R.W. International Corp. v. Welch Food, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 93-1704

R. W. INTERNATIONAL CORP. AND T. H. WARD DE LA CRUZ, INC.,

Plaintiffs, Appellants,

v.

WELCH FOOD, INC., ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Gilberto Gierbolini, U.S. District Judge]

Before

Breyer, Chief Judge,

Coffin, Senior Circuit Judge,

and Boudin, Circuit Judge.

Jose A. Hernandez Mayoral with whom Rafael Hernandez Mayoral was

on brief for appellants.
Jaime E. Toro-Monserrate with whom Samuel T. Cespedes and Ana

Matilde Nin were on brief for Welch Food, Inc.

Jorge I. Peirats with whom Jacabed Rodriguez Coss was on brief

for Magna Trading Corp.

January 20, 1994

COFFIN, Senior Circuit Judge. The parties in this action

attempted to negotiate a long-term distribution relationship, but

after a year of haggling, defendant Welch Foods, Inc. (Welch)

notified plaintiffs R.W. International Corp. (R.W.) and T.H. Ward

de la Cruz, Inc.,1 that it was calling off the corporate

marriage because of irreconcilable differences. Plaintiffs

claimed that the dissolution of the relationship violated the

Puerto Rico Dealers' Contracts Act, P.R. Laws Ann. tit. 10, 278

(Law 75), and federal and state antitrust laws. Plaintiffs also

alleged a claim of tortious interference with contractual

relations against defendant Magna Trading Corp., supervisor of

Welch's operations in Puerto Rico.

The district court concluded that the association between

the parties had not yet matured into a relationship protected by

Law 75, and it consequently granted summary judgment for

defendants on the Dealers' Act and tort claims. It dismissed the

antitrust claims on the ground that plaintiffs had failed to make

the required showing of injury to competition. Our review of the

caselaw and circumstances persuades us that only the antitrust

claims properly were dismissed. We therefore reverse the summary

judgment on the other causes of action.

1 These two related corporations are both in the food
distribution business. According to answers to interrogatories,
R.W. does marketing for mainland corporations and accounting for
De la Cruz, Inc.. De la Cruz, in turn, distributes but does not
purchase products from producers. It makes purchases from Impex
Trading, another related company. See District Court opinion at

5 n.2. For convenience, we refer to these companies jointly as
either "plaintiffs" or "R.W.".

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I. Factual Background

The facts underlying this dispute essentially are

undisputed, with the parties differing only with respect to their

legal significance. Our review of the district court's grant of

summary judgment is plenary. Cambridge Plating Co. v. Napco,

Inc., 991 F.2d 21, 24 (1st Cir. 1993).

Welch, a producer of fruit juices and related products, has

sold its products through local distributors in Puerto Rico since

the 1930s. In 1987, Welch needed a new distributor for its

frozen concentrate line of products, and, with the help of its

local broker, Magna Trading, it identified R.W. as the most

suitable -- though not perfect -- candidate.

From the beginning of Welch's interest in R.W., company

executives had concerns about R.W.'s handling a competing line of

juice products under the "Donald Duck" label. Welch's

international marketing manager initially had suggested

internally that R.W. would have to drop the Donald Duck line "to

be a viable option," see App. at 213, but he later reported that

R.W.'s owner, Thomas Ward, had agreed to undertake several

measures to assure that the Welch frozen concentrates would

receive full support despite the continued presence of the Donald

Duck products. These included "[a] trial period with no

commitment by Welch's for a larger period of representation,"

App. at 219, and a financial contribution from R.W. for

advertising Welch's product.

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Discussion among the parties took place through the early

months of 1988 and, on March 25, Welch's international marketing

manager wrote to Ward to announce his company's decision:

. . . I am pleased to inform you that Welch's has
reached a decision to continue the frozen concentrate
distribution and sales business begun by Ventura
Rodriguez in Puerto Rico by transferring our account to
R.W. International.

Confirming our conversation on Monday, Welch's
will proceed to draft an agreement calling for the
appointment of R.W. International in Puerto Rico for a
one-year trial period . . . .

App. at 364. Four days later, on March 29, Welch notified its

customers that it had

made the decision to appoint R.W. International and its
distributing affiliate T.H. Ward de la Cruz Inc. as its
distributors in Puerto Rico for Welch's frozen product
line. This change will go into effect as of this date
and a written agreement is expected to be arrived at in
the near future.

App. at 366 (translation in appendix to appellant's brief).

