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Apex Oil Co. v. DiMauro, 822 F.2d 246 | Casetext
MINPECO, SA v. Conticommodity Services, Inc.
Discussion Three recent Supreme Court decisions — Matsushita Electric Industrial Co. v. Zenith Radio…
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Full title:APEX OIL COMPANY, PLAINTIFF-APPELLANT, v. JOSEPH DiMAURO, TRIAD…
Date published: Jun 17, 1987
822 F.2d 246 (2d Cir. 1987)
holding that "inferring that a conversation took place would amount to speculation" where a defendant's notebook contained the name of another defendant, a date, and specific phrases, and plaintiff attempted "to infer from this that Berberich spoke to Oliver on February 1 and agreed to 'demand delivery' and thereby 'press for default'"
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Richard J. Wiener, New York City (Pamela Rogers Chepiga, Jeffrey Q. Smith, Robert D. Rippe, Jr., Cadwalader, Wickersham Taft, New York City, of counsel), for plaintiff-appellant.
Martin I. Kaminsky, New York City (Edward T. McDermott, Pollack Kaminsky, New York City, of counsel), for defendants-appellees Joseph DiMauro, Triad Petroleum, Inc., and TIC Commodities, Inc.
Michael Lesch, New York City (Adam B. Gilbert, Yee Wah Chin, Shea Gould, New York City, of counsel), for defendants-appellees The Coastal Corp., Coastal States Marketing, Inc., Belcher Oil Co., The Belcher Co. of New York, Inc., Belcher New England, Inc., and Belcher New Jersey, Inc.
Donald E. Egan, Lee Ann Watson, James E. Hanlon, Jr., Katten, Muchin, Zavis, Pearl, Greenberger Galler, Chicago, Ill., Christopher H. Lunding, Mitchell A. Lowenthal, Cleary, Gottlieb, Steen Hamilton, New York City, of counsel, for defendants-appellees Stinnes Corp. and Stinnes Interoil, Inc.
Kenneth J. McGuire, Stein, Bliablias, McGuire Pantages, Livingston, N.J., of counsel, for defendant-appellee Eastern Oil of New Jersey.
Neil T. Motenko, T. Christopher Donnelly, Lisa C. Wood, Nutter, McClennon Fish, Boston, Massachusetts, Jon Paul Robbins, Nitken, Alkalay, Handler Robbins, New York City, of counsel, for defendants-appellees Northeast Petroleum Corp. and Northeast Petroleum Industries, Inc.
David R. Schaefer, James C. Graham, Brenner, Saltzman, Wallman Goldman, New Haven, Connecticut, Darrell K. Fennell, Owen Fennell, New York City, of counsel, for defendant-appellee George E. Warren Corp.
William E. Hegarty, New York City (Peter Leight, Kathy Silberthau, Phillip C. Essig, Cahill Gordon Reindel, New York City, of counsel), for defendant-appellee New York Mercantile Exchange.
Julius Berman, Phillip A. Geraci, Kaye, Scholer, Fierman, Hays Handler, New York City, of counsel, for defendant-appellee Julian Raber.
Before PIERCE and ALTIMARI, Circuit Judges, and SPRIZZO, District Judge.
Hon. John E. Sprizzo, Judge, United States District Court for the Southern District of New York, sitting by designation.
The rules of the Exchange provided that any February contracts not liquidated by Friday, January 29, 1982 — the close of trading for such contracts — would be matched, long with short, for the purpose of delivery (or EFP). At the close of trading, Apex was short 4,378 contracts. In other words, Apex had agreed to deliver 4,378 contracts (183,876,000 gallons) of oil in February 1982. The total number of outstanding contracts designated for delivery by all persons holding short positions, including Apex, was 4,906.
Of the 4,906 contracts open at the close of trading, 1,945 were held by a number of oil companies and their affiliates who were named as defendants herein (the "long defendants"):
1. Northeast Petroleum Corporation and Northeast Petroleum Industries, Inc. (collectively "Northeast"). Apex and Northeast settled this case after argument and this appeal was dismissed as to Northeast in May 1987.
2. Global Petroleum Corporation ("Global"). Pursuant to a stipulation and order filed on November 22, 1983, this action was "discontinued" as to Global with prejudice.
