Source: https://www.law.cornell.edu/supremecourt/text/405/251
Timestamp: 2015-11-27 18:19:34
Document Index: 792240599

Matched Legal Cases: ['§ 4', '§ 2', '§ 4', '§ 4', '§ 16', '§ 4', '§ 4', '§ 4', '§ 4', '§ 15', '§ 15', '§ 15', '§ 4']

State of HAWAII, Petitioner, v. STANDARD OIL COMPANY OF CALIFORNIA et al. | US Law | LII / Legal Information Institute
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405 U.S. 251 (92 S.Ct. 885, 31 L.Ed.2d 184)
Section 4 of the Clayton Act does not authorize a State to sue for damages for an injury to its general economy allegedly attributable to a violation of the antitrust laws. Pp. 257266.
amici curiae information on Pages 251-252 intentionally omitted
The issue presented by this case is whether § 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. 15, authorizes a State to sue for damages for an injury to its economy allegedly attributable to a violation of the antitrust laws of the United States. We hold that it does not.
On May 24, 1968, and again on August 19, 1968, hawaii filed amended complaints. The third amended complaint, filed on September 6, 1968, raised for the first time the issue presented herein. The complaint named all four respondents as defendants and charged them with violating the Sherman Act, 26 Stat. 209, 15 U.S.C. 1, in the following ways: by entering into unlawful contracts; by conspiring and combining to restrain trade and commerce in the sale, marketing, and distribution of refined petroleum products; and by attempting to monopolize and actually monopolizing said trade and commerce.
After each of the respondents moved to dismiss the second and third counts of the complaint, the District Court held a hearing to determine the propriety of the State's suing on behalf of its citizens. With respect to count two, the court held that Hawaii 'has not even alleged an interest in its citizens' claims, much less interest of its own aside from the State's proprietary rights,' and granted the motions to dismiss.
Viewing the class action as being 'overlapping, parallel and/or alternative to' the parens patriae claim, the court dismissed the third count as well.
Respondents moved to dismiss the second and third counts, and hearing was again had in the District Court. The class action was dismissed by the court on the ground that 'under the circumstances . . ., the class action based upon the injury to every individual purchaser of gasoline in the State, . . . in the context of the pleadings, would be unmanageable.'
In a rather extensive opinion, the court examined the law that has developed concerning suits by a State as parens patriae and denied the motions to dismiss the second count. 301 F.Supp. 982 (1969). Recognizing that the state of the law was unclear, the District Court certified its decision denying the motions to dismiss for an interlocutory appeal pursuant to 28 U.S.C. 1292(b).
431 F.2d 1282 (1970). Certiorari was granted so that we might review this decision. 401 U.S. 936, 91 S.Ct. 931, 28 L.Ed.2d 215 (1971).
The concept of parens patriae is derived from the English constitutional system. As the system developed from its feudal beginnings, the King retained certain duties and powers, which were referred to as the 'royal prerogative.' Malina & Blechman, Parens Patriae Suits for Treble Damages Under the Antitrust Laws, 65 Nw.U.L.Rev. 193, 197 (1970) (hereinafter Malina & Blechman); State Protection of its Economy and Environment: Parens Patriae Suits for Damages, 6 Col.J.L. & Soc.Prob. 411, 412 (1970) (hereinafter State Protection). These powers and duties were said to be exercised by the King in his capacity as 'father of the country.'
For example, Blackstone refers to the sovereign or his representative as 'the general guardian of all infants, idiots, and lunatics,'
and as the superintendent of 'all charitable uses in the kingdom.'
In the United States, the 'royal prerogative' and the 'parens patriae' function of the King passed to the States.
These cases establish the right of a State to sue as parens patriae to prevent or repair harm to its 'quasisovereign' interests.
They deal primarily with original suits brought directly in this Court pursuant to Art. III, § 2, of the Constitution under common-law rights of action. The question in this case is not whether Hawaii may maintain its lawsuit on behalf of its citizens, but rather whether the injury for which it seeks to recover is compensable under § 4 of the Clayton Act. Hence, Hawaii's claim cannot be resolved simply by reference to any general principles governing parens patriae actions.
Like this suit, Georgia arose under the federal antitrust laws. It is plain from the face of the complaint that '(t)he prayer (was) for damages and for injunctive relief.' 324 U.S., at 445, 65 S.Ct., at 720. See id., at 446447, 450451, 65 S.Ct., at 720721, 722723.