The parties immediately began doing business, with

plaintiffs regularly submitting purchase orders and defendants

delivering the merchandise and billing plaintiffs. It was not

until three months later, however, in late June, that Welch

submitted a proposed contract to plaintiffs. Ward responded in

August with a counterproposal. Of particular concern to the

Puerto Rico company were provisions in the agreement that

appeared to reflect an effort by Welch to bypass Act 75, which

subjects companies to substantial damages if they terminate

dealership contracts for other than "just cause." The Welch

document, for example, characterized the relationship with R.W.

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as a transfer of the contractual arrangement that had existed

between Welch and its prior distributors before the passage of

Act 75. Welch's draft also specified that New York law would

govern the agreement. R.W.'s revised draft, inter alia, deleted

the "transfer" language and specified that Puerto Rico law would

apply.

In mid-October, after a series of telephone conversations

between attorneys, Welch submitted a third proposed draft of the

agreement, which reinstated all of the language that had been of

primary concern to R.W. During a visit to Puerto Rico in early

December and in subsequent correspondence, Welch's international

marketing manager encouraged Ward to complete the contract

negotiations "as soon as possible." On January 30, 1989, Ward

responded by letter stating that he, too, was anxious to finalize

the agreement, but that there were a few items "that your lawyer

insists on and that we feel are not in the best interest of our

future relationship." In response to an inquiry about R.W.'s

investing $50,000 in a promotional campaign, Ward noted that the

commitment was not yet ripe because he had agreed to make this

expenditure "once we as a company[] held a working agreement with

Welch's." A follow-up letter sent by Ward on February 8 to the

president of Magna Trading reiterated concerns about the

"transfer" concept as a means of "avoid[ing] Law 75 constraints."

At this point, the applicability of Law 75 remained the only

significant point of contractual disagreement between the

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parties. They had resolved earlier conflicts as to which of

Ward's entities would be named specifically in the contract (only

R.W.), and whether R.W. would have an exclusive distributorship

during the one-year trial period (no).

The companies had been continuing to do business throughout

the negotiation period. Late in 1988, the relationship appeared

to be working well; Magna Trading's president, Roberto Giro,

wrote to Ward in early December to commend him for exceeding by

11 percent the goal on a special product promotion. Early in

1989, however, Giro began to express concern about R.W.'s side-

by-side handling of the Welch and Donald Duck products. On

January 20, he wrote to Welch's marketing manager indicating

discomfort with Ward's involvement in a new line of Donald Duck

grape juice products. This concern escalated, and Giro wrote

again on March 22 suggesting that R.W. was not giving priority to

Welch products as it had promised to do.

On March 30, 1989, Welch's international vice president,

William Hewins, informed Ward in a letter of Welch's decision "to

discontinue the existing pre-trial relationship . . . and,

therefore, putting an end to the one-year trial or probationary

relationship for our frozen concentrate products." The letter

continued:

As you know, the idea of working together on a one-year
trial basis was, as per your recommendations, to
determine if Welch's frozen concentrates could be
handled to our satisfaction in spite of your handling a
competitive product. The pre-trial relationship proved
to us that the conflicts of interest of your
representing both competing lines are significant and
irreconcilable. . . . An increased level of conflict in

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personal relations between our broker and R.W.
International has also been noted, tracing to conflicts
between the brands represented by the two firms. . . .
Instead of complementing one another, as was your
original premise, these brands represent conflicting
interests for you and us. . . .

Because Welch terminated the relationship before the parties

reached an agreement in writing, the one-year trial period

envisioned at the outset of their dealings never even commenced.

Plaintiffs filed this action in April 1989. Their amended

complaint alleges that Welch terminated their dealership

agreement without just cause in violation of Law 75; that Magna

Trading tortiously interfered with their contractual relationship

with Welch; and that defendants violated antitrust laws by

threatening, and then later actually terminating, plaintiffs'

dealership if R.W. did not agree to drop Donald Duck products,

and by seeking to monopolize the bottled grape juice market

through a price-cutting war. The case was dismissed once on

improper procedural grounds, see R.W. International Corp. v.

Welch Foods, Inc., 937 F.2d 11 (1st Cir. 1991), and, following

remand, dismissed again on defendants' motions for summary

judgment.

In this appeal, plaintiffs maintain that all of their claims

are viable. They argue that, contrary to the district court's

ruling, precedent on Law 75 establishes that the statute does

govern the business relationship within which R.W. and Welch

operated for a year. They assert that this arrangement also

provides a basis for their tortious interference claim against

Magna. In addition, plaintiffs argue that their antitrust

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allegations were sufficient to withstand defendants' summary

judgment motion and that, if their showing were deficient, the

court erred in dismissing the claims without first allowing

discovery.

