracompany transfers were made to Lipoid-California, the court will deny Lipoid-California's motion for partial summary judgment on Plaintiff's tortious interference claim.
Under New Jersey law, a party complaining of tortious interference must demonstrate that: (1) plaintiff had a reasonable expectation of an economic benefit or advantage; (2) defendant knew of plaintiff's expectancy; (3) defendant wrongfully and intentionally interfered with this expectancy; (4) a reasonable probability existed that, but for defendant's wrongful interference, plaintiff would have realized the economic benefit; and (5) plaintiff was injured as a result of defendant's conduct. E.g., Carpet Group Int'l v. Oriental Rug Imps. Ass'n, 256 F. Supp. 2d 249, 288 (D.N.J. 2003) (citations omitted). Fundamental to a cause of action for tortious interference with economic or contractual advantage is the requirement that the claim be directed against defendants who are not parties to the relationship; one cannot interfere with one's own contractual or economic relationship. Fioriglio v. City of Atlantic City, 996 F. Supp. 379, 392 (D.N.J. 1998), aff'd, 185 F.3d 861 (3d Cir. 1999). Thus, if an employee or agent is acting on behalf of his or her employer or principal, then no action for tortious interference will lie. DiMaria Constr., Inc. v. Interarch, 351 N.J. Super. 558, 568 (N.J. App. Div. 2001). An employee who acts for personal motives, out of malice, beyond his authority, or otherwise not "in good faith in the corporate interest" falls outside the scope of the privilege. Varrallo v. Hammond Inc., 94 F.3d 842, 849 n. 11 (3d Cir. 1996) (citations omitted).
As discussed supra in the section concerning whether "sales" were made to Lipoid-California, Plaintiff and Defendants have presented a genuine issue of material fact as to whether Lipoid-Germany or Dr. Rebmann exercised dominion and control over Lipoid-California. Plaintiff has introduced evidence that Peter Rohde exercised substantial managerial authority over Lipoid-California independently of any influence that Dr. Rebmann may have exerted, which is disputed. The court will deny Lipoid-California's motion for partial summary judgment with respect to the tortious interference claim against it.
D. Breach of Contract Claims
The parties dispute the Supplement's effect on two provisions in the Representation agreement, namely, the term provision and the exclusivity provision. First, Defendants argue that the parties never reached an agreement to extend their contract for a specific term beyond September 2004, and that the Supplement eliminated the provision, found in paragraph five of the Representation Agreement, which automatically renewed the Representation Agreement for an indefinite term (the "evergreen provision"). Plaintiff argues that the Supplement did not, as a matter of law, render the Representation Agreement unenforceable after September 30, 2004. Second, Defendants assert that ¶ 2 of the Supplement eliminated Vernon Walden's exclusive rights, while Plaintiff argues that ¶ 2 does not mention any change to Vernon Walden's exclusive rights. For the reasons set forth below, the court finds that there are genuine issues of material fact that preclude summary judgment disposing of these arguments.
Paragraph five of the Representation Agreement provides in part: "This agreement will be valid until June 1st, 1999 and will continue for an indefinite time thereafter unless either party decides to terminate this agreement for just cause." (Emphasis added).
Whether a contract term is clear or ambiguous is a question of law. Kaufman v. Provident Life Cas. Ins. Co., 828 F. Supp. 275, 282 (D.N.J. 1992) (citations omitted), aff'd, 993 F.2d 877 (3d Cir. 1993). An ambiguity in a contract exists if the terms of the contract are susceptible to at least two reasonable alternative interpretations, and, before it can be said that no ambiguity exists, it must be concluded that the questioned words or language is capable of only one interpretation. Senior Executive Benefit Plan Participants v. New Valley Corp. ( In re New Valley Corp.), 89 F.3d 143, 152 (3d Cir. 1996) (citations omitted). To decide whether a contract is ambiguous, the court does not simply determine whether, from its point of view, the language is clear; rather, the court will consider the proffer of the parties and determine if there are objective indicia that the contract terms are susceptible of different meanings. Id. at 150 (citation omitted). Before making a finding concerning the existence of ambiguity, the court will consider the contract language, the meanings suggested by counsel, and the extrinsic evidence offered in support of each interpretation. In re Teamsters, 989 F.2d at 135 (citation omitted). Once the existence of ambiguity has been found, the interpretation of the ambiguous contract provision is a question of fact. Teamsters Indus. Employees Pension Fund v. Rolls-Royce Motor Cars, Inc. ( In re Teamsters Indus. Employees Welfare Fund), 989 F.2d 132, 135 n. 2 (3d Cir. 1993).
