Case Name: WESTERN WASTE SERVICE SYSTEMS, Plaintiff-Appellant, v. UNIVERSAL WASTE CONTROL and Waste Management, Inc., Defendants-Appellees
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 1980-03-04
Citations: 616 F.2d 1094
Docket Number: No. 77-3131
Parties: WESTERN WASTE SERVICE SYSTEMS, Plaintiff-Appellant, v. UNIVERSAL WASTE CONTROL and Waste Management, Inc., Defendants-Appellees.
Judges: Before KENNEDY and ANDERSON, Circuit Judges, and CLAIBORNE, District Judge.
Reporter: Federal Reporter 2d Series
Volume: 616
Pages: 1094–1102

Head Matter:
WESTERN WASTE SERVICE SYSTEMS, Plaintiff-Appellant, v. UNIVERSAL WASTE CONTROL and Waste Management, Inc., Defendants-Appellees.
No. 77-3131.
United States Court of Appeals, Ninth Circuit.
March 4, 1980.
Rehearing Denied April 28, 1980.
P. Richard Meyer, Meyer, Vucichevich & Cimala, Phoenix, Ariz., for plaintiff-appellant.
Joseph V. Giffin, Chicago, Ill., argued, for defendants-appellees; Paul G. Ulrich, Lewis & Roca, Phoenix, Ariz., Joseph V. Giffin, Chadwell, Kayser, Ruggles, McGee & Hastings, Chicago, Ill., on brief.
Before KENNEDY and ANDERSON, Circuit Judges, and CLAIBORNE, District Judge.
Honorable Harry E. Claiborne, United States District Judge for the District of Nevada, sitting by designation.

Opinion:
KENNEDY, Circuit Judge:
The narrow issue in this case is whether a garbage collection business in Phoenix, Arizona sufficiently affects interstate commerce to fall within the protection of section 1 of the Sherman Act. Finding this court's previous decision in Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969), to be controlling, the district court granted a pretrial motion to dismiss the action, holding "there is no sufficient nexus with interstate commerce to support Sherman Act jurisdiction." The plaintiff brought this appeal. We conclude that Sun Valley is distinguishable from the case before us, and that the standards announced in intervening Supreme Court opinions establish that there is jurisdiction here. We vacate the judgment of the trial court and remand the cause for further proceedings.
Appellant Western Waste Service Systems (Western Waste), the plaintiff below, is an Arizona corporation engaged in the waste disposal business in the Phoenix metropolitan and adjoining areas. Universal Waste Control (Universal) is a California corporation engaged in the waste disposal business in the same area. Universal is a wholly-owned subsidiary of defendant Waste Management, Inc., a Delaware corporation.
Western Waste brought suit against Universal and Waste Management, claiming that Universal had monopolized and attempted to monopolize the waste disposal business in Phoenix by providing waste disposal services at prices substantially below cost. Western Waste also charged that Universal conspired with other competitors to eliminate Western Waste from the waste disposal business. Universal moved to dismiss for lack of subject matter jurisdiction. After discovery was taken on this issue, the district court granted Universal's motion, holding that the garbage collection business was a local one which did not affect interstate commerce.
In this appeal and for purposes of Universal's motion, we must read the pleadings and evidence adduced in discovery in the light most favorable to Western Waste. The following facts must be taken as true in ruling on Universal's motion. Both Western Waste and Universal acquire a substantial amount of their garbage collection equipment from out of state. All trucks and truck bodies were manufactured outside of Arizona and most of the rubbish containers purchased were also manufactured outside of Arizona. Some of the waste material which is collected by Universal is paper which is hauled to paper brokers in Phoenix for shipment out of state. Scrap wood is also collected by Universal and shipped to recyclers. Approximately four tons of such wood were sent by Universal to recyclers from June 1, 1976 to May 31, 1977. The recyclers make this material into wood chips which are shipped out of state.
Both Western Waste and Universal are distributors of garbage compactors manufactured by out-of-state companies for sale or lease within Phoenix. In 1975, Western Waste became the Phoenix dealer of Black-welder, a California manufacturer of compaction equipment. Blackwelder's compactor was new to the market and had unique features. Western Waste sent two of its employees to California for instruction in the selling and servicing of Blackwelder compaction equipment. In 1976 Universal used its market power and the power of its parent company to induce Blackwelder to terminate Western Waste's distributorship and choose Universal as its exclusive distributor. Subsequently, Universal advertised itself as Blackwelder's exclusive distributor in Phoenix.
