Opinion ID: 162903
Heading Depth: 4
Heading Rank: 1

Heading: Injury to Business

Text: 26 Ashley Creek is not, and has never been, in the business of mining and selling phosphate concentrate. 7 However, most courts have not required a plaintiff to actually be engaged in an ongoing business in order to have standing under the antitrust laws. It is sufficient if he has manifested an intention to enter the business and has demonstrated his preparedness to do so. Curtis, 687 F.2d at 338 (quotation omitted); see also ABA Section of Antitrust Law, Antitrust law Developments 842 & n. 38 (5th ed.2002) (collecting cases for following proposition: [M]ost courts have held that injury to an enterprise in the planning stage is actionable, provided that the plaintiff has an intent and capability to enter the market and has achieved a sufficiently advanced state of preparation for doing so.). This court has identified the following as key elements in evaluating the plaintiff's preparedness to enter a business: (1) ability to finance the business and purchase the necessary facilities and equipment; (2) consummation of contracts needed for the proposed venture; (3) affirmative actions by the plaintiff to engage in the proposed business; and (4) the background and experience of the plaintiff in the prospective business. Curtis, 687 F.2d at 338. In examining preparedness, courts have uniformly 27 drawn the line at the point where promotion transcends the level of hopes, desires, and expectations, and reaches a certain stage of maturity and concreteness, a stage where it is accompanied by certain indicia of ultimate success. Put another way, the courts have held that a potential competitor cannot achieve standing merely by demonstrating his intention to enter a field; he must also demonstrate his preparedness to do so. 28 Hecht v. Pro-Football, Inc., 570 F.2d 982, 994 (D.C.Cir.1977) (cited with approval in Curtis, 687 F.2d at 338). 29 In analyzing whether Ashley Creek could demonstrate standing under the standards set out by this court in Curtis, the district court began by assuming, without deciding, that Ashley Creek had manifested its intention to enter the phosphate concentrate market. The district court concluded, however, that Ashley Creek could not satisfy any of the key elements identified in Curtis for measuring preparedness to enter the phosphate concentrate market. In that regard, the district court noted that Ashley Creek's own estimates placed the cost of entering the phosphate concentrate market at something in excess of $67 million during the relevant time frame. The record revealed, however, that Ashley Creek had only a thousand dollars on hand and had done nothing to obtain financing. The record further revealed that Ashley Creek had completed only a limited Type 1 feasability study, and that a Type 3 or Type 4 study would be necessary to secure financing. In addition, the district court noted that Archer, Ashley Creek's sole shareholder, testified that to obtain financing Ashley Creek would need signed contracts with customers to purchase phosphate concentrate at a specified price. The record revealed, however, that Ashley Creek had never discussed price with any potential customer. The district court noted that this was most likely because Ashley Creek's very preliminary feasibility study left it unable to project its own costs of production at anything less than a margin or error of plus or minus 25%. In fact, Ashley Creek did not know whether there were any customers who would buy concentrate at the price Ashley Creek would have to charge even if the tariff was zero. Finally, the district court noted that although Archer, the only then-current officer of Ashley Creek, did have experience in buying and selling phosphate reserves, he did not have any experience in mining and selling phosphate concentrate. 30 The district court likewise rejected Ashley Creek's assertion that it was not required to demonstrate any further preparatory steps to enter the phosphate concentrate market because the actions of Chevron and SF had rendered such steps futile. Although noting that not all courts had adopted such a futility exception and that this court had yet to decide the question, the district court nevertheless concluded that Ashley Creek failed to fall within the ambit of the rule. The district court pointed out that Ashley Creek's assertion that it could not conduct relevant feasability studies because Chevron had refused to publish a tariff was not borne out by the record. In particular, at no time after Chevron published a tariff in 1989 did Ashley Creek take steps to determine whether it was economically feasible to sell phosphate under the 1989 tariff or any of the successively lower tariffs. This was true even after the State