J.D. Fields & Co. v. Nucor-Yamato Steel

Citations: 976 F. Supp. 2d 1051; 2013 WL 5467104; 2013 U.S. Dist. LEXIS 140669Docket: Case No. 4:12-cv-00754-KGB

Court: District Court, E.D. Arkansas; September 30, 2013; Federal District Court

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Plaintiff J.D. Fields Company, Inc. has filed a lawsuit against defendant Nucor-Yamato Steel Company (NYS), asserting violations of the Robinson-Patman Act and several state-law claims including tortious interference, fraudulent misrepresentation, negligent misrepresentation, conspiracy, and breach of contract. NYS has moved for judgment on the pleadings, which the Court has partially granted and partially denied.

NYS manufactures and supplies structural steel products, including H-pilings, and is one of three U.S. manufacturers of this product. Fields, also a supplier of structural steel, entered a seven-year exclusive supply agreement with NYS in May 2005, under which NYS was to supply all of Fields's requirements for structural steel in North America. Fields alleges that during this period, NYS engaged in favoritism by providing preferential pricing to Skyline Steel LLC, a competitor and distributor of H-pilings, undermining Fields's competitive position.

Fields claims it repeatedly sought assurances from NYS regarding equal pricing compared to other distributors, including Skyline. Fields asserts that, despite this, it discovered that NYS sold H-pilings to Skyline at lower prices than those quoted to Fields, resulting in significant financial losses and the inability to compete effectively for government and other contracts. Fields maintains that NYS's actions granted Skyline a competitive edge, which directly harmed Fields's business opportunities during the contractual period.

Fields alleges that NYS colluded with Skyline to undermine Fields’ pricing by misrepresenting the availability of structural steel products, particularly H-pilings. When Fields inquired about H-pile availability for project quotes, NYS claimed that no quantities were available and often declined to produce additional rollings for Fields, while simultaneously supplying H-piles to Skyline. This resulted in Fields being unable to compete effectively for contracts, as Skyline received preferential treatment in both pricing and availability.

Specific instances illustrate this alleged misconduct. In July 2009, NYS provided Fields a mill price of $39.00/cwt and additional transportation costs, whereas Skyline was offered a lower price, preventing Fields from submitting competitive quotes for a highway interchange project in San Bernardino County. In mid-August 2009, NYS quoted Fields $35.00/cwt for H-piles for another phase of the same project, while other contractors, including Skyline, received lower quotes, disadvantaging Fields further. Later, in late August 2009, NYS quoted Fields $37.00/cwt for H-piles and beams, despite Fields indicating it could not compete at that price, while Skyline received lower offers.

Additionally, Fields claims NYS denied it quotes for steel products for jobs in Puerto Rico, despite the absence of restrictions in their supply agreement for that market. Fields contends that NYS effectively granted Skyline exclusive access to supply H-piles for projects in Puerto Rico, further limiting Fields' ability to compete.

Fields alleges that NYS unreasonably terminated his distribution rights for sheet piles, a structural steel product, due to his prior relationship with a foreign manufacturer. He contends that NYS provided sheet piles to other distributors, including Skyline, even while Skyline sold foreign-manufactured sheet piles domestically. Consequently, Fields was compelled to buy sheet piles from third parties at higher prices than those offered by NYS. His seven-year contract with NYS ended on May 4, 2012, and shortly after, NYS announced an acquisition of Skyline, completed by June 21, 2012. On June 26, 2012, Fields filed a lawsuit in the United States District Court for the Southern District of Texas, alleging violations of the Robinson-Patman Act and several other claims. NYS moved to dismiss the complaint on August 20, 2012, citing lack of personal jurisdiction and improper venue, or alternatively, to transfer the case. The court transferred the case on December 4, 2012, and NYS subsequently answered the complaint and moved for judgment on the pleadings. NYS argues that Fields's complaint fails to state a claim for relief. The legal standard for such a motion is aligned with that for a motion to dismiss for failure to state a claim, requiring a “short and plain statement” of the claim, with enough factual matter to suggest plausibility rather than mere possibility. The complaint must not consist solely of conclusory statements but must provide sufficient detail to allow the court to infer liability.