The standards which we must apply to these facts are familiar. It is established that the reach of the Sherman Act is as inclusive as the constitutional limits of Congress' power to regulate interstate commerce. United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944); Thornhill Publishing Co. v. General Tel. & Elec. Corp., 594 F.2d 730 (9th Cir. 1979); Rasmussen v. American Dairy Ass'n, 472 F.2d 517 (9th Cir.), cert. denied, 412 U.S. 950, 93 S.Ct. 3014, 37 L.Ed.2d 1003 (1973). As judicial construction of the scope of the commerce clause has expanded, so has the reach of the Sherman Act. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 202, 95 S.Ct. 392, 402, 42 L.Ed.2d 378 (1974); Rasmussen, supra, 472 F.2d at 521. "[T]he conduct of the defendants is within the jurisdictional reach of the Sherman Act if Congress can prohibit that conduct under the commerce clause.' Id.
Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies "in restraint of trade or commerce among the several States." 15 U.S.C. § 1 (1976). This phrase defines both the conduct proscribed by the statute and its jurisdictional reach. Gough v. Rossmoor Corp., 487 F.2d 373 (9th Cir. 1973). In resolving the jurisdictional issue, our task is to assume, without deciding, that the conduct complained of constitutes a violation of the Sherman Act and then to determine whether that conduct could be regulated under the commerce power. Rasmussen, supra, 472 F.2d at 522.
To establish Sherman Act jurisdiction, the district court required Western Waste to show that Universal's alleged antitrust violations had a substantial effect on interstate commerce. This test, however, was rejected by the Supreme Court this Term in McLain v. Real Estate Bd.,- U.S. -, 100 S.Ct. 502, 62 L.Ed.2d 411 (1980). In McLain real estate purchasers brought suit against real estate brokers in the New Orleans area, claiming that the brokers had fixed their commissions in violation of the Sherman Act. The district court granted defendants' motion to dismiss for lack of subject matter jurisdiction, 432 F.Supp. 982 (E.D.La.1977), and the Fifth Circuit affirmed. 583 F.2d 1315 (5th Cir. 1978). In vacating the judgment, the Supreme Court unanimously held that the defendants' brokerage activities substantially affected interstate commerce so as to confer Sherman Act jurisdiction. The Court held that it was not necessary for the alleged antitrust violations complained of to have affected interstate commerce as long as defendants' business activities, independent of the violations, affected interstate commerce. The Court declared:
To establish the jurisdictional element of a Sherman Act violation it would be sufficient for petitioners to demonstrate a substantial effect on interstate commerce generated by respondents' brokerage activity. Petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix commission rates, or by those other aspects of respondents' activity that are alleged to be unlawful. The validity of this approach is confirmed by an examination of the case law. If establishing jurisdiction required a showing that the unlawful conduct itself had an effect on interstate commerce, jurisdiction would be defeated by a demonstration that the alleged restraint failed to have its intended anti-competitive effect. This is not the rule of our cases. See American Tobacco Co. v. United States, 328 U.S. 781, 811 [66 S.Ct. 1125, 1139, 90 L.Ed. 1575] (1946); United States v. Socony Vacuum Oil Co., 310 U.S. 150, 225, n.59 [60 S.Ct. 811, 846, 84 L.Ed. 1129] (1940). A violation may still be found in such circumstances because in a civil action under the Sherman Act, liability may be established by proof of either an unlawful purpose or an anti-competitive effect. United States v. United States Gypsum Co., 438 U.S. 422, 436 n.13 [98 S.Ct. 2864, 2864, 57 L.Ed.2d 854] (1978); see United States v. Container Corp., 393 U.S. 333, 337 [89 S.Ct. 510, 512, 21 L.Ed.2d 526] (1969); United States v. National Assn. of Real Estate Boards, 339 U.S. 485, 489 [70 S.Ct. 711, 714, 94 L.Ed. 1007] (1950); United States v. Socony Oil Co., supra, 310 U.S. 150 at 224-225 n.59 [60 S.Ct. [811], at 844-846, 84 L.Ed. 1129].
- U.S. at -, 100 S.Ct. at 509.
