Opinion ID: 301338
Heading Depth: 1
Heading Rank: 2

Heading: Second Circuit Decisions

Text: 48 The majority opinion contends that prior decisions in the Second Circuit support the lower court ruling here that appellant has failed to state a claim for relief under the antitrust laws and it is incumbent on this court to follow that precedent. I disagree. 49 The issue now presented is essentially different from previous determinations in this circuit. Here, the appellant, an owner-lessor of motion picture theatres under a percentage lease agreement alleges that its lessee and other individuals conspired to violate the antitrust laws causing substantial financial damage to the appellant. The cases cited that supposedly preclude recovery are the following: Productive Inventions, Inc. v. Trico Products Corp., 224 F.2d 678 (2d Cir. 1955), cert. denied, 350 U.S. 936, 76 S.Ct. 301, 100 L.Ed. 818 (1956); S. C. M. Corp. v. Radio Corporation of America, 407 F.2d 166 (2d Cir.), cert. denied; 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461, rehearing denied, 396 U.S. 869, 90 S.Ct. 38, 24 L.Ed.2d 125 (1969); Billy Baxter, Inc. v. Coca-Cola Company, 431 F.2d 183 (2d Cir. 1970), cert. denied, 401 U.S. 923, 91 S.Ct. 877, 27 L.Ed.2d 877, rehearing denied, 401 U.S. 1014, 91 S.Ct. 1250, 28 L.Ed.2d 553 (1971); Fields Productions, Inc. v. United Artists Corp., 432 F.2d 1010 (2d Cir. 1970), affirming, 318 F.Supp. 87 (S.D.N.Y.1969), cert. denied, 401 U.S. 949, 91 S.Ct. 932, 28 L.Ed. 2d 232 (1971); Lieberthal v. North Country Lanes, Inc., 221 F.Supp. 685 (S.D.N.Y.1963), aff'd on other grounds, 332 F.2d 269 (2d Cir. 1964). I will analyze each of these cases to demonstrate that they are not controlling here and that they have not considered this particular question. 50 In Productive Inventions v. Trico Products Corp., supra, the owner of a patent brought an action against its licensees-competitors, causing harm to said licensees, and, in turn, damaging plaintiff because of reduced royalties. The court concluded that the wongful acts were not directed against plaintifflicensor but against its licensees and, hence, that plaintiff lacked standing to sue. This case is unlike ours in that there defendant-licensee was an innocent party and not a participant in the antitrust violations. Moreover, the court limited that decision to the facts of the case by saying: 51 No hard and fast rule can be laid down in these situations as the line between direct and incidental damage is not always definable with clarity. All we here determine is that under the facts pleaded appellant has no right to recover treble damages. Productive Inventions v. Trico Products Corp., supra, 224 F.2d at 680. 52 Furthermore, the Productive Inventions case, in seeming to restrict the concept of treble damages, is in apparent conflict with the purpose of the statute and the Supreme Court pronouncements, besides being the subject of much criticism. See, e. g., 69 Harv.L.Rev. 575, 576 (1956); SCM Corp. v. Radio Corporation of America, 2 Cir., 407 F.2d 166, 172-173 (1969) (Judge Timbers dissenting). 53 S. C. M. Corp. v. Radio Corporation of America, supra, like Productive Inventions, involved an owner of a patent bringing an action against competitors of its licensees for antitrust violations. In S. C. M. RCA alleged a counterclaim based on allegations that S. C. M. sold Electrofax machines on the unlawful condition that purchasers would not buy or use goods of an S. C. M. competitor in violation of the Clayton Act. RCA also claimed that S. C. M. lured and induced breach of contract by the personnel of its prospective competitors and licensees, and complained of diminished royalties which resulted in injury. Judge McLean, in the court below, decided that there was no direct injury to RCA because the injuries suffered were by 63 licensees and, hence, RCA had no standing to sue. 54 Judge Moore in the Court of Appeals seems to have agreed with Judge McLean that RCA's injuries in loss of royalties and litigation expenses were not sustained by reason of the plaintiff's antitrust violations but because of plaintiff's challenges to RCA patents. 