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LEVI CASE CO. v. ATS PRODS.

April 8, 1992

LEVI CASE COMPANY, INCORPORATED, a New York corporation, Plaintiff,
v.
ATS PRODUCTS, INC., a California corporation, and LAWRENCE E. SHEA, Defendants.



The opinion of the court was delivered by: VAUGHN R. WALKER

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT ON CONSPIRACY ISSUE.

 I. BACKGROUND FACTS.

 Lawrence Shea is the holder of three patents for a resin-based fiberglass type of heating, ventilation and air conditioning ("HVAC") ductwork. The ductwork produced by Shea's method is recognized by both plaintiff and defendant as superior for certain indoor environments. In the broader market for HVAC ductwork, ductwork made through Shea's process competes with ductwork made of other fiberglass compounds, steel, plastic and polyester.

 In 1978, Shea formed ATS Products, Inc. ("ATS") to exploit Shea's patents. Shea became an officer of ATS and was the majority shareholder. Shea conveyed to ATS the "exclusive license throughout the world" to use Shea's three patents. The agreement provided that Shea be paid royalties, that Shea and ATS share improvements in the technology, that ATS purchase materials for fabricating the ductwork from suppliers designated by Shea, and that Shea would hold veto power over a decision by ATS to sublicense the patent or assign the license to a third party.

 In 1986, ATS, represented by Shea, and Shea individually, entered into a non-exclusive sublicensing agreement with Levi Case, a manufacturer of ductwork, to manufacture ductwork using Shea's patents. This agreement was effective January 1985. A dispute arose as to the parties' performance under the 1985 agreement, and in 1988 the parties renegotiated. Levi Case was, and still is, ATS's only competitor in the market for ductwork produced using Shea's patents.

 In May 1989, Shea and his fellow shareholders sold 100% of ATS to Sterling Imperial Corp. Under the terms of the sale, ATS became a wholly-owned subsidiary of Sterling Imperial. The exclusive licensing agreement between Shea and ATS was terminated, and a similar exclusive licensing agreement was executed between Shea and Sterling Imperial. The new licensing agreement recognized the continued existence of the sublicense to Levi Case, and also authorized a sublicense of the patents to ATS. In conjunction with the sale of ATS, Shea's previous relationship with ATS as an officer and director was terminated, and Shea instead entered into consulting and non-competition agreements with Sterling Imperial.

 Soon after the sale of ATS to Sterling Imperial, the relationship between ATS and Levi Case worsened. Both parties accused the other of breach. Soon thereafter, Levi Case filed this lawsuit, against ATS only, alleging breach of contract and various business tort claims.

 II. PROCEDURAL MATTERS.

 Plaintiff's antitrust claims are premised on a document which Levi Case obtained through discovery, which indicates, according to Levi Case, that Levi Case's contract troubles with ATS were in fact due to defendants' efforts to monopolize the submarket for ductwork produced by using Shea's patents. Of course, defendants deny that they are liable for antitrust violations.

 Shea now moves for summary judgment on the antitrust claims, on the ground that, under the teachings of the Supreme Court in the Copperweld case, Shea and ATS are legally incapable of entering into an antitrust conspiracy.

 Although ATS has not filed a formal joinder to Shea's motion, ATS filed with the court, seven days prior to the noticed hearing date in this matter, a "Memorandum in Support of Summary Judgment on all Conspiracy Claims." In a subsequent brief received by the court, Levi Case objected to the court's consideration of the ATS brief.

 The ATS brief, however, can be considered to be a portion of defendants' reply brief to Levi Case's opposition brief. The ATS brief is filed seven days prior to the hearing date, as required by Local Rule 220-3. Therefore, the ATS brief will be considered by the court in connection with Shea's motion, because (1) it is timely filed as a reply brief; and (2) the combined page length of the reply briefs filed by ATS and Shea totals less ...


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