3. Coastal Corporation, Coastal States Marketing, Inc., Belcher Oil Company, The Belcher Company of New York, Inc., Belcher New England, Inc., and Belcher New Jersey, Inc. (collectively "Belcher")
4. Stinnes Corporation and Stinnes Interoil, Inc. (collectively "Stinnes")
5. George E. Warren Corporation ("Warren").
1. Joseph DiMauro, a broker in the commodities futures market and the cash ("wet") market for No. 2 heating oil.
2. Triad Petroleum, Inc. ("Triad"), DiMauro's brokerage firm for transactions on the wet market.
3. TIC Commodities, Inc. ("TIC"), DiMauro's brokerage firm for transactions on the futures market.
4. The New York Mercantile Exchange (the "Exchange") and Julian Raber ("Raber"), the vice-chairman of the Exchange (collectively the "Exchange defendants").
Northeast 748 Global 362 Belcher 315 Stinnes 300 Warren 170 Eastern 50 [13] As required by Exchange rules, on February 1, 1982, Apex selected a delivery site through its broker and clearing member Goldman Sachs Co. ("Goldman"). For 4,281 of its 4,378 contracts, it selected GATX terminal in Carteret, New Jersey, as the delivery site. Apex designated B.P. terminal at Tremley Point, New Jersey, as the delivery site for the remaining contracts. On the same day, also pursuant to Exchange rules, each long defendant submitted "Notice of Intention to Accept Petroleum Products Futures." The clearing house then matched up longs and shorts for delivery. All of the open long positions held by the long defendants, except for fifteen contracts to be delivered to Warren, were designated by the Exchange for delivery by Apex.
Meanwhile, on February 4 and 5 the Exchange Control Committee asked several clearing members to suggest that their customers holding long positions agree to change delivery dates and sites. Apex alleges that its own requests to change delivery dates, methods or sites were either ignored or rejected by the long defendants. The long defendants do not appear to contest this allegation. Apex further alleges that this inflexibility was the result of a conspiracy among the defendants to "squeeze" Apex by forcing it to deliver an enormous amount of oil on short notice. As a result of this inflexibility, Apex claims that it was forced to purchase oil from the long defendants at inflated prices in order to meet its delivery obligations. Indeed, there is evidence that while the closing price for February contracts was 89.7¢ per gallon, Apex paid prices as high as 97.5¢ per gallon to several long defendants for oil that was immediately delivered back to the long defendants to satisfy Apex's delivery obligations. These purchases of oil enabled Apex to avoid a default.
1. Antitrust Conspiracy. Apex alleges four Sherman Act claims; treble damages are requested. Three claims allege violations of section 1 of the Act and one alleges a violation of section 2. See 15 U.S.C. §§ 1, 2.
The first claim asserts that the long defendants and the exchange defendants conspired to nominate for early delivery in violation of section 1 of the Act. The early nominations allegedly enabled the long defendants to "manipulate, raise, maintain, stabilize and/or fix the price of No. 2 Heating Oil" by creating an "artificial shortage." Amended Complaint ¶¶ 46-52; see 15 U.S.C. § 1.
The second claim alleges that the long defendants conspired to refuse to deal with Apex by refusing to sell No. 2 oil to Apex, thereby weakening Apex's position as a competitor and creating an artificially high price for the oil. Amended Complaint ¶¶ 53-59; see 15 U.S.C. § 1.
The third claim asserts that the long defendants conspired to prevent other sources of No. 2 oil from supplying it to Apex, thereby artificially raising the price for the oil. Amended Complaint ¶¶ 60-64; see 15 U.S.C. § 1.
The fourth claim alleges that the long defendants conspired to monopolize the wet market for No. 2 oil available for delivery in New York Harbor during early February 1982, thereby causing Apex to pay artificially high prices for such oil. Complaint ¶¶ 65-69; see 15 U.S.C. § 2.
2. Commodities Manipulation. The fifth claim in the amended complaint alleges that the long defendants violated sections 9(b) and 13(a) of the Commodity Exchange Act ("CEA") by manipulating the price of oil and that all the defendants violated the CEA by spreading false reports about Apex. Amended Complaint ¶¶ 70-79; see 7 U.S.C. §§ 13(b), 13c(a). This claim apparently has been abandoned with respect to the Exchange defendants.