II. Applicability of Law 75

Law 75 provides that, notwithstanding any contractual

provision to the contrary, the supplier in a distribution

contract may terminate a dealership only for "just cause." P.R.

Laws Ann. tit. 10, 278a.2 The statute was intended to protect

Puerto Rico dealers from the harm caused when a supplier

arbitrarily terminates a distributorship once the dealer has

created a favorable market for the supplier's products, "thus

frustrating the legitimate expectations and interests of those

who so efficiently carried out their responsibilities," Medina &

Medina v. Country Pride Foods, Ltd., 858 F.2d 817, 820 (1st Cir.

1988) (reproducing in full translation of Puerto Rico Supreme

Court's response to certified question, 122 P.R. Dec. 172 (1988)

(citing legislative reports)). The Act has been described as

"very much a `one-way street' designed to protect dealers from

the unwarranted acts of termination by suppliers," Nike Int'l

2 The provision states in full:

Notwithstanding the existence in a dealer's
contract of a clause reserving to the parties the
unilateral right to terminate the existing
relationship, no principal or grantor may directly or
indirectly perform any act detrimental to the
established relationship or refuse to renew said
contract on its normal expiration, except for just
cause.

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Ltd. v. Athletic Sales, Inc., 689 F. Supp. 1235, 1237 (D.P.R.

1988).

For purposes of its summary judgment motion, Welch did not

dispute that R.W. and its affiliates were performing the

functions of a distributor within the meaning of Law 75 during

the twelve months the parties were doing business, see P.R. Laws

Ann. tit. 10, 278(a).3 Welch's position was, and is, that

these operations occurred during a kind of "twilight zone" period

while the parties attempted to negotiate in good faith the terms

that would govern their actual relationship. Because the

negotiations failed, the relationship never materialized, and so,

in Welch's view, Law 75 never was implicated.

The district court accepted this argument, concluding that

Law 75 was not meant to apply to a period of preliminary

negotiations preceding a completed working agreement between a

supplier and distributor. The court noted that keeping

operations in abeyance during a good-faith negotiating process

"would allow distributors to sit and wait while the principal

loses its market -- obtaining, literally without any effort, a

stronger bargaining position every day it waits." Applying Law

75 to dealings during that period, however, "would curtail the

autonomy required for arms-length negotiations." Neither

3 This provision defines a "dealer" as a "person actually
interested in a dealer's contract because of his having
effectively in his charge in Puerto Rico the distribution,
agency, concession or representation of a given merchandise or
service."

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approach would serve the statute's purpose of "improving and

permitting a system of free competition."

Plaintiffs' challenge to this judgment is straightforward.

Law 75 makes no distinctions among distributorship arrangements,

they assert, be they described as pre-trial, preliminary,

temporary or tentative. The only relevant point of inquiry is

whether R.W. and its affiliates were performing as a dealer under

the statute; if so, Law 75 governs. R.W. thus contends that,

because Welch concedes dealer status, its decision to terminate

the relationship must be judged under the statute's "just cause"

test.

We are persuaded that plaintiffs' position is the correct

one. Their most compelling support is provided by the statutory

language, which defines a "dealer's contract" subject to Law 75

as: [a] relationship established between a dealer and a
principal or grantor whereby and irrespectively of the

manner in which the parties may call, characterize or

execute such relationship, the former actually and

effectively takes charge of the distribution of a
merchandise, or of the rendering of a service, by
concession or franchise, on the market of Puerto Rico.

P.R. Laws Ann. tit. 10, 278(b) (emphasis added). The statute

clearly incorporates within its reach any arrangement between a

supplier and dealer in which the dealer is actually in the

process of distributing the supplier's merchandise in Puerto

Rico. The statute does not apply to suppliers' simple sales to

Puerto Rican wholesalers. It insists upon establishment of a

"supplier/dealer" relationship. But once that relationship is

established, the statute applies irrespective of the length of

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time such an arrangement has been in existence, and it explicitly

rejects any efforts by the parties to foreclose coverage through

semantic niceties. Welch's concession that R.W. was acting as a

dealer (for purposes of summary judgment) thus seems dispositive.

Welch, however, asserts that the statute is not meant to be

as inclusive as its language suggests, and it offers several

reasons to support this position. In our view, each falters upon

close scrutiny.

