Source: https://law.justia.com/cases/federal/appellate-courts/F3/199/6/475953/
Timestamp: 2017-11-23 14:57:23
Document Index: 354181991

Matched Legal Cases: ['§ 15', '§ 4', '§ 4', '§ 4', '§ 4', '§ 7']

The Serpa Corporation, Plaintiff, Appellant, v. Mcwane, Inc., Anaco, F/k/a Anaheim Foundry Company and Tyler Pipe Industries, Defendants, Appellees, 199 F.3d 6 (1st Cir. 1999) :: Justia
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The Serpa Corporation, Plaintiff, Appellant, v. Mcwane, Inc., Anaco, F/k/a Anaheim Foundry Company and Tyler Pipe Industries, Defendants, Appellees, 199 F.3d 6 (1st Cir. 1999)
US Court of Appeals for the First Circuit - 199 F.3d 6 (1st Cir. 1999)
Heard Oct. 8, 1999. Decided December 8, 1999
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Nancy J. Gertner, U.S. District Judge.[Copyrighted Material Omitted]
Plaintiff argues that the district court erred in dismissing its antitrust claims for lack of standing. We review a dismissal for failure to state a claim pursuant to Fed. R. Civ. P. 12(b) (6) de novo, accepting all well-pleaded facts as true and drawing all reasonable inferences in favor of the party dismissed. See Carreiro v. Rhodes Gill and Co., Ltd., 68 F.3d 1443, 1446 (1st Cir. 1995); Washington Legal Found. v. Massachusetts Bar Found., 993 F.2d 962, 971 (1st Cir. 1993). We do not, however, accept a plaintiff's unsupported conclusions or interpretations of law. Id. For the reasons stated below, we affirm the ruling of the district court.
15 U.S.C. § 15. Despite the broad language of § 4, the Supreme Court has held that § 4 of the Clayton Act does not "allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property." Blue Shield of Va. v. McCready, 457 U.S. 465, 477 (1982); see also Hawaii v. Standard Oil Co., 405 U.S. 251, 263 (1972) ("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."). Instead, the Court has created a comprehensive antitrust standing doctrine to determine which persons are entitled to bring suit under the federal antitrust statutes. See Associated General Contractors of Cal., Inc., v. California State Council of Carpenters, 459 U.S. 519, 529-35 (1983); Sullivan v. Tagliabue, 25 F.3d 43, 45 (1st Cir. 1994).
Standing is restricted in antitrust cases to avoid overdeterrence. By limiting the availability of private antitrust actions to certain parties, federal courts "ensure that suits inapposite to the goals of the antitrust laws are not litigated and that persons operating in the market do not restrict procompetitive behavior because of a fear of antitrust liability." Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1449 (11th Cir. 1991); see also Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 394 (7th Cir. 1993) ("Given the potential scope of antitrust violations and the availability of treble damages, an overbroad reading of § 4 could result in 'overdeterrence,' imposing ruinous costs on antitrust defendants, severely burdening the judicial system, and possibly chilling economically efficient behavior."). The result is that standing in an antitrust case is "not simply a search for an injury in fact; it involves an analysis of prudential considerations aimed at preserving the effective enforcement of the antitrust laws." Todorov, 921 F.2d at 1448 (citing Associated General, 459 U.S. at 535).
In Associated General, the Supreme Court set forth six factors that must be evaluated on a case-by-case basis to determine whether a plaintiff has standing to bring an antitrust action. See Sullivan, 25 F.3d at 46 (citing Associated General, 459 U.S. at 537-45). These factors are: (1) the causal connection between the alleged antitrust violation and harm to the plaintiff; (2) an improper motive; (3) the nature of the plaintiff's alleged injury and whether the injury was of a type that Congress sought to redress with the antitrust laws ("antitrust injury"); (4) the directness with which the alleged market restraint caused the asserted injury; (5) the speculative nature of the damages; and (6) the risk of duplicative recovery or complex apportionment of damages. See id.
Although courts must "consider the balance of factors in each case in an effort to guard against 'engraft[ing] artificial limitations on the § 4 remedy,'" Sullivan, 25 F.3d at 46 (quoting McCready, 457 U.S. at 472), we can dispose of this case on the antitrust injury factor since distributors, like Serpa, presumptively lack antitrust standing. Cf. SAS of Puerto Rico, Inc. v. Puerto Rico Tel. Co., 48 F.3d 39, 44-45 (1st Cir. 1995).
