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Bogosian v. Gulf Oil Corp, 561 F.2d 434 | Casetext
561 F.2d 434 (3d Cir. 1977)
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Bogosianv.Gulf Oil Corp.
United States Court of Appeals, Third CircuitJul 21, 1977
David Berger, Warren D. Mulloy, Bruce K. Cohen, Warren Rubin, Steven M. Kramer, David Berger, P. A., Philadelphia, Pa., Harold Brown, Brown Leighton, Boston, Mass., Norman P. Zarwin, Zarwin, Baum, Arrangio Somerson, Philadelphia, Pa., for appellants, Paul J. Bogosian and Louis J. Parisi.
Patrick T. Ryan, Drinker, Biddle Reath, Philadelphia, Pa., for American Oil Co.
Benjamin M. Quigg, Jr., Stephen W. Armstrong, Morgan, Lewis Bockius, Philadelphia, Pa., Robert L. Norris, Houston, Tex., for Exxon Corp.
Ralph W. Brenner, David L. Grove, Montgomery, McCracken, Walker Rhoads, Philadelphia, Pa., Lewis J. Ottaviani, Bartlesville, Okl., for Phillips Petroleum Co.
John T. Clary, Philadelphia, Pa., William Simon, William R. O'Brien, Robert J. Brookhiser, Howrey Simon, Washington, D.C., for Shell Oil Co.
John G. Harkins, Jr., Barbara W. Mather, Pepper, Hamilton Scheetz, Philadelphia, Pa., Robert M. Dubbs, St. Davids, Pa., for Sun Oil Co.
Henry T. Reath, Duane, Morris Heckscher, Philadelphia, Pa., Milton Handler, Milton J. Schubin, Kaye, Scholer, Fierman, Hays Handler, New York City, for Texaco, Inc.
Edward W. Mullinix, Arthur H. Kahn, Schnader, Harrison, Segal Lewis, Philadelphia, Pa., for The Standard Oil Co. (Ohio).
Moses Lasky, Richard S. Haas, Brobeck, Phleger Harrison, San Francisco, Cal., Edward W. Mullinix, Arthur H. Kahn, Schnader, Harrison, Segal Lewis, Philadelphia, Pa., for Union Oil Co. of California.
H. Francis DeLone, Richard G. Schneider, Dechert, Price Rhoads, Philadelphia, Pa., C. Lansing Hays, Jr., Hays, Landsman Head, New York City, for Getty Oil Co.
Robert W. Sayre, Frederick H. Ehmann, Jr., Saul, Ewing, Remick Saul, Philadelphia, Pa., William E. Jackson, Milbank, Tweed, Hadley McCloy, New York City, for Amerada Hess Corp.
Allen F. Maulsby, Cravath, Swaine Moore, New York City, George P. Williams, III, Schnader, Harrison, Segal Lewis, Philadelphia, Pa., for Chevron Oil Co.
After substantial discovery limited to the class action allegations, the district court refused to certify the class (62 F.R.D. 124, E.D.Pa. 1973), and under 28 U.S.C. § 1292(b) certified as immediately appealable its order denying class action status. This court refused petitioners' application to appeal pursuant to § 1292(b). (Misc. Record No. 76-8087, April 17, 1974). In April, June and July of 1975 the district court granted motions for summary judgment made by all moving defendants which had had no business dealings with the named plaintiffs (non-lessor defendants), but refused the motions as to the lessors of the named plaintiffs. 393 F. Supp. 1046 (E.D.Pa. 1975). Prior to the grant of the motions no discovery had been taken on the issue of concerted action. Although plaintiffs moved for discovery under Fed.R.Civ.P. 56(f), the court held that "[b]ecause the complaint fails, as a matter of law, to state a cause of action under the Sherman Act § 1 against [nonlessor defendants], summary judgment will be granted and plaintiffs' Rule 56(f) motion will be denied." (footnote omitted). The court granted the summary judgment motion because it concluded that the allegation of "interdependent consciously parallel action" in a complaint is an insufficient statement of the concerted action necessary to state a claim under § 1.
Behind Rule 54(b) is the recognition that with the liberal joinder of claims and parties now permitted by the federal rules, the policy against piecemeal review implicit in the "single judicial unit" rule must be weighed against the untoward effects which can occur when decisions final as to some claims and some parties cannot be entered until the litigation is final as to all claims and all parties. The district court is not empowered to enter judgment on a decision which is not final. However, by determining that a final decision which terminates the action as to one or more but fewer than all parties or as to one or more but fewer than all claims is an appropriate judicial unit, the court can dispatch for appeal decisions which otherwise would not then be appealable because of the "single judicial unit" rule. Wetzel v. Liberty Mutual Insurance Co., 424 U.S. 737, 96 S.Ct. 1202, 47 L.Ed.2d 435 (1976); Sears, Roebuck Co. v. Mackey, 351 U.S. 427, 76 S.Ct. 895, 100 L.Ed. 1297 (1957). The threshold issue, therefore, is whether the order appealed from finally resolved at least one entire claim, leaving at least one separate claim unresolved or alternatively whether the order finally determined the rights and liabilities of at least one party leaving at least one other party whose rights or liability remains undetermined.