First, Welch claims that the word "established" in the

provision indicates that Law 75 applies only once the parties

have achieved a certain level of stability. The parties in this

case may have been working with each other, Welch observes, but

their failure to reach agreement on essential terms meant that

their relationship was never "established" within the meaning of

Law 75. In support of this argument, Welch cites language from

cases describing the Law 75 relationship as "characterized by its

continuity, stability, mutual trust, coordination between both

parties as independent entrepreneurs," J. Soler Motors, Inc. v.

Kayser Jeep Int'l Corp., 108 P.R. Dec. 134, 145 (1978) (Official

Translation); see also Roberco, Inc. v. Oxford Industries, Inc.,

122 P.R. Dec. 117 (1988), Official Translation of the Supreme

Court of Puerto Rico, slip op. at 5 (June 30, 1988); Medina &

Medina, 858 F.2d at 822.

We cannot agree that a relationship is "established" within

the meaning of Law 75 only after a supplier and dealer have

reached the point at which their relationship might be described

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as "stable" or "continuous." Although the statute was enacted to

protect from abrupt and arbitrary termination dealers whose

longstanding representation had provided substantial economic

benefit to the manufacturer, the law is drafted to govern

relationships from their inception to ensure that they will both

become and remain stable and continuous. See Medina & Medina,

858 F.2d at 820 (Act 75 levels bargaining power between

manufacturer and dealer "[i]n order to achieve reasonably stable

dealership relationships in Puerto Rico"). Although the

precedent cited by Welch describes the type of longstanding

commercial partnership that gave rise to Law 75, we do not read

the cases to exclude fledgling relationships from the act's

coverage. A well-established dealer may have more to lose -- and

may have provided more benefit to the supplier -- than a dealer

with less tenure, but the statute makes no distinction between

them.

Nor can it be said that a relationship is established within

the meaning of Law 75 only if it is committed to writing.

Indeed, Welch's counsel acknowledged at oral argument that a

relationship subject to the statute may be established through a

course of dealing, but argued that this was not such a case

because the parties continued to disagree over the essential

terms of their affiliation throughout their entire collaboration.

In other words, Welch contends that this relationship was not

established because its terms still were being negotiated.

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While it is true that the parties had yet to agree on the

dimensions of their future relationship, the fact remains that

they were operating as business partners under some terms for a

full year. Plaintiffs sent purchase orders to Welch

approximately once a week between March 1988 and March 1989, and

Ward's companies were actively involved in distributing Welch

products throughout that time. As noted above, Ward received a

commendation from Magna Trading's president for its effort in a

successful special promotion. To be sure, the relationship

envisioned by the parties when they began to do business never

materialized; the relationship protected by Law 75, however, was

the one that actually existed.

Welch's second argument, that applying Law 75 during a

period of preliminary negotiations improperly burdens the

parties' liberty to contract, is the one the district court found

particularly convincing. When parties freely have agreed that a

trial period will precede establishment of the long-term

relationship Law 75 is intended to protect, the company asserts,

invoking the Act before conclusion of the trial period is

tantamount to coercing the parties into a contract neither agreed

to enter. This is particularly harmful to the supplier, Welch

maintains, because Law 75 is designed to empower dealers. Thus,

a supplier who is not allowed to step away from an unsuccessful

attempted relationship would be forced into accepting the

dealer's terms and conditions, with the consequent loss of its

financial and legal autonomy.

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We detect several problems with this argument. In the first

place, as we have noted, the parties in this case were not simply

negotiating a relationship to be activated sometime in the

future. R.W. had been serving as Welch's Puerto Rico dealer for

twelve months. While we would have no difficulty in accepting

that a supplier could break off negotiations, no matter how long

they had been going on, the issue before us is whether Welch can

terminate an actual dealership relationship that existed

contemporaneously with the negotiations. Welch wants to insulate

those dealings from Law 75 because they were part of a longer-

term plan. The statute, however, plainly states that the

characterization of a relationship (e.g., calling it temporary or

preliminary) does not affect its status under Law 75. If the

parties are dealing, a dealership exists for purposes of the Act.

This bright line makes sense. Otherwise, suppliers could

insist on various types of contingency arrangements to avoid Law

75's restrictions for substantial periods of time. Although

Welch's concerns about R.W.'s capacity to perform in the face of

a potential conflict of interest seem legitimate, delaying Law

75's coverage until long after the dealership relationship began

would allow Welch to terminate for any reason whatsoever. Welch,

for example, could forsake R.W. without recourse and without

regard for any efforts taken by R.W. to gear up for Welch's

business, if another dealer willing to accept a smaller

commission suddenly became available. Moreover, there seems to

be no principled distinction between Welch's one-year trial

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period and a supplier's effort to designate a three- or even

five-year "preliminary" distributorship before deciding on a

long-term relationship. To rule that a contingent relationship

is outside the scope of Law 75 is thus to allow a significant

loophole in the protection the Puerto Rico legislature sought to

provide.

