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Cromar Co. v. Nuclear Materials and Equipment Corp.

argued: March 26, 1976.



Seitz, Chief Judge, Rosenn and Garth, Circuit Judges. Rosenn, Circuit Judge, Concurring and Dissenting.

Author: Garth

GARTH, Circuit Judge.

This private antitrust suit raises two questions for our consideration. The first concerns standing to maintain a Sherman Act § 2 monopolization claim. The second involves the admissibility of evidence to establish a Sherman Act § 1 conspiracy in restraint of trade claim arising from the termination of a contract. In contrast to the district court, we conclude that the plaintiff has standing under § 2 and that the plaintiff's evidence was admissible with respect to its § 1 case. Hence, we reverse and remand for trial.


Plaintiff-appellant The Cromar Company commenced this private antitrust action against Atlantic Richfield Co. (ARCO) and its wholly owned subsidiary Nuclear Materials and Equipment Corp. (NUMEC). Cromar, a leading manufacturer of prefinished wood parquet flooring,*fn1 alleged Sherman Act violations arising from its contractual dealings with the defendants-appellees.

Defendants ARCO and NUMEC had undertaken a research program resulting in the development of a wood plastic composite with properties superior to those of wood alone. This process involved impregnating wood with a liquid plastic, a monomer, and thereafter irradiating the wood, thereby converting the liquid monomer into a solid polymer. The resulting wood-plastic composite, more durable than wood, could then be used to make parquet flooring.

On March 19, 1969 Cromar entered into a contract with NUMEC which was guaranteed by ARCO. Under the contract Cromar was to convert lumber into finished wood fillets,*fn2 NUMEC would subject these fillets to radiation, and then Cromar was to assemble these wood-plastic fillets into parquet panels.*fn3 ARCO marketed this wood-plastic composite flooring under the brand name of "Perma-Grain."

On June 19, 1970 NUMEC and ARCO terminated the agreement claiming that Cromar failed to assemble parquet panels in accordance with the yield requirements of the contract. Following this termination Cromar was financially unable to continue in business. This action followed.

Cromar's amended complaint alleged that NUMEC and ARCO had engaged in conduct which violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2.*fn4 The amended complaint states:

11. During the period January 1, 1969, and June 19, 1970, and thereafter, Defendants combined and conspired among themselves . . . in restraint of trade or commerce among the several states, to force Plaintiff out of business and production of irradiated parquet wood flooring, irradiated prefinished parquet wood flooring, prefinished praquet [sic] wood flooring, praquet [sic] wood flooring, prefinished wood flooring, and wood flooring.*fn5

13. During the period January 1, 1969, and June 19, 1970 . . . Defendants attempted to monopolize and conspired to monopolize among themselves . . . part of the trade or commerce of the several states, the production, sale and distribution of irradiated prefinished parquet wood flooring, irradiated parquet wood flooring, prefinished parquet wood flooring, parquet wood flooring, prefinished wood flooring, and wood flooring.

14. Defendants, during the period January 1, 1969, and thereafter sold irradiated prefinished parquet wood flooring and parquet wood flooring below cost in an attempt to monopolize the portions of trade and commerce set forth in paragraph 13 supra and to eliminate competition and potential competition, including Plaintiff therefrom.

Brief for Appellees at A-3.

Following discovery the defendants NUMEC and ARCO moved for summary judgment. In an opinion and order the district court (1) denied the defendants' motion for summary judgment as to the § 1 claim; and (2) granted summary judgment as to the § 2 claim based upon Cromar's lack of standing.

The § 1 claim was then tried to a jury. Cromar's attempt to introduce evidence concerning the defendants' actions under the contract and the defendants' conduct in the wood-plastic flooring industry was not permitted. Thereafter, Cromar rested its case and the defendants moved for a directed verdict. The district court granted the motion and this appeal followed. Our jurisdiction is predicated upon 28 U.S.C. § 1291.


We initially address the summary judgment entered in favor of NUMEC and ARCO on Cromar's § 2 claim asserting monopolization.*fn6 The district court based its conclusion that Cromar lacked standing to sue under § 2 of the Sherman Act upon what it conceived as the settled law of this Circuit. Relying upon our decisions in Harrison v. Paramount Pictures, Inc., 115 F. Supp. 312 (E.D. Pa. 1953), aff'd 211 F.2d 405 (3d Cir.), cert. denied, 348 U.S. 828, 99 L. Ed. 653, 75 S. Ct. 45 (1954) and Melrose Realty Co. v. Loew's Inc., 234 F.2d 518 (3d Cir.), cert. denied, 352 U.S. 890, 1 L. Ed. 2d 85, 77 S. Ct. 128 (1956), the district court concluded that this Court had created "a 'competitors only' standing doctrine for anti-trust actions." 395 F. Supp. 198, 202 (M.D. Pa. 1975). Since Cromar was "not a competitor" of either ARCO or NUMEC in the wood-plastic flooring market, the district court felt constrained to grant summary judgment in favor of the defendants on Cromar's § 2 claim. Id.

Thereafter Cromar moved for reconsideration of the district court's order with respect to standing under § 2 based upon this Court's decision in International Association of Heat and Frost Insulators and Asbestos Workers v. United Contractors Assn., Inc. of Pittsburgh, Pa., 483 F.2d 384 (3d Cir. 1973), amended 494 F.2d 1353 (3d Cir. 1974). Despite language in International Association that cast doubt upon the district court's analysis of the issue of standing, the district court denied reconsideration based upon its view that Harrison and Melrose were still controlling. App. at 150a-152a.

Cromar argues on appeal that this Circuit abandoned the "direct injury" test of standing represented by Harrison-Melrose in favor of the "target area" test of International Association.*fn7 Alternatively, Cromar contends that it may assert its claim based upon either of the two principal tests of standing ...

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