Source: https://casetext.com/case/may-dept-store-v-graphic-process-co
Timestamp: 2019-03-19 06:09:54
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Matched Legal Cases: ['§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 1653', '§ 13', '§ 13', '§ 13', '§ 13']

May Dept. Store v. Graphic Process Co, 637 F.2d 1211 | Casetext
May Dept. Store v. Graphic Process Co.
637 F.2d 1211 (9th Cir. 1980)
May Dept. Storev.Graphic Process Co.
United States Court of Appeals, Ninth CircuitMay 27, 1980
Stephen R. Hasting, Belcher, Henzie Biegenzahn, Los Angeles, Cal., for plaintiff-appellant.
This is a commercial bribery action for treble damages under the Clayton Act as amended by section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c). The district court determined, without an opinion, that transactions between the parties were sales of services and not sales of "goods, wares, or merchandise" as required for an action under section 13(c). Summary judgment was granted to the defendant, Graphic Process Company (Graphic).
From 1965 through 1973 Graphic was awarded contracts by May's agents for the production of veloxes. May alleges tow of its employees breached their fiduciary duty and accepted bribes from Graphic. In exchange for the bribes the two employees awarded contracts to Graphic. The bribes were recouped by Graphic through overcharges to May.
May filed a treble damages suit for $267,000 under 15 U.S.C. § 13(c) and 15. Summary judgment was awarded to Graphic. The district court found that the production of veloxes was a service performed by Graphic and was not the sale of goods. May appeals.
2. Is May entitled to amend its complaint to sufficiently plead the interstate commerce requirement of 15 U.S.C. § 13(c)?
Our examination is limited to determining the appropriateness of summary judgment in this case. California Pacific Bank v. Small Business Administration, 557 F.2d 218 (9th Cir. 1977). In determining whether summary judgment was proper, we are not bound by the usual rule requiring us to accept findings of the trial court unless they are clearly erroneous. Pepper Tanner, Inc. v. Shamrock Broadcasting, Inc., 563 F.2d 391 (9th Cir. 1977). Our standard of review is identical to that of the trial court. Reed v. Lockheed Aircraft Corp., 613 F.2d 757 (9th Cir. 1980). Summary judgment may properly be granted only when no genuine issue of material fact exists and the moving party is clearly entitled to prevail as a matter of law. Real v. Driscoll Strawberry Associates, 603 F.2d 748, 753 (9th Cir. 1979).
It is necessary for an action under section 2(c) of the Robinson-Patman Act that the transactions between the parties constitute a sale of "goods, wares, or merchandise" and not merely a contract for services. Rangen, Inc. v. Sterling Nelson Sons, Inc., 351 F.2d 851 (9th Cir. 1965), cert. denied, 383 U.S. 936, 86 S.Ct. 1067, 15 L.Ed.2d 853 (1966). The phrase "goods, wares, or merchandise" is not defined by the Act. Similarly, the term "commodity" found in 15 U.S.C. § 13(a) is not defined. Legislative history reveals only that Congress intended the Act to apply to tangible goods and not services. 79 Cong. Rec. 9079, June 11, 1935. See Baum v. Investors Diversified Services, 409 F.2d 872 (7th Cir. 1969); Kennedy Theater Ticket Service v. Ticketron, Inc., 342 F. Supp. 922 (E.D.Pa. 1972). Our legislative search discloses no congressional discussions on the distinction between goods and services for purposes of the Act. Courts have understandably struggled to articulate a test to define limitations on the Act's application.
Our research uncovered tens of cases interpreting the terms of sections 13(a) and 13(c). An impressive list of citations can be garnered from Advanced Office Systems v. Accounting Systems, 442 F. Supp. 418, 421-422, (D.S.C. 1977); Kennedy Theater Ticket Service v. Ticketron, Inc., 342 F. Supp. 922 (E.D.Pa. 1972); and Anderson, Toulmins Antitrust Laws of the United States (1978), v. 7, pp. 7-9 of supplement.