3. Failure to Regulate. The seventh claim in the amended complaint asserts that the exchange defendants failed to regulate properly the activities of brokers, traders and others with respect to the trading and delivery of oil during the period in question, thus violating the CEA and regulations thereunder. Amended Complaint ¶¶ 86-91; see 7 U.S.C. §§ 7(d), 7a(8).
4. Fraud. The sixth claim alleges fraud under the Commodity Exchange Act, see 7 U.S.C. §§ 6b, 13c(a), and the eighth claim alleges common law fraud by the long defendants. Amended Complaint ¶¶ 80-85, 92-97.
Discovery on all the claims having been completed, all the defendants moved for summary judgment dismissing all the claims. The district court granted the motions and entered judgment dismissing the amended complaint. See Apex Oil Co. v. DiMauro, 641 F.Supp. 1246 (S.D.N.Y. 1986).
A motion for summary judgment shall be granted if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Herein, we focus primarily on the first part of the test: whether there is an issue of fact as to the existence of a conspiracy.
The movant bears the initial burden of demonstrating "the absence of a genuine issue as to any material fact." See Adickes v. S.H. Kress Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). This may consist simply of pointing out that the plaintiff has failed to present any evidence to establish a necessary element of the cause of action. See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). In response, the non-moving party must then "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see Celotex Corp., 106 S.Ct. at 2552 n. 3; Adickes, 398 U.S. at 159-61, 90 S.Ct. at 1609-10. While the non-moving party must show more than a "metaphysical doubt" as to material facts, Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986), all inferences must be drawn in favor of the non-moving party. Id. at 1356-57. However, the Supreme Court has stated that "antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case." Id., 106 S.Ct. at 1357.
Specifically, "conduct as consistent with permissible conduct as with [an] illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy." Id.; see Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 1470, 79 L.Ed.2d 775 (1984). There must be some evidence that "tends to exclude the possibility that the [defendants] were acting independently." Id. at 764, 104 S.Ct. at 1471. Thus, evidence of parallel conduct alone cannot suffice to prove an antitrust conspiracy. A plaintiff "should present direct or circumstantial evidence that reasonably tends to prove that the [defendants] `had a conscious commitment to a common scheme designed to achieve an unlawful objective.'" Id. (quoting Edward J. Sweeney Sons v. Texaco, Inc., 637 F.2d 105, 111 (3d Cir. 1980), cert. denied, 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981)); see also H.L. Moore Drug Exchange v. Eli Lilly Co., 662 F.2d 935, 941 (2d Cir. 1981), cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 144 (1982). As stated by this court, "[a]t a minimum,.... `the circumstances [must be] such as to warrant a jury in finding that the conspirators had a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement.'" International Distribution Centers, Inc. v. Walsh Trucking Co., 812 F.2d 786, 793 (2d Cir. 1987) (quoting Michelman v. Clark-Schwebel Fiber Glass Corp., 534 F.2d 1036, 1043 (2d Cir.), cert. denied, 429 U.S. 885, 97 S.Ct. 236, 50 L.Ed.2d 166 (1976)).
We must note, however, that while summary judgment is a valuable means for avoiding unnecessary trials, and recent Supreme Court as well as Second Circuit cases have tended to encourage its use in complex cases such as this one, see, e.g., Celotex Corp., 106 S.Ct. at 2555; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita, supra; Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir. 1986), cert. denied, ___ U.S. ___, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987); Eastway Construction Corp. v. City of New York, 762 F.2d 243, 250-51 (2d Cir. 1985), it should not be regarded as a substitute for trial. Thus, while the Supreme Court has indicated that trial courts should draw only reasonable inferences in favor of the non-moving party viewing the evidence as a whole, see Matsushita, Id. at ___, 106 S.Ct. at 1357; see also International Distribution Centers, 812 F.2d at 793-94, and while some assessing of the evidence is necessary in order to determine rationally what inferences are reasonable and therefore permissible, it is evident that the question of what weight should be assigned to competing permissible inferences remains within the province of the fact-finder at a trial.
