Source: https://law.justia.com/cases/federal/appellate-courts/F2/641/457/25708/
Timestamp: 2020-07-09 16:00:36
Document Index: 139733297

Matched Legal Cases: ['§ 15', '§ 4', '§ 85', '§ 19', '§ 31', 'art.12', '§ 403', '§ 110', '§ 110']

Jack Weit et al., Plaintiffs-appellants, v. Continental Illinois National Bank and Trust Company Ofchicago et al., Defendants-appellees, 641 F.2d 457 (7th Cir. 1981) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Seventh Circuit › 1981 › Jack Weit et al., Plaintiffs-appellants, v. Continental Illinois National Bank and Trust Company Ofc...
Jack Weit et al., Plaintiffs-appellants, v. Continental Illinois National Bank and Trust Company Ofchicago et al., Defendants-appellees, 641 F.2d 457 (7th Cir. 1981)
US Court of Appeals for the Seventh Circuit - 641 F.2d 457 (7th Cir. 1981) Argued June 3, 1980. Decided Feb. 11, 1981. Rehearing and Rehearing En Banc Denied April 13, 1981
This controversy arises out of the formation of the Midwest Bank Card System by the defendant banks. As the District Court noted, the circumstances surrounding the formation of Midwest and its successor, Mastercharge, are not in dispute.4 Those facts are set forth in detail in the District Court's opinion. See Weit v. Continental Illinois National Bank & Trust Co., 467 F. Supp. 197, 200-205 (N.D. Ill. 1978). However, a brief summary of the Midwest system is appropriate.
The District Court found that the defendant's parallel interest rate; the opportunity to conspire to fix those rates; the specific references to interest rates in the record; and the opinion of Professor Shull did not create a reasonable inference of the conspiracy which plaintiffs alleged. 467 F. Supp. at 210-211. In support of their motion for summary judgment, defendants, as they must, came forward with testimony under oath refuting plaintiffs' allegations. This evidence showed that each defendant had independently projected the costs and early losses from the credit card system, and independently arrived at 1.5% per month as the minimum interest rate they could charge. The Court below noted that every employee of the defendant banks who participated in the formation of Midwest denied, under oath, that there had been any discussion relating to a fixed or agreed interest rate. The Court found that the parallel rates were not surprising since each defendant faced the "identical problems of fraud, credit losses, and large initial expense, to which reasonable businessmen would react in the same fashion." 467 F. Supp. at 210-211.
The Court found that defendants had shifted the burden to the plaintiffs to come forward with "significant probative evidence to support the complaint," citing First National Bank of Arizona v. Cities Service, 391 U.S. 253, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1968). The District Court concluded that, after more than eight years of discovery,
... plaintiffs have confronted every person who attended those meetings, examined the minutes of and documents generated by each meeting, and found no evidence which affirmatively supports their theory. 467 F. Supp. at 211.
In the instant case the District Judge reviewed the evidence in the record at the conclusion of a lengthy period of discovery and found no significant probative evidence of a conspiracy to fix interest rates. Based on our independent review of the record, we, too, are unable to uncover any such evidence, and conclude that further proceedings in this case would result in a waste of limited judicial time and resources.15 THE ALLEGED HORIZONTAL CONSPIRACY
Plaintiffs contend that circumstantial evidence in the record parallel rates and the opportunity to conspire are sufficient to meet their burden under Rule 56(e). Clearly, circumstantial evidence can be sufficient to support a finding of a price-fixing conspiracy. Interstate Circuit v. United States, 306 U.S. 208, 59 S. Ct. 467, 83 L. Ed. 610 (1939). Parallel business behavior or "conscious parallelism" is the type of circumstantial evidence which, absent more direct evidence, will be relied on in inferring unlawful agreement. Theatre Enterprises v. Paramount Film Distributing Corp., 346 U.S. 537, 540, 74 S. Ct. 257, 259, 98 L. Ed. 273 (1954). However, when defendants come forward with denials sufficient to shift the burden under Rule 56(e), plaintiffs must come forward with some significant probative evidence which suggests that conscious parallelism is the result of an unlawful agreement. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289-90, 88 S. Ct. 1575, 1592-1593, 20 L. Ed. 2d 569 (1962); Modern Home Institute, Inc. v. Hartford Accident and Indemnity Co., 513 F.2d 102 (2d Cir. 1975). Parallel behavior and the hope that something further can be developed at trial is not sufficient to warrant a trial on the merits. Cities Service at 290, 88 S. Ct. at 1593; Perma Research and Development Co. v. Singer Co., 410 F.2d 572, 578 (2d Cir. 1969). Conscious parallelism in the instant case could support a wide range of inferences. One logical inference is that the 1 1/2 per month interest rate reflected a business decision as to what rate the market for consumer credit would bear, and eventually prove profitable as well. An equally plausible inference, and one supported in the record, is that the already established rate of consumer credit was 1 1/2 per month, as reflected by Bank Americard and retail outlets offering installment credit.16 If plaintiffs are to proceed to trial, they must be able to point to some probative evidence that parallel interest rates resulted from unlawful agreement rather than lawful business reasons.