(1) Duration provision
Defendants argue that the Supplement expressly amended the Representation Agreement to provide that its duration was extended through September 30, 2004 only, and that the evergreen provision was thereby deleted. As extrinsic evidence, Defendants present the affidavit of Dr. Rebmann, wherein he states that the evergreen provision was deleted after the parties discussed whether to extend the Representation Agreement for ten years or three years, and agreed to an extension of six years. Defendants argue that it would be nonsensical for the parties to agree upon a fixed six year term and then include the evergreen provision.
Plaintiff takes issue with Defendants' contention that the Supplement eliminated the evergreen provision in the Representation Agreement. Plaintiff maintains that the Supplement clearly showed an intent to change only one aspect of paragraph 5 of the Representation Agreement, specifically, that the Supplement merely substituted the date of "September 30, 2004" for the date of "September 1, 1999." Plaintiff asserts that the Supplement preserved all other aspects of the Representation Agreement, such as the evergreen provision, the obligation to provide three month's notice if terminated for cause, and Lipoid-Germany's right to terminate without cause or notice if Plaintiff undergoes a change of ownership or control.
After examining the language and structure of the Supplement and the Representation Agreement, the parties' competing interpretations, and extrinsic evidence, the court finds that the Supplement is ambiguous as a matter of law with respect to the duration provision in the Representation Agreement. Paragraph 1 of the Supplement states, "The duration of the [Representation Agreement] will be prolonge [ sic] until sept. [ sic] 30th 2004. The other item of point 5 [in the Representation Agreement] will be unchanged." The reference to "other item" in the singular is ambiguous because point 5 in the Representation Agreement contains many items, including the evergreen provision and the right to terminate provisions. Whether the singular "item" refers to the evergreen provision (which would preserve it) or not is ambiguous because the evergreen provision is in the same sentence as the original date certain, September 1, 1999, in the Representation Agreement. Therefore, it is unclear whether the sentence in the Supplement prolonging the duration of the Representation Agreement until September 30, 2004 is the only change or whether, alternatively, it eliminated the second half of the sentence in the Representation Agreement that contained the evergreen provision by failing to mention it.
Because the duration provision is ambiguous and there are genuine issues of material fact as to whether the Supplement extended the duration of the Representation Agreement only until September 30, 2004 and eliminated the evergreen provision, the court will deny Defendants' motion for partial summary judgment striking claims for damages beyond September 30, 2004.
Defendants also argue that, under New Jersey law, a contract that is open-ended and indefinite in its duration cannot be enforced. The court disagrees. Doyle v. Northrop Corp., 455 F. Supp. 1318 (D.N.J. 1978), which Defendants cite, involved an agreement which was not enforced on vagueness grounds. In re Estate of Miller, 90 N.J. 210 (N.J. 1982), another case cited by Defendants, allowed for perpetual contract performance if the parties manifested such an intention in a contract.
(2) Exclusivity provision
Defendants argue that nothing in the language of the Supplement precludes Lipoid-Germany from conducting direct sales of its own products through its own company in the United States. Dr. Rebmann represents in his affidavit that it was his understanding that Lipoid-Germany could conduct sales through its own company in the United States, and that Vernon Walden would remain its only distributor. Defendants argue that the language "the distributor" in the Supplement evinces such an understanding. Defendants also argue that the parties' course of conduct supports this understanding; more specifically, that Plaintiff acquiesced in the establishment of Lipoid-California.
