Opinion
No. 93-11325-MLW
January 4, 1996
MEMORANDUM AND ORDER
This case is an appeal from the denial of a motion for partial relief from an automatic stay imposed by Section 362(a) of the Bankruptcy Code. In the bankruptcy court, TSJ, Inc. ("TSJ") and Systemcare, Inc. ("Systemcare") requested relief from an automatic stay barring proceedings against Wang Laboratories, Inc. ("Wang"), a debtor in Chapter 11 bankruptcy. TSJ and Systemcare sought authorization to pursue equitable relief in two actions which had been extensively litigated prior to the date Wang filed for bankruptcy.
There are five other plaintiffs in the TSJ case: Byron Systems, Reardon Computing Group, Standard Data, ICA and Genesis Equipment Marketing. The group of plaintiffs is referred to as TSJ.
Specifically, TSJ sought to pursue an appeal from a judgment entered by the district court for the Northern District of California in TSJ, Inc. et al. v. Wang Laboratories, Inc., Civ. Act. C-91-2243-CAL (N.D.Cal. June 29, 1992), ("TSJ"), dismissing the plaintiffs' antitrust claims. The district court dismissed the claims following trial because the plaintiffs failed to show that the relevant market for antitrust purposes consisted exclusively of used Wang VS minicomputers. The court held that Wang VS minicomputers did not constitute a separate market from minicomputers made by other manufacturers, and that they could be substituted by computers of other manufacturers. Appellant's Brief, page 4.
Systemcare sought relief from the automatic stay to permit the district court for the District of Colorado to decide two motions filed by Systemcare in Systemcare, Inc. v. Wang Laboratories, Inc., Civ. Act. No. 89-B-1778 (D.Colo. Apr. 28, 1992) ("Systemcare"). Systemcare's motions were in response to a Memorandum Opinion and Order entered in the district court on March 13, 1992, granting Wang's motion for summary judgment on Systemcare's antitrust claims. Appellant's Brief, page 2. One motion was for relief from judgment pursuant to Federal Rule of Civil Procedure 60(b), and the other was to alter or amend judgment pursuant to Federal Rule of Civil Procedure 59(e).
In the motions before the bankruptcy court, the plaintiffs in TSJ andSystemcare informed the court that they were seeking relief from the stay only to pursue injunctive relief. If granted, Wang would be prohibited from engaging in certain business practices. Appellee's Brief, page 13. The bankruptcy court denied the motion for relief because the appellants failed to show a likelihood that the underlying cases would succeed on appeal.
The issue presented to this court on appeal is whether the bankruptcy court erred in denying the motions of appellants, TSJ, Inc. and Systemcare, Inc., for partial relief from the automatic stay imposed by Section 362(a) of Title 11 of the United States Code. This court finds that the bankruptcy court did not err and, therefore, affirms.
The appeals by TSJ and Systemcare have been presented to this court as one collective action, consolidating cases that were commenced separately prior to the filing of a bankruptcy petition by Wang Laboratories, Inc.
I. FACTS
In TSJ and Systemcare, two separate district court actions, the appellants each failed to obtain injunctive relief against Wang for alleged antitrust violations.
The TSJ Case
TSJ is an independent supplier of used Wang minicomputers. The company sued Wang concerning Wang's decision in 1991 to begin charging license fees for operating system ("O/S") software programs to all purchasers of Wang central processing units ("CPUs") or upgrades. TSJ, Inc. v. Wang Laboratories, Inc., No. C-91-2243 CAL, (N.D.Cal. June 15, 1992). Prior to 1991, Wang charged the license fees only to consumers who purchased the hardware directly from Wang. The licensing of this type of software program is commonplace in the industry, and it effects total systems costs to customers. Appellee's Brief, page 3.