Plaintiffs rely heavily on the opportunity to conspire as probative evidence of unlawful conspiracy. The dissent also attaches significance to the close personal ties among the members of the Chicago banking community. Yet, the mere opportunity to conspire,17 even in the context of parallel business conduct, is not necessarily probative evidence. See Venzie Corporation v. United States Mineral Products Co., 521 F.2d 1309 (3rd Cir. 1975); Overseas Motors, Inc. v. Import Motors Ltd., 375 F. Supp. 499, 535 (E.D. Mich. 1974), aff'd 519 F.2d 119 (6th Cir. 1975). This is especially the case when the need to set up a compatible card system requires a degree of cooperation. The only rational inference here is that the need to set up a compatible system mandated that defendants work together. Given the need for some degree of cooperation in a venture of this nature, the opportunity to conspire evidence lacks significant probative value. Of greater significance is the sworn testimony compiled during eight years of depositions which uniformly denies discussion of any agreement or understanding as to the interest rate to be charged.
It is suggested that while parallel pricing alone is not sufficient to establish a price-fixing conspiracy, such evidence together with an opportunity to conspire is sufficient to rebut defendants' denials and require a trial on the merits. See C-O-Two Fire Equipment Co. v. United States, 197 F.2d 489 (9th Cir. 1952), cert. denied 344 U.S. 892, 73 S. Ct. 211, 97 L. Ed. 690 (1952); Esco Corporation v. United States, 340 F.2d 1000 (9th Cir. 1965).18 However, when the plaintiff or prosecution relies on circumstantial evidence alone, the inference of unlawful agreement rather than individual business judgment must be the compelling, if not exclusive, rational inference. Pevely Dairy Co. v. United States, 178 F.2d 363 (8th Cir. 1949). Indeed, the Court in Pevely stated:
Plaintiffs suggest that summary judgment should rarely be entered in anti-trust cases due to the central role of motive and intent issues. See Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962). However, no greater caution or concern for litigants' rights is required in the anti-trust context than in other substantive areas of Federal Court litigation. Lupia v. Stella D'Oro Biscuit Company, Inc., 586 F.2d 1163, 1167 (7th Cir. 1978), cert. denied 440 U.S. 982, 99 S. Ct. 1791, 60 L. Ed. 2d 242 (1979).
This Circuit has recognized that "the very nature of anti-trust litigation would encourage summary disposition ... when permissible." Lupia v. Stella D'Oro, 586 F.2d at 1167. The statutory remedy of treble damages creates a "special temptation for the institution of vexatious litigation." Id., citing Poller, 368 U.S. at 478, 82 S. Ct. at 493 (Harlan, J., dissenting). Also, anti-trust actions have proven to be especially protracted, and difficult for jury consideration. See United States v. United Gypsum Co., 438 U.S. 422, 465-469, 98 S. Ct. 2864, 2887-2889, 57 L. Ed. 2d 854 (1978); ILC Peripherals Leasing Corporation v. International Business Machines Corporation, 458 F. Supp. 423, 445-448 (N.D. Cal. 1978). Indeed, in the ILC case the District Judge, after a five month trial which ended in a deadlocked jury and a mistrial, concluded that the case was "beyond the ability and competency of any jury to understand and decide rationally." 458 F. Supp. at 448.
While we recognize the importance of preserving litigants' rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an anti-trust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint. 391 U.S. at 290, 88 S. Ct. at 1593.
Plaintiffs rely, as does the dissent, on Poller v. Columbia Broadcasting, 368 U.S. 464, 82 S. Ct. 486, 7 L. Ed. 2d 458 (1962) in support of the contention that issues of anti-competitive intent are particularly appropriate for jury consideration. The Court in Cities Service noted several factual distinctions between that case and Poller which could be applied in the instant case as well.34 Ultimately, however, these other cases are distinguished on the basis of the inferences which may reasonably be drawn from the evidence in the record. Our review of the record leads us to the conclusion that the circumstantial evidence in support of the complaint is so insubstantial when measured against the evidence in support of defendants' denials, as to preclude a verdict for plaintiffs. Summary judgment on the claims of horizontal conspiracy is therefore appropriate.