of Utah and SF entered into a settlement agreement guaranteeing that the tariff would not be raised and after SF published the fourth tariff which recovers only operating and new capital costs and no original capital costs. More importantly, the district court noted that even assuming some or all of the first three tariffs were too high, Ashley Creek was not prevented from determining: (1) what price customers were willing to pay for phosphate concentrate, assuming there was actually a market for phosphate concentrate; (2) the freight cost to ship phosphate concentrate from the railhead in Rock Springs; or (3) its own production costs with sufficient precision to know the significance of a few dollars difference in the tariff. These factors, coupled with Archer's deposition testimony that Ashley Creek would not move forward with its project, regardless of the amount of the applicable tariff, without owning a 40% share of the pipeline, led the district court to conclude that a futility exception did not apply. 31 Although its brief before this court is less than clear, Ashley Creek appears to challenge both the district court's ruling that it lacked standing because it failed to demonstrate preparedness to enter the phosphate concentrate market and the district court's ruling that its lack of preparation is not excused by some futility exception to the preparedness doctrine. Neither of Ashley Creek's arguments are convincing. 32 This court can easily dispose of Ashley Creek's assertion that it was, in fact, prepared to enter the market during the relevant time frame. 8 Ashley Creek sets out the following list of eleven steps that it took prior to the point Chevron refused to publish a tariff: (1) obtained the mineral leases; (2) hired a mining engineer to explore the leaseholds and test the ore and provide a preliminary assessment on the economic feasability of producing phosphate concentrate; (3) obtained the promise of common carriage in the pipeline; (4) obtained a contract for necessary water 9 ; (5) filed a mine plan and commenced acquisition of necessary permits; (6) commenced acquisition of an appropriate plot of land at Rock Springs 10 ; (7) preliminarily designed a mining operation 11 ; (8) performed a preliminary feasibility study; (9) commenced initial negotiations with potential customers 12 ; (10) commenced inquiries regarding financing 13 ; (11) formed a corporation to carry on the business. These very preliminary steps are insufficient to show preparedness to enter the market. 33 First, as noted by the district court, Ashley Creek had no financing commitment and was in no position to obtain financing. In particular, Ashley Creek has not cited to a single piece of record evidence indicating that it made even a preliminary inquiry regarding financing of a mining and milling operation, an operation which Ashley Creek itself estimated to cost in excess of $67 million. Even if it had made such contacts, Ashley Creek does not contest the district court's conclusion that the Type 1 feasability study conducted by Ashley Creek was completely insufficient for such purposes. Nor had Ashley Creek consummated any of the contracts necessary to operate a phosphate mine. The record citations provided by Ashley Creek on appeal show only that it engaged in negotiations regarding water supplies to the proposed mine and that it discussed sales of phosphate concentrate with Cominco without ever discussing a price. Furthermore, although Ashley Creek notes that it commenced the application process for a mining permit, that is only one of the many permits necessary to develop and operate the mine, it points to no record evidence that it ever obtained the necessary permits. In fact, the record demonstrates that when Ashley Creek filed its mining plan and applied for a mining permit in March of 1986, the application was rejected on multiple grounds. Finally, it is clear that Ashley Creek did not have the necessary experience and background in the business of selling phosphate concentrate. Ashley Creek has never had any paid employees. Archer, the sole shareholder, pays all of Ashley Creek's bills and runs the corporation out of his house. Although Archer has been in the business of acquiring and selling mineral properties and reserves, neither he nor Ashley Creek has ever developed or operated a mine. For these reasons, we agree with the district court that Ashley Creek was not prepared to enter the market at the point when Chevron refused to publish a tariff. Furthermore, as set out at length in the district court's opinion, Ashley Creek Phosphate Co. v. Chevron, 129 F.Supp.2d 1299, 1304-05 (D.Utah 2000), Ashley Creek did not take any further, meaningful preparatory steps at any point after Chevron and SF filed a series of successively lower tariffs. Accordingly, the district court correctly concluded that Ashley Creek lacked standing under Section 4 of the Clayton Act for its injury to business claim, having failed to demonstrate that it was prepared to enter the market. 