The fees charged by Wang ranged from $2,000.00 for the smallest CPU to $100,000.00 for the largest. Id. at 4. Wang also charged license fees for O/S programs provided to purchasers of used CPU's. These fees were 50% or less than those charged for new systems. Id. The fees represent a fraction of total customer costs of acquiring used CPU's and software from Wang. The license fees charged to consumers who purchased CPUs from Wang were the same as those charged to consumers who purchased CPUs from other suppliers. Id. at 21.
TSJ claimed that Wang's practice of charging O/S license fees to customers who buy CPU's from it or from other independent sellers constitutes monopolization, attempted monopolization, and a tie of O/S software (the "tying product") to CPU hardware (the "tied product"). These claims required definition and proof of a relevant product market.See In re Super Premium Ice Cream Distribution Antitrust Litig., 691 F. Supp. 1262, 1267-68 (N.D.Cal. 1988), aff'd mem. sub nom.,Haagen-Daaz Co. v. Double Rainbow Gourmet Ice Creams, Inc., 895 F.2d 1417 (9th Cir. 1990); Mozart Co. v. Mercedes-Benz of North America, Inc., 833 F.2d 1342, 1348-52 (9th Cir. 1987), cert. denied, 488 U.S. 870 (1988). The appellants attempted to prove that used Wang minicomputers constituted a single market, distinct from the market for minicomputers of other manufacturers, and that Wang had influence with respect to that market. Appellants' Brief, page 3.
After two weeks of trial, the District Court rejected the appellant's contention that the relevant market consisted only of used Wang equipment. Appellee's Brief, page 5. The court found, instead, that the relevant market consisted of mid-range computer systems of all brands, including both new and used equipment, and that Wang did not have market power in this market. Id. The court ruled against the appellants on this basis.
In addition to the market power component, TSJ asserted a claim that Wang's software licensing policy constituted an illegal tying arrangement, allowing the sale of system operating software on commercially reasonable terms only if the consumer purchased the hardware from Wang. Appellant's Brief, page 4. A tying arrangement is a device used by a competitor with market power in one market (for the "tying" product) to extend its market power into an entirely distinct market (for the "tied" product). Jefferson Parrish Hospital Dist. No. 2 v. Hyde, 466 U.S. 2, 16 (1984). To accomplish this, the competitor agrees to sell the tying product only on the condition that its customers also purchase the tied product. Id. In other words, the competitor uses its market power in the tying product to coerce the customer into purchasing the tied product. The Supreme Court has determined that this is illegal under Section 1 of the Sherman Act. Jefferson Parrish Hospital Dist. No. 2, 466 U.S. at 16; See also Data Gen. v. Grumman Systems Support, 36 F.3d 1147, 1178 FN. 54 (1st Cir. 1994). The district court, however, found that Wang did not exert enough influence in the relevant market to qualify its pricing scheme as an illegal tying arrangement. Appellee's Brief, page 6.
The Systemcare Case
Systemcare is an independent service organization ("ISO") that provides maintenance services for Wang computer equipment in Colorado and the surrounding geographic area. The company could provide service for Wang equipment, but not for software support, because Wang holds the copyright for its computer's software, and thus the exclusive right to provide software support services. Appellants' Brief, page 5.
Wang's services were available to customers in any combination of individual services or predetermined packages. Wang also offered all customers a choice of two methods of obtaining and paying for software support services: either (1) a "per incident" billable basis or (2) a fixed-fee annual contract basis. Appellee's Brief, page 7. "Per incident" means that customers paid for bulletins, updates, telephone support and on-site assistance each time a service is rendered.
To be eligible for a Wang Software Support contract, customers had to maintain a valid software license and a current hardware maintenance contract with Wang covering their system's CPU, one terminal and one printer. Appellee's Brief, page 8. In Systemcare, Inc. v. Wang Laboratories, Inc., Systemcare sued Wang alleging that this was an illegal tying arrangement, because software support was available on a contractual basis only to customers who purchased equipment maintenance from Wang. 787 F. Supp. 179 (D.Colo. 1992). Although Systemcare does not dispute that software support and hardware maintenance are separately available, they claim that customers are forced to purchase them both from Wang because the separately available "per incident" service is more expensive and less reliable than Wang's contract services. Appellants' Brief, page 5. They argued that this was an antitrust violation under Section 1 of the Sherman Act. 15 U.S.C. § 1.