Georgia claimed that the conspiracy had severely damaged its economy and sought to recover damages on behalf of its citizens.
Hawaii grounds its claim for treble damages in § 4 of the Clayton Act, 15 U.S.C. 15, which reads:
This section is notably different from § 16 of the Clayton Act, 15 U.S.C. 26, which provides for injunctive relief:
Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. See Northern Pacific R. Co. v. United States, 356 U.S. 1, 4, 78 S.Ct. 514, 517, 2 L.Ed.2d 545 (1958). This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation. By offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as 'private attorneys general.' See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130131, 89 S.Ct. 1562, 15801581, 23 L.Ed.2d 129 (1969); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 147, 88 S.Ct. 1981, 19881989, 20 L.Ed. 982 (1968) (Fortas, J., concurring in result).
Thus, § 4 permits Hawaii to sue in its proprietary capacity for three times the damages it has suffered from respondents' alleged antitrust violations.
The section gives the same right to every citizen of Hawaii with respect to any damage to business or property. Were we, in addition, to hold that Congress authorized the State to recover damages for injury to its general economy, we would open the door to duplicative recoveries.
Support for this reading of § 4 is found in the legislative history of 15 U.S.C. 15a,
which is the only provision authorizing recovery in damages by the United States, and which limits that recovery to damages to 'business or property.' The legislative history of that provision makes it quite plain that the United States was authorized to recover, not for general injury to the national economy or to the Government's ability to carry out its functions, but only for those injuries suffered in its capacity as a consumer of goods and services.
See also H.R.Rep.No.422, 84th Cong., 1st Sess., 25 (1955); U.S.Code Cong. & Admin.News, p. 2330. In light of the language used as well as the legislative history of 15 U.S.C. 15a, it is manifest that the United States cannot recover for economic injuries to its sovereign interests, as opposed to its proprietary functions. And the conclusion is nearly inescapable that § 4, which uses identical language, does not authorize recovery for economic injuries to the sovereign interests of a State.
Congress has given private citizens rights of action for injunctive relief and damages for antitrust violations without regard to the amount in controversy. 28 U.S.C. 1337; 15 U.S.C. 15. Rule 23 of the Federal Rules of Civil Procedure provides for class actions that may enhance the efficacy of private actions by permitting citizens to combine their limited resources to achieve a more powerful litigation posture. The District Court dismissed Hawaii's class action only because it was unwieldy; it did not hold that a State could never bring a class action on behalf of some or all of its consumer citizens. Respondents, in moving to dismiss count three of the fourth amended complaint, in which the State sought to bring such an action, virtually conceded that class actions might be appropriate under certain circumstances. The fact that a successful antitrust suit for damages recovers not only the costs of the litigation, but also attorney's fees, should provide no scarity of members of the Bar to aid prospective plaintiffs in bringing these suits.
Today's decision reflects a miserly approach to the fashioning of federal remedies rectifying injuries to the collective interests of the citizens of a State through action by the State itself. It is reminiscent of the illstarred decision in Ohio v. Wyandotte Chemicals Corp., 401 U.S. 493, 91 S.Ct. 1005, 28 L.Ed.2d 256.
So-called 'growth,' 'progress,' and 'development' are more than symbols of power in modern society; they represent the goal which plannersprivate and public alikeestablish and seek to attain. And the State plays an important, at times crucial, role in achieving that goal.
If Hawaii can sustain her allegations by proof, she establishes injury both as respects her tourism and her industry, her 'growth' and her 'development.'
The State of Hawaii seeks treble damages and injunctive relief for an alleged conspiracy among respondents to monopolize and fix prices on the sale of petroleum products in the State. Court one of Hawaii's complaint alleges an economic injury to the State in its proprietary capacity as purchaser of those products. Count two states a claim by the State, as parens patriae, for injury to its 'economy and prosperity,' including the withdrawal of its citizens' revenues, increased taxes to offset such losses, curtailment of manufacturing, shipping, and commerce, and injury to the competitive position of Hawaiian goods in the national market. Count three alleges a class action on behalf of all purchasers in the State of respondents' petroleum products. The District Court dismissed count three as unmanageable, but denied respondents' motion to dismiss count two, the parens patriae claim. An interlocutory appeal was taken by respondents under 28 U.S.C. 1292(b), and the Court of Appeals for the Ninth Circuit reversed and ordered dismissal of count two. The Court of Appeals held that even if the State's economy might suffer injury from antitrust violations independent of the injury suffered by private persons, that injury would not be to the State's 'business or property' within the meaning of § 4 of the Clayton Act, and in any event would be too remote from respondents' alleged violations to permit the State to recover as parens patriae.
Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 (1945), in my view, requires reversal. In that case the State of Georgia sought to invoke the original jurisdiction of this Court to remedy a conspiracy by several railroads to fix rates on the transportation of goods to and from the State. as noted by the Court, ante, at 259 n. 13, Georgia sought damages in each of the four counts of its complaintin its sovereign capacity, as a quasi-sovereign, in its proprietary capacity, and as representative of its citizens. Treating the complaint as a prayer 'for damages and for injunctive relief,' 324 U.S., at 445, 65 S.Ct., at 720, the Court held that Georgia, both as parens patriae and proprietor, was an appropriate party to bring these claims:
This is the same sort of interest sought to be protected here. Hawaii's economy, to which tourism and the tourist trade are important, would be particularly vulnerable to injury from a price conspiracy involving petroleum products. In seeking to preserve the economic opportunities of its people, and the tax revenues generated thereby, Hawaii is asserting an interest not significantly different in concept from that involved in Chattanooga. Whether the injury sought to be remedied consists of additional payments from the public purse, as in that case, or the failure to generate additional wealth, as here, the result in either instance is the samethe government and its population, as entities, have suffered harm to their economic well-being. If that harm is characterized 'business or property' in one case, then we stretch no traditional property concepts in applying the same label in the other.
This conclusion is not undercut by 15 U.S.C. 15a, which limits recovery by the United States for injury to its 'business or property' caused by a violation of the antitrust laws to 'actual damages suffered' 'solely as a buyer of goods.' S.Rep.No.619, 84th Cong., 1st Sess., 3 (1955). Nothing in the Act similarly restricts a State, suing as parens patriae. As the legislative history of § 15a shows, the major emphasis during passage of the Sherman Act was on the methods of its enforcement. '(I)t was believed that the most effective method, in addition to the imposition of penalties by the United States, was to provide for private treble-damage suits. It was originally hoped that this would encourage private litigants to bear a considerable amount of the burden and expense of enforcement and thus save the Government time and money.' Id., at 2; U.S.Code Cong. & Admin.News, p. 2329. Thus private litigants, encouraged by the hope of triple recovery, were seen as a major instrument of antitrust enforcement, supplemented by criminal prosecutions and civil forfeiture actions brought by the Federal Government. These remedies did not, however, adequately protect the Government as the volume of its procurement grew and collusion among its suppliers became increasingly evident. This was the mischief Congress enacted § 15a to curb:
'The American taxpayer is entitled to full value for his tax dollar. He should be protected against its going into the pockets of wrongdoers in the form of excessive prices and profits gained through violation of the antitrust laws. If he were spending the money himself, he could sue for triple damages. Surely, he is entitled to protection from actual loss where the Government spends it for him. By permitting the United States Government to recover the provable damages resulting from unlawful practices engaged in by those with whom it does business, (§ 15a) would afford those safeguards necessary to the Public Treasury and at the same time severely deter those who would conspire in their dealings with Federal departments.' H.R.Rep.No.422, 84th Cong., 1st Sess., 45 (1955).
In the third amended complaint, the State abandoned a claim made in the initial complaint that the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. 13(a), had been violated. This claim has not been resurrected in any of the later stages of the proceedings.
The opinion of the court is unreported, but is contained in App. 5158.
increasing taxes, or reducing government services, or both. But this does not mean that the two kinds of injuries are identical in nature. Where the injury to the State occurs in its capacity as a consumer in the marketplace, through a 'payment of money wrongfully induced,' Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U.S. 390, 396, 27 S.Ct. 65, 66, 51 L.Ed. 241 (1906), damages are established by the amount of the overcharge. Under § 4, courts will not go beyond the fact of this injury to determine whether the victim of the overcharge has partially recouped its loss in some other way, even though a State, for example, may ultimately recoup some part of the overcharge through increased taxes paid by the seller. See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 489, 88 S.Ct. 2224, 2229, 20 L.Ed.2d 1231 (1968). Measurement of an injury to the general economy, on the other hand, necessarily involves an examination of the impact of a restraint of trade upon every variable that affects the State's economic healtha task extremely difficult, 'in the real economic world rather than an economist's hypothetical model.' Id., at 493, 88 S.Ct., at 2231.