The argument for admissibility of this evidence is that it is relevant to the question of whether defendants conspired to fix interest rates. As the dissent points out, an inference can be drawn that the banks would not have worked together in lobbying for passage of a bill in the legislature unless they had implicitly agreed on an interest rate as well. We agree that such an inference could be drawn. Our problem with this evidence is that it more directly suggests an agreement to influence legislators on behalf of a particular bill under consideration. In Eastern Railroads Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S. Ct. 523, 5 L. Ed. 2d 464 (1961), the Court held that such conduct does not violate the Sherman Act, even though there may be an anti-competitive motive behind such conduct.35 In United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965), the Court reaffirmed that principle. The Court in Pennington noted:
Plaintiffs also claim that Continental, Harris, Central and Pullman conspired between themselves and their correspondent banks to fix interest rates charged to consumers and discount rates charged to merchants, in violation of Section 1 of the Sherman Act. The District Court entered summary judgment on the claim of vertical price-fixing by Continental in its Order of December 22, 1978. 467 F. Supp. 214-216. The rationale for entry of summary judgment was that the plaintiffs, in the face of sworn denials by Continental, had failed "to produce any significant probative evidence ... that a conspiracy existed." Id. at 216, citing Lamb's Patio Theatre v. Universal Film Exchanges, 582 F.2d 1068, at 1070. The District Court entered summary judgment for defendants Harris and Central in its order of September 6, 1979.40 The District Court noted at the outset the plaintiffs were cardholders of Continental and not within the "target area" of any conspiracy between defendants. The Court concluded that since plaintiffs could not have suffered any damage as a result of such conspiracy they cannot represent any class of persons holding cards issued by Harris, Central or Pullman. The Court went on to find that even assuming standing plaintiffs had failed to point to any evidence suggesting that interest rates were the result of anything other than independent business decisions. The Court also noted that the vertical conspiracy allegations "must fail because the basis for their existence the allegation of a conspiracy among the named defendants can no longer be maintained in light of this Court's ruling of December 22, 1978." 478 F. Supp. at 298.
In the face of what the Court below found to be legitimate business relationships, plaintiffs are unable to point to any evidence of agreement or conspiracy. Here, as in the alleged horizontal conspiracy, plaintiffs can point only to the opportunity to conspire; the ability to conspire; but no evidence of actual conspiracy. The District Court correctly concluded that this is not sufficient to create a genuine issue of material fact as to the existence of a conspiracy. First National Bank of Arizona v. Cities Service, 391 U.S. at 286-288, 88 S. Ct. at 1591-1592. See also Lupia v. Stella D'Oro Biscuit Co., Inc., 586 F.2d 1163 (7th Cir. 1978), cert. denied 440 U.S. 982, 99 S. Ct. 1791, 60 L. Ed. 2d 242 (1979).
Section 4 of the Clayton Act, 15 U.S.C. § 15, permits anyone who has been "injured in his business or property" to maintain a private action for treble damages. As the Supreme Court's opinion in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977) indicates, the injury must be a direct one. In addition to this requirement of "antitrust injury," a plaintiff in any lawsuit must show that he has sustained or is in immediate danger of sustaining some direct injury from the defendant's actions. O'Shea v. Littleton, 414 U.S. 488, 494, 94 S. Ct. 669, 675, 38 L. Ed. 2d 674 (1974); Sierra Club v. Morton, 405 U.S. 727, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972). A plaintiff who does not have such a stake in the outcome lacks standing to maintain the action irrespective of the merits of the asserted claim.
The Court below noted, as has this Court, that the distinction between the "antitrust injury" requirement of Section 4 and the more general standing requirement is often blurred. 478 F. Supp. at 297. See also Lupia v. Stella D'Oro Biscuit Co., Inc., 586 F.2d at 1168-69. This is not surprising in antitrust actions as the two requirements overlap considerably. The labels are not important, however. The fundamental requirement is that plaintiffs establish a sufficient nexus between the defendant's alleged actions and an injury to plaintiffs.
Here the plaintiffs are unable to establish that nexus. The named plaintiffs are cardholders of only Continental's Midwest chargecards. The fact that they purport to represent Pullman cardholders who would have standing to complain of a vertical conspiracy between Pullman and its correspondents cannot create standing to bring an action. If plaintiffs lack the requisite stake in a controversy at the time the complaint is filed, they may not bootstrap that element into their claim by means of class action certification. Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 734 (3d Cir. 1970). Similarly, plaintiffs who have not suffered antitrust injury from an alleged conspiracy cannot bring themselves within the "target area" simply by purporting to represent those who are. See Lupia v. Stella D'Oro, 586 F.2d, at 1168-69. The District Court correctly concluded "the named defendants could not have been injured by any conspiracy between Pullman and its correspondents and lack standing to raise any claim against Pullman." 478 F. Supp. at 299.