In the second place, we fail to see how applying Law 75 in

the circumstances of this case necessarily would require Welch to

continue a relationship it does not want in a manner to which it

has serious objections. Law 75 simply requires a supplier to

justify its decision to terminate a dealership. If Welch's

conflict-of-interest concerns about R.W. are legitimate, we have

no doubt that this would constitute "just cause" under Law 75.

See Medina & Medina, 858 F.2d at 823-24.4 Thus, applying Law 75

here does not force a contract onto unwilling parties; it simply

imposes conditions on an existing relationship.

Finally, the liberty of contract argument stumbles insofar

as it presumes that only the supplier will suffer if, to avoid

4 Medina & Medina is not precisely on point because it

involved a supplier's decision to totally withdraw from the
Puerto Rico market following good-faith negotiations that failed
to achieve agreement between the parties. There is no indication
here that Welch intended to leave the market rather than find a
new dealer. Nevertheless, we believe the principle underlying
Medina & Medina is equally applicable in these circumstances,

i.e., that a supplier has just cause to terminate if it has
bargained in good faith but has not been able "to reach an
agreement as to price, credit, or some other essential element of
the dealership," 858 F.2d at 824. This would be true at least
where, as here, the supplier's market in Puerto Rico was well
established before the current dealer relationship and the
supplier's action therefore "is not aimed at reaping the good
will or clientele established by the dealer," id.

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application of Law 75, the parties refrain from dealing until

they have reached final agreement on all terms to govern their

long-term relationship. The manufacturer and the dealer share an

interest in maximizing sales of the product, and it would be no

more to the dealer's advantage than to the manufacturer's for a

market to slip away while the parties are engaged in protracted

negotiations. We therefore disagree with the district court's

view that dealers will gain unfair advantage in bargaining if Law

75 is triggered as soon as the parties start dealing. Both sides

have an incentive to reach agreement at the earliest possible

time. To the extent a supplier's future flexibility is

diminished by its choice to begin dealing before all issues have

been resolved, this is a result intended by the legislators who

enacted Law 75.

In short, the practical effect of activating the Dealers'

Act as soon as the parties start conducting business as supplier

and dealer is to ensure that, right from the start, the

relationship is marked by a certain level of commitment from the

supplier. This does not entirely deprive suppliers of the

opportunity to evaluate the suitability of a particular match

through a "test period." It simply means that the relationship

can be severed without consequence only for just cause, i.e., if

the dealer fails a meaningful test. This should not trouble

suppliers engaged in good-faith negotiations, for their goal is

to produce a long-term working agreement. If, on the other hand,

a preliminary "understanding" disintegrates into impasse over

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essential terms, a finding of "just cause" seems likely. Law 75

is not intended to extend unworkable relationships, but only to

prevent arbitrary terminations. See Medina & Medina, 858 F.2d at

823-24.

Of course, whether or not statutes of this kind are sound

policy is not our concern. Perhaps a case can be made for having

a fixed period during which the relationship is probationary and

the statutory rights under Law 75 do not vest; this is typical

for tenure arrangements in government employment and in the

academic world. But the legislature has not enacted such a

window, as we read the present statute, and it is not for us to

amend the statute in the guise of construction.

Welch's effort to bolster its position through reliance on

Medina & Medina and another case involving a novel Law 75

question, Nike Int'l Ltd. v. Athletic Sales, Inc., 689 F. Supp.

1235 (D.P.R. 1988), is unavailing. In Medina & Medina, the

Puerto Rico Supreme Court held that a supplier may withdraw from

the Puerto Rico market without consequence under Law 75 if "the

parties have bargained in good faith but have not been able to

reach an agreement as to price, credit, or some other essential

element of the dealership," 858 F.2d at 824. Welch contends that

the district court's ruling, allowing the company to call off the

protracted, unsuccessful negotiations with R.W., is faithful to

that decision.

In Medina & Medina, however, the Puerto Rico Supreme Court

did not rule that a temporary relationship pending completion of

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negotiations is outside the scope of Law 75, but it held that the

failed negotiations over price and credit terms provided just

cause for the supplier's decision to terminate the

distributorship a year after it began.5 Until that case, it was

unclear whether a supplier could terminate without consequence

for any reason other than the dealer's adverse actions. Medina &

Medina does help Welch, in that it allows an argument that failed

negotiations may support a finding of "just cause," but it does

not bolster the company's argument that preliminary dealings fall

outside Law 75.