The Supreme Court has defined "antitrust injury" as an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). The harm "should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be 'the type of loss that the claimed violations . . . would be likely to cause.'" Id. (quoting Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 125 (1969)). Consequently, a proper plaintiff "must prove more than injury causally linked to an illegal presence in the market." Id.
Competitors and consumers in the market where trade is allegedly restrained are presumptively the proper plaintiffs to allege antitrust injury. See SAS, 48 F.3d at 44-45. ("[T]he presumptively 'proper' plaintiff is a customer who obtains services in the threatened market or a competitor who seeks to serve that market."). In contrast, a commercial intermediary, such as a distributor or sales representative, generally lacks standing because its antitrust injury is too remote. See, e.g., G.K.A. Beverage Corp., 55 F.3d at 767; SAS, 48 F.3d at 44; Fischer v. NWA, Inc., 883 F.2d 594, 600 (8th Cir. 1989); John Lenore & Co. v. Olympia Brewing Co., 550 F.2d 495, 500 (9th Cir. 1977); Universal Brands, Inc. v. Philip Morris, Inc., 546 F.2d 30, 33 (5th Cir. 1977). A leading antitrust treatise explains:
Areeda & Hovenkamp, Antitrust Law ¶ 381'c, at 114 (Supp. 1999).
Even though Lenore's injury may have ". . . occurred 'by reason of' the unlawful acquisitions, it did not occur 'by reason of' that which made the acquisition unlawful." The terminations were an incidental matter which the merger may have made possible, but certainly did not cause. All Lenore really alleges is that because Olympia purchased the Hamm's brand, Lenore was replaced in favor of other distributors. This is insufficient to make out a case under § 7 which is concerned with competition, not competitors.
Here, Serpa does not bring its claim as either a competitor or a consumer but as a distributor whose injuries resulted from the loss of its position as Anaco's exclusive sales representative in the New England market. This loss is neither connected with, nor resulted from, defendant's market power in the CISPs, fittings, and couplings industry. Therefore, plaintiff's injuries do not flow "from that which makes the defendants' acts unlawful." Brunswick, 429 U.S. at 489. Because Serpa's injuries flow from the termination of its distributorship, and not from any anticompetitive effects of defendants' acquisition of Anaco, we find that Serpa has not suffered an antitrust injury. See G.K.A. Beverage Corp., 55 F.3d at 767; SAS, 48 F.3d at 44; Fischer, 883 F.2d at 600; Olympia Brewing Co., 550 F.2d at 500.
In reaching this conclusion, we recognize that there may be some instances where presumptively disfavored plaintiffs do have standing to bring an antitrust action. See SAS, 48 F.3d at 45. In SAS, this court stated that although competitors and consumers are presumptively favored, "'presumptively' does not mean always; there can be exceptions, for good cause shown." Id. Here, Serpa alleges that it is the "only truly viable plaintiff" because (1) "there is no real competitor on the manufacturing level," and (2) plumbing wholesalers, contractors, and home buyers have no incentive to file an antitrust suit because monopoly pricing in this market increases the costs to individual consumers by a relatively small margin. This Court has stated that the "most obvious reason for conferring standing on a second-best plaintiff is that, in some general category of cases, there may be no first best with the incentive to sue." Id. (citing Associated General, 459 U.S. at 542). In this case, however, we are satisfied that at least some consumers, as well as defendants' competitors, have ample incentive to bring an antitrust claim.
Finally, plaintiff's reliance on Blue Shield of Va. v. McCready, 457 U.S. 465 (1982), is misplaced. In McCready, the court held that a consumer of health services could sue under the antitrust laws to redress an alleged conspiracy between her insurance plan and Virginia psychiatrists. The terms of the plan precluded participants from receiving reimbursements for treatment given by psychologists. Although McCready was not the immediate target of the alleged boycott, she was a plan beneficiary who had used a psychologist and had been denied reimbursement. The Supreme Court granted McCready standing, stating that her injury "was inextricably intertwined with the injury the conspirators sought to inflict on psychologists and the psychotherapy market." Id. at 484. The Court further stated that McCready was the "necessary step in effecting the ends of the alleged illegal conspiracy." Id. at 479.