Plaintiff asserts that it strongly objected to the establishment and activities of Lipoid-California, and submits as evidence two letters dated August 22, 2001 and September 7, 2001, in which Plaintiff informs Dr. Rebmann that it considered the establishment of Lipoid-California to be a violation of the exclusivity provision in the Representation Agreement. Plaintiff also presents the affidavit of James Borkan, wherein he asserts that Plaintiff would not have entered the Supplement if it had included any intention to eliminate the exclusivity provision. Plaintiff also claims that its understanding was that Lipoid-Germany contemplated establishing its own manufacturing company in the United States, not a distributor that would compete with Plaintiff. Plaintiff notes that the sole sentence comprising ¶ 2 of the Supplement does not mention any change to Plaintiff's exclusive rights. Plaintiff further argues that its understanding is consistent with the parties' course of dealing since 1989 and that Defendants have not presented any evidence that the parties intended to change their longstanding, exclusive relationship. Plaintiff also addresses the possibility that it was a mistake for the language in the Supplement to refer to Plaintiff as "the" distributor instead of "a" distributor; Plaintiff argues that a unilateral mistake cannot create ambiguity or alter the plain meaning of the face of the agreement.
After examining the language and structure of the Supplement and the Representation Agreement, the parties' competing interpretations, and extrinsic evidence, the court finds that the Supplement is ambiguous as a matter of law with respect to the exclusivity provision in the Representation Agreement. Paragraph 2 of the Supplement states that Vernon Walden would be "the" distributor if Lipoid established "an own company" in the United States. It is ambiguous whether ¶ 2 amends the Representation Agreement by eliminating the exclusivity provision for two reasons. First, ¶ 2 might reasonably be construed as amending the exclusivity provision in the Representation Agreement by allowing Lipoid-Germany to set up "an own company." However, it is also reasonable to construe ¶ 2 as leaving the exclusivity provision untouched for two reasons — (1) ¶ 2 does not mention exclusivity or refer to paragraph 1 of the Representation Agreement, which contains the exclusivity provision, and (2) the type of "own company" contemplated in ¶ 2 is ambiguous as to whether it refers to a manufacturing company or a distributor. Second, the language that Vernon Walden would be "the" distributor is reasonably susceptible to two meanings — that it would remain the one and only distributor, or become one of several distributors.
Therefore, the court will deny Plaintiff's motion for partial summary judgment declaring that the Supplement did not eliminate Plaintiff's exclusive rights under the Representation Agreement.
E. Appeal of Magistrate Judge's Decision
A district court reviewing a magistrate judge's order on a non-dispositive motion may modify or vacate the order only if the ruling was "clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A); FED. R. CIV. P. 72(a); Loc. R. 72.1(c)(1); see N.L.R.B. v. Frazier, 966 F.2d 812, 816 (3d Cir. 1992). "A finding is clearly erroneous 'when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. A ruling is contrary to law if the magistrate judge has misinterpreted or misapplied applicable law." Bobian v. CSA Czech Airlines, 222 F. Supp. 2d 596, 601 (D.N.J. 2002) (citations omitted).
Federal Rule of Civil Procedure 30(e) provides, in relevant part, that:
If requested by the deponent or party before completion of the deposition, the deponent shall have 30 days after being notified by the officer that the transcript or recording is available in which to review the transcript or recording and, if there are changes in form or substance, to sign a statement reciting such changes and the reasons given by the deponent for making them. . . .
The original answers given in a deposition are not to be stricken when changes are made. E.g., Podell v. Citicorp Diners Club, Inc., 112 F.3d 98, 103 (2d Cir. 1997) (citation omitted). Rather, a deponent's original answers should be admitted into evidence even when he amends his deposition testimony. Id. (noting that the deponent is "[o]f course . . . free to introduce the amended answer and explain the reasons for the change") (citation omitted).