The district court granted summary judgment and directed the immediate entry of judgment for all moving defendants except Gulf and Atlantic Richfield in 393 F. Supp. 1046 ( Bogosian) and to all moving defendants except Exxon and Atlantic Richfield in 393 F. Supp. 1046 ( Parisi); the motions for summary judgment filed by Atlantic Richfield on August 6, 1975 were denied without prejudice because they were made after plaintiffs had filed their notices of appeal. Cities Service Oil Company, a defendant in both cases, has not moved for summary judgment. Therefore, Cities Service and Atlantic Richfield remain as defendants in both cases and are not before the court on appeal. In entering judgment in favor of those defendants on this appeal other than Gulf and Exxon the court clearly acted within its power since those defendants have been wholly terminated from both actions.
On the other hand, although Gulf has been wholly terminated in Parisi, it remains as a defendant in Bogosian, while Exxon, which is no longer a defendant in Bogosian, remains as a defendant in Parisi. If the rights and liabilities of Gulf and Exxon have not been wholly terminated then, assuming arguendo that the complaint states a single claim, the district court properly could not enter judgment for them and plaintiffs could not maintain this appeal as to them. Compare Backus Plywood Corp. v. Commercial Decal, Inc., 317 F.2d 339 (2d Cir.), cert. denied, 375 U.S. 879, 84 S.Ct. 146, 11 L.Ed.2d 110 (1963), with 6 Moore, supra, Para. 54.34 [2.-2] at 564.
Once it is determined that the district court was empowered to enter final judgment under 54(b), its decision to do so can be set aside only for an abuse of discretion. Mackey, supra, 351 U.S. at 437, 76 S.Ct. 895. We have previously indicated that ". . . ordinarily an application for a 54(b) order requires the trial judge to exercise considered discretion, weighing the overall policy against piecemeal appeals against whatever exigencies the case at hand may present. . . ." Panichella v. Pennsylvania RR., 252 F.2d 452, 455 (3d Cir. 1958).
We think that the question before us could be mooted by a disposition of the pending claim in the district court. As defendants argued, a resolution of the tie-in claim in favor of the lessor defendants will moot the "conspiracy claim." In each complaint plaintiffs allege that certain provisions contained in the lease agreements between themselves and their lessors constitute an unlawful tying arrangement. They further allege that each defendant, through concerted action, imposed the same unlawful tying arrangement on its lessees. Thus, if after trial and appeal, the contractual arrangements in issue on the pending claims against the lessors were found not to amount to an unlawful tying arrangement, plaintiffs would be collaterally estopped from relitigating the lawfulness of the same contractual arrangements against the remaining defendants.
Since the nonlessor defendants are not parties in the claim pending in the district court, mutuality is lacking. Nevertheless, we have indicated that a lack of mutuality will not preclude defensive use of collateral estoppel at least absent special circumstances indicating unfairness. Provident Tradesmen's Bank Trust Co. v. Lumbermen's Mutual Cas. Co., 411 F.2d 88, 92-94 (3d Cir. 1969). See also Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971).
The second point we question is whether the issue before us on this appeal may again require attention by this court on a subsequent appeal. As we have indicated, two of the 15 defendants, Atlantic Richfield and Cities Service are not now before this court. A decision by this court in favor of plaintiffs on any issue would not bind the absent defendants. Nevertheless, if in that situation the district court were to decide either the summary judgment motion or class action issue against the absent defendants in a manner consistent with our decision as to the other defendants, the absent defendants could appeal that decision at the appropriate time, forcing us to consider these issues again. While we agree that such is the law, we do not agree that such an eventuality necessarily makes it inappropriate to enter final judgment without delay.
We have the benefit on this appeal of the joint brief of 13 defendants, 11 of whom are nonlessors with whom Atlantic Richfield and Cities Service are similarly situated. Although our mandate will not bind the absent defendants, we recognize, nevertheless, that the operation of stare decisis is unlikely to make full reconsideration of the issues decided on this appeal unlikely if and when those issues are tendered on a subsequent appeal. We conclude, therefore, that the fact that absent defendants might on a subsequent appeal raise issues which must now be considered if the entry of judgment under 54(b) stands, is not a significant factor in this case.
"To avoid conflicts in panel decisions no subsequent panel may overrule a published opinion of a previous panel. Court in banc consideration is required to overrule a previous decision of this Court." Internal Operating Procedures of the United States Court of Appeals for the Third Circuit at 13.
It is clear from the district court's opinion that it excluded everything but the complaint in granting the motions. Moreover, the record before us shows that the discovery which had been taken was directed solely toward the class action issues. The memorandum in support of plaintiffs' Rule 56(f) motion indicated that the evidence which would support its theory of a combination or conspiracy was, as it usually is in such cases, in the hands of defendants and that summary judgment should not be granted without affording plaintiffs an opportunity for discovery on the issue of concerted action. "[W]e have said that where the facts are in possession of the moving party a continuance of a motion for summary judgment for purposes of discovery should be granted almost as a matter of course." Costlow v. United States, 552 F.2d 560, at 564 (3d Cir. 1977), citing Ward v. United States, 471 F.2d 667, 670-71 (3d Cir. 1973). The district court regarded discovery as irrelevant, however, because it based its decision solely on the complaint which it thought failed to state a claim as a matter of law.