Section 1 of the Sherman Act requires a finding of "concerted action" between multiple parties. McKenzie v. Mercy Hosp., 854 F.2d 365, 366-67 (10th Cir. 1988); City of Chanute v. Williams Natural Gas Co., 955 F.2d 641, 650 (10th Cir.), cert. denied, 113 S.Ct. 96 (1992). The District Court granted Wang's motion for summary judgment, noting that "the record unambiguously reveal[ed] that Wang acted alone in imposing this alleged tying arrangement." Appellees' Brief, page 10. Thus the concerted action requirement could not be met.
Subsequent to the decisions in TSJ and Systemcare, Wang filed a bankruptcy petition under Chapter 11 of the United States Code. This gave Wang the protections of the automatic stay, which prohibits the commencement or continuation of judicial proceedings against the debtor.In re Sonnax Industries, Inc., 907 F.2d 1280, 1286 (2d Cir. 1990). The appellants attempted to obtain relief from the automatic stay from the bankruptcy court in order to appeal the district court decisions. The bankruptcy court denied relief because it found, in accordance with applicable standards, that there was no likelihood that the appellants would succeed on appeal if relief from the stay were granted. Transcript of Hearing on Motion of Plaintiff-Appellants in TSJ, Inc, et al v. Wang and Systemcare, Inc. for Partial Relief to 362(d)(1) of the Bankruptcy Code, Bankruptcy Rules 9014 and 4001, and Local Rule 27, May 6, 1993 ("Tr.").
II. JURISDICTION
Jurisdiction over this appeal is based on 28 U.S.C. § 158(a). An appeal from a bankruptcy court is governed by Bankruptcy Rule 8013, which provides:
On an appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and
due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.
Rule 8013, therefore, mandates that findings of fact must not be set aside unless clearly erroneous. In Re Bible Speaks, 869 F.2d 628, 629 (1st Cir.), cert. denied, 493 U.S. 816 (1989). However, a district court must review conclusions of law de novo. See In Re Gonic Realty Trust, 909 F.2d 624, 626 (1st Cir. 1990).
III. DISCUSSION
According to Section 362 of the Bankruptcy Code, upon the debtor's filing of a bankruptcy petition, an automatic stay takes effect to prevent all pre-petition creditors from taking action to collect their debts. Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 31 (1st Cir. 1994). This stay protects the debtor and preserves the bankruptcy estate for later distribution to creditors. The legislative history of Section 362(a) of the Bankruptcy Code gives a clear statement of the section's purpose. It is intended to "give the debtor a breathing spell from his creditors . . ., permit the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy." S. Rep. No. 989, 95th Cong., 1st Sess. 54-55; H.R. Rep. No. 595, 95th Cong., 1st Sess. 340-341, reprinted in 1978 U.S. Code Cong. and Admin. News 5787, 5840, 5963, 6296-97 (1977). "The automatic stay is `one of the most fundamental debtor protections provided by the bankruptcy laws, and hence can be compromised only when good reason exists to do so.' " Midlantic Nat'l Bank v. New Jersey Dept. of Environmental Protection, 474 U.S. 494, 503 (1986) (quoting S. Rep. No. 95-989, 95th Cong., 2d Sess. 340 (1977)); See also In re Stranahan Gear Co., Inc., 67 B.R. 834, 836 (Bankr.E.D.Pa. 1986).