The plausibility standard allows a well-pleaded complaint to advance even if actual proof of the alleged facts seems improbable. The Supreme Court's decision in Twombly replaced the previous 'no set of facts' standard from Conley v. Gibson, establishing that a complaint should only be dismissed if it is clear that the plaintiff cannot prove any set of facts that would support their claim. This standard was reaffirmed in Iqbal, which emphasized that the notice pleading standard of Rule 8(a)(2) remains intact. A claim is plausible if it includes factual content that permits a reasonable inference of the defendant's liability, without requiring detailed fact pleading. The court must evaluate the complaint as a whole, considering the totality of the factual allegations, and apply context-specific judgment.

The Eighth Circuit has indicated that the liberal pleading rules of Fed. R. Civ. P. 8 apply equally to antitrust cases, highlighting that dismissals in such cases should be rare prior to full discovery since the defendant typically controls the evidence. 

NYS contends that Fields's complaint does not adequately state a claim under the Robinson-Patman Act, asserting that Fields merely claims non-actionable price discrimination. The Robinson-Patman Act prohibits discriminatory pricing among different purchasers of similar commodities when such discrimination could harm competition. It does not outlaw all price differences but targets those that threaten competitive integrity. The Supreme Court has recognized three types of competitive injury pertinent to Robinson-Patman claims: primary line, secondary line, and tertiary line.

Primary-line cases involve competitive harm at the level of the seller and its direct competitors, while secondary-line cases relate to price discrimination affecting the seller's customers, and tertiary-line cases involve injuries to competition at the level of the purchasers' customers. Fields alleges secondary-line injury against NYS, claiming NYS is the discriminating seller and Fields the disfavored purchaser. To establish a secondary-line injury claim, Fields must demonstrate: 1) the relevant sales of H-pilings occurred in interstate commerce; 2) the H-pilings were of 'like grade and quality'; 3) NYS engaged in price discrimination between Fields and another purchaser; and 4) such discrimination may harm competition in favor of a favored purchaser. The Robinson-Patman Act mandates at least two transactions at different prices to different actual buyers to constitute price discrimination. A single sale does not violate the Act; thus, an offer to sell at a higher price or a refusal to sell does not constitute discrimination. Competitive injury is marked by the diversion of sales from a disfavored to a favored purchaser, and the complaint must be supported by direct evidence of this diverted sales. The court recognizes that a significant price reduction to a favored competitor over time may infer competitive injury, but actual competition with the favored purchaser must be present to demonstrate such injury. Fields claims NYS violated the Robinson-Patman Act by charging Skyline lower prices than those offered to Fields, making products available to Skyline that were not available to Fields, and supplying Skyline in areas where Fields was not supplied.

Fields alleges that NYS's actions hindered its ability to compete with Skyline by preventing competitive quotes for certain projects, thereby reducing competition in the market. Fields claims that NYS's preferential pricing and distribution towards Skyline resulted in a substantial lessening of competition or the creation of a monopoly. The Court agrees with NYS that Fields has abandoned claims related to NYS's alleged violations of the Robinson-Patman Act regarding unequal product availability and geographic supply due to Fields' failure to respond to NYS's motion. Consequently, NYS's motion for judgment on these claims is granted.

The remaining issue pertains to whether Fields has sufficiently alleged a claim for price discrimination under the Robinson-Patman Act that withstands NYS's motion for judgment. NYS contends that Fields's complaint does not meet the two-sales requirement or demonstrate competitive injury. Specifically, NYS argues that Fields does not allege two completed, actionable sales but instead relies on non-actionable quotes or offers. Fields counters that its allegations reflect systematic price discrimination and provides examples of specific sales to both Fields and Skyline at different prices concurrently, supported by long-term supply contracts.

Fields asserts that the two-sales requirement is met due to these supply contracts and cites case law indicating that parties to executory contracts are considered 'seller' and 'purchaser' under the Robinson-Patman Act. It is noted that a 'purchase' is legally recognized once there is mutual assent in negotiations, even if the contract remains executory, meaning delivery and payment are not essential for Robinson-Patman claims.