The district court could dismiss for failure to state a claim upon motion for summary judgment, but a motion so decided is functionally equivalent to a motion to dismiss. Schwartz v. Compagnie General Transatlantique, 405 F.2d 270, 273 (2d Cir. 1968); Moore, supra, Para. 56.02[3], at 2035. We therefore think it appropriate to review the order as we would one dismissing the complaint with prejudice for failure to state a claim. E. g. Tuley v. Heyd, supra, 482 F.2d at 593-94; Marvasi v. Shorty, 70 F.R.D. 14, 17 (E.D.Pa. 1976); see Grzelak v. Calumet Publishing Co., Inc., 543 F.2d 579, 583 (7th Cir. 1975).
The standards by which the orders must be tested is whether taking the allegations of the complaint as true, Cooper v. Pate, 378 U.S. 546, 84 S.Ct. 1733, 12 L.Ed.2d 1030 (1964), and viewing them liberally giving plaintiffs the benefit of all inferences which fairly may be drawn therefrom, see Murray v. City of Milford, 380 F.2d 468, 470 (2d Cir. 1967), "it appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claim which would entitle [them] to relief." Hospital Building Co. v. Trustees of Rex College, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976).
"19. As a result of the defendants' unlawful combination, plaintiff and the members of the class have suffered, and unless defendants are enjoined, will continue to suffer irreparable harm . ."
Paragraphs 16, 17, and 19 of the second amended complaint [hereinafter complaint], quoted supra, expressly refer to an unlawful combination. It is unnecessary to restate defendants' linguistic arguments to the effect that the word "combination" was not used to refer to an actual combination. Suffice it to say that their acceptance would hardly be consistent with the precept that the complaint be liberally construed.
Even if we had no doubt that plaintiffs' substitution of "combination" for "conspiracy" was deliberate and purposeful, we would be unwilling to speculate at this stage as to plaintiffs' theory. Plaintiffs' complaint alleges an unlawful combination and their briefs have not sought to explain that allegation in terms other than that of a classic combination or conspiracy. We perceive no distinction between the terms combination and conspiracy which would distinguish the two complaints. Our reading of § 1 cases indicates that the two terms are used interchangeably. As one commentator has noted, the cases have interpreted the statute as "present[ing] a single concept about common action, not three separate ones: `contract . . . combination or conspiracy' becomes an alliterative compound noun, roughly translated to mean `concerted action.' There is little need to grapple with issues about the meanings of the particular words of the statute nor to mark nice distinctions among them." L. Sullivan, Law of Antitrust 312 (1977). We therefore consider the sufficiency of a complaint which fairly read alleges a combination or conspiracy based upon interdependent consciously parallel action among defendants to impose allegedly unlawful tie-in agreements upon defendants' respective lessees.
Defendants argue nevertheless, and the district court held, that the failure to allege an agreement is fatal to plaintiffs' claim. We think that this position is based upon a misunderstanding of the limited role of the complaint in federal practice. It is not necessary to plead evidence, nor is it necessary to plead the facts upon which the claim is based. "To the contrary, all the Rules require is `a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957).
In their motions for summary judgment and on appeal, defendants argued that plaintiffs lacked standing under §§ 4 and 16 of the Clayton Act to challenge the practices of those defendants with whom they had no business dealings. Although the district court rejected this position, if we were to accept it, we would be required to affirm the grant of summary judgment. See California Bankers Association v. Shultz, 416 U.S. 21, 71, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974); Jurinko v. Edwin L. Wiegand Co., 477 F.2d 1038, 1045 (3d Cir.), vacated on other grounds, 414 U.S. 970, 94 S.Ct. 293, 38 L.Ed.2d 214 (1973).
section 16, 15 U.S.C. § 26 provides inter alia:
The gravamen of the complaints is that defendants jointly imposed a system of lease arrangements which eliminated wholesale price competition among defendants on sales to independent dealer lessees. The fact that each plaintiff and class member had direct business dealings with only one defendant is not dispositive, for plaintiffs allege that it was the joint participation of all defendants in the unlawful scheme which made possible the charging of supracompetitive prices to each dealer by his supplier. Thus, this case is similar to one in which defendants conspire to fix prices in sales to their customers. The fact that a customer has not made purchases from every co-conspirator does not prevent him from suing all — for each co-conspirator contributed to the charging of the supra-competitive price paid by the purchaser.
In Katz v. Carte Blanche Corp., 496 F.2d 747, 756-57 (3d Cir. 1974) ( in banc), we articulated the standard of review applicable to class action decisions. We must decide whether the 23(a) prerequisites have been met, whether the district court correctly identified the issues involved and which are common, and whether it properly identified the comparative fairness and efficiency criteria. If the court's analysis on these points is correct, then, "it is fair to say that we will ordinarily defer to its exercise of discretion" embodied in the findings on predominance and superiority. Id.