In Matsushita the plaintiffs had alleged that various Japanese television manufacturers were engaged in a predatory pricing scheme, financed by the charging of higher than competitive prices in Japan, designed to put American companies out of business. In that case, the Supreme Court stated that summary judgment dismissing the action was appropriate since predatory pricing schemes are inherently unlikely and since there was no sign of the alleged goal of such a scheme ever coming within reach after many years of its alleged operation. Thus, since the scheme was not "plausible," the Court stated that the jury should not be permitted to infer the existence of a conspiracy from evidence of higher than competitive prices in Japan since to do so could deter pro-competitive conduct, i.e., the setting of low prices in the United States. Id. at ___, 106 S.Ct. at 1360; see also Monsanto, 465 U.S. at 762-64, 104 S.Ct. at 1470. If the scheme alleged is implausible, a conspiracy must be proved by strong direct or strong circumstantial evidence, and the implausibility of a scheme will reduce the range of inferences that may permissibly be drawn from ambiguous evidence. See Matsushita, Id. at ___, 106 S.Ct. at 1360-62.
We also think it worth noting that in the Matsushita and Monsanto cases, the types of conspiracies alleged were more susceptible of direct proof since they concerned long-term complex relationships among competitors. See Posner, Oligopoly and the Antitrust Laws: A Suggested Approach, 21 Stan. L. Rev. 1562, 1569-75 (1969) (discussing difficulty of maintaining cartel of many firms and probable need for explicit agreement); see also Gainesville Utilities Department v. Florida Power Light Co., 573 F.2d 292, 303 (5th Cir.), cert. denied, 439 U.S. 966, 99 S.Ct. 454, 58 L.Ed.2d 424 (1978); F. Sherer, Industrial Market Structure and Economic Performance 199-200 (2d ed. 1980). In a case where the alleged scheme is short-term and relatively simple in operation, we must as a practical matter accept that the best proof available most often will only tend to show the existence of an informal, perhaps even tacit, rather than explicit, agreement. Therefore, we carefully examine the conduct and communications of the defendants in order to determine whether it evidences an agreement. See Gainesville Utilities Department, supra (citing Posner, supra, at 1562).
Much of the evidence in this case concerns the alleged parallel conduct of the defendants. Parallel conduct can be probative evidence bearing on the issue of whether there is an antitrust conspiracy. However, parallel conduct alone will not suffice as evidence of such a conspiracy, even if the defendants "knew the other defendant companies were doing likewise." Modern Home Institute, Inc. v. Hartford Accident Indemnity Co., 513 F.2d 102, 110 (2d Cir. 1975). More must be shown.
Since mere parallel behavior can be consistent with independent conduct, courts have held that a plaintiff must show the existence of additional circumstances, often referred to as "plus" factors, which, when viewed in conjunction with the parallel acts, can serve to allow a fact-finder to infer a conspiracy. See id.; In re Plywood Antitrust Litigation, 655 F.2d 627, 633-37 (5th Cir. 1981), cert. dismissed, 462 U.S. 1125, 103 S.Ct. 3100, 77 L.Ed.2d 1358 (1983). Such circumstances might include a common motive to conspire or a high level of interfirm communications. See, e.g., In re Plywood Antitrust Litigation, 655 F.2d at 633 (interfirm communications); Ambook Enterprises v. Time Inc., 612 F.2d 604, 616 (2d Cir. 1979) (common motive to conspire), cert. dismissed, 448 U.S. 914, 101 S.Ct. 35, 65 L.Ed.2d 1179 (1980). See generally P. Areeda, Antitrust Analysis 371-82 (3d ed. 1981). However, such plus factors may not necessarily lead to an inference of conspiracy. For example, such factors in a particular case could lead to an equally plausible inference of mere interdependent behavior, i.e., actions taken by market actors who are aware of and anticipate similar actions taken by competitors, but which fall short of a tacit agreement. See id. at 374-75. In such a case, a court might find it difficult to hold that the parallel acts "tend to exclude the possibility" of independent action.
As discussed below, see Parts IV.A.2 to IV.A.5 infra, while Apex points to evidence indicating that the long defendants may have been motivated by a desire to make inordinate profits, to "get" Apex, this evidence of motivation creates an equally valid inference of independent action. Apex also points to evidence of a number of communications among the defendants. However, aside from the particular communications discussed below, see Part IV.A.2 infra, for the reasons stated by the district court, we believe that inferring a conspiracy from the existence of these communications would amount to speculation under the circumstances herein. See 641 F.Supp. at 1266-69. Accordingly, we believe that in this case Apex must show more.