The lower courts have been virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation. See, e.g., Miley v. John Hancock Mutual Life Insurance Co., 148 F.Supp. 299, 303 (Mass.), aff'd, 242 F.2d 758 (CA1), cert. denied, 355 U.S. 828, 78 S.Ct. 38, 2 L.Ed.2d 41 (1957); Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183 (CA2 1970), cert. denied, 401 U.S. 923, 91 S.Ct. 877, 27 L.Ed.2d 826 (1971); Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 732734 (CA3 1970), cert. denied, 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323 (1971); South Carolina Council v. Newton, 360 F.2d 414, 419 (CA4), cert. denied, 385 U.S. 934, 87 S.Ct. 295, 17 L.Ed.2d 215 (1966); Dailey v. Quality School Plan, Inc., 380 F.2d 484 (CA5 1967); Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F.2d 383, 395 (CA6 1962), cert. denied, 372 U.S. 907, 83 S.Ct. 721, 9 L.Ed.2d 717 (1963); Commonwealth Edison Co. v. Allis-Chalmers Mfg. Co., 315 F.2d 564, 566567 (CA7), cert. denied sub nom. Illinois v. Commonwealth Edison Co., 375 U.S. 834, 84 S.Ct. 64, 11 L.Ed.2d 64 (1963); Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679, 688689 (CA8 1966); Hoopes v. Union Oil Co., 374 F.2d 480, 485 (CA9 1967); Nationwide Auto Appraiser Serv. v. Association of Cas. & Sur. Co., 382 F.2d 925, 928929 (CA10 1967).
'Whenever the United States is hereafter injured in its business or property by reason of anything forbidden in the antitrust laws it may sue therefor . . ., and shall recover actual damages by it sustained and the cost of suit.' 69 Stat. 282, 15 U.S.C 15a.
In Wyandotte, the Court refused to exercise its conceded original jurisdiction over an original complaint filed by the State of Ohio to enjoin alleged pollution of Lake Erie by manufacturing plants in Michigan and Ontario, Canada, because 'as a practical matter, it would be inappropriate for this Court to attempt to adjudicate the issues . . ..' 401 U.S., at 501, 91 S.Ct., at 1011. In the light of our rules permitting the appointment of special masters, however, this rationale is questionable at best. Id., at 510512, 91 S.Ct., at 10151016 (Douglas, J., dissenting). See generally Woods & Reed, The Supreme Court and Interstate Environmental Quality: Some Notes on the Wyandotte Case, 12 Ariz.L.Rev. 691 (1970).
'In these three respectsas a clearing house for necessary institutional innovations; as an agency for resolution of conflicts among group interests; and as a major entrepreneur for the socially required infrastructurethe sovereign state assumes key importance in channeling the explosive impacts of continuous structural changes, in providing a proper framework in which these structural changes, proceeding at revolutionary speed, are contained and prevented from exploding into a civil war (as they sometimes may, and have). Thus, the high rate of change in economic structure is linked to the importance of the sovereign state as an organizing unit. It is not accidental that, in measuring and analyzing economic growth, we talk of the economic growth of nations and use national economic accounts. In doing so, we imply that the sovereign state is an important factor in modern economic growth; that, given the transnational, worldwide character of the supply of useful knowledge and science, the major permissive factor of modern economic growth, the state unit, in adjusting economic and social institutions to facilitate and maximise application, plays a crucial supplementary role.' S. Kuznets, Economic Growth of Nations 346347 (1971).
My quarrel with the Court does not extend to its approving reference to the possibility that Hawaii may yet be able to maintain a class action on behalf of her consumers, ante, at 266. Cf. Comment, Wrongs Without Remedy: The Concept of Parens Patriae Suits for Treble Damages Under the Antitrust Laws, 43 S.Cal.L.Rev. 570, 580583 (1970). The District Court's dismissal of Hawaii's class action count as 'unmanageable' was not certified for interlocutory appeal, and Hawaii's rights under Fed.Rule Civ.Proc. 23 are not before us for review.