(1) Numerosity. Estimates of the number of class members have varied between 100,000 to 2 million, but it is conceded by all parties that the numerosity requirement has been met. (2) Common Questions. It is also clear that there are at least some issues of both fact and law which are common to the class as our discussion in the next section illustrates. (3) Representative claims typical. The claims pressed by the representatives are identical to those which they press on behalf of the class generally. Beyond this general observation there appears to be nothing which would fall under this rubric which is not also covered by one of the other subsections. See 3B J. Moore, Federal Practice, Para. 23.06-2 (2d ed. 1948). (4) Adequacy of Representation. This prerequisite embodies concerns which fall into two categories: that the representatives and their attorneys will competently, responsibly and vigorously prosecute the suit, and that the relationship of the representative parties' interests to those of the class are such that there is not likely to be divergence in viewpoint or goals in the conduct of the suit. See Mersay v. First Republic Corp. of America, 43 F.R.D. 465, 469 (S.D.N.Y. 1968); 3B Moore, supra Para. 23.07. We see no problem concerning the first aspect. The district court has described counsel for plaintiffs as "experienced and learned attorneys in the field of antitrust litigation." 393 F. Supp. at 1048 n. 5. With regard to the second, however, the district court was concerned that the potential may develop for a divergence of interests between former and present lessees. In that situation the adequacy of the representation of the named representatives, neither of whom is a former lessee of a defendant who is not also a present lessee of a defendant, might be questioned. Nevertheless, as the district court recognized, it is equipped by Rule 23(d) to deal with this situation by a variety of means, including certification of subclasses, if and when its concerns ripen. In short, on this record, there is no basis to deny class certification on the basis of inadequacy of representation.
Parisi was a lessee of Exxon from 1968-71, but is now, according to his deposition testimony, a lessee of Atlantic Richfield.
B. Identification of Common Questions 1. The Elements of A Tying Violation
[60] The elements of a Sherman Act § 1 tying violation are well settled. As we indicated in Ungar v. Dunkin' Donuts of America, Inc., 531 F.2d 1211 (3d Cir. 1976), a per se violation is established when plaintiff proves three elements: the existence of a tie, "that the seller has sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product," and "that a `not insubstantial amount of interstate commerce is affected.'" Id. at 1223-24 quoting Northern Pacific Ry. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958).
Relying upon Ungar, defendants appear to argue that coercion is a requirement of proof in all tying cases. Neither Ungar nor any other case has so held. Rather, Ungar affirmed that under a long line of Supreme Court precedents a tying claim consists solely of the three elements quoted above. Assuming economic power over the tying product and a not insubstantial amount of commerce, the plaintiff need only show that a seller conditioned the sale of one product (the tying product) on the purchase of another product (the tied product). It has never been an element of plaintiff's case to disprove, nor even a permitted defense, that the tied product is superior to others available on the market, or that even without the tie requirement plaintiff would have purchased the tied product. The short answer to defendants' contention is, and has always been, that without a tie requirement, "[i]f the manufacturer's brand of the tied product is in fact superior to that of competitors the buyer will presumably choose it anyway." Standard Oil Co. v. United States, 337 U.S. 293, 306, 69 S.Ct. 1051, 1058, 93 L.Ed. 1371 (1949). Cf. United States Shoe Machinery Corp. v. United States, 258 U.S. 451, 462, 42 S.Ct. 363, 66 L.Ed. 708 (1922).
The rule for which defendants contend would be analogous to a rule in price-fixing cases either requiring plaintiffs or permitting defendants to prove that the market set prices would have been no lower than the fixed prices — a proposition long since put to rest. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 222-23, 229, 60 S.Ct. 811, 84 L.Ed. 1129 (1940); United States v. Trenton Potteries Co., 273 U.S. 392, 396-401, 47 S.Ct. 377, 71 L.Ed. 700 (1927). We therefore conclude that once a plaintiff proves that a defendant has conditioned the sale of one product upon the purchase of another there is no requirement that he prove that his purchase was coerced by the seller's requirement.
A number of cases have recognized, however, that an illegal tie-in may exist even when the seller has not expressly conditioned the sale of one product upon purchase of another, if the existence of a tie-in can otherwise be established from business conduct. E. g., Advance Business Systems Supply Co. v. SCM Corp., 415 F.2d 55, 64 (4th Cir. 1969), cert. denied, 397 U.S. 920, 90 S.Ct. 928, 25 L.Ed.2d 101 (1970). In many situations in which the existence of a tie-in is proven on the basis of business conduct, a dominant party, such as a franchisor, suggests, persuades or requests that the economically dependent party, such as a franchisee, purchase certain products in conjunction with other products which the franchisee sought to buy. The claim is that there is more in this seemingly innocent conduct than meets the eye. The franchisee claims that the franchisor has created an economic arrangement in which the perceived threat of termination buttresses the franchisor's salesmanship. We considered this type of claim in the context of a class action certification in Ungar, supra.
In Ungar, all of the franchise agreements avoided conditioning the sale of the allegedly tied products on the purchase of the franchise, and some affirmatively secured to the franchisee the right to purchase those products from other suppliers. Plaintiffs nevertheless claimed that this right was illusory because they were coerced into accepting unwanted products from the franchisor or its designee. The district court held that the "`individual coercion mode of proof of use is inapplicable in a class context. . . .'" and that "`. . [P]ersuasion or influence may be the virtual equivalent of coercion where there is an unequal relationship between the parties . . .,' [or [that] use of economic power in a class context may be inferred] `from the acceptance by large numbers of buyers of a burdensome or uneconomic tie.'" 531 F.2d at 1217 quoting 68 F.R.D. at 114-15. We rejected this conclusion holding that, on the facts of that case, coercion was a necessary element of a prima facie case and that each franchisee must prove coercion on an individual basis. 531 F.2d at 1226.