In Nike, a federal district court permitted termination of a

dealer who failed to give the contractually required written

notice to the supplier of its intent to renew the contract. 689

F. Supp. at 1239. According to Welch, Nike stands for the

principle that dealers may not avoid the express terms of

agreements to which they willingly subscribe. Consequently, the

company argues, the district court properly held appellants to

their own characterization of the arrangement as a preliminary

test period.

This argument stretches Nike far beyond its legitimate

boundaries. Nike addressed only whether Law 75 released a dealer

from an explicit renewal procedure contained in the

distributorship contract. Noting that the statute's purpose was

to protect against unjustified termination by the principal, the

5 The dealership contract between Medina & Medina and
Country Pride contained no time limit. Product prices were set
periodically by mutual agreement. 858 F.2d at 818.

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court ruled that it had no effect on mutual agreements specifying

the manner in which a dealer must notify a supplier of its desire

to continue their relationship. See 689 F. Supp. at 1239. In

other words, while Law 75 takes away from the supplier the right

to make a subjective decision to terminate, other than for "just

cause," the parties may agree to a contractual procedure that

gives the dealer the power either to end or to continue the

relationship after a given period of time. Nike holds that Law

75 does not protect the dealer from its own failure to follow

that procedure.

This case is simply not equivalent to Nike. Welch, in

essence, claims that the parties agreed that Welch would have the

power to terminate their relationship after a preliminary test

period, without regard to just cause. This, however, is

precisely the imbalance of power to which Law 75 was directed,

and the statute invalidates such an agreement. Under Law 75, a

principal may not wield unilateral authority to terminate a

dealership relationship for other than just cause.

In sum, we find no basis upon which to exclude the ongoing

commercial dealings between Welch and R.W. from the embrace of

Law 75. The district court's grant of summary judgment therefore

must be reversed so that the court may consider whether Welch had

"just cause" for terminating the relationship.6 Because summary

judgment on the claim for tortious interference with a

6 We recognize that Welch conceded that R.W. was performing
as a dealer only for purposes of its summary judgment motion, and
that, consequently, this issue also may surface again on remand.

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contractual relation was premised on the Law 75 holding, that

decision also must be vacated and remanded for further

consideration. The remand on the tortious interference claim is

without prejudice to any argument Welch may be making that,

regardless of the existence of a relationship protected by Law

75, there was no contract protected against tortious

interference.

III. Antitrust Claims

In January 1989, R.W. introduced a new Donald Duck bottled

grape juice into the market with an intensive promotional

campaign. Plaintiffs allege that defendants' reaction to the new

product, and R.W.'s representation of it, violated sections 1 and

2 of the Sherman Act, 15 U.S.C. 1, 2, as well as Commonwealth

antitrust law, P.R. Laws Ann. tit. 10, 258, 260. The

principal actions cited by plaintiffs in their amended complaint

were (1) discussions in which Welch and Magna expressed "anger

(`molestia'), discomfort and preoccupation with Plaintiffs'

handling of the `Donald Duck' bottled grape juice," Amended

Complaint at 78; (2) a "massive promotional campaign" for

Welch's own bottled grape juice, and a price cutting war, "in

order to block out the entrance [of] the `Donald Duck' bottled

grape juice into the Puerto Rican market," id. at 82, 91; and

(3) the decision of Welch to terminate its relationship with

plaintiffs because R.W. did not drop representation of the Donald

Duck juice, id. at 81.

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The district court granted summary judgment on these claims,

concluding that plaintiffs had failed to demonstrate a genuine

issue of material fact as to whether defendants' actions

constituted either a conspiracy in restraint of trade in

violation of 1 of the Sherman Act,7 or an unlawful conspiracy

to monopolize the bottled grape juice market in violation of

2.8 Of greatest significance to the court was a declaration

from one of Magna's principals, Francisco Gil, stating that

Donald Duck bottled products had reached, within a short period

of time, at least 80 percent of the stores typically carrying

such products. The court found that summary judgment was proper

because "plaintiffs never responded to Welch's claim that []

competition has not been injured, and that the Donald Duck

bottled grape juice was successfully introduced into the Puerto

Rico market."

Plaintiffs claim on appeal that the court improperly and

prematurely dismissed their antitrust claims. Much of their

brief on this issue, however, is devoted to an off-the-mark

argument concerning the court's failure to treat the allegations

in their complaint liberally. The court did not dismiss the

7 Section 1 makes unlawful "[e]very contract, combination in
the form of trust or otherwise, or conspiracy, in restraint of
trade or commerce among the several States, or with foreign
nations . . . ." 15 U.S.C. 1.

