Business Finance
read the case study and the chapter and follow the instructions

Question Description

You should be prepared to discuss the following about your case in class :

1-Summarize the case in Event/Meeting Proessional Terms (Avoiding the legal jargon ). Do you agree with the judgement ? why or why not?

2-Identify the risk management/legal issues pertaining to this case.

3-identify what each of the parties could have done to avoid litigation

4-what does the outcome of this case mean for events and meeting industry ? How could you utilize this case in your own organization?


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CORE TERMS: boat, summary judgment, per se rule, per se, rule of reason, anti-competitive, proffer, boycott, antitrust laws, antitrust, anticompetitive, competitor, discovery, matter of law, antitrust claim, restraining, invocation, concerted, space, Sherman Act, genuine issue, contract claim, restrain trade, supplemental, price-fixing, competitive, touchstone, literally, exhibited, requisite COUNSEL: [*1] For plaintiff: Allen M. Lenchen, Upper Marlboro, Md. For defendant: Stuart C. Law, Washington, D.C. OPINION BY: FLANNERY OPINION Memorandum FLANNERY, D.J.: This matter comes before the court on defendant's motion for summary judgment. Defendants maintain that there are no genuine issues of material fact and that plaintiff's antitrust claim cannot be maintained because, as a matter of law, plaintiff cannot show any anti-competitive effect resulting from defendants' actions in this case. Defendants further maintain that if this court grants summary judgment on plaintiff's antitrust claim, then it should also dismiss plaintiff's pendent state law contract claim. In response, plaintiff asserts that there are numerous genuine issues of material fact that must be decided by this court before the merits of its claims can be judged; specifically, plaintiff argues that further facts must be developed as to both the anti-competitive effect of defendants' actions and defendants' intent. For the reasons discussed below, defendants' motion for summary judgment is granted. Facts Plaintiff, Family Boating Center, Inc., originally brought this action as a result of an alleged refusal of the defendants [*2] to sell plaintiff exhibition space at a five-day boat show held at the D. C. Armory. Plaintiff maintains that this refusal was the product of concerted group activity directed at it by defendants, among whom are a number of plaintiff's competitors. The action was originally brought, together with an application for a temporary restraining order, on March 23, 1981, two days before the boat show was to begin. At that time, plaintiff alleged that forty to eighty thousand people were expected to attend the show, complaint at 6, and that there was no alternative substitute available to it for services in a comparable boat show. Plaintiff further alleged that it would lose gross sales of $ 600,000.00 and net profits of $ 150,000.00 if it was not allowed to participate in the show. This court denied plaintiff's application for a temporary restraining order. In support of their motion for summary judgment, defendants proffer the following facts: (1) that only 6,757 people attended the whole five-day boat show; (2) that over fifty percent of the exhibition space at the show was used for recreational vehicles, which do not compete with plaintiff, and (3) that Tri-State Marine Distributors, [*3] Inc., one of plaintiff's competitors who did participate in the show, sold just three boats for profits of just over $ 5,000.00 at the show. On the basis of these facts, defendants assert, in effect, that the show at issue was simply too small to enable plaintiff to be able to establish any anticompetitive effect resulting from plaintiff's exclusion from the show. As a result, defendants argue that they are entitled to summary judgment. On September 30, 1981, this court heard oral argument on defendant's motion for summary judgment. At that time, the court determined that the issues presented, especially the issue of anti-competitive effect, needed additional clarification and, as a result, the court held its ruling in abeyance and granted the parties sixty additional days in which to take discovery and further develop the record as to the issues underlying defendants' motion. See Scrogins v. Air Cargo, Inc., 534 F. 2d 1124 (5th Cir. 1976); 4 Moore's Federal Practice P26.72. After this additional period of discovery, both the plaintiff, on November 30, 1981, and the defendant, on December 8, 1981, filed supplemental memoranda discussing the issues involved in defendants' motion [*4] for summary judgment. Discussion Two guiding principles set the parameters governing application of the antitrust laws to any particular case: the "rule of reason" and the "per se" rule. Together, the two principles tend to condemn arrangements which have the purpose or effect of significantly restraining competition and to validate those which do not. See Sullivan, Antitrust at 166. The touchstone of the Sherman Act in all cases is competition, Mardirosian v. American Institute of Architects, 474 F. Supp. 628, 639 (D.D.C. 1979); "[In both the per se category and under the rule of reason] the purpose of the analysis is to form a judgment about the competitive significance of the restraint." National Society of Professional Engineers v. United States, 435 U.S. 679, 692 (1978). The "rule of reason" softens the otherwise all-encompassing language of the antitrust laws 1 so that the antitrust prohibitions apply only to those activities that unreasonably restrain trade. As its name suggests, the "rule of reason" requires an impact analysis to be performed to determine whether the alleged trade restraint is in fact unreasonable. This analysis involves a number of factors, [*5] 2 but essentially it entails a determination of whether the alleged restraint has a significantly anticompetitive effect. 