Although in Ungar we spoke of coercion as being implicit in the leverage concept upon which the tying rule is premised, we were not articulating coercion as a separate legal element of proof. As we indicated in III B 1 a supra, leverage or coercion is implicit when plaintiff proves the conditioning of sales of one product upon purchase of another. We read Ungar to have required coercion to be proven only because the conditioning of the sale of one product upon purchase of another was not reflected in the agreement or in the operation of its terms. We refused to "construct" such a condition from proof of salesmanship coupled with dominance of the seller over the buyer. The principle of Ungar is that when a class action tie-in claim is made, without basis is an express agreement, proof of salesmanship coupled with inequality of bargaining power does not prove the existence of a tie, but rather proof of actual coercion on an individual basis is necessary to prove the existence of a tie.
Neither in Ungar nor in this case are we faced with the situation in which the existence of a tie-in is attempted to be shown by a uniform writing extrinsic to the agreement.
All but one of the cases which we have found discussing coercion as an element of proof in a tying claim have application to the situation in which the existence of a tie-in is sought to be proved on the basis of a request or suggestion coupled with pressure, intimidation, in short — coercion. In American Manufacturers Mutual Insurance Co. v. American Broadcasting-Paramount Theatres, Inc., 446 F.2d 1131 (2d Cir. 1971), cert. denied, 404 U.S. 1063, 92 S.Ct. 737, 30 L.Ed.2d 752 (1972), for example, an insurance company developed an advertising program which called for sponsoring the Evening Report over a number of local stations. During negotiations with ABC, the company was able to add at least some of the 28 stations it particularly desired to the 99 station lineup originally offered. It later contended that the lineup included 32 unwanted stations which were allegedly tied to the desirable stations. The Second Circuit affirmed the finding of the district court that the company had not proven that it was coerced to accept the lineup agreed upon. Coercion was an essential element of proof in that case because the existence of two separate products necessary to establish a tie could not be determined without reference to the buyer's state of mind, since advertising on one configuration of stations as opposed to another cannot be differentiated apart from the particular advertiser's wants. See also Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1326-1331 (5th Cir. 1976) (coercion required when lease agreement specifies that franchisee free to obtain putative tied product from any source); Davis v. Marathon Oil Co., 528 F.2d 395 (6th Cir. 1975), cert. denied, 429 U.S. 823, 97 S.Ct. 75, 50 L.Ed.2d 85 (1976) (claim of tie-in of TBA to gasoline rejected when lease did not require purchases and evidence did not show coercion); Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir.), cert. denied, 408 U.S. 928, 92 S.Ct. 2494, 33 L.Ed.2d 341 (1972) (coercion required when putative tie based upon request to purchase TBA rather than requirement to do so).
There have been several cases in which the claim that actual coercion was necessary to prove the existence of a tie-in has been rejected because the seller expressly conditioned sale of one product upon purchase of another. E. g., Hill v. A-T-O, Inc., supra; Aamco Automatic Transmissions, Inc. v. Tayloe, 407 F. Supp. 430 (E.D.Pa. 1976); Esposito v. Mister Softee, Inc., 1976-1 Trade Cas. Para 60,887 (E.D.N.Y. 1976).
In order to apply the legal standards stated above to the claims made here, it is necessary to first identify in greater depth the nature of the claims. The complaint indicates that plaintiffs seek relief on two distinct grounds. Plaintiffs contend that it is illegal for defendants to require as a condition to the leasing of a gas station site that the lessee purchase gasoline only from defendants (lease claim). The second claim is that it is illegal for defendants to require dealers to sell only gasoline supplied by defendant from pumps bearing their trademark (trademark claim).
We cannot agree with the district court that proof of coercion is necessary to the existence of a tie-in on the theory under which the lease claim is brought. Plaintiffs do not contend that defendants pressured them into refraining from selling competing brands, but that the lease contracts themselves precluded them from doing so. Defendants acknowledge that the only way a lessee could sell other brands under the lease agreements would to be install his own pumps and tanks. Whether such a course is realistically open to a short term lessee is a common question of fact which can be developed by expert testimony concerning the relative costs and benefits of making such installations. Similarly, a lease provision which permits termination of the lease when a stated quantity of gasoline is not purchased from the lessor hardly leaves the lessee open to reject some or all of the lessor's gas in favor of that of a competitor. If plaintiffs are able to show that the lease agreements in use by all defendants have similar clauses which have the practical economic effect of precluding sale of other than the lessor's gasoline, they will have shown than the purchase of gasoline was tied in to the lease of the service station. Under these circumstances the lease agreement itself conditions the sale of one product (here a lease) upon purchase of another, and as we indicated in part III B 1 a, supra, proof of coercion is not a required element of plaintiffs' case. Thus, this case differs from Ungar in which plaintiffs' proof of the existence of a tie-in focused not on the terms of the agreement but on proof of salesmanship accompanied by threats of termination.