Apex presents evidence which it believes shows that the parallel acts were "against the apparent individual economic self-interest of the alleged conspirators." Modern Home Institute, 513 F.2d at 111. Such a showing, if successful, might tend to exclude the possibility of independent parallel behavior. See Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978); see also Matsushita, supra. See generally 6 P. Areeda, Antitrust Law ¶¶ 1415, 1434, at 84-93, 213-21 (1986).
Apex argues that it made no economic sense for defendants individually to nominate early. However, the most we can say in support of this position is that the evidence concerning the rationality of nominating early is ambiguous. For example, it is not really controverted that the price of oil was falling in early February 1982. The defendants suggest that this provided them with a good reason to take delivery early; the oil would be more valuable earlier in the month than later. Apex counters that this makes sense only if there was an immediate market for the oil since it costs money to store oil, since the money used to buy the oil early instead could be invested, and since the defendants allegedly already had inventories of oil on hand. However, these costs which might be incurred as a consequence of early delivery were very likely small in comparison with the potential decrease in value of the oil by the end of the month. Apex provides no probative evidence tending to show that defendants would have experienced difficulty in selling the oil after delivery or even that any defendant believed that late delivery would be harmful. Indeed, it was an officer of Apex who testified that in a falling market early delivery was indicated. While Apex presented the testimony of an expert who asserted that the defendants did not need the oil, the expert did not state that taking the oil early would be to the defendants' disadvantage. Since the evidence as to the rationality of nominating early is ambiguous, it appears that we do not have a case where a fact-finder could be allowed to infer from the parallel conduct the existence of a conspiracy in the absence of additional evidence. See id. ¶ 1415b, at 86-87 (question is whether no rational person would engage in the alleged parallel behavior individually) (discussing Modern Home Institute, supra).
We next consider several entries made in the notebook of William Berberich of Belcher on February 1, 1982, prior to the nominations by the long defendants. In that notebook, the name of Don Oliver, a trader at Northeast, appears. An arrow is drawn from the name to the notation, " Losses." Under these notations there are additional notations that appear to relate to prices of No. 2 oil. Then there appears the following: "Demand delivery" (emphasis in original), "Look for Default" and "Merc — EFP." Several pages later, in another notation for February 1, the notebook reads, "Sat. demand 12:01 Sat. [February 6] AM"; and in notations for February 2 appear the words, "promote crunch" and "press for default."
Apex asks us to infer from this that Berberich spoke to Oliver on February 1 and agreed to "demand delivery" and thereby "press for default" on the part of Apex. Apex offers no other evidence indicating that the conversation ever took place. Looking at this evidence alone, we agree with the defendants and the district court that inferring that a conversation took place would amount to speculation. Proof of Belcher acting independently in an attempt to create a short squeeze would not show a violation of the Sherman Act as alleged in the amended complaint.
However, Apex also points to another conversation, between Slifka of Global and Berberich of Belcher, which Apex argues supports an inference that Belcher took part in a conspiracy. On February 3, Slifka spoke to Berberich. Berberich admitted that the conversation took place, but stated that it was limited to whether Slifka thought there would be a default and to the fact that Warren held a long position. In his notebook for that day, Berberich entered Slifka's name and telephone number, followed by, "1) G.E. Warren .150. 2) Sent Wires and Want Immediate Answer. (3) Threatened WS [illegible]." Two pages later in the notebook, on the same date, an entry reads:
— Penalty to start Fri.—
— 10% after 5 days —
— oil at 5 days —
— Bring suit against exchange
— Restraining order to prevent any further trades on Merc.
Apex points out that the above entries in Berberich's notebook closely resemble the entries in Denihan's notes, discussed above, regarding a conversation between Slifka (Global) and Oliver (Northeast) on the same day. Apex also points out that "`once a conspiracy is shown, only slight evidence is needed to link another defendant with it.'" United States v. Wilkinson, 754 F.2d 1427, 1436 (2d Cir.) (Mansfield, J.) (quoting United States v. Marrapese, 486 F.2d 918, 921 (2d Cir. 1973), cert. denied, 415 U.S. 994, 94 S.Ct. 1597, 39 L.Ed.2d 891 (1974)), cert. denied, 472 U.S. 1019, 105 S.Ct. 3482, 87 L.Ed.2d 617 (1985).