The standard announced by the Supreme Court must, of course, govern our decision in this case. Applying this test to the facts that we must accept as true for the purpose of Universal's motion, we conclude that the pleadings and evidence adduced by Western Waste at this stage of the proceedings provide more than a sufficient basis for Western Waste to proceed to trial to establish Sherman Act jurisdiction. We believe that the facts establish not only that Universal's rubbish collection business substantially affected interstate commerce, but also that the alleged antitrust violations substantially af-fected interstate commerce. Under McLain it is unnecessary to establish that the alleged antitrust violations substantially affected interstate commerce, but when, as here, this effect is alleged, it is a strong indicator that the defendant's business has an interstate impact.
Universal's acts directly impeded a line of interstate commerce. Before Universal's acts, Western Waste was engaged in the purchase of garbage compaction equipment from an out-of-state supplier. Universal used its market power to attempt to terminate this relationship. Shortly thereafter, Western's dealership was cancelled and Universal advertised that it was the supplier's exclusive distributor in Phoenix.
Universal spent $69,680 in 1975 and $356,-061 in 1976 for equipment purchased out of state. Western Waste spent $88,335 and $124,007 during these respective years for out-of-state equipment. This evidence demonstrates that Universal's business substantially affected interstate commerce. It demonstrates, moreover, that the alleged antitrust violations had a substantial effect on interstate commerce. If Universal succeeds in its alleged attempt to drive Western Waste out of business, Western Waste's purchases will be totally eliminated. See Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 744, 96 S.Ct. 1848, 1852, 48 L.Ed.2d 338 (1976). A reasonable inference from the record is that the alleged antitrust violations reduced Western Waste's purchases during the periods in question.
Universal hauls several tons of waste which it collects to paper brokers and recyclers that ship these materials out of state. This evidence also demonstrates Universal's effect on interstate commerce as these shipments were the beginning point for a significant line of interstate commerce. If Universal succeeds in its alleged attempt to drive Western Waste out of business, the number of suppliers from whom the dealers may purchase such scrap materials for out-of-state shipment will diminish. With fewer suppliers in the market, the suppliers of such scrap materials will be able to restrict supply and raise their prices with a concomitant reduction in the interstate commerce of such materials. See id.
Universal contends, however, that this case is controlled by our decision in Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969). In that case this court wrote:
Appellant conducted a wholly local garbage disposal and container leasing business. Appellant supplied this business with equipment from out of state. This fact alone does not turn what was really a local activity into an interstate one.
Id. at 343. In Sun Valley, the court required the plaintiff to show that the alleged antitrust violation affected interstate commerce. As we have noted above, this reasoning was rejected by the Supreme Court in McLain. Furthermore, in the intervening Supreme Court case of Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976), the Court held that acts which affect the out-of-state purchases, financing, and revenues of intrastate businesses provide a sufficient basis for Sherman Act jurisdiction. In any event the facts here are sufficiently different from those in Sun Valley so as to confer jurisdiction on the district court under the Sherman Act. First, a direct restraint on a line of interstate commerce is present here while none was present in Sun Valley. Second, Universal hauls several tons of the waste which it collects to scrap dealers and paper brokers which ship these materials out of state. Universal's argument that its role is somehow incidental to the shipping of these materials out of state and that this defeats jurisdiction was expressly rejected by the Supreme Court in Rex Hospital and McLain. In McLain the Supreme Court declared that jurisdiction under the Sherman Act is not defeated by a plaintiff's failure "to quantify the adverse impact of defendant's conduct." McLain, supra, - U.S. at -, 100 S.Ct. at 510.
Third, a substantial amount of garbage collection equipment, including trucks, truck bodies and containers is purchased from out of state each year. We noted in Rasmussen v. American Dairy Ass'n, 472 F.2d 517 (9th Cir.), cert. denied, 412 U.S. 950, 93 S.Ct. 3014, 37 L.Ed.2d 1003 (1973), that "[t]he opinion [in Sun Valley] discloses none of the underlying business facts upon which [its] conclusion rests, and it may well be that the supplies moving in interstate commerce were an economically insignificant part of the total service rendered." Id. at 527. In Rasmussen we held that when all the ingredients of a product have been obtained from interstate commerce, then actions undertaken to restrain trade in that product sufficiently affect interstate commerce to confer jurisdiction under the Sherman Act. We noted that "[i]n this area perhaps more than in most, each case must turn on its own facts." Id. at 526.