One case, Hehir v. Shell Oil, 72 F.R.D. 18 (D.Mass. 1976), reached a contrary result on what appear to be identical facts. The court did not explain why it regarded coercion as a required element of proof, however, and the case, therefore, does not persuade us.
It follows from the foregoing discussion that if class certification is granted, plaintiffs will be precluded from introducing evidence of threats of termination to prove the existence of a tie-in. Ungar, supra. Similarly, plaintiffs could not prove that they were precluded from installing tanks and pumps by the clause requiring the lessors' approval of leasehold alterations if proof that such approval would be withheld depended on specific instances of the clause being exercised in that manner.
(ii) Variety of Contractual Forms
Assuming that plaintiffs do not have direct evidence of a conspiracy among the defendants, it will be necessary for plaintiffs to introduce evidence of the various lease agreements used by each defendant in order to show parallel business behavior from which a conspiracy can be inferred. If the action were not sought to be maintained on a class basis, a single plaintiff, in order to prove a conspiracy on this basis, would have to prove this much. When the action is brought by the class, the nature of the proof is no different, however. Plaintiffs' claim is not that each defendant imposed a tie-in on every dealer, but that all defendants conspired to impose tie-in arrangements on each dealer and that without the agreement of all, none could do so successfully. Thus, the district court incorrectly identified the legal issue. While the nature of the claim is such that proof will be detailed and lengthy, the factual and legal questions presented in this phase will be precisely the same in a class action as they would be in an individual suit.
If plaintiffs had direct evidence of conspiracy, it would be unnecessary to prove that each defendant actually imposed the tie-in upon its lessees, only that each agreed to do so. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224-226 n. 59, 60 S.Ct. 811, 84 L.Ed. 1129 (1940).
Plaintiffs contend that all gasoline of the same octane rating is fusible, that defendants, in fact, exchange their gasolines when convenient, and, citing Siegel v. Chicken Delight, Inc., 448 F.2d 43 (9th Cir. 1971), cert. denied, 405 U.S. 955, 92 S.Ct. 1172, 31 L.Ed.2d 232 (1972), that defendants' trademarks should therefore be regarded as warranting only the quality rather than the source of the gasoline. The district court noted:
The court also opined that "[I]f the sole question were whether such trademark protection clauses, however worded, constituted in and of themselves violation of the antitrust laws, a class action for determining the legality of such a clause might be appropriate." Id. at 136.
There are two distinct aspects to what in antitrust literature has come to be known as a requirement of fact of damage in private suits under § 4 of the Clayton Act. See Pollock, The "Injury" "Causation" Elements of a Treble-Damage Antitrust Action, 57 Nw.L.Rev. 691 (1962). One of these is founded upon the recognition that some limitation must be placed upon liability stemming from violations which may have a widespread and unforeseeable ripple effect throughout the economy. Thus, notwithstanding the language of § 4 that "[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . .," as a matter of policy, courts have uniformly limited the private action to those plaintiffs whose injury is not too indirect, remote or incidental a consequence of a violation. This policy has been expressed under the rubric of "standing" and implemented under a "target area" test, see, e. g., Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183 (2d Cir. 1970), cert. denied, 401 U.S. 923, 91 S.Ct. 877, 27 L.Ed.2d 826 (1971), or by a more detailed, functional inquiry. See Cromar Co. v. Nuclear Material Equipment Corp., 543 F.2d 501, 506 (3d Cir. 1976). We have addressed this aspect, supra and will not refer to it again.
The second aspect is comprised of two elements — that plaintiff suffered some loss in his business or property and that there is a causal relationship between the violation and the loss. Fact of damage in this sense is purely factual and does not involve questions of policy in its routine application. It advances no policy apart from the simple concept of causation — that plaintiff has suffered loss as a consequence of the violation. See Bigelow v. United States, 327 U.S. 251, 257-60, 66 S.Ct. 574, 90 L.Ed. 652 (1946).
Our conclusion is not at variance with recent cases in other circuits indicating that fact of damage could not be proven on a class basis, since those cases turned upon their individual facts, rather than upon a rule of law precluding common proof of fact of damage. See, e. g., Shumate Co., Inc. v. National Association of Securities Dealers, Inc., 509 F.2d 147, 155 (5th Cir.) cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46 L.Ed.2d 97 (1975); In Re Hotel Telephone Charges, 500 F.2d 86, 89 (9th Cir. 1974). On the other hand, it has been recognized that fact of damage can be proven on a common basis. See, e. g., City of Philadelphia v. American Oil Co., 53 F.R.D. 45, 60, 67-68 (D.N.J. 1971); In Re Antibiotic Antitrust Actions, 333 F. Supp. 278, 281, 287 (S.D.N.Y. 1971); Developments, Class Actions, 89 Harv.L.Rev. 1318, 1513 n. 301. See generally Wall Products Co. v. National Gypsum Co., 326 F. Supp. 295, 327 (N.D.Cal. 1971).
The method by which loss will be proven may depend upon the type of violation involved and its impact on plaintiff's business or property. For example, if anticompetitive practices result in the destruction of plaintiff's business, he may recover as damages lost profits or the going concern value of the business. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). If, however, defendants supply an article at supra-competitive prices, plaintiff may recover the amount of the illegal overcharge. See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 487-90, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968). When plaintiff elects to prove damages on the basis of lost profits or going concern value, it would seem that his proof necessarily would focus on the operation of his business. But, if plaintiff seeks to establish payment of an illegal overcharge, the nature of proof may well be different.