Section 362, in addition to protecting the debtor's fresh start, also protects creditors' interests by preserving their relative positions and preserving the debtor's estate against dissipation through a "chaotic and uncontrollable scramble for the debtor's assets in a variety of uncoordinated proceedings in different courts." Fidelity Mortgage Investors v. Camelia Builders, Inc., 550 F.2d 47, 55 (2d Cir. 1976),cert. denied, 429 U.S. 1093 (1977).
Section 362(d) of the Bankruptcy Code provides that the automatic stay may only be modified for cause. The section provides in relevant part:
(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay —
(1) for cause . . .
Although "cause" is not defined by the Bankruptcy Code, the decision of whether to grant or deny relief from the stay is committed to the discretion of the bankruptcy court, and will be disturbed only upon a showing of abuse of discretion. In re Sonnax Industries, Inc., 907 F.2d at 1286. The bankruptcy court's exercise of its discretion should not be lightly disturbed. In re Hooker Invs., Inc., 122 B.R. 659, 664 (S.D.N.Y.), appeal denied, 937 F.2d 833 (2d Cir. 1991).
The bankruptcy court must consider several factors in deciding whether or not to grant relief from the automatic stay to allow adjudication of related matters. These include: (1) whether the underlying litigation is connected to or might interfere with the bankruptcy case; (2) whether the hardship to the plaintiff by maintenance of the stay considerably outweighs the hardship to the debtor; and (3) whether the plaintiff has a probability of prevailing on the merits. In re Parkinson, 102 B.R. 141, 142 (Bankr.C.D.Ill. 1988); In re Pro Football Weekly, Inc., 60 B.R. 824, 826 (N.D.Ill. 1986); In re Sonnax Industries, Inc., 907 F.2d at 1286; In re Johnson, 115 B.R. 634, 636 (Bankr.D.Minn. 1989).
The burden of proof on a motion to lift the automatic stay is a shifting one. Sonnax Industries, Inc., 907 F.2d at 1285; In re Keene Corp., 171 B.R. 180, 182 (Bankr.S.D.N.Y. 1994). The party seeking relief from the stay has the initial burden to show that cause exists to warrant relief. Sonnax Industries, Inc., 907 F.2d at 1285. If the movant fails to make this initial showing, then the court should deny relief without requiring any showing from the debtor that continued protection is necessary. Id. If, however, the moving party succeeds, then the burden of proof shifts to the debtor to show that the stay should remain in place. 11 U.S.C. § 362(g).
The bankruptcy court refused to grant partial relief from the automatic stay in both TSJ and Systemcare because it found that the appellants were not likely to succeed on appeal. Tr. page 7. In other words, the bankruptcy court concluded that the district court decisions were not likely to be reversed. On appeal, this court must review the decision of the bankruptcy court to determine if these findings were an abuse of the court's discretion. As set forth below, they were not.
The TSJ Case
Appellants argue that the bankruptcy court's denial of their motion for relief from the stay was error because they are likely to succeed on appeal of the TSJ case. More specifically, TSJ argues that the bankruptcy court failed to recognize that Eastman Kodak Co. v. Image Technical Services, Inc., 112 S.Ct. 2072 (1992), warrants a finding that Wang exerts market power over a single product market, consisting only of used Wang equipment, and that this creates a likelihood that they will succeed on appeal. In other words, they contend that Kodak requires the finding that the relevant market for antitrust purposes consists of used Wang minicomputers, and that Wang has economic influence over this market. This court agrees with the district court and the bankruptcy court that Kodak does not create a likelihood that appellants will succeed on appeal.
In Kodak the Supreme Court addressed the issue of defining an aftermarket under antitrust doctrine. Id. However, the Court did not decide what the relevant market actually was. In that case, a group of ISOs sued Kodak for changing its policy of access to Kodak replacement parts for photocopiers owned by customers who used ISOs, instead of Kodak servicers, to maintain their machines. Id. The ISOs charged that Kodak illegally tied the sale of replacement or repair parts to service of machines and thus monopolized the market in service of Kodak copiers.Id.