In our view, the similarity between the notes seems striking. If a finder of fact were to infer a conspiracy between Global and Northeast, a possibility we have concluded would be reasonable in light of Denihan's notebook entries, see supra, it could reasonably conclude in light of Berberich's notebook entries regarding the Slifka conversation that Belcher also participated, especially if we view the Slifka conversation in light of Berberich's notations made two days earlier (e.g., "promote crunch" and "press for default"). The long defendants point out that the conversation between Berberich and Slifka took place after Belcher had made its nominations, and argue that the entries merely refer to a discussion of whether there was going to be a default. However, the notes could more easily be interpreted as outlining the method of continuing the pressure that already had been placed on Apex. Thus, it reasonably could be inferred that the conversation consisted of more than mere speculation concerning Apex's ability to deliver. Accordingly, in light of all of the circumstances, including communications among the defendants and their parallel conduct, we must conclude that sufficient evidence has been produced from which a factfinder could infer that Belcher, Global, and Northeast "`had a unity of purpose or a common design and understanding, or a meeting of the minds in an unlawful arrangement.'" International Distribution Centers, 812 F.2d at 793 (quoting Michelman, 534 F.2d at 1043). We therefore reverse the dismissal of the antitrust claims as to Belcher.
Apex points to evidence of a series of additional conversations said to have occurred among the long defendants. Bearing in mind that evidence of the mere exchange of information by competitors cannot establish a conspiracy, see Kreuzer v. American Academy of Periodontology, 735 F.2d 1479, 1487 (D.C.Cir. 1984), we have carefully considered the arguments of Apex with respect to these conversations. For essentially the reasons stated by the district court, see 641 F.Supp. at 1266-69, we conclude that inferring the existence of a conspiracy from the remaining conversations would amount to mere speculation.
Apex presents a mass of other material that Apex characterizes as evidence of a conspiracy. We have carefully reviewed this evidence and, while we reverse and remand as to the antitrust claims against Belcher for the reasons stated above, and remain aware that "`once a conspiracy is shown, only slight evidence is needed to link another defendant with it,'" Wilkinson, supra, since we do not find such a link, we conclude that affirmance of the grant of summary judgment is appropriate as to the remaining defendants.
Apex first points to an offer on February 1 by Sal DiMauro on behalf of Stinnes to sell Apex 300,000 barrels of oil for approximately 87 per gallon. This offer was withdrawn ten minutes later after Joseph DiMauro, also of Triad and TIC, spoke to the president of Stinnes. On February 2, Sal DiMauro offered Apex 300,000 barrels from Stinnes at 97 cents. And on February 3, Joseph DiMauro offered Apex 1.5 million barrels at 93.5 cents. Apex wishes us to infer a conspiracy from this. However, Apex offers no evidence tending to show that this sequence was part of any agreement beyond one between Stinnes and its broker, DiMauro. Moreover, the fact that Stinnes used its broker to make the offers does not amount to an illegal conspiracy. A more likely inference from this evidence is that once the market became aware of Apex's delivery obligations, Stinnes and others, as rational sellers, raised the price of oil in order to take advantage of Apex's plight.
For example, Apex argues that Tony Densieski, a trader for Texas Energy (not a defendant) informed the Vice President of the Exchange that certain longs had invited Densieski to take advantage of Apex's position. However, Densieski never specified which longs had made this offer. We clearly cannot infer the participation on the part of any defendant based on such a generalized accusation.
Similarly, while Julian Raber allegedly told Patricia Lyons of Apex that he was aware of "a conspiracy to `squeeze the shorts,'" and referred to the actions of the longs as a "sting," the testimony concerning these statements lacked any indication of what facts Raber based his opinion on or even whether his opinion was based on anything at all other than rumor or speculation.
