Opinion ID: 501682
Heading Depth: 1
Heading Rank: 4

Heading: antitrust immunity under the ica

Text: 46 Defendants argue that they are immune from antitrust liability for their ratemaking activities because they are parties to the ICC-approved 1950 Eastern Railroad Agreement. The Reed-Bulwinkle Act, which was enacted in 1948 14 as an amendment to the Interstate Commerce Act, gives the parties to an ICC-approved ratemaking agreement immunity from the antitrust laws: 47 If the Commission approves the agreement, it may be made and carried out under its terms and under the conditions required by the Commission, and the Sherman Act (15 U.S.C. 1, et seq.), the Clayton Act (15 U.S.C. 12, et seq.), the Federal Trade Commission Act (15 U.S.C. 41, et seq.), sections 73 and 74 of the Wilson Tariff Act (15 U.S.C. 8 and 9), and the Act of June 19, 1936, as amended (15 U.S.C. 13, 13a, 13b, 21a) do not apply to parties and other persons with respect to making or carrying out the agreement. 48 49 U.S.C. Sec. 10706(a)(2)(A). 49 The district court held that the immunity in this provision does not cover a conspiracy to eliminate a competitor. Pinney Dock, 600 F.Supp. at 878. On appeal the defendants attack the district court's reasoning, while the plaintiffs endorse it and ask this court to uphold it. 50 The district court held that the language of Reed-Bulwinkle excludes anti-competitive conspiracies from the grant of immunity. The court found support in the legislative history for this reading of the statute. First the court considered the meaning of the statutory language: 51 [T]he issue confronting this court is whether the ICC's approval of the defendants' [ratemaking] agreement operates as either an express or implied approval of a later agreement to eliminate a competitor and monopolize a market. 52 600 F.Supp. at 866-67. 53 This definition of the issue is correct insofar as it refers to the statutory provision that the parties to a rate agreement are exempt from the antitrust laws with respect to making the agreement. This definition protects the defendants from liability for their conduct in making the 1950 Eastern Railroads agreements, however, it does not necessarily protect them from liability for any other agreement, including the alleged anticompetitive conspiracy. 54 But Reed-Bulwinkle also exempts the parties to a rate agreement from antitrust liability with respect to ... carrying out the agreement. Thus, if the parties to a rate agreement conform with the agreement when setting rates, they are exempt from antitrust liability. 55 So long as defendants stay within the framework of the rate agreement and conform their rates to those approved by the Commission, it cannot make a difference that their underlying intent may be anti-competitive. The difficulty with the district court's conclusion is that while it takes into account the exemption for making a rate agreement, it is irreconcilable with the exemption for carrying out a rate agreement: 56 [N]othing in the present record indicates that the ICC ever approved or even was aware of defendants' alleged predatory conspiracy to boycott and eliminate plaintiff as a competitor. The 1950 Eastern Railroads Agreement, which merely establishes the procedures for discussing rate matters and reaching rate agreements, cannot be read as impliedly or expressly approving such a predatory conspiracy. 57 600 F.Supp. at 867. Assuming that this reasoning is adequate as far as it goes, it still ignores the reality that the Agreement was only the first, not the last word, in the Acts of the defendants which it contemplated. It was the establishing of rates which was the purpose of the Agreement, and it is the rates and the incorporated provisions concerning their application which lie at the heart of plaintiff's complaint. It is difficult if not impossible to contemplate how the railroads could establish rates under the Agreement without communication with one another and even more difficult to hypothesize how such communication, in an area which is undeniably anti-competitive even in its effect, could not always be construed as capable of anti-competitive motivation. 58 Therefore, the challenged activities must be measured against the fact that concerted activity was contemplated by the Commission in its original recognition of the 1950 Agreement. The real issue is whether in such circumstances the task is one of determining if the defendants' conduct was within the framework of permissible activity condoned by the Commission's approval of the Agreement. It is asserted that much of the evidence in this case will concern private communications among the alleged conspirators and allegations of the withholding of certain exchanges from the plaintiffs. Such contentions, however, seem to us to be inextricably intertwined with the question of whether the 1950 Agreement itself was violated, a question which should be addressed, at least first, to the wisdom and expertise of the ICC. 59 The district court also held that the legislative history of Reed-Bulwinkle shows that Congress intended to exclude anticompetitive conspiracies from the antitrust exemption. The court inferred this from legislative history indicating that Reed-Bulwinkle left intact the Supreme Court's decision in Georgia v. Pennsylvania Railroad Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 (1945). 600 F.Supp. at 871, 873-74. We are unable to agree. 60 In Georgia, the State of Georgia sued several northern and southern railroads under the antitrust laws. Georgia alleged that the railroads conspired to fix rates in a manner that prevented her shippers and sellers from gaining access to national markets. Georgia also alleged that the northern railroads forced the southern railroads to take part in the conspiracy. The rates were approved by the ICC. However, the defendants acted through rate bureaus that were not approved by the ICC; at the time the law did not provide for ICC approval of rate bureaus. Georgia alleged that the setting of rates through rate bureaus violated the antitrust laws. The complaint asked for damages and an injunction to end the conspiracy. 324 U.S. at 443-44, 455, 65 S.Ct. at 719-20, 725. 61 The Court held that Keogh barred the claim for damages because the rates were approved by the ICC. 324 U.S. at 453, 65 S.Ct. at 724. But because Keogh only addresses damage claims, the Court allowed the injunctive claim to proceed. Id. In this regard the Court made a statement that the plaintiffs in the present case rely on to argue that there is no immunity for a anticompetitive conspiracy: 62 [W]e find no warrant in the Interstate Commerce Act and the Sherman Act for saying that the authority to fix joint through rates clothes with legality a conspiracy to discriminate against a State or a region, to use coercion in the fixing of rates, or to put in the hands of a combination of carriers a veto power over rates proposed by a single carrier. 63 Id. at 458, 65 S.Ct. at 726. 64 The legislative history that led the district court to conclude that Reed-Bulwinkle left Georgia intact included several statements to that effect by the law's sponsors. For example, after the law passed Representative Bulwinkle said: 65 The charge made against the railroads in the Georgia case is that they combined and conspired to fix rates by coercion and to discriminate against Georgia. A combination or conspiracy of that kind would not be protected or immunized [under the new law]. 66 600 F.Supp. at 871 (quoting 94 Cong.Rec.App. 4033-34 (1948)). The district court also cited the final House and Senate Reports: 67 The bill leaves the antitrust laws to apply with full force and effect to carriers, so far as they are now applicable, except as to such agreements or arrangements between them as may have been submitted to the Interstate Commerce Commission and approved by that body upon a finding that, by reason of furtherance of the national transportation policy as declared in the Interstate Commerce Act, relief from the antitrust laws should be granted. 68 600 F.Supp. at 871 (quoting H.R.Rep. No. 1100, 80th Cong., 2d Sess., reprinted in 1948 U.S.Code Cong. & Admin.News 1844, 1848 (1948)) (emphasis added). 69 We do not read the statement from the House and Senate Reports that The bill leaves the antitrust laws to apply with full force and effect as preserving the Georgia rule that injunctive relief is available against anticompetitive conspiracies. This statement was qualified, as emphasized above, by a statement that the antitrust laws will not apply to agreements that have been approved by the ICC. Thus, if the Georgia case had arisen after the enactment of Reed-Bulwinkle, and if the rate agreement had been