The district court granted summary judgment to Kodak on the theory that plaintiff's argument did not make economic sense. Id. at 2088. The district court accepted the theory that Kodak could not have market power over Kodak parts and service (the "aftermarket"), because Kodak allegedly did not have a sufficient share of the market power in the basic equipment market. Id. at 2076.
A tying arrangement violates Section 1 of the Sherman Act if the seller has "appreciable economic power" in the tying product market and if the arrangement affects a substantial volume of commerce in the tied market. Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 503 (1969). Market power is defined as the power to "force a purchaser to do something he would not do in a competitive market."Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U.S. at 21-22.
However, the Ninth Circuit held that the ISOs had produced a sufficient record to present a genuine issue concerning the material fact concerning Kodak's market power in service and parts aftermarkets. Id. at 2092. It rejected Kodak's claim that lack of market power in aftermarkets must be assumed from lack of power in the primary market for equipment. Id. The Supreme Court affirmed this decision, rejecting Kodak's claim that competition in the market for copiers was "interbrand" competition whereas competition for service was "intrabrand." Id. Furthermore, the Court held that certain facts could establish that one brand of a product constitutes a distinct market for antitrust purposes, although the facts before it were insufficient to define the market at issue. Id. at 2090.
This court agrees that Kodak does not create a likelihood that TSJ will succeed on appeal with regard to the issue of the relevant market. In fact, Kodak is not directly applicable to the facts presented by this appeal. In Kodak, the Supreme Court affirmed the Ninth Circuit's reversal of a summary judgment that had been granted by the district court. The decision was, therefore, based on the summary judgment standard, which requires the court to consider the facts in the light most favorable to the respondent. Id. at 2077. The Supreme Court found that under that standard the facts created a genuine issue about what the relevant market was. However, the Court did not indicate whether the facts were sufficient to establish that the relevant market did, in fact, consist of the product of one manufacturer. Id. The district court in TSJ recognized this, explaining that:
There's no doubt that Kodak is the governing law. But all Kodak did was to overrule a summary judgment that had been granted by the district court. Kodak still required a factual analysis of what the market is. . . . Appellee's Brief, page 18 (quoting TSJ, Trial Transcript, page 55.)
Therefore, contrary to the appellant's contention, Kodak does not require the finding that the relevant market consists of Wang products only.
Furthermore, the facts of TSJ have been determined after trial. In contrast, in Kodak the Supreme Court noted that the district court's decision was rendered without a hearing, and that the plaintiff's opportunity for discovery had been severely limited. Id. at 2078. In fact, the Supreme Court observed that, "Kodak [did] not present any actual data on the equipment, service, or parts markets." Id. at 2082. Instead, the company urged "the adoption of a substantive legal rule that equipment competition precludes any finding of monopoly power in derivative aftermarkets." Id., at 2082. The Supreme Court in Kodak held that a trial was necessary to decide the material facts. 112 S.Ct. at 2092. In TSJ, however, the appellants had an opportunity for extensive discovery and the district court's decision was rendered after two weeks of trial to determine the facts. TSJ has not shown that if an appeal is permitted it is likely to prevail in asserting that the facts found by the district court were clearly erroneous or that the court derived the wrong legal conclusion from them. Thus, TSJ has failed to prove that Kodak demonstrates that the bankruptcy court abused its discretion in denying its request for relief from the automatic stay. See Sonnax Industries, Inc., 907 F.2d at 1285.
The appellants also contend that the bankruptcy court ignored the standard set forth in
Brown Shoe Co. v. United States, 370 U.S. 294 (1962), in ruling that the relevant market consisted of mid-range computer systems of all brands. Brown Shoe Co. described a series of practical indicia by which courts "may" determine the boundaries of a product market for antitrust purposes. Id. These factors include:
industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. Id. at 325.