In En Vogue v. UK Optical Ltd., the court recognized purchaser status under the Robinson-Patman Act due to a contractual relationship similar to that in Tandet, which involved anticipated minimum purchases. The Fifth Circuit's exception to the two-purchaser requirement is relevant, allowing claims if competitors are engaged in competitive purchasing at the time of price discrimination and if the inability to make a second purchase is linked to the defendant's discriminatory practices. The Eighth Circuit affirmed this exception but also upheld that an established customer, denied the right to purchase a lower-priced item of like quality being sold to a competitor, can sue under the Act. NYS contends that Fields' reliance on the Fifth Circuit’s precedent from Bruce’s Juices has faced criticism and has been limited by other courts, which emphasize the statutory requirement for consummated transactions. Various cases indicate a reluctance to extend the Robinson-Patman Act to claims of failure to sell and suggest that mere price offers do not constitute actionable claims. Courts have described Bruce’s Juices as inconsistent and criticized it for allowing claims without a contractual basis. Ultimately, the court determined that Fields' allegations were sufficient to withstand NYS's motion to dismiss regarding the two-sales requirement under Federal Rule of Civil Procedure 12(b)(6).

The Court clarifies that it does not mandate heightened fact pleading for specific facts, only a sufficient factual basis to state a plausible claim for relief. When evaluating a motion to dismiss, the Court must consider the complaint in its entirety and assess the facts collectively, utilizing judicial experience and common sense. The Court determines that Fields has provided adequate factual context to support a claim of price discrimination under the Robinson-Patman Act.

NYS contends that Fields has failed to demonstrate competitive injury, arguing that Fields has not sufficiently alleged that it and Skyline were competing for sales to the same customer. NYS points to specific paragraphs in Fields’s complaint, which it claims only discuss quotes rather than completed sales. Furthermore, NYS asserts that even where Fields alleges specific sales, it does not indicate that both parties were competing for the same customer at the time of those sales. 

However, the Court finds that Fields’s complaint indicates a pattern of discriminatory pricing in completed sales and asserts that both Fields and Skyline were in direct competition during the alleged discriminatory pricing. Despite Fields not meeting NYS's suggested specificity, the Court believes that further details can be uncovered through discovery. Should Fields fail to substantiate its claims, NYS may seek summary judgment to avoid unnecessary trials.

Lastly, the Court addresses NYS’s argument that the Robinson-Patman Act does not apply to competitive bidding markets, noting that this interpretation was not adopted by the Supreme Court in previous rulings. The Court finds this argument unpersuasive and states it does not need to resolve this issue at this stage, as it remains unclear if this case pertains to a competitive bidding market.

The Court finds that Fields has adequately claimed price discrimination under the Robinson-Patman Act, denying NYS’s motion regarding these claims related to H-pilings. However, the Court grants NYS’s motion on claims concerning product availability and geographic distribution under the same Act. Regarding Fields’s state-law claims, the Court must apply either Arkansas or Texas law based on the choice-of-law provisions in the parties’ contract. Federal district courts in diversity cases must use the forum state's substantive law, including conflict of law rules. Arkansas courts respect choice-of-law provisions if reasonably related to the transaction and not against public policy. NYS argues that Arkansas law governs all of Fields's state-law claims, citing a provision in the supply agreement that states it is governed by Arkansas law. While Fields agrees this applies to the contract action, they contend it does not automatically govern tort claims. The Court references Northwest Airlines, Inc. v. Astraea Aviation Services, Inc., which determined that tort claims closely related to contract performance are governed by the same choice-of-law provision. The Court concludes that Fields's tort claims, which stem from issues of contract performance, similarly fall under the Arkansas law provision.

Determining whether tortious activity occurred necessitates an examination of the contract's warranties and their implications. This analysis aligns with the Northwest Airlines precedent, where choice-of-law clauses dictate that contracts are governed by North Carolina and Iowa law. In this case, Fields’s tort claims are connected to the contract’s performance, governed by Arkansas law. 

Fields claims that NYS engaged in tortious interference by offering Skyline better pricing, product availability, and geographic advantages, which allegedly caused Fields to lose government contracts. The complaint asserts that NYS was aware of the competition between Fields and Skyline and intentionally interfered with Fields’ pricing to Skyline’s benefit, violating U.S. antitrust laws.

Under Arkansas law, the elements of tortious interference include: 1) a valid contractual relationship or business expectancy; 2) the interfering party's knowledge of this relationship; 3) intentional interference causing a breach or termination; and 4) resulting damages to the disrupted party. Additionally, Arkansas law requires the defendant's conduct to be at least ‘improper,’ with guidance from the Restatement (Second) of Torts regarding what constitutes improper behavior. 

NYS argues that Fields’ complaint does not adequately demonstrate that NYS intended to harm Fields or acted improperly under Arkansas law. For a claim of intentional harm, Arkansas law requires that the defendant either desired to cause harm or knew that their actions would likely result in such harm. Fields contends that NYS's actions to undermine Fields in the market satisfy the intent requirement.