1 The plain language of the antitrust laws condemns any concerted conduct which restrains trade. See 15 U.S.C. § 1. 2 Such factors include: (1) the type of restraint involved, (2) the purpose of the restraint, (3) any benefits to competition resulting from the restraint. (4) any detriment to competition resulting from the restraint, and (5) the market power possessed by those exercising the restraint. See Sullivan at 186-90. The "per se" rule can best be viewed as an exception to, or a subset of, the "rule of reason". See Sullivan at 193. The per se rule holds that certain arrangements or restraints, by virtue of their obvious and necessary effect on competition, are conclusively presumed to be unreasonable restraints on trade. 3 See Northern Pacific Railway v. United States, 356 U.S. 1, 5 (1958). Once the existence of such an arrangement is established, rule of reason analysis is supplanted and no evidence of actual public injury is required. See Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656 (1961). Modern antitrust [*6] analysis, however, requires more than just the existence of one of these prohibited activities; it requires a further showing of anticompetitive purpose or intent. See Smith v. Pro Football, Inc., 593 F. 2d 1173, 1178 (D.C. Cr. 1978) (purpose to exclude is key characteristic of per se decisions); McQuade Tours, Inc. v. Consolidated Air Tour Mcnual Committee, 467 F. 2d 178, 187 (5th Cir. 1972) (touchstone of per se illegality is purpose of arrangement). 3 Such historically condemned activities include price-fixing, market division and group boycotts. In any given case, therefore, to establish an antitrust violation, a claim must meet the criteria of either the rule of reason or the per se rule. Of course, as noted above, the per se rule is not applicable to every case, but only to those wherein one of the specific prohibited arrangements exists. In the instant case, plaintiff has alleged that the defendants through concerted group activity illegally refused to sell it space at the boat show; these allegations appear at first glance to bring this case within the per se prohibition against group boycotts. 4 See McQuade, supra. 4 Indeed, invocation of the per se rule appears to be plaintiff's sole argument against defendants' motion for summary judgment. See Plaintiff's Supplemental Memorandum In Opposition To Defendants' Motion for Summary Judgment. [*7] However, "[o]n the other hand, it is not clear that the attempt, here accomplished... by a... refusal to deal... is made in circumstances where the potential for effectuation of a true explicit boycott (in the sense of causing a near total inability to compete) is serious enough to warrant a per se approach." Mardirosian, 474 F. Supp. at 638 n. 19; see Sullivan at 86 (purpose and effect as guides to characterization as per se boycott); cf. Smith v. Pro Football, Inc., 593 F. 2d at 1178 (refusal to deal with competitors type boycott effective only where such dealing necessary in order to carry on their business). Concern over proper invocation of the per se approach is heightened by the Supreme Court's recent admonition against applying "easy labels" to commercial conduct in order to bring that conduct under a per se regime. 5 See Broadcast Music, Inc. v. Columbia Broadcasting Systems, Inc., 441 U.S. 1 (1979).As the Broadcast Music Court further noted: 5 Since a plaintiff will always benefit by invocation of the per se approach because it does away with the necessity for proving anti-competitive effect under the rule of reason, there is obviously a strong incentive to attempt to apply it to all sorts of cases. [*8] [A] literal approach does not alone establish that this particular conduct is one of those types [per se ] or that it is "plainly anticompetitive" and very likely without "redeeming virtue." Literalness is overly simplistic and often overbroad. When two partners set the price of their goods or services they are literally "pricefixing," but they are not per se in violation of the Sherman Act. Thus it is necessary to characterize the challenged conduct as falling within or without that category of behavior to which we apply the label "per se price-fixing." Id. at 8-9. Thus, even though defendants' actions in this case may "literally" seem to constitute a "group boycott," such a literal finding alone is insufficient to characterize those actions as per se violations of the antitrust laws. Before defendants' actions can be so characterized, an inquiry must be made to determine "whether the effect and... purpose of the practice is to threaten the proper operation of our predominantly free market economy -- that is, whether the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output." Id. at 19-20; see Continental [*9] T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49-50 (1977) (per se rule appropriate only when conduct is manifestly anticompetitive). Although the scope of such an inquiry should not be as broad as the burdensome level of analysis required under the rule of reason, "or else we should apply the rule of reason from the start," Id. at 19 n. 33, nonetheless some significant initial inquiry is necessary. Conducting such an initial inquiry in this case, the court is considerably impressed by defendants' factual proffers as to the actual show in dispute, see text supra at 1-2, and by defendants' additional proffers: (1) that there are a significant number of boat shows held each year in this area, see Defendants' Motion For Summary Judgment at 3 & Affidavit of J. Riley Smirnow, (2) that the plaintiff itself exhibited at two major boat shows in the area just before the show in dispute, 6 id., and (3) that plaintiff also exhibits boats at various shopping center shows in the area. Id. Taken together, the sum of these proffers makes it almost impossible to imagine that this one, small, isolated boat show, and plaintiff's absence from it, could have any significant effect whatsoever on [*10] the competition among boat dealers in this area. 7 6 Plaintiff exhibited at the Chesapeake Bay Show from January 24 -- February 1, 1981 and at the Washington International Boat Show from February 14-22, 1981. At this last show, plaintiff, by its own admission, sold ten times as many boats as its competitor, Tri-State Marine Distributors, Inc., sold at the show in dispute in this case. See Plaintiff's Second Answers to Interrogatories at No. 3. 7 The defendants and, or perhaps, through, the show involved in this case simply do not possess the requisite market power, see note 2 supra, to affect significantly the competition in this industry (i.e. they possess no essential facility). In response, plaintiff proffers nothing but the argument that its allegations sufficiently establish a per se violation. 8 This of course begs the question, however, because the instant "competitive effects" inquiry is being undertaken to determine whether defendants' actions should be considered as per se violations. 8 Indeed, after the court allowed 60 additional days for discovery, especially as to anti-competitive effect, plaintiff took numerous depositions and discovery, but still did not proffer any facts as to the anti-competitive effect of defendants' actions. [*11] Rule 56(e) states: When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him. Fed. R. Civ. P. 56(e) (emphasis supplied). In the instant case, as against the conclusive evidence supporting defendants' motion on the issue of anti-competitive effect, the plaintiff has responded with nothing at all to controvert the overwhelming implications of defendants' proffers. This being so, defendants' proffers stand uncontroverted and this court finds, as a matter of law, that no genuine issue exists as to the anti-competitive effect of defendants' actions and that said actions can in no way be viewed as significantly affecting competition in this area's boat retail business. Defendants thus are entitled to summary judgment as a matter of law. 9 9 While the court recognizes that "summary procedures should be used sparingly in antitrust litigation," 6 Moore's, Federal Practice P56.17(5) (1980), it also recognizes that "[i]t was a desire to eliminate the public injury of aiminished competition which impelled Congress to enact the antitrust laws." Havoco of America, Ltd. v. Shell Oil Co., 626 F. 2d 549, 554 (7th Cir. 1980). Although there exists some possibility of private injury to plaintiff as a result of the events underlying this lawsuit, there is simply no possibility of the requisite threshold public injury. [*12] Because plaintiff's antitrust claim has been resolved and because that claim was the linchpin of this court's jurisdiction over plaintiff's claims, the court has determined, in accordance with the guidelines set forth by the Supreme Court in United Mine Workers v. Gibbs, 383 U.S. 715, 722 & 726 (1966), that plaintiff's pendent state law contract claim should be dismissed without prejudice to its being re-brought in an appropriate state form. An appropriate Order accompanies this Memorandum. ...
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Final Answer

Attached.

Legal and Ethical Compliance – Outline
I. Introduction
II. Summary of the case
A. Reasons for agreeing with the ruling
III. The legal issue in the case
A. Antitrust claim
IV. What each party could have done to avoid litigation
A. Washington Area Marine Dealers Association
(i)

Abide by their legal responsibility

(ii)

Observe duty and degree of care

B. Family Boating Inc.
(i)

Consider due diligence

V. Meaning of the outcome to events and meeting industry


Running head: LEGAL AND ETHICAL COMPLIANCE

Legal and Ethical Compliance
Name
Institution

1

LEGAL AND ETHICAL COMPLIANCE
Legal and Ethical Compliance
Events, alongside law and order, comprise the part of the social fabric in human lives.
Different countries have different laws aimed at serving the common good and protecting the
cit...

henryprofessor (65490)
Carnegie Mellon University

Anonymous
Return customer, been using sp for a good two years now.

Anonymous
Thanks as always for the good work!

Anonymous
Excellent job

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