The issue before this court is whether this court is satisfied that a properly instructed jury, giving full weight to plaintiffs' evidence, drawing every reasonable inference in its favor, and subjecting defendants' evidence to a critical eye, could not rationally find that plaintiffs were entitled to any relief. Ambook Enterprises v. Time, Inc., 612 F.2d 604, 611 (2d Cir. 1979), cert. dismissed, --- U.S. ----, 101 S. Ct. 35, 65 L. Ed. 2d 1179 (1980). See Continental Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 82 S. Ct. 1404, 1409, 8 L. Ed. 2d 777 (1962).2 That the issues may be particularly difficult for jury consideration is immaterial to the merits of plaintiffs' claim. The court should only consider whether, after examining all the evidence, plaintiffs' case remains devoid "of any significant probative evidence tending to support the complaint." Ambook Enterprises v. Time, Inc., supra, 612 F.2d at 611, citing First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S. Ct. 1575, 1593, 20 L. Ed. 2d 569 (1968).
As the majority and the district court noted, the circumstances surrounding the formation of Midwest in 1966 and its successor, Mastercharge, are not in dispute. Weit I, 467 F. Supp. at 199. The significance of plaintiffs' evidence introduced in support of their allegations of a horizontal conspiracy is more readily apparent, however, when viewed in light of certain salient facts about the Chicago banking community and the credit card industry at the time of Midwest's formation. Plaintiffs produced evidence to show the following.
In 1966, the Chicago banking market was an oligopoly dominated by First National Bank3 and Continental.4 Illinois prohibitions against branch banking5 contributed to this high level of concentration.6 Defendants' officers knew each other personally, attended many of the same functions, and were members of the same clubs. Weit I, 467 F. Supp. at 206-07. Kenneth Zweiner, chairman of Harris, and Tilden Cummings, of Continental, worked together for 20 years as trustees of Northwestern University.7 David Kennedy, chairman of Continental, and Frank Bauder, president of Central, knew each other "very well" because Bauder had worked with Kennedy at Continental.8 James R. Kennedy, who ran the Town and Country Charge Card Program at Continental,9 became American's second vice-president in charge of the bank's charge card operations, which he designed, instituted and managed.10 Thus, the very nature of the Chicago banking community facilitated the exchange of pricing information. Gainesville Utilities Dep't 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). Given this situation, defendants' conduct should be carefully scrutinized for evidence of conspiratorial behavior. Id.
Illinois had no credit card interest law in 1966. The Illinois usury statute in effect at that time, however, prohibited interest rates in excess of a 7% add-on per annum, (which Harris counsel said would proximate 14% annually), Ill.Ann.Stat. ch. 74, § 4 (Smith-Hurd 1966), and defendant Harris, a state bank, assumed that it would be bound by this statute. See Plaintiffs' Ex. 1, quoted in Weit I, 467 F. Supp. at 200. The federal statute governing the nationally chartered banks (defendants Continental and Central, and First) provided that they could charge interest at the rate allowed by the laws of the state in which the bank is located. 12 U.S.C. § 85 (1976). In determining what state law it was bound by, defendant Continental looked to the Illinois Consumer Finance Act, Ill.Ann.Stat. ch. 74, § 19 et seq. (Smith-Hurd 1966), which applied to small consumer loans and allowed an interest rate of 3% per month on loans up to $150.00, or 36% per annum, 2% per month or 24% per annum on the balance of the loans exceeding $150 and not exceeding $300, and 1% per month, or 12% per annum, on any part of the unpaid balance exceeding $300. Id. at § 31. Continental interpreted this Act as allowing a 1 1/2 per month, or 18% per annum maximum overall effective rate. Weit I, 467 F. Supp. at 201. Without attempting to resolve these seemingly conflicting positions, I assume throughout this opinion that the limitations on the two types of banks differed as the parties thought.
Defendant banks began discussing the idea of a joint charge card in 1966 so as to prevent competition from outsiders and to prevent any one Chicago bank from taking the lead in the new charge card market. Continental was afraid that outsiders would enter the market, resulting in chaos.11 Continental believed that First's motive in proposing a joint system was to prevent Continental from getting a head start.12 At the same time, Continental didn't want First, Harris and Central to start a charge card system "while we were sitting over there without a charge card."13 High start-up costs and large initial losses were projected, Weit I, 467 F. Supp. at 201, so defendants were anxious to avoid an outbreak of competition. Gaylord Freeman, president and later chairman of First testified "... since nobody had a viable credit card (in 1966) and it was all new and if one of the others had aggressively merchandised the card at a lower cardholder interest rate, I think (First) would have to go too, at the lower rate, too." Id. at 207.