Although the appellants claim that these factors require the finding that the relevant market consists of used Wang minicomputers, they offer no support for this. Furthermore, the district court, in holding that the relevant market consisted of "new and used mid-range computers of all brands", found that the Brown criteria did not constitute a "binding checklist". Appellants' Brief, page 8. Other courts support this conclusion. See e.g. General Foods Corp v. Federal Trade Commission, 386 F.2d 936, 941 (3d Cir. 1967), cert. denied, 391 U.S. 919 (1968) (holding that the Brown indicia are not binding). In fact, the Supreme Court has recognized that the guidelines provided by Brown "offer no precise formula for judgment." United States v. Continental Can Co., et al, 378 U.S. 441, 449 (1964). Accordingly, this court is not persuaded that the district court's interpretation of Brown is likely to be shown on appeal to be erroneous.
The appellants also argue that they are likely to succeed on appeal because the district court and bankruptcy court incorrectly held that the operating system software at issue and the minicomputer hardware were not two distinct products. Appellants' Brief, page 11. They contend that this precluded a finding that a tying arrangement existed, and that an appellate court is likely to correct this error. Id. However, the record does not indicate a finding by either the district court or bankruptcy court that the software and hardware were a single product. The district court found that the plaintiffs failed to prove both the existence of the relevant market that they sought to prove, and the existence of any wrongful tying agreement. Appellee's Brief, pages 5-6 (citing Order Adjudicating Plaintiffs' First Amended Complaint, page 1). The district court decided that the antitrust market consisted of new and used mid-range computers of all manufacturers, not just those made by Wang. The record indicates that this conclusion was based on the interchangeability of Wang systems with those of other manufacturers, not the fact that Wang's operating system software and minicomputers were one product. Appellee's Brief, page 18 (citing TSJ Trial Transcript, June 15, 1992). In addition, even the Appellee concedes that "the products are offered separately." Appellees' Brief, page 5. Consequently, it is not likely that the appellants will succeed on appeal based on this argument.
However, even assuming that the software and hardware are offered separately, the record still does not offer sufficient evidence to find an illegal tying arrangement. A tying arrangement is a device used by a competitor with market power in one market to extend its market power into an entirely distinct market. Jefferson Parrish Hospital Dist. No. 2 v. Hyde, 466 U.S. at 16. Thus, it is illegal anticompetitive behavior for a supplier to use market power to force consumers to purchase one product as a condition of obtaining another. Id. at 14. By definition, market power is "the ability to force a purchaser to do something that he would not do in a competitive market." Id. In Jefferson Parish Hospital Dist. No. 2 v. Hyde, the Supreme Court described it as:
the power of a supplier to induce his customers for one product to buy a second product from him that would otherwise be purchased solely on the merit of that second product. 466 U.S. at 14 FN. 20 (emphasis added).
Thus, the essential characteristic of this type of arrangement lies in the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere. See Data General., 36 F.3d at 1180.
The appellants must, therefore, show that Wang has sufficient market power in the relevant market to influence the purchasing decisions of consumers. Jefferson Parish, 466 U.S. at 14. In the present case, the appellants have failed to show that the bankruptcy court erred in using the market for computers of all manufacturers as the relevant market. Therefore, they must demonstrate that Wang has power in that market. The appellants, however, have not offered sufficient evidence that Wang has influence over consumers to force them to purchase Wang products over those of other manufacturers. In fact, the district court in TSJ found that customers were free to, and in fact did, switch between manufacturers. Appellee's Brief, page 18 (quoting TSJ, Trial Transcript, page 60.) Since consumers are free to purchase both equipment and software operating systems from companies other than Wang, Wang does not have the requisite market power to qualify its conduct as an anticompetitive tying arrangement. See Jefferson Parish, 466 U.S. at 12-16.