NYS argues that Fields has not provided sufficient factual allegations to demonstrate “improper” conduct. NYS claims the complaint suggests it treated another customer more favorably than Fields without any ill intent, portraying itself as a manufacturer delivering good service. In contrast, Fields contends that NYS’s actions adversely affected its expected business relationships, as NYS was aware of Fields’ interest in bidding on projects. Fields alleges that NYS engaged in discriminatory practices to allow Skyline to underbid Fields, thus strengthening Skyline's market position. Specifically, Fields claims NYS misrepresented product availability and pricing to disadvantage Fields while favoring Skyline. Fields describes this conduct as both improper and tortious, citing fraud and antitrust violations. The Court agrees that Fields' allegations could potentially support a tortious interference claim under Arkansas law and the Restatement. NYS further contends that Fields has not plausibly shown it would have secured any business opportunities absent NYS’s alleged conduct, characterizing Fields' claims as vague. However, the Court finds Fields sufficiently stated that its business relationships were impacted by NYS’s actions, meeting the notice-pleading standard required by Rule 8 of the Federal Rules of Civil Procedure. The determination of whether Fields can prove a valid business expectancy disrupted by NYS's actions will be addressed later in the litigation.

NYS's motion for judgment on the pleadings regarding Fields's tortious interference claim is denied, as the court finds sufficient factual allegations to support the claim. Fields alleges that NYS provided false assurances about receiving equal pricing with other distributors and misrepresented product availability. Specifically, Fields claims NYS misled them into believing they were receiving equal pricing compared to Skyline while favoring Skyline with better pricing and product availability. Fields contends that these misrepresentations were material, made either falsely or recklessly, and that they justifiably relied on them to their detriment, resulting in lost contracts and higher prices. 

The court evaluates whether Fields has adequately pleaded fraud according to Rule 9(b) of the Federal Rules of Civil Procedure, which mandates specific details about the fraudulent activity, including the who, what, when, where, and how. The Eighth Circuit emphasizes that the requirement for particularity allows the defendant to respond effectively to allegations. NYS challenges Fields's claims, arguing that they lack basic details regarding the alleged fraudulent actions, although they concede that Fields has provided specific examples of better pricing offered to other customers.

NYS contends that Fields' complaint lacks details regarding when or how NYS allegedly made misrepresentations regarding pricing. In response, Fields asserts that it has provided specific details about the fraudulent misrepresentations, including the time, place, and content, supported by an affidavit from Patrick Burk. This affidavit identifies two key individuals at NYS involved in the misrepresentations, which were made in person and via telephone to Fields' representatives in Houston, Texas. Fields suggests that if the Court finds the complaint insufficient, any relief granted to NYS should allow Fields to amend its complaint to include more specific allegations from Burk's affidavit. 

The Court finds that Fields' complaint does not meet the specificity requirements of Rule 9(b), as it fails to identify the individuals who made the misrepresentations and does not specify what Fields relinquished or gained in reliance on those statements. Consequently, NYS’s motion to dismiss Fields’ fraudulent misrepresentation claim is granted without prejudice, allowing Fields 14 days to amend its complaint.

Regarding the negligent misrepresentation claim, NYS argues that Arkansas law does not recognize such a cause of action. The Court agrees, ruling that Fields has failed to state a claim for negligent misrepresentation, leading to the granting of NYS's motion for judgment on this claim.

In the conspiracy claim, Fields alleges that NYS and Skyline conspired to give Skyline a competitive advantage through preferential pricing and product availability, violating U.S. antitrust laws. Fields claims that this conspiracy resulted in lost contracts and unremunerated damages.

NYS contends that Fields' conspiracy claim is invalid under Arkansas law, which requires that conspiracy be based on an underlying tort, citing Varner v. Peterson Farms, which states that civil conspiracy is not a standalone tort. NYS argues that since Fields' claims for tortious interference and fraudulent misrepresentation are deficient, the conspiracy claim must also fail. Arkansas law defines civil conspiracy as the collaboration of two or more parties to achieve an unlawful purpose or to accomplish a lawful purpose through unlawful means, potentially demonstrated through direct or circumstantial evidence. Fields asserts that NYS and Skyline conspired to give Skyline a competitive edge, causing tortious interference with Fields' business prospects. The Court finds that Fields has adequately alleged tortious interference, thus permitting the conspiracy claim to proceed, and denies NYS's motion to dismiss this claim.