Little of the evidence discussed thus far relates to the Exchange defendants. The strongest evidence presented by Apex to show that the Exchange defendants participated in a conspiracy consists of evidence of a number of communications between the Exchange defendants and the long defendants. However, the content of these conversations, even as characterized by Apex, amounts to "jawboning" in an attempt to avert an impending default. We note that the Exchange also communicated with Apex as part of this effort. Moreover, Apex has offered no plausible motivation for the Exchange defendants to have participated in the alleged scheme. We therefore affirm the grant of summary judgment as to the Exchange and Raber, its vice chairman.
The district court held alternatively that in addition to failing to prove participation by the Exchange defendants in a conspiracy, Apex failed to show bad faith, which the district court believes is necessary in an antitrust claim asserted against a self-regulating market such as the Exchange when the claim relates to the duty of the Exchange to maintain a fair and orderly market. See 641 F.Supp. at 1282; see also P.J. Taggares Co. v. New York Mercantile Exchange, 476 F.Supp. 72, 78-79 (S.D.N.Y. 1979). Since we have concluded that Apex has failed to present evidence linking the Exchange defendants to a conspiracy, we need not reach the issue of whether bad faith is a necessary element of the antitrust claims against the Exchange.
The fifth claim in the amended complaint alleges that the defendants manipulated the commodities market in violation of the CEA, 7 U.S.C. § 13(b), which prohibits, inter alia, (1) any "attempt to manipulate the price of any commodity ... for future delivery" and (2) delivery of "false or misleading or knowingly inaccurate reports concerning . . . market information or conditions that affect or tend to affect the price of any commodity in interstate commerce."
The amended complaint alleges first that the long defendants, with the assistance of the other defendants, "attempted to and did manipulate the price of No. 2 Heating Oil" by "cornering" or "squeezing" the market for No. 2 oil. Amended Complaint ¶¶ 72-73. It also alleges that the long defendants, with the assistance of the other defendants, disseminated false reports in violation of the CEA. The district court dismissed both aspects of this claim. On appeal, Apex only presents arguments for reinstatement of the manipulation aspect of the claim. We therefore leave undisturbed the district court's dismissal of the false reports aspect of the claim.
Apex alleges as its seventh claim that the Exchange defendants failed to remedy the alleged market manipulation by the long defendants in violation of the CEA, 7 U.S.C. §§ 7(d), 7a(8). The district court dismissed this claim because it found that Apex failed to present evidence tending to show that the Exchange acted or failed to act as a result of self-interest or bad faith as interpreted in a number of this court's decisions. See, e.g., Brawer v. Options Clearing Corp., 807 F.2d 297 (2d Cir. 1986); Sam Wong Son v. New York Mercantile Exchange, 735 F.2d 653 (2d Cir. 1984). Apex on appeal argues that a number of statements by persons connected with the Exchange, most notably Julian Raber, could lead a reasonable juror to infer the existence of an improper motive in light of all of the circumstances herein. Having carefully reviewed the allegations and the proffered evidence, we affirm the district court's dismissal of the claim of failure to regulate for the reasons stated in the district court opinion. 641 F.Supp. at 1276-81.
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In Apex Oil Co. v. DiMauro, 822 F.2d 246, 254 (2d Cir. 1987), for example, the plaintiff survived a summary judgment motion by advancing evidence in the form of detailed memoranda indicating the existence of an agreement.
Summary of this case from Alvord-Polk, Inc. v. F. Schumacher Co.
In DiMauro, the Second Circuit merely held that, at the summary judgment stage, in the absence of any evidence of a conspiracy, plaintiffs could not proceed on a theory that each defendant could alone have manipulated the market because a complaint that "alleges collective action... cannot be allowed to proceed as if it alleges individual action."
Summary of this case from In re Commodity Exch., Inc.
suggesting that allegations that are consistent only with market actors who are aware of and anticipate similar actions by competitors would be insufficient to support the existence of a tacit agreement
Summary of this case from In re Zinc Antitrust Litig.
noting that "common motive to conspire" and "a high level of interfirm communications" are appropriate plus factors
In Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir.), cert. denied, ___ U.S. ___, 108 S.Ct. 489, 98 L.Ed.2d 487 (1987), the court conceded "that while summary judgment is a valuable means for avoiding unnecessary trials,... it should not be regarded as a substitute for trial."
Summary of this case from Guinness Mahon Cayman Tr. v. Windels, Marx