Plaintiffs' Ex. 1, quoted in Weit I, 467 F. Supp. at 200. Representatives of the four banks met again on May 26, 1966. The minutes of this meeting state that "Wood (of First) said the First's lawyers had two legal questions rate and anti-trust and the anti-trust seemed to be the easier of the two." Id. The group began meeting regularly after this. American was not a formal participant, but sent a representative. Central, a correspondent bank of both Harris and Continental, did not participate in these early meetings, but received status reports on the formation of a compatible system.16 Pullman, a correspondent of First, Continental and Harris, did not attend the group meetings either, as it was planning to issue its own bank credit card. Pullman received mailings about the compatible system, however, and in June, a Continental officer called a Pullman officer to tell him about a pending Continental press release on the joint system. Weit II, 478 F. Supp. at 289.
During this time, defendant Pullman was going ahead with plans to issue its own charge card. Pullman intended to announce its card, which was to have an interest rate of 18% per annum, on August 12, 1966, and the program was to begin on November 7, 1966. Weit II, 478 F. Supp. at 288-90. The other banks knew about Pullman's plans. A description of the Pullman credit card program, including the cardholder interest rate, appeared in the feasibility study prepared by Continental in July, 1966,21 and on August 5, 1966, at a meeting of the Continental Advisory Committee, Alfred Lindgren of Continental reported "that the Pullman Bank has changed their package, and are now offering basically what we are proposing."22 The night before Pullman's scheduled announcement, three Continental officers had dinner with Donald O'Toole, president of Pullman, and tried to talk him into delaying Pullman's start-up date. Id. at 289. O'Toole refused. Continental, Harris and First then decided to advance their start-up dates to early November.23
On October 24, 1966, First, Continental, Harris, Central and Pullman signed the "interim agreement" establishing the Midwest charge card system. Weit I, 467 F. Supp. at 202. The agreement mandated certain requirements for all membership banks: uniform floor limits; uniform cash advance limits; uniform merchandising return procedures; uniform advertising limitations; uniform transaction reporting procedures; and uniform card format and design. Id. It did not mention charge card holder interest rates. By this time, however, each defendant, with the exception of American,28 was planning on charging its cardholders an interest rate of 18% per annum, or 1 1/2 per month. Continental, which thought it was bound by the Illinois Consumer Finance Act, could have charged an interest rate of 36% per annum for the first $150, 24% on the next $150, and 12% on the remaining balance above $300,29 but settled on an interest rate of 18% per annum, as did Central, which decided 18% was the maximum allowed by law. Weit II, 478 F. Supp. at 288. Harris, which assumed it was limited by the Illinois usury law30 to charging a 7% add-on, or less than 14% annually, Weit I, 467 F. Supp. at 200, arrived at the 18% interest rate by charging 1% interest and 1/2 "service charge" per month.31 Pullman was also charging an interest rate of 18%.
Although American had attended the Midwest organizational meetings in 1966, it did not get into the charge card business until 1968. It then hired James Kennedy, who ran the charge card program at Continental, to establish the program for American. Weit I, 467 F. Supp. at 204. American joined Midwest in the spring of 1969, charging the (by now) standard cardholder interest rate of 18% per annum. Id. Midwest joined the Interbank Card Association, Inc. (Mastercharge) that year as well. Id. at 205. In 1970, First left the Midwest system, joined Bank Americard, and began soliciting the defendants' correspondent banks for the first time. Id.
Defendants, in their motion for summary judgment, introduced affidavits by and depositions of their officers denying the existence of an agreement and giving business reasons for arriving at the 18% per annum charge card holder interest rate. David M. Kennedy, chairman of the Board of Directors, for Continental, stated that during the summer of 1966, he determined that Continental's charge card should carry the highest interest rate legally permissible so as to make the system, for which Continental projected early high losses, profitable as soon as possible. Weit I, 467 F. Supp. at 201. Harris Bank's senior vice-president, Carroll E. Prater, also testified that Harris decided to charge the maximum legal rate because "it was an expensive business to get into ... losses were very high." Id.