If, in this case, a nationwide conspiracy is proven, the result of which was to increase prices to a class of plaintiffs beyond the prices which would obtain in a competitive regime, an individual plaintiff could prove fact of damage simply by proving that the free market prices would be lower than the prices paid and that he made some purchases at the higher price. If the price structure in the industry is such that nationwide the conspiratorially affected prices at the wholesale level fluctuated within a range which, though different in different regions, was higher in all regions than the range which would have existed in all regions under competitive conditions, it would be clear that all members of the class suffered some damage, notwithstanding that there would be variations among all dealers as to the extent of their damage. "[The] burden of proving the fact of damage under § 4 of the Clayton Act is satisfied by . . proof of some damage flowing from the unlawful conspiracy . . . ." Zenith Radio, supra, 395 U.S. at 114, 89 S.Ct. at 1571 n. 9. Under these circumstances, proof on a common basis would be appropriate. Even if the variation in price dynamics among regions or marketing areas were such that in certain areas the free market price would be no lower than the conspiratorially affected price, it might be possible to designate subclasses to conform with these variations. See In Re Antibiotic Antitrust Actions, supra, 333 F. Supp. at 281.
With respect to the calculation of the amounts of damages, it would be necessary for each member of the class individually to prove the quantity of gasoline purchased at supracompetitive prices and the price paid. Nevertheless, it has been commonly recognized that the necessity for calculation of damages on an individual basis should not preclude class determination when the common issues which determine liability predominate. E. g., Philadelphia Electric Co. v. Anaconda American Brass Co., 43 F.R.D. 452, 457 (E.D.Pa. 1968); Dolgow v. Anderson, 43 F.R.D. 472, 490-91 (E.D.N.Y. 1968). If for any reason the district court were to conclude that there would be problems involved in proving damages which would outweigh the advantages of class certification, it should give appropriate consideration to certification of a class limited to the determination of liability. See Rule 23(c)(4)(A).
With respect to former lessees, however, plaintiffs proposed notice by publication in trade journals. If the names and addresses may be ascertained through reasonable effort, regardless of expense, plaintiffs must bear the cost of individual notice to every proposed member of the class. Eisen v. Carlisle Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). If plaintiffs indicate that they are unable or unwilling to bear this expense, the class certification, if granted, must be limited to current lessees. But even if the former lessees are retained in the class, we do not, at this point, perceive that the mechanics of providing notice will present insuperable management problems for the court. The court, may, we think, direct and supervise the mechanics of providing notice without directly performing them. See 3B Moore supra at Paras. 23.45[4.-4], 23.55.
[107] ALDISERT, Circuit Judge, dissenting.
My first, and most fundamental, disagreement with the majority concerns the role of pleading and discovery in this kind of litigation. The majority says that a "complaint is much too blunt an instrument with which to forge fundamental policies." But, if a complaint cannot even be depended on to state the essential theory of the litigation, I do not know how a court can correctly resolve the particular case, must less forge fundamental policies. This is not a pro se case. Plaintiffs' counsel are competent, experienced and, in fact, nationally renowned attorneys in the antitrust field. Nor is this a case that was hastily terminated by summary judgment. The original complaints were filed in 1971, the Bogosian complaint was amended in 1972, and both complaints were amended in 1973. Now, six years after the action was commenced, the majority remarks that it is "unwilling to speculate at this stage as to the plaintiffs' theory." In my view, this case has long since passed the stage where anyone concerned — parties, lawyers, or judges — should have to speculate as to the theory of the litigation.
Federal procedure relies on notice pleading rather than fact pleading, but at a minimum, as explained by the Advisory Committee on Civil Rules in October, 1955, the pleader is required "to disclose adequate information as the basis of his claim for relief". 2A J. Moore, Federal Practice ¶ 8.01[3] (2d ed. 1974). Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957), teaches that "the defendant [be given] fair notice of what the plaintiff's claim is and the grounds upon which it rests," (emphasis supplied), and we have recently reiterated that the defendant is entitled to "fair notice of the claim asserted." Joiner Systems, Inc. v. AVM Corp., 517 F.2d 45, 47 (3d Cir. 1975).
The crucial question is whether respondents' conduct toward petitioner stemmed from independent decision or from an agreement, tacit or express. To be sure, business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. Interstate Circuit, Inc. v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939); United States v. Masonite Corp., 316 U.S. 265, 62 S.Ct. 1070, 86 L.Ed. 1461 (1942); United States v. Bausch Lomb Optical Co., 321 U.S. 707, 64 S.Ct. 805, 88 L.Ed. 1024 (1944); American Tobacco Co. v. United States, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946); United States v. Paramount Pictures, Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260 (1948). But this Court has never held that proof of parallel business behavior conclusively establishes agreement or, phrased differently, that such behavior itself constitutes a Sherman Act offense.