34 This court also agrees with the district court that Ashley Creek's lack of preparation is not excused by a futility exception to the preparation requirement. As Ashley Creek quite correctly notes, several courts have recognized that in order to show preparation to enter a given market, an antitrust plaintiff need not take those steps which would have been rendered futile by an alleged monopolist. See, e.g., Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566, 1572 (11th Cir.1991) ([A] defendant cannot benefit by the application of the standing doctrine from the fact that it is able to prevent the plaintiff from becoming a [competitor].); Fleer Corp. v. Topps Chewing Gum, Inc., 415 F.Supp. 176, 180 (E.D.Pa.1976) (It would be inconsistent with one purpose of the Clayton Act — to protect the business interests of the victims of monopolistic practices — to require an antitrust plaintiff to pay a courtroom entrance fee in the form of an expenditure of substantial resources in a clearly futile competitive gesture.). Although this court has not yet addressed the issue, we have no doubt that there exists some type of futility exception to the preparation requirement set out in Curtis. Whatever the parameters of such an exception, however, it clearly does not excuse Ashley Creek from performing the most basic preparatory steps to determine whether: (1) there was a market for phosphate concentrate and, if so, what price customers were willing to pay; (2) the exact nature of its reserves; and (3) its own costs of production and delivery within a reasonable margin, including shipping costs from the railhead in Rock Springs, in order to determine whether it could profitably sell concentrate even if the tariff were set at zero. Without undertaking the basic preparatory steps to answer these questions, Ashley Creek has absolutely no basis for showing that its business was in any way damaged by the allegedly exclusionary tariffs or other factors. See Ashley Creek, 129 F.Supp.2d at 1305 (quoting following from 1993 statements of David Aro, Ashley Creek's consulting mining engineer: I have felt for some time that the level of legal effort far exceeds the level of technical data that is essential to verifying the reserves and costs. Without `proven' reserves and `acceptable' costs, the legal arguments could be `hypothetical and meaningless.'). 35 Ashley Creek's futility argument boils down to an assertion that a proposed market participant need take no further preparatory steps, even of the most basic and preliminary nature, after an asserted violation of the antitrust laws by the party in control of an essential facility. Such an approach would eviscerate the standing requirement, rendering it wholly dependent on the merits of the plaintiff's case. See Gas Utils. Co. of Ala., Inc. v. S. Natural Gas Co., 825 F.Supp. 1551, 1573 (N.D.Ala. 1992) (holding that plaintiff could not use defendant's denial of access to a pipeline to create an inference of antitrust injury to business or property). Allowing an antitrust plaintiff to recover merely upon a showing of a violation of the act, without a demonstration of injury-in-fact, would conflict with this court's precedent. See City of Chanute, 955 F.2d at 652 (A violation of the Act without resultant injury to the [plaintiff] is insufficient to confer standing. (quotation omitted)). Furthermore, none of the cases cited by Ashley Creek support its assertion that this court should adopt such an expansive reading of the futility doctrine. In the very cases cited by Ashley Creek, the courts applied the four-factor preparedness test and analyzed whether the plaintiff had presented adequate evidence of concrete preparedness. See, e.g., Thompson, 934 F.2d at 1572 (applying preparedness requirement and finding standing when plaintiff was already an established realtor in the market served by the defendant board of realtors and multiple listing service); Jayco Sys. v. Savin Bus. Mach. Corp., 777 F.2d 306, 314 (applying four-part test and finding standing only for injury to plaintiff's normal course of business, not to its proposed business expansion); Hecht, 570 F.2d at 994 (applying four-part test and noting that plaintiff's preparation must be at a stage where it is accompanied by certain indicia of ultimate success). 36 For these reasons, in addition to those separate reasons set out by the district court, 14 we conclude that Ashley Creek's almost complete failure to prepare to enter the phosphate concentrate market is not excused by the futility doctrine.