Pullman officers stated that they arrived at an interest rate of 1 1/2 per month based on their prior experience in the charge card business. Weit II, 478 F. Supp. at 289. Even at that rate, they did not expect the charge card program to be profitable for several years. Id. Frank Bauder, chairman of Central, testified that by the time Central decided to join Midwest in September of 1966, the 1 1/2 per month interest rate was taken for granted as necessary to cover costs. Id. at 288. James Kennedy, American's second vice-president in charge of the bank's charge card operations, gave similar reasons for American's decision to charge 1 1/2 per month. Weit I, 467 F. Supp. at 204.
Under Rule 56(e) defendants' denials were sufficient to shift the burden to plaintiffs to produce some significant probative evidence tending to support their complaint. First National Bank of Arizona v. Cities Service, 391 U.S. 253, 289-90, 88 S. Ct. 1575, 1592-1593, 20 L. Ed. 2d 569 (1968). The critical question then becomes whether plaintiffs presented enough evidence so that a rational trier of facts could find that this uniform interest rate resulted from an agreement among and between defendants rather than from independent identical decisions by individual bankers. See Ambook Enterprises v. Time, Inc., 612 F.2d 604, 613 (2d Cir. 1979), cert. dismissed, --- U.S ----, 101 S. Ct. 35, 65 L. Ed. 2d 1179 (1980). In order to infer such an agreement, there must be more than merely parallel business conduct. See Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 541, 74 S. Ct. 257, 259, 98 L. Ed. 273 (1954). I think that plaintiffs did present evidence of more than merely parallel conduct, from which a jury could rationally conclude that defendants Continental, Harris, Pullman and Central agreed on uniform interest rates.
Here, defendants Continental and Harris said they wouldn't fix prices,38 yet in discussions between the two banks, representatives of Harris spoke of 1 1/2 enabling legislation and Continental officers referred to "regular 1 1/2" interest rates. In the same way, Pullman told Continental what it was going to charge. The Supreme Court has held that an exchange of price information, in an industry dominated by relatively few sellers, is itself a violation of section 1 of the Sherman Act because "(p)rice is too critical, too sensitive a control to allow it to be used even in an informal manner to restrain competition." United States v. Container Corp. of America, 393 U.S. 333, 338, 89 S. Ct. 510, 513, 21 L. Ed. 2d 526 (1969). If the Supreme Court could find that the exchange of price information was sufficient for inferring a price-fixing agreement, surely we should consider it as some evidence, when combined with subsequent parallel pricing, joint action, product uniformity and motive from which an agreement could be inferred.39
The district court judge did not consider the joint lobbying activities by defendants Continental, Harris, Central and Pullman,40 stating that the prejudice of this evidence outweighed its probative value. Weit I, 467 F. Supp. at 207-08 n. 22. The majority adopts this holding, but I respectfully disagree. Federal Rule of Evidence 403 is meant to exclude evidence which tends to horrify, evoke sympathy or increase a desire to punish due to prior bad acts, and whose probative value is slight. 10 Moore's Federal Practice § 403.10(1), at IV-75 (2d Ed.1979). Defendants' lobbying activities do not fall into any of these categories.
While defendants' united support of the 18% per annum interest rate is not in itself illegal under Eastern Railroads Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S. Ct. 523, 5 L. Ed. 2d 464 (1961),41 it is certainly probative of an existing agreement to fix interest rates at that level. The inference is very readily drawn that defendants could not have worked together on the same bill, at a time when a number of different interest rates could have been agreed to, and when defendants had differing understandings regarding the legal restrictions on their interest rates, without implicitly agreeing that 18% was the rate they thought best and would therefore charge. Indeed, this is the rate they were each charging when they agreed to support a credit card interest bill. The Supreme Court has held that such a concerted effort, when defendants conformed to the arrangement, is probative of a price fixing conspiracy. See United States v. Paramount Pictures, 334 U.S. 131, 142, 68 S. Ct. 915, 921, 92 L. Ed. 1260 (1948). Thus, defendants' joint lobbying activities should be considered as further evidence of an implicit agreement to charge 18% interest rate per year.
Here, under competitive conditions, credit card characteristics would have changed as independent banks experimented with one or another promotional features and cardholders and merchants gave their business to the banks offering the most attractive combination.44 Instead, defendants Continental, Harris, Central and Pullman each signed an agreement, on the same day, which artificially homogenized their product and eliminated an area of potential competition. Their defense that such standardization was needed to eliminate chaos among the merchants and public, see Weit I, 467 F. Supp. at 211, should not be definitive of the issue, as industry self-regulation should be viewed with suspicion. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 220-22, 60 S. Ct. 811, 842-843, 84 L. Ed. 1129 (1940).