346 U.S. at 540-41, 74 S.Ct. at 259. From this, it is clear to me that consciously parallel behavior is admissible as circumstantial evidence of a properly pleaded contract, combination or conspiracy. That is the point that was implicated in Venzie Corp. v. United States Mineral Products Co., 521 F.2d 1309 (3d Cir. 1975). In Venzie, we specifically noted that the plaintiffs "relied on . . . circumstantial evidence . . as proof of agreement. Their evidence does not, however, include two elements generally considered critical in establishing conspiracy from evidence of parallel business behavior . . .". Id. at 1314. Venzie was an appeal from an order granting a defendants' motion for judgment n. o. v. As such, it was our obligation to review the plaintiffs' evidence, and we concluded that they had not met their burden of proving conspiracy. This, however, is not an appeal from a judgment n. o. v., it is an appeal from a summary judgment for failure to state a claim. We are faced not with a question of evidence, but with a question of pleading.
If there is anything in this case that hearkens back to "magic words", it is not, as the majority suggests, the requirement that a Sherman Act complaint allege concerted action of some kind. It is rather, the asserted power of the word "interdependent" to breathe vitality into a lifeless theory of recovery. Nowhere has the talismanic character of that word been explained to my satisfaction. Indeed, it seems to me that interdependence is implicit in the notion of conscious parallelism and that the added word is hardly more than a redundancy. In the usual situation of parallel business behavior, a businessman is conscious of what his competitor is doing and his action, or inaction, depends on what the competitor does. This is not a violation of the antitrust laws; it is, in fact, the essence of the competitive behavior that those laws seek to promote. Because his competitor takes the same attitude toward him, the two businessmen are mutually conscious of each other and their actions are "interdependent". In a concentrated industry, such mutually conscious and interdependent conduct by several competitors may have anticompetitive effects. But it is not necessarily collusive, and I cannot understand how a proliferation of descriptive words changes the legal status of the conduct. Until there is a contract, combination or conspiracy, in restraint of trade, there is no § 1 violation. As the Supreme Court observed in Theater Enterprises: "Circumstantial evidence of consciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward conspiracy; but `conscious parallelism' has not yet read conspiracy out of the Sherman Act entirely." 346 U.S. at 541, 74 S.Ct. at 259 (footnote omitted).
In their brief in this court, plaintiffs rely primarily on Wall Products Co. v. National Gypsum Co., 326 F. Supp. 295 (N.D.Cal. 1971), and Modern Home Institute, Inc. v. Hartford Accident and Indemnity Co., 513 F.2d 102 (2d Cir. 1975). Based on these decisions, they say "it is clear that [the courts] have uniformly held that proof of interdependent conscious parallel action, while not conclusive proof of a Section 1 Sherman Act violation, is sufficient to support a finding of violation." Appellants' Brief at 21. In my view, it is not necessary to agree or disagree with that reading of the cases in order to affirm the summary judgment here.
Like the majority, the plaintiffs have mistaken an issue of pleading for an issue of evidence. We are not presented with a situation where interdependent consciously parallel action — however that may differ from merely consciously parallel action — has been introduced as evidence of a properly pleaded contract, combination or conspiracy. Nor are we presented with the issue whether such evidence alone would be sufficient to support a finding of concerted action. Instead, we are presented with the pure question of law whether an allegation of interdependent consciously parallel action, without more, states a claim under § 1 of the Sherman Act. In my view, it does not. As no amount of discovery can cure a complaint that fails to state a claim, I would affirm the entry of summary judgment.
The majority has concluded that the district court erred when it found that common questions would not predominate over individual ones, as required by Rule 23(b)(3). I disagree. Rather than paraphrasing, I prefer the exact language concerning our review of a predominance finding as stated in Katz:
Concerning the lease claim, the majority correctly states that "[t]here is no single lease provision which requires that the lessee purchase all gasoline from his lessor." It goes on to say, also correctly, that it is a "constellation of lease provisions" which allegedly has the practical economic effect of tying the purchase of gasoline to the lease of the service station. Then, having admitted that whether the lessee realistically could sell other brands of gasoline is a "question of fact which can be developed by expert testimony concerning the relative costs and benefits of [installing the lessee's own pumps and tanks]," the majority nevertheless concludes that the practical economic effect of the various lease provisions would present a common question, provable by common proof. Even if there were only one defendant oil company and only one form contract, the practical economic effect would vary from dealer to dealer, city to city, and region to region. It might, for example, be economically feasible for a large volume dealer in a large city to install his own pumps and tanks while it might not be feasible for a smaller dealer in a smaller city to do so. Here there are more than a dozen oil companies, with operations concentrated in different regions of the country, and there are more than 400 different forms of contracts and agreements. A fortiori, the practical economic effects of the agreements will present diverse questions.
The majority has also concluded that the district court's reasons for finding the class action not to be superior to other adjudicative vehicles were "erroneous". Again, Katz articulates the standard of review of a finding on the issue of superiority: "[O]ur review looks first at whether the district court properly applied the relevant criteria to the facts of the case. If this has been done it is fair to say that we will ordinarily defer to its exercise of discretion." 496 F.2d at 757.
If the district court saw fit to reconsider its class action decision at a later point in the litigation, that would be within its power under Rule 23(c)(1). But I can see no basis at present for upsetting its denial of the class certification, and I would, therefore, affirm that denial.