Furthermore, the license fee arrangement does not force consumers to purchase Wang's own products directly from Wang, as the appellants allege. The appellants claim that Wang's imposition of licensing fees on the sale of equipment by independent distributors makes it cost prohibitive to purchase Wang equipment from those distributors. Although Wang does impose licensing fees to consumers who purchase Wang equipment from independent distributors, these fees are exactly the same as the fees charged to customers who purchase the hardware directly from Wang. Appellee's Brief, page 21. Consequently, Wang does not have the power to control consumer choices, and thus there is no tying arrangement, despite the fact that Wang's operating system software license fee is imposed to all purchasers of Wang CPUs.
The appellants argue that this result ignores controlling case law that would require the finding that Wang's licensing arrangement created an illegal tying arrangement. Appellant's Brief, page 10. Specifically, TSJ argues that Digidyne Corp. v. Data General Corp., 734 F.2d 1336 (9th Cir. 1984), requires a finding that the an illegal tying arrangement exists specifically because the software license fee is attached to the purchase of Wang hardware. However, that case does not support the appellants' contentions.
In Digidyne, a defendant manufacturer had refused to license its operating system software to anyone who did not also purchase its central processing unit. 735 F.2d at 1338. The plaintiffs alleged that this purchase requirement was a tying arrangement prohibited by antitrust law. The Ninth Circuit agreed, holding that since the computer operating system was a separate product from the hardware, the condition of obtaining the software constituted a tying arrangement. Id. at 1338.
However, the decision of the bankruptcy court is not contrary to the holding in Digidyne. In Digidyne the court found that the defendant company had market influence in the relevant market, which was narrowly defined as the market for "NOVA instruction set CPUs", a specific product made by the defendant. Id. at 1334. In that case, the defendant's market influence was evident in its ability to force consumers to purchase hardware directly from it in order to obtain the software. Id. at 1341.
However, it has been found in TSJ that the market is for a general type of product, mid-range computers, regardless of manufacturer, and it appears that Wang does not have sufficient power in that market to classify its pricing scheme as anticompetitive. Furthermore, Wang does not require that consumers purchase the hardware from it in order to purchase the software. In fact, they were free to purchase the hardware from any distributor. Thus, Wang did not have the market influence necessary to find a tying arrangement. Therefore, TSJ is distinguishable from Digidyne.
Consequently, the appellants have failed to show that Wang has the requisite market power in the relevant market to qualify Wang's licensing fee policy as a tying arrangement. They have not offered sufficient evidence that the licensing fee had the effect of conditioning the purchase of the software upon the purchase of the hardware from Wang. Nor have they offered sufficient evidence to show that Wang exerts influence in the market for mid-range computers of all manufacturers. Accordingly, the appellants have not offered sufficient evidence of a likelihood of success on appeal to meet the initial burden of showing cause for relief from the automatic stay. Thus, the bankruptcy court's denial of relief from the automatic stay to allow TSJ, Inc. to proceed with an appeal was not an abuse of discretion.
The Systemcare Case
The appellants contend that the bankruptcy court also erred with respect to the Systemcare case because it failed to consider the likelihood of Systemcare's success on appeal. Appellants Brief, page 12. In support of this they argue that the bankruptcy court failed to recognize that the district court relied on "anomalous Tenth Circuit precedent" in granting Wang's motion for summary judgement. Appellants' Brief, page 12. In addition, they argue that other case law shows a likelihood of success on appeal. Id.
Appellants claim that the court is likely to find that Wang tied software support to hardware maintenance in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. According to the Court of Appeals for the Tenth Circuit, Section 1 requires a finding of concerted action. City of Chanute v. Williams Natural Gas Co., 955 F.2d 641, 650 (10th Cir.),cert. denied, 113 S.Ct. 96 (1992). The district court in Systemcare granted summary judgment to Wang under the established rule in the Tenth Circuit that a unilaterally imposed tie does not satisfy the concerted activity requirement of § 1 of the Sherman Act. City of Chanute, 955 F.2d at 650.