55 Judge Moore commented, however, that RCA was not foreclosed from seeking treble damages or injunctive relief if it could plead and establish by proof the causation required by the statute. As he said: 56 RCA is not foreclosed from seeking treble damages or injunctive relief if it can plead, and establish by proof, that causation required by the statute. All that the district court decided was that 'the second counterclaim does not allege facts which confer upon defendant standing to sue for plaintiffs' alleged violations of the Sherman Act and the Clayton Act.' This is all that we affirm. S. C. M. Corp. v. Radio Corporation of America, supra, 407 F. 2d at 171. 57 All the S. C. M. case held was that there was no causal connection between the violations and plaintiff's injuries and that the real injury occurred to the licensees. Furthermore, in S. C. M., Circuit Judge Timbers, then a district judge, dissented and strongly questioned the precedent in Productive Inventions. Judge Timbers concluded that where the defendant had acted to deter competition and, as a result, the plaintiff suffered substantial injury, standing to sue should be granted. 58 Billy Baxter, Inc. v. Coca-Cola Company, supra, involved basically a similar relationship. Here, the plaintiff-franchisor asserting the rights of its franchisees brought a treble damage antitrust action against defendant manufacturers of nonalcoholic carbonated beverages for alleged use of improper methods to persuade retail outlets to buy products other than those it manufactured. In Billy Baxter the franchisees were innocent third parties and mere victims of the illegal activity. In addition, none of the producers who were affected by the persuasion were customers of Baxter, Inc. It is difficult to see how this case applies to our situation. 59 In Fields Productions Inc. v. United Artists Corporation, supra, the plaintiff, a motion picture producer, alleged that defendant, in block booking plaintiff's picture, allocated a sum of money to such picture which was less than fair value of the television rights in such picture. The district court held that plaintiff did not have standing to sue and maintain a private treble damage antitrust action. The district court however, did say that it was the television stations and the other distributors who . . . [were] in the target area.' Id. 318 F.Supp. at 88. Under this rationale, Calderone's three theatres would be in an analogous situation to the television stations (an exhibitor of the motion pictures) and here would fall within the so-called target area. Therefore, Calderone, the owner of these three theatres is directly affected by the loss of revenue of these theatres, and it was reasonably foreseeable that Calderone would be so affected. Moreover, in Fields, the Court held that the damages asked for were unrelated to the alleged antitrust violations and thus held that there was no standing to sue. 60 Finally, in Lieberthal v. North Country Lanes, Inc., supra, a case not discussed by the majority opinion, the amended complaint was dismissed in the district court on account of lack of jurisdiction because bowling does not involve interstate commerce. Id. 221 F.Supp. at 688. The fact that Judge Wyatt went further and intimated that the plaintiff has no standing to sue is purely obiter dictum. The Court of Appeals seems to have affirmed the district court decision on the ground that the complaint does not establish a Sherman Anti-Trust violation based on acts occurring in interstate commerce and expressed no opinion as to the question of standing to sue. Id. 332 F.2d at 272, 273. 61 It is obvious from the examination of these Second Circuit cases that none are on point. They have denied standing to sue in situations either where licensees are innocent victims or where a causal connection has not been established between the violation and the injury. These cases have involved neither landlord-tenant relationships (except for Lieberthal) nor cases where the lessee was an active participant in the conspiracy. In addition, a number of the cases have been sharply restricted to their particular facts. 62 Admittedly, the target area test applied by the Second Circuit has been more restrictive than in other circuits. However, here, the factual circumstances present a different situation unlike the ones presented in the previous cases discussed. The target area test applied to this particular set of facts should follow the Ninth Circuit's approach conceived in Conference of Studio Unions and Karseal and expanded in Hoopes and Mulvey. The test should consider not merely at whom the violations were aimed but rather at whom the violations were reasonably foreseen to affect.