Finally, plaintiffs introduced evidence of defendants' motive to conspire. It was plaintiffs' inability to show a motive to agree and benefits obtained through the agreement which led the Supreme Court to affirm a summary judgment for defendants in First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 287, 88 S. Ct. 1575, 1591, 20 L. Ed. 2d 569 (1968). In the present case, defendants admitted the motive for doing exactly what they are accused of: defendant officers testified that they were afraid of aggressive competition in the new market for credit cards, which they thought would result in chaos. If someone entered the market at a lower rate, which Harris thought it may have been forced to do, given the state usury laws, the other defendants may have marketed their cards at a lower rate as well. None of the banks wanted to face this possibility as they were afraid of large losses in starting the new program.46
Defendants introduced independent business reasons to explain their decisions to charge an 18% per annum interest rate. It is up to the jury, however, and not the trial judge, to decide which explanation for defendants' action is more reasonable. See Continental Baking Co. v. United States, 281 F.2d 137, 143-46 (6th Cir. 1960).47 Furthermore, the legitimate business reasons which defendants suggest motivated their actions do not defeat the possibility that defendants acted collusively. Reading Industries, Inc. v. Kennecott Copper Co., 1979-2 Trade Cases P 62,906 at 79,215 (S.D.N.Y. 1979). The Supreme Court has stated: "(t)his evidence (of business judgment), together with other testimony of any explanatory nature, raised fact issues requiring the trial judge to submit the issue of conspiracy to the jury." Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 542, 74 S. Ct. 257, 260, 98 L. Ed. 273 (1954). In Theatre Enterprises, as in Weit I, defendants had denied any agreement and had introduced evidence of local conditions, attributing their uniform action to individual business judgment. The Supreme Court went on to affirm the jury verdict for defendants, over plaintiff's argument that the district court should have directed a verdict, but it was the jury, and not the court making the ultimate decision. When defendants' credibility is at issue, as it was in Theatre Enterprises and is in Weit I, directed verdicts and summary judgments "should be used sparingly," because "(i)t is only when the witnesses are present and subject to cross examination that their credibility and the weight to be given their testimony can be appraised." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962).48 In the present case, the district judge overstepped his proper role by determining for himself that defendants' explanations were more credible than plaintiffs' explanation of the evidence. His entry of summary judgment for defendants was therefore improper.
In sum, plaintiffs have rebutted Continental's, Harris', Pullman's and Central's denials with evidence of more than the merely conscious parallelism held insufficient to withstand a summary judgment in Cities Service, supra, 391 U.S. at 290, 88 S. Ct. at 1593. They produced evidence that Continental, Harris and Pullman communicated directly regarding the interest rates each was going to charge; Continental, Harris, Pullman and Central took joint action on legislation regarding legal interest rates and on most other aspects of the charge card system; and that all four banks had a motive to agree to fix interest rates. All of these factors have been held sufficient, when combined with a showing of parallel behavior to withstand motions for summary judgment. See De Jong Packing Co. v. United States, 618 F.2d 1329, 1334 (9th Cir.), cert. denied, --- U.S. ----, 101 S. Ct. 783, 66 L. Ed. 2d 603 (1980); L. Sullivan, Antitrust § 110 at 316 (1977). Plaintiffs, having presented evidence from which an agreement to fix prices may rationally be inferred, should be given a chance to present their case against these four defendants to a jury.
Weit v. Continental Illinois National Bank and Trust Co., et al., 467 F. Supp. 197, 214 (N.D. Ill. 1978); and Weit v. Continental Illinois National Bank & Trust Co., 478 F. Supp. 285, 298 (N.D. Ill. 1979)
467 F. Supp. at 199
Weit v. Continental, 467 F. Supp. at 207-208, Nt. 22
The District Court characterized the bulk of this evidence as falling into the "mere possibility range." 467 F. Supp. at 211. We agree. The fact that the Chairmen of Harris and Continental both served as trustees of Northwestern University is of little relevance, much less probative value
467 F. Supp. at 210-11
"If you can find a jury that's both a computer technician, a lawyer, an economist, knows all about that stuff, yes, I think you could have a qualified jury, but we don't know anything about that." (Tr. 19,548), 458 F. Supp., at 447.