These principles, however, do not help Defendants' appeal of Judge Wigenton's decision. Although Defendants have cited numerous opinions — Podell v. Citicorp Diners Club, Inc., 112 F.3d 98 (2d Cir. 1997), Elwell v. Conair, Inc., 145 F.Supp.2d 79 (D.Me. 2001), Tingley Systems, Inc. v. CSC Consulting, Inc., 152 F.Supp.2d 95 (D.Mass. 2001), Innovative Marketing Technology, L.L.C. v. Norm Thompson Outfitters, Inc., 171 F.R.D. 203, (W.D.Tex. 1997), and Thorn v. Sundstrand Aerospace Corp., 207 F.3d 383 (7th Cir. 2000) — to suggest a broad reading of Rule 30(e)'s language, none of these opinions address the issue of whether errata sheets may be submitted where the deponent has already sworn that his deposition transcripts, together with prior errata sheets, are true and correct.
This issue has been addressed in Qatar Nat'l Navigation Transport Co., Ltd. v. Citibank, N.A., No. 89 Civ. 464 (CSH), 1996 WL 601540 (S.D.N.Y. Oct. 18, 1996). The court in Qatar declined to receive an errata statement where the deponent had already endorsed his deposition transcripts as correct. Id. at *1. The court found that there was no authority entitling the plaintiff to file an errata statement changing the deponent's prior sworn declaration. Id. Judge Wigenton's reasoning is substantially similar to the Qatar decision and is not clearly erroneous or contrary to law.
Regarding the timeliness issue, Defendants concede that "the Federal Rules undeniably set a time limit," but argue that the parties had a prior agreement to permit late service of errata changes. Plaintiff argues that their agreement merely allowed for submission of certifications and errata within a reasonable time after the deposition transcripts were available, and in no way waived its right to object to Defendants' supplemental errata sheets. Judge Wigenton's findings — i.e., that the proposed supplemental errata sheets were untimely and that, notwithstanding the untimeliness issue, changes to deposition transcripts that have been certified under oath are not permitted — are not clearly erroneous or contrary to Rule 30(e). The court therefore affirms Judge Wigenton's order rejecting the submission of supplemental errata sheets.
III. CONCLUSION
For the reasons set forth above, the court will dispose of the various motions and appeal in the following manner:
A. Robinson-Patman Act claims:
· DENY Defendants' motion for partial summary judgment dismissing Plaintiff's § 2(a) Robinson-Patman Act claim against Lipoid-Germany; and
· DENY Defendants' motion for partial summary judgment dismissing Plaintiff's § 2(f) Robinson-Patman Act claim against Lipoid-California; and
· DENY Defendants' motion for partial summary judgment that Plaintiff was merely an agent; and
· GRANT Plaintiff's motion for partial summary judgment that Plaintiff was a "purchaser" for Robinson-Patman Act purposes; and
· DENY Plaintiff's and Defendants' cross-motions for partial summary judgment as to whether Lipoid-Germany made "sales" or intracompany transfers to Lipoid-California; and
· DENY Defendants' motion for partial summary judgment that "two contemporaneous sales" were not made and that Lipoid-California did not compete with Plaintiff on the same functional level; and
· GRANT Plaintiff's motion for partial summary judgment that "two contemporaneous sales" were made and that Lipoid-California competed with Plaintiff on the same functional level; and
· GRANT Plaintiff's motion for partial summary judgment striking certain affirmative defenses to the Robinson-Patman Act claims; andB. Tortious interference claim
· DENY Lipoid-California's motion for partial summary judgment on Plaintiff's tortious interference claim; andC. Breach of contract claims
· DENY Defendants' motion for partial summary judgment striking claims for damages beyond September 30, 2004; and
· DENY Plaintiff's motion for partial summary judgment declaring that the Supplement did not eliminate Plaintiff's exclusive rights under the Representation Agreement; andD. Appeal of magistrate judge's decision
· AFFIRM Judge Wigenton's November 19, 2004 order rejecting the submission of supplemental errata sheets.