8 Section 2 makes it an offense for any person to
"monopolize, or attempt to monopolize, or combine or conspire
with any other person or persons, to monopolize any part of the
trade or commerce among the several States, or with foreign
nations . . . ." 15 U.S.C. 2.

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antitrust claims based on the pleadings, but ruled that

plaintiffs had failed to substantiate in any way their conclusory

allegations in response to defendants' summary judgment motion

and accompanying declaration. Our review of the district court's

decision consequently focuses solely on the appropriateness of

summary judgment.

Section 1 of the Sherman Act. As argued by plaintiffs in

their appellate brief, the unreasonable restraint of trade

underlying their 1 claim was an alleged threat by Welch (as

part of a conspiracy with Magna) to terminate plaintiffs'

dealership and the subsequent actual termination of the

relationship. These actions presumably were alleged to violate

the antitrust laws based on their impact in pressuring plaintiffs

to drop the Donald Duck line of products, thereby suppressing

competition among grape juice manufacturers.

Heavy-handed competitive tactics alone do not constitute an

antitrust violation, however. To survive defendants' motion for

summary judgment, plaintiffs needed to demonstrate a genuine

dispute as to whether defendants' actions caused an injury to

competition, as distinguished from impact on themselves. See,

e.g., Spectrum Sports, Inc. v. McQuillan, 113 S. Ct. 884, 892

(1993) ("The law directs itself not against conduct which is

competitive, even severely so, but against conduct which unfairly

tends to destroy competition itself."); Copperweld Corp. v.

Independence Tube Corp., 467 U.S. 752, 767 n.14 (1984) ("`[T]he

antitrust laws . . . were enacted for "the protection of

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competition, not competitors."'") (citations omitted) (emphasis

in original); Clamp-All Corp. v. Cast Iron Soil Pipe Inst., 851

F.2d 478, 486 (1st Cir. 1988) ("`Anticompetitive' . . . refers

not to actions that merely injure individual competitors, but

rather to actions that harm the competitive process."). Once

defendants presented a declaration averring that the Donald Duck

products successfully entered the market during the relevant

period of time -- indicating a lack of injury to competition --

plaintiffs were obliged to counter that statement with more than

the bare allegations contained in their complaint. See

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

584-87 (1986).

Plaintiffs responded with a statement from R.W. owner Ward,

which stated, in relevant part:

2. During the last months of 1988 R.W. International
Corp. became the broker of Donald Duck bottled grape
juice.

3. Shortly after the introduction in the market of the
Donald Duck bottled grape juice, Welch's began an
intensive promotion of their bottled grape juice
products.

4. This intensive promotion of the Welch's Grape
bottled products caused [] the introduction of the
Donald Duck bottled grape juice be severely suppressed.

5. Upon information and believe [sic], this intensive
promotion was carried out in conjunction with Magna
Trading Corporation to eliminate the Donald Duck
bottled grape juice from [the] Puerto Rico market.

The district court concluded that this statement was

insufficient to generate a genuine factual dispute because it

left unchallenged defendants' assertion that the Donald Duck

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bottled juice had deeply penetrated the Puerto Rico market during

the period of defendants' allegedly unlawful conspiracy. The

court observed:

[A]s the Puerto Rico Supreme Court has recognized,
distributors are in contact with the retailers,
consumers, and the different components of the trade.
Medina, 817 F.2d at 823 n.6. Plaintiffs were in the

position to show, based on their knowledge of the
Puerto Rico market, the effects of Welch's conduct on
the market . . . . However, other than the conclusory
allegation that their line had been "severely
suppressed," plaintiffs never responded to Welch's
claim that the competition has not been injured, and
that the Donald Duck bottled grape juice was
successfully introduced into the Puerto Rico market.

The district court's decision and explanation are

unimpeachable. Plaintiffs may have felt pressured to drop the

Donald Duck products in order to preserve the Welch dealership,

and may have suffered economic consequences from Welch's decision

to terminate, but these circumstances are irrelevant insofar as

an antitrust violation is concerned. Plaintiffs' failure to

rebut defendants' assertion that Donald Duck bottled grape juice

had no problem entering the market -- an implicit assertion that

competition was not affected -- fully justifies the district

court's decision to grant summary judgment for defendants.