The Seventh Circuit found that Congress intended commodities to be limited to tangible products of trade. Baum v. Investors Diversified Services, supra. Evidence of a tangible product is needed to meet the requirements of either section 13(a) or 13(c). See, e. g., La Salle Street Press, Inc. v. McCormick and Henderson, Inc., 293 F. Supp. 1004 (N.D.Ill. 1968); Kennedy Theatre Ticket Service v. Ticketron, supra. The Fifth Circuit, however, noted that virtually no service can be performed without the incidental involvement or transfer of a tangible item. Tri-State Broadcasting Co. v. UPI, 369 F.2d 268 (5th Cir. 1966). In Tri-State the Fifth Circuit held that the "dominant nature" of a transaction must control in establishing whether it falls within the provisions of the Robinson-Patman Act. In a later case the Fifth Circuit expanded on the dominant nature standard by rejecting a strict comparison of the cost of labor and parts in a repair contract. Aviation Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186 (5th Cir. 1978). That court found that repair work on aircraft engines was a service even though the cost of parts exceeded the cost of labor.
The Sixth Circuit is generally credited with developing the dominant nature test. General Shale Products Corp. v. Struck Construction Co., 132 F.2d 425 (6th Cir. 1942), cert. denied, 318 U.S. 780, 63 S.Ct. 857, 87 L.Ed. 1148 (1943). That court found no sale of a commodity in a construction contract even though the contract listed separately the cost of tangible items to be supplied. See Aviation Specialties, Inc. v. United Technologies Corp. 568 F.2d 1186, 1191 (5th Cir. 1978).
This court once examined the distinction between goods and services for purposes of section 13(c). Rangen v. Sterling Nelson Sons, Inc., supra. In that case a manufacturer of fish food alleged that a competitor bribed Idaho officials to gain business. In determining whether the supplying of fish food was a sale of goods or a service, this court noted that Idaho supplied some ingredients to Rangen. Rangen, however, supplied over fifty percent of the ingredients and did not bill separately for compounding, processing, and mixing services. On these facts this court concluded the transaction was a sale of goods. Rangen, supra at 861.
Both parties rely on SCM Corp. v. Xerox Corp., 394 F. Supp. 384 (D.Conn. 1975). We find the case helpful but not dispositive of the issue here. In that case the lease of a photocopy machine with payments based on the number of copies produced was held not to be a commodity for purposes of section 13(a). The trial court found that the process of transforming a plain piece of paper into one bearing an image was not a commodity. It noted, however, that the paper was not supplied by Xerox. Where a customer acquires both the paper and the image from the supplier, a closer question is created. SCM, supra at 386, n. 1. The analogy of a photographer sending in negatives for processing was considered. Has such a photographer purchased the process of enlarging the negatives (a service) or enlarged prints (goods)? The trial court left the question unanswered. Id. The issue before us is similar to the trial court's analogy and must now be addressed.
We join other circuits in adopting a "dominant nature" standard to determine of transactions are for sale of services or goods. We accept the Fifth Circuit's reasoning that the dominant nature of a transaction cannot be measured by merely breaking down the costs between intangible service and tangible goods provided. Aviation Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186 (5th Cir. 1978). We do believe, however, that such a comparison might be useful as one of many factors to consider. The supplying of ingredients and the breakdown of costs on billing invoices might be other factors for consideration. Rangen v. Sterling Nelson Sons, Inc., supra.
E. g. Tri-State Broadcasting Co. v. UPI, 369 F.2d 268 (5th Cir. 1966); Freeman v. Chicago Title Trust Co., 505 F.2d 527 (7th Cir. 1974); Morning Pioneer, Inc. v. Bismarck Tribune Co., 493 F.2d 383 (8th Cir.), cert. denied 419 U.S. 836, 95 S.Ct. 64, 42 L.Ed.2d 63 (1974).