The appellant argues that "notwithstanding Chanute, it is well-settled that Section 1 of the Sherman Act may apply to the conduct of a single entity, not necessarily in conspiracy with others." Appellant's Brief, page 12, citing Betaseed, Inc. v. U I, Inc., 681 F.2d 1203 (9th Cir. 1982); Heatransfer Corp. v. Volkswagenwerk, A.G., 553 F.2d 964 (5th Cir. 1977), cert. denied, 434 U.S. 1087 (1978); Smith Machinery Co. v. Hesston Corp., 878 F.2d 1290 (10th Cir. 1989, cert. denied, 493 U.S. 1073 (1990); Black Gold, Ltd. v. Rockwool Industries, Inc., 729 F.2d 676, 686 (10th Cir.), aff'd on rehearing, 777 F.2d 779 (10th Cir. 1984). However,City of Chanute is the controlling law in the Tenth Circuit. Although other Circuits have disagreed with the Tenth Circuit, the Supreme Court in Chanute declined to review and resolve the split in the Circuits. See 113 S.Ct. at 96. Thus, this court agrees with the bankruptcy court that it is not probable that Systemcare will succeed on appeal if relief from the automatic stay is granted, and the underlying case is heard by the Tenth Circuit. Therefore, denying relief from the automatic stay was not an abuse of the bankruptcy court's discretion.
The appellant also argues that the bankruptcy court erred with regard to the Systemcare case because its refusal to grant relief from the stay impermissibly prevented the appeals court from rendering its decision on motions that were ripe for determination. Appellant's Brief, page 13. Appellants argue that the automatic stay does not prevent the district court from rendering its decision where a matter has been submitted to a court for resolution before the bankruptcy filing. Id. This is incorrect.
The automatic stay, which arises upon filing of a bankruptcy petition, prohibits the continuation of judicial proceedings commenced prepetition.Herman v. Brown, 160 B.R. 780 (E.D.La. 1993). This is because the stay is designed to protect the debtor and estate property for the purpose of reorganization. Id. Systemcare requested relief from the stay in order to allow the district court to make a decision on motions previously submitted. This is an attempt to continue judicial proceedings commenced prepetition, and it is contrary to the protections provided to the debtor by the automatic stay.
Although Systemcare relies on two cases from other jurisdictions to support their argument, those cases are clearly distinguishable from the facts presented to this court on appeal. The appellant claims that In re Willard, 15 B.R. 898 (Bankr. 9th Cir. 1981), and In re Wilson, 72 B.R. 956 (Bankr.M.D.Fla. 1987), mandate that the bankruptcy court grant relief to allow a determination of the motions pending before the district court in Colorado. In In re Willard the bankruptcy court held that the automatic stay did not prevent enforcement of a state court ruling that was made pre-petition, but formally entered post-petition. 15 B.R. at 900. In that case, the court had filed an Intended Decision prior to the filing of the petition. The problem arose because the Intended Decision was not formally entered as a final judgment until shortly after the debtor filed the bankruptcy petition. The bankruptcy court found that, in light of the pre-petition Intended Decision, the judgment did not violate the stay. Id. Similarly, in In re Wilson the parties had concluded all activity concerning the proceeding, and the judge had announced his ruling on the record in open court, prior to the filing of the bankruptcy petition. 72 B.R. 956 (Bankr.M.D.Fla. 1987). "All that remained was for the oral ruling to be codified in written form." Id. at 958. The court held that entry of a decision that was made pre-petition did not violate the stay. Id.
These cases present a different issue than Systemcare because they both involve decisions that were announced pre-petition. In contrast, Systemcare has two motions pending in the district court in Colorado. Although Systemcare claims that the motions have been fully briefed by both parties, there is no contention that a decision was made on either one. In fact, Systemcare argues that the motions are "ready for decision by the district court." Appellant's Reply-Brief, page 4. Consequently, any decision by the court would be a post-petition decision, and would violate the automatic stay.
IV. CONCLUSION
For the foregoing reasons the judgment of the bankruptcy court is hereby AFFIRMED.