Plaintiffs take issue with the significance of defendants'

penetration figure, arguing that each of the stores carrying

Donald Duck juice may have had only a single bottle of that brand

while displaying shelves full of Welch products. We agree with

the district court, however, that such information, if true,

could have been obtained easily by plaintiffs, and its absence is

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thus not a proper basis upon which to withhold summary judgment

from defendants.9 See infra at 24-25 (denial of discovery).

Section 2 of the Sherman Act. Plaintiffs' 2 claim

characterizes defendants' promotional campaign, in which Welch

reduced prices on its bottled grape juice, as an impermissible

effort to gain monopoly control of the bottled grape juice market

in Puerto Rico. In light of R.W.'s success in introducing the

Donald Duck juice, this claim is wholly without merit.

The Supreme Court repeatedly has recognized that "cutting

prices in order to increase business often is the very essence of

competition," Matsushita, 475 U.S. at 594. See also Brook Group

Ltd. v. Brown & Williamson Tobacco Corp., 113 S. Ct. 2578, 2586

(1993) (". . . Congress did not intend to outlaw price

differences that result from or further the forces of

competition."); Atlantic Richfield Co. v. USA Petroleum Co., 495

U.S. 328, 341 (1990) ("`It is in the interest of competition to

permit dominant firms to engage in vigorous competition,

including price competition.'") (citations omitted). There was

little basis for believing that Welch was engaged in below-cost

9 We have not considered Magna's argument that the 1 claim
fails because the requirement for joint action by independent

entities is not fulfilled here in light of Magna's and Welch's
unified economic interest. The argument does seem to have some
force, however. See Copperweld, 467 U.S. at 776 (holding that

"the coordinated behavior of a parent and its wholly owned
subsidiary falls outside the reach of [ 1]"); Pink Supply Corp.

v. Hiebert, Inc., 788 F.2d 1313, 1316-17 (8th Cir. 1986)

(corporate agents may lack "the independent economic
consciousness" necessary to be conspirators separate from their
principal).

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pricing as opposed to mere price reduction, although even below-

cost pricing is not automatically an antitrust violation if

competition is not threatened. See Brook Group, 113 S. Ct. at

2588. Where, in addition, a new product is able to deeply

penetrate the market during the challenged price-cutting period,

it is evident that competition is unharmed and "summary

disposition of the case is appropriate," id. at 2589.

Request for Discovery. Plaintiffs suggest that their

inability to respond with particularity to defendants' motion for

summary judgment is attributable to the district court's refusal

to lift a stay of discovery that had been imposed on the

antitrust claims. The decision whether to allow discovery while

a summary judgment motion is pending rests within the discretion

of the district court, Sheinkopf v. Stone, 927 F.2d 1259, 1263

(1st Cir. 1991), and "the party seeking additional time for

discovery . . . must show that the facts sought `will, if

obtained, suffice to engender an issue both genuine and

material,'" id. (citation omitted).

As the district court observed, plaintiffs were well

situated to explore Welch's impact on competition in the bottled

grape juice market, and they had an obligation to use their

knowledge and connection with the market to develop some basis to

justify further inquiry.10 Plaintiffs, however, "never

10 For example, plaintiffs could have done a sampling of
stores to compare prices and shelf life between the Welch and
Donald Duck products. If bottles of Donald Duck juice remained
on the shelves for long periods while Welch products enjoyed a
quick turnover, and Welch's prices were substantially lower,

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articulated how discovery from Welch would provide insight on the

impact of Welch's conduct on the market." District Court

Opinion, at 23-24. Their failure to do so negates their claim

that the district court erred in denying discovery.

Accordingly, we conclude that the district court properly

dismissed plaintiffs' claims under sections 1 and 2 of the

Sherman Act, as well as under the analogous provisions of Puerto

Rico law.

IV. Conclusion

For the foregoing reasons, we vacate the summary judgment

for defendants on the Law 75 and tortious interference claims,

and remand those issues for further proceedings consistent with

this opinion. We affirm dismissal of the antitrust claims. We

have not considered in any fashion defendants' argument to the

district court that dismissal of all claims alternatively is

appropriate based on Fed. R. Civ. P. 41 and the court's inherent

powers to control the proceedings before it. The district court

explicitly sidestepped this issue, and it is not properly before

us.

Affirmed in part, and vacated and remanded in part. Each

party to bear its own costs.

plaintiffs may have been able to persuade the district court to
grant discovery into the possibility that Welch was engaged in
predatory pricing. See Brook Group, 113 S. Ct. at 2587 (predatory

pricing involves pricing products "in an unfair manner with an
object to eliminate or retard competition and thereby gain and
exercise control over prices in the relevant market").

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