We realize the difficulty in applying an abstract standard. In some instances, of course, the "dominant nature" of a transaction will be clearly a service or goods. E. g. Freeman v. Chicago Title Trust Co., 505 F.2d 527 (7th Cir. 1974) (title insurance and title searches are services); Tri-State Broadcasting Co. v. UPI, 369 F.2d 268 (5th Cir. 1966) (news wire services are not goods); Bichel Optical Lab., Inc. v. Marquette National Bank of Mpls., 336 F. Supp. 1368 (D.Minn. 1971), affirmed 487 F.2d 906 (8th Cir. 1973) (lending money is a service). Some factual circumstances, however, present a much closer question. E. g. Morning Pioneer, Inc. v. Bismarck Tribune Co., 493 F.2d 383 (8th Cir.), cert. denied 419 U.S. 836, 95 S.Ct. 64, 42 L.Ed.2d 63 (1974) (in dictum, newspaper is a commodity); SCM Corp. v. Xerox Corp., supra (leasing of photocopy machine is a service); Stutzman Feed Service, Inc. v. Todd Sargent, Inc., 336 F. Supp. 417 (S.D.Iowa 1972) (construction contract might be either goods or a service). In the latter classification we note that often the application of the dominant nature test is less than scientific.
Graphic raises for the first time on appeal a challenge to our subject matter jurisdiction. Graphic argues that May failed to allege that the transactions were in interstate commerce as required by 15 U.S.C. § 13(c). This interstate commerce requirement has been treated as a threshold jurisdictional question. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 202, n. 19, 95 S.Ct. 392, 402, n. 19, 42 L.Ed.2d 378 (1974). Failure to plead and prove the involvement of interstate commerce results in dismissal for lack of subject matter jurisdiction. E. g. Red Apple Supermarkets, Inc. v. Deltown Foods, Inc., 419 F. Supp. 1256 (S.D.N.Y. 1976).
The allegation in May's complaint that jurisdiction is invoked by 15 U.S.C. § 13(c) is conclusionary and insufficient to invoke federal jurisdiction. Mantin v. Broadcast Music, Inc., 244 F.2d 204 (9th Cir. 1957). May admits its pleadings were insufficient and did not properly allege interstate commerce. May, however, asserts a right under 28 U.S.C. § 1653 to amend its complaint.
This court has determined that an action should not be dismissed for lack of jurisdiction without giving the plaintiff an opportunity to be heard unless it is clear the deficiency cannot be overcome by amendment. Harmon v. Superior Court of California, supra. The interstate character of the companies involved may provide a sufficient commerce nexus to meet the jurisdictional requirement. Rangen v. Sterling Nelson Sons, Inc., 351 F.2d 851, 861 (9th Cir. 1965), cert. denied 383 U.S. 936, 86 S.Ct. 1067, 15 L.Ed.2d 853 (1966). Since it is not clear that the deficiency cannot be overcome by amendment, we remand with instructions that May be allowed to amend its complaint to attempt to properly allege the interstate commerce requirement of 15 U.S.C. § 13(c).
SUFFICIENCY OF AFFIDAVITS
[30] SKOPIL, Circuit Judge (dissenting):
". . . this bill insures to the independent dealer who buys one carload, whether of groceries, dry goods, hardware or any other commodity, the same price that is given to the chain buying 10 carloads of the same good, . . ." 79 Cong.Rec. 9079, June 11, 1935.
Although Representative Patman was describing "commodities" in reference to 15 U.S.C. § 13(a), I believe that the statement is equally applicable to defining "goods" for purposes of 15 U.S.C. § 13(c). In the absence of congressional action to expand the scope of the Act's application, I would decline to apply it to transactions which are borderline between goods and services. I would therefore affirm the district court, holding that Graphic was entitled to judgment as a matter of law.
A proposal to amend 15 U.S.C. § 13(a) to expand the term "commodities" to include specific services was introduced in Congress in 1957. Congress rejected the proposal and affirmed its intent that the provision cover "only tangible commodities and not services". See H.R. 8277, 85th Cong. 1st Sess., 103 Cong.Rec. 9898 (1957); H.R. 607, 85th Cong. 1st Sess. 66-67 (1957).