Serpa urges the Court to apply the "inextricably intertwined" language of McCready to this case. We decline. First, this Court has already stated that "[i]t is doubtful that this language -- if taken as a physical image -- was ever intended as a legal test of standing." SAS, 48 F.3d at 46. Second, while standing in McCready was conferred to a plaintiff who was only derivatively injured, the plaintiff was a consumer in the market directly affected by the antitrust violation. Accordingly, subsequent Supreme Court jurisprudence has interpreted the McCready language as a legal conclusion; i.e., applying the "inextricably intertwined" standard to consumers and competitors. See Atlantic Richfield v. USA Petroleum Co., 495 U.S. 328, 345 (1990); Associated General, 459 U.S. at 539; SAS, 48 F.3d at 46. Moreover, even if we thought "inextricably intertwined" was a proper test for standing, the facts do not support its application in this case. Specifically, Serpa's marginal pricing discretion belies plaintiff's assertion that defendants necessarily had to terminate Serpa to eliminate competition in the New England plumbing supply market. Therefore, under the circumstances of this case, we decline to interpret McCready broadly, believing that such an approach would needlessly expand the limits of antitrust standing currently in place in this Circuit.
Under Massachusetts law, a contract without a durational term is terminable at will by either party upon reasonable notice. See Teitelbaum v. Hallmark Cards Inc., 520 N.E.2d 1333, 1336 (Mass. App. Ct. 1988). Plaintiff argues that whether Anaco provided reasonable notice of termination is a question of fact, and therefore summary judgment was inappropriate. We disagree.
Plaintiff's reliance on Cherick Distributors, Inc. v. Polar Corporation, 669 N.E.2d 218 (Mass. App. Ct. 1996), is misplaced. In Cherick, the plaintiff's exclusive distributorship agreement was terminated by defendant on four days notice in retaliation for a letter plaintiff sent to other distributors urging the distributors to collectively negotiate with the defendant. The court determined that "[w]hether the four-day termination notice constituted reasonable notice under commercial standards of good faith and fair dealing was a question properly put to the jury in this case." Id. at 220. The court reasoned:
Plaintiff argues that its abrupt termination constitutes a breach of the implied covenant of good faith and fair dealing that is implicit in every contract. See Anthony's Pier Four, Inc. v. HBC Assocs., 583 N.E.2d 806, 820 (Mass. 1991) ("Every contract implies good faith and fair dealing between the parties to it."). Plaintiff's argument is unavailing. The notice of termination was reasonable and there is nothing per se unreasonable about terminating an exclusive distributorship contract.
C. Intentional Interference With Advantageous BusinessRelationship
Under Massachusetts law, to state a cause of action for intentional interference with an advantageous business relationship, plaintiff "must plead and prove that the defendants (1) engaged in intentional and willful acts (2) calculated to cause damage to the plaintiffs' lawful business (3) with an unlawful purpose and without right or justification, (4) thereby causing actual damage or loss." Doyle v. Hasbro, Inc., 884 F. Supp. 35, 40 (D. Mass. 1995); Chemawa Country Golf, Inc. v. Wnuk, 402 N.E.2d 1069, 1072 (Mass. App. Ct. 1980).
For conduct to violate Chapter 93(A) it must (1) fall within "the penumbra of some common-law, statutory, or other established concept of unfairness"; (2) be "immoral, unethical, oppressive, or unscrupulous"; and (3) "cause[] substantial injury to [other businessman]." Linkage Corp. v. Trustees of Boston Univ., 679 N.E.2d 191, 209 (Mass. 1997) (quoting PMP Assocs., Inc. v. Globe Newspaper Co., 321 N.E.2d 915, 917 (Mass. 1975)). Here, Serpa relies on the "same facts underlying its federal antitrust claims to support its Massachusetts statutory claim."Having carefully reviewed the record, we conclude there is no evidence of "immoral, unethical, oppressive, or unscrupulous" conduct sufficient to state a Chapter 93A claim. See Bradley v. Dean Witter Realty, Inc., 967 F. Supp. 19, 29 (D. Mass. 1997). As a matter of law, "a refusal to deal, without a showing of monopolistic purpose or concerted effort to hinder free trade, is not an unfair trade practice under G.L.C. 93A, and is therefore not actionable." PMP Assocs., 321 N.E.2d at 919. Accordingly, summary judgment on this claim was proper.