Opinion ID: 328803
Heading Depth: 2
Heading Rank: 2

Heading: Price-fixing

Text: 36
37 The district court was in error in finding that plaintiff lacked capacity to sue for the period prior to May-June 1972, on the theory that plaintiff and his carriers were in a partnership and only a partnership could bring the suit. 38 The theory of limited capacity to sue for partners is based on California law as incorporated by reference in Rule 17(b) of the Federal Rules of Civil Procedure. Under California law the failure to raise at the outset of a case an objection to a plaintiff's alleged lack of capacity to sue is a waiver. Leh v. General Petroleum Corp., 165 F.Supp. 933 (S.D.Cal.1958). In this case the issue was raised after the commencement of the trial. 39 In addition, the evidence relied upon by the court to find a partnership was insufficient. For the period in question the carriers made collections from the subscribers, kept 20 percent of the gross proceeds, gave Blankenship 80 percent of the proceeds, and if a subscriber failed to pay his bill did not have to pay Blankenship the amount owed. This was apparently the evidence relied upon by the court. Under California law the sharing of gross returns does not alonease, in fact, shares few of the attributes of partnership. The carriers had no communiase, in fact, shares few of the attributes of partnership. The carriers had no community of interest with one another; they had no management role; they did not share in each other's profits or losses; they did not share in Blankenship's risks except to the limited extent of losing their profit if a subscriber failed to pay; there was no writing between Blankenship and the carriers indicating a partnership. See Constans v. Ross, 106 Cal.App.2d 381, 386, 388-89, 235 P.2d 113, 116, 117-18 (C.A.1951). In fact, a minor could not legally be a partner in California since a minor cannot delegate power, Cal.Civil Code § 33, and a delegation by a partner to the other partners is required, Cal.Corp.Code § 15009. 40
41 After mid-1972 Blankenship altered his previous 80 percent 20 percent division of gross proceeds with his carriers and began selling the newspapers outright to the carriers. Appellees argued before the district court and argue here that the only allegations in the complaint were that they attempted to fix the retail price of the paper; that there were no allegations nor evidence that Hearst fixed appellant's resale price; therefore, since retail sales would be the affected area of the economy, the claimed injury to appellant occurred entirely outside that area and standing must be denied. The district court held that Blankenship had no standing to complain about Hearst's alleged price-fixing after mid-1972. 42 Conference of Studio Unions v. Loew's, Inc., 193 F.2d 51 (9th Cir. 1951), cert. denied, 342 U.S. 919, 72 S.Ct. 367, 96 L.Ed. 687 (1952), established the rule in this circuit that a plaintiff in order to demonstrate standing under the antitrust laws must show that his business was within that area of the economy which is endangered by a breakdown of competitive conditions in a particular industry. Id. at 55. The court found the plaintiff labor unions and its members to have suffered nonrecoverable incidental damages from an alleged conspiracy to drive certain movie production companies which employed none of the union members out of business. Id. at 54. 43 The court reembraced the target area approach in In re Multi-district Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122 (9th Cir.), cert. denied, 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973). Under the two-step approach suggested, there must first be an identification of the affected area of the economy which is the target of the alleged anticompetitive conduct. Second, it must be determined whether the alleged injury was within that area. Id. at 129. Blankenship argues that Hearst sought to control the retail price of the newspaper by means directed at Blankenship and other dealers. He details alleged activities by Hearst directed at the dealers which were designed to affect their influence over the prices charged by the carriers. 44 In order to define the proper limits of the target area of the economy one determines what area could reasonably be foreseen would be affected by the alleged illegal activity. Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073, 1076 (9th Cir. 1970), cert. denied, 402 U.S. 923, 91 S.Ct. 1377, 28 L.Ed.2d 662 (1971); Karseal Corp. v. Richfield Oil Corp., 221 F.2d 358, 362 (9th Cir. 1955). It would appear in the instant case that Hearst could reasonably foresee that efforts directed at dealers to have the dealers influence their carriers as part of a scheme to control the retail price would affect the dealers. The price the dealers could charge the carriers and thus the dealers' profits were here directly affected by any change in retail price; a fixed retail price would prevent the dealers from charging the carriers a higher price. 45 In addition, the facts of this case as alleged, taking a view favorable to appellant, constitute resale price maintenance. In the fall of 1971 Robert McKinney, a division manager, made a statement to Blankenship that Hearst would not permit any subscriber to pay more than $36 a year or $3 a month for the paper. In his letter of August 29, 1972, appellee Myers demanded that Blankenship and the other dealers agree not to increase or decrease the price of the newspaper as stipulated. By the statement of 1971 appellees commanded that retail prices be fixed, and by the letter of 1972 they directed both the minimum and the maximum prices that could be charged to the subscribers. The necessary predicate of both the statement and the letter in view of the pressure by Blankenship and other dealers for higher prices was that the dealers' resale pricing discretion was to be severely circumscribed by the dealers' duty to maintain the retail price. 46 As the Court said in Albrecht v. Herald Co., 390 U.S. 145, 153, 88 S.Ct. 869, 873, 19 L.Ed.2d 998 (1968): 47 Maximum price fixing may channel distribution through a few large or specifically advantaged dealers who otherwise would be subject to significant nonprice competition. Moreover, if the actual price charged under a maximum price scheme is nearly always the fixed maximum price, which is increasingly likely as the maximum price approaches the actual cost of the dealer, the scheme tends to acquire all the attributes of an arrangement fixing minimum prices. It is our view, therefore, that the combination formed by the respondent in this case to force petitioner to maintain a specified price for the resale of the newspapers which he had purchased from respondent constituted, without more, an illegal restraint of trade under § 1 of the Sherman Act. (Footnote omitted.) 48 The fixing of maximum retail prices here had the inevitable effect of also fixing or illegally restraining the resale pricing of the wholesalers. 49 Therefore, under both approaches discussed above Blankenship's pricing activities were within the target of Hearst's retail price-fixing scheme, and the alleged injury was within that target area. A breakdown of the competitive process at the retail level achieved by Hearst's control of retail prices would endanger the dealers' price-making autonomy as well as the retailers'. See Conference of Studio Unions v. Loew's, Inc., 193 F.2d 51, 54-55 (9th Cir. 1951), cert. denied, 342 U.S. 919, 72 S.Ct. 367, 96 L.Ed. 687 (1952). Blankenship was not incidentally injured. Id. at 54. He had standing to contest Hearst's alleged price-fixing both because the foreseeable result would be to affect the dealers and because that effect constitutes resale price maintenance.