Finally, Universal finances almost all of its equipment purchases by borrowing from Waste Management in Illinois. Universal made interest payments to Waste Management which amounted to $178,624 in 1975 and $123,505 in 1976. In addition, Universal paid management and corporate service and development fees to Waste Management in Illinois totalling $130,100 in 1975 and $145,100 in 1976. Revenues collected by Universal are transferred to an account in California from which approximately $300,000 per month is transferred to Waste Management in Illinois. No such out-of-state financing or remission of revenues to out-of-state sources was present in Sun Valley. The interstate flow of these funds could reasonably be expected to fluctuate in direct proportion to Universal's success in conducting its alleged antitrust violations.
The intervening Supreme Court cases and the material differences in the facts of this case from the facts in Sun Valley establish that the district court had jurisdiction over Western Waste's claim. It is possible that the evidence relied upon by Western Waste to establish jurisdiction at this stage will be rejected at trial by the finder of fact. Nothing we say here should be taken to indicate that we have indeed found the facts to be in Western Waste's favor. We also express no opinion on whether the matters alleged constitute antitrust violations. That is a determination to be made in another proceeding. We do hold that "what was submitted to the District Court shows a sufficient basis for satisfying the [Sherman] Act's jurisdictional requirements under the effect on commerce theory so as to entitle the [plaintiff] to go forward." McLain, supra, - U.S. at -, 100 S.Ct. at 511.
The judgment of the district court is VACATED and the cause REMANDED for further proceedings consistent with this opinion.
. Universal's argument that the district court had authority to inquire into and determine the facts relating to Sherman Act jurisdiction at this stage of the proceedings was expressly rejected by the Supreme Court this term in McLain v. Real Estate Bd., - U.S. -, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980). In McLain, the defendant also moved to dismiss for lack of jurisdiction. After discovery was taken on this issue, the district court granted the motion and the Fifth Circuit affirmed. In vacating the judgment, the Supreme Court ruled that the pleadings, as supplemented by the evidence produced in discovery, had to be read in the light most favorable to the party against whom the motion was made. The inquiry was said to be whether there was a sufficient basis for plaintiff to proceed to trial to establish Sherman Act jurisdiction. In concluding that the jurisdictional requirements had been met, the Court declared:
It is axiomatic that a complaint should not be dismissed unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 [78 S.Ct. 99, 101-102, 2 L.Ed.2d 80] (1957); see 5 Wright & Miller, Federal Practice and Procedure: Civil § 1202, 1205-1207, 1215-1224, 1228. This rule applies with no less force to a Sherman Act claim, where one of the requisites of a cause of action is the existence of a demonstrable nexus between the defendants' activity and interstate commerce. Here what was submitted to the District Court shows a sufficient basis for satisfying the Act's jurisdictional requirements under the effect on commerce theory so as to entitle the petitioners to go forward. We therefore conclude that it was error to dismiss the complaint at this stage of the proceedings.
- U.S. at -, 100 S.Ct. at 511.
. The dissent argues that McLain stands for the proposition that a party suing under the Sherman Act must demonstrate a substantial nexus between the plaintiff's business activities and interstate commerce. We disagree. The Supreme Court made clear there that the focus of the inquiry is on the defendant's business. The fact that the opinion in Sun Valley directed its analysis to determining whether the plaintiffs business affected interstate commerce provides a further basis for concluding that its test for Sherman Act jurisdiction has been rejected by the Supreme Court.
. The dissent suggests that our opinion in Rasmussen failed to define the term "substantial effect on interstate commerce" and suggests that en banc proceedings are necessary to do this. Our opinion in Rasmussen, however, comprehensively and correctly discusses this standard, see 472 F.2d at 521 -24, 526-28, and the intervening Supreme Court decisions discussed in the text reinforce our view that the standard articulated there is correct.
Even if, as the dissent suggests, the opinions in Sun Valley and Rasmussen can be viewed as establishing conflicting tests to determine whether out-of-state purchases provide a sufficient basis for Sherman Act jurisdiction, the Supreme Court clearly embraced the Rasmussen approach in the intervening case of Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 744, 96 S.Ct. 1848, 1852, 48 L.Ed.2d 338 (1976).