See Klors Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S. Ct. 705, 3 L. Ed. 2d 741 (1959); U. S. v. Socony Vacuum Oil Co., 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129 (1940)
The original plaintiff was Gerald Waldron. Upon his death the First National Bank of Arizona, his executor, was substituted as plaintiff. See Cities Service, 391 U.S. 253, 259 n. 1, 88 S. Ct. at 1578 n. 1
391 U.S. at 277, 88 S. Ct. at 1586
For example, the Court in Cities Service noted that in Poller a competitive relationship existed between the plaintiff and defendant. In both Cities Service and the instant case there is no competitive business relationship. 391 U.S. at 285, 88 S. Ct. at 1590
365 U.S. at 140, 81 S. Ct. at 531
381 U.S. at 670, 85 S. Ct. at 1593
467 F. Supp., at 207-208 N. 22
478 F. Supp. 285 (N.D. Ill. 1979)
For a discussion of Continental's relationship with its correspondents, see the District Court opinion, 467 F. Supp. at 202-204, 215-216. Harris' and Central's correspondent relationships are detailed at 478 F. Supp. 290-294, 297-298. Pullman's correspondent relationships are set out at 478 F. Supp. 290-291 and 297-299
The district court's opinion granting summary judgment for defendants Continental, Harris and American as to the charges of horizontal conspiracy and for Continental as to the charge of vertical conspiracy is reported in Weit v. Continental Ill. Nat'l Bank & Trust Co., 467 F. Supp. 197 (N.D. Ill. 1978) (hereinafter "Weit I "). The decision granting summary judgment for defendants Central and Pullman on both the horizontal and vertical conspiracy claims and for defendant Harris on the vertical conspiracy claim is reported at Weit v. Continental Ill. Nat'l Bank & Trust, 478 F. Supp. 285 (N.D. Ill. 1979) (hereinafter "Weit II ")
First was named as a non-defendant co-conspirator in Counts I and III of plaintiffs' third amended complaint. Although First was a founding member of Midwest, it left Midwest and joined the Bank Americard System in 1970. Weit I, 467 F. Supp. at 200 n. 3
A memorandum by Thomas G. Patterson to John B. Tingleff, both Continental officers, stated "(Valley National Bank, Phoenix) believes that if anyone goes in Chicago others will and this may result in chaos in the market. Could be (disastrous)." Weit I, 467 F. Supp. at 200
American did not join Midwest until 1969, although a representative of American attended the group meetings. Weit I, 467 F. Supp. at 202
It can also be inferred from this statement that Continental was saying "this is the only rate a bank should charge." It is interesting to note that Continental referred to 18% as the "regular" interest rate several months before it consulted with Robert Bloom, Chief Counsel to the Comptroller of the Currency, The United States Treasury, regarding its interpretation of the Illinois Consumer Finance Act, Weit I, 467 F. Supp. at 201
Plaintiffs did not allege that this activity in and of itself constituted an illegal conspiracy. Rather, they introduced it as evidence of the alleged agreement between defendant banks to fix the interest rate of 18%. This evidence thus falls within an exception to the Noerr rule being the "established rule of evidence that testimony of prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny." United Mine Workers of America v. Pennington, 381 U.S. 657, 670 n. 3, 85 S. Ct. 1585, 1593, n.3, 14 L. Ed. 2d 626 (1965)
The district court distinguished C-O-Two from the present case by saying that a finding of conspiracy was warranted in light of other factors: identical bids, unnecessary product standardization, illegal licensing contracts, dealer policing, and identical price increases at times of surplus, coupled with the fact that the defendants offered no rebuttal evidence. Weit I, 467 F. Supp. at 214. Admittedly, plaintiffs in this case have not made as strong a showing of conspiracy as did the government in C-O-Two. But this case is not a challenge to the legal sufficiency of the evidence for a criminal conviction. All that is necessary to withstand a motion for summary judgment, which is the only issue at this point, is a showing of at least one other factor, in addition to parallel pricing, from which a jury could infer an agreement. L. Sullivan, Antitrust § 110, at 317 (1977). Plaintiffs have shown at least three such factors, and their opportunity evidence merely contributes to the overall picture
It is true that defendants' credibility in the present case is not at issue in the same way in which it was at issue in Poller. There, the issue was defendants' intent, as their actions in cancelling plaintiffs' affiliation contract and then buying its equipment would have been legal unless done with an intent to monopolize. CBS, in its motion for summary judgment, presented "substantial evidence tending to show the nonexistence of conspiratorial behavior." Cities Service, supra, 391 U.S. 253, 285, 88 S. Ct. 1575, 1590, 20 L. Ed. 2d 569 (discussing the difference between Poller and Cities Service) . Nonetheless, the Court held that the denials of unlawful intent by "interested parties," Poller, supra, 368 U.S. at 468, 82 S. Ct. at 488, were insufficient to rebut plaintiff's allegations of conspiracy for purposes of granting a summary judgment. Id. at 473, 82 S. Ct. at 491