Regarding breach of contract, Fields alleges that NYS violated the supply agreement by not providing equal pricing and by failing to use best efforts in supplying steel products, particularly by restricting the allocation of H-piles. NYS argues these claims contradict the contract's provisions granting it sole discretion over pricing and production scheduling, supported by merger clauses. Fields counters that the Uniform Commercial Code (UCC) governs the contract, which obligates NYS to set prices in good faith. NYS claims Fields did not reference the UCC in the complaint and cannot amend it to introduce what NYS views as a new theory. The Court rejects this argument, clarifying that Fields did not introduce a new claim, and emphasizes that under UCC guidelines, even in an open term contract, the seller must determine prices in good faith, aligning with reasonable commercial standards.

The section emphasizes the necessity of good faith in the performance and enforcement of contracts under Arkansas law, as mandated by Ark. Code Ann. 4-1-304. Good faith is defined as honesty in fact and adherence to reasonable commercial standards of fair dealing. Determinations of good faith are generally factual issues for a jury, as established in Adams v. First State Bank and Midway Auto Sales, Inc. NYS argues that Fields’ complaint lacks specific allegations regarding reasonable commercial standards in the H-piling industry and claims that a mere assertion of a better price offered to another customer is insufficient. NYS references case law indicating that under the UCC, a price set by an open term contract need not be the lowest possible price, as long as it is reasonable. The court, however, rejects NYS's reliance on these cases, asserting they do not support dismissal at the pleading stage. The court highlights that good faith includes both an objective element (commercial reasonableness) and a subjective element (honesty in fact), noting that a breach can occur due to improper motives even if prices seem reasonable. The court concludes that Fields has adequately stated a breach of contract claim related to pricing and will consider Fields’ assertion regarding NYS’s failure to supply products.

Section 2-306 of the UCC, as adopted in Arkansas, mandates good faith obligations in supply contracts. It stipulates that any quantity determined by the seller's output or the buyer's requirements must reflect actual needs in good faith, prohibiting unreasonable quantities compared to estimates or prior outputs. It also imposes a duty on sellers to use best efforts in exclusive dealing arrangements, while buyers must promote sales. NYS contends that the contract allows it to operate without good faith constraints by granting it "absolute right" to manage production. However, the court finds no clear waiver of good faith obligations in the contract, allowing Fields's claims to proceed past a motion to dismiss.

NYS further argues that Fields did not satisfy the contractual notice requirement for claiming a breach regarding supply failures, as defined in the contract. Fields maintains that this issue is factual and not suitable for resolution at the motion to dismiss stage, which the court agrees with, thus allowing Fields’s breach of contract claims to survive.

The court partially grants NYS’s motion for judgment on the pleadings, dismissing Fields's claims under the Robinson-Patman Act related to unequal product availability to different customers and dismissing fraudulent and negligent misrepresentation claims, but allowing Fields the opportunity to amend the complaint. Other claims remain intact. The terms "H-pilings" and "H-piles" are used interchangeably in the complaint. The "covered period" refers to the contract duration from May 4, 2005, to May 4, 2012, while "relevant market" encompasses the structural steel products market, specifically H-pilings, within North America during that timeframe.

Nucor Corporation, as the general partner of NYS, acquired Skyline. The document references Section 1 of the Robinson-Patman Act and its relation to Section 2(a) of the Clayton Act, often cited as 15 U.S.C. 13(a). NYS included a supply agreement in its motion to dismiss, which the Court can consider without converting the motion to one for summary judgment, as it is treated as incorporated by reference into the complaint. This incorporation is relevant for the negligent misrepresentation claim, as Fields acknowledges that Texas and Arkansas tort laws are largely similar, except for this specific count. The parties dispute whether Texas law applies and if it imposes a shorter limitations period on certain tort claims; however, the Court applies Arkansas law and does not address the limitations issue. Fields has pleaded conspiracy as a third cause of action, but the Court will analyze the claims in the order presented by the parties. The contract's paragraph 17 establishes that it constitutes the entire agreement between the parties, superseding prior representations and requiring any amendments to be in writing. The attached terms and conditions state that, unless otherwise agreed in writing, they, along with a Nucor sales order acknowledgment, form the entire agreement regarding the sale of goods, using “Nucor” to collectively refer to Nucor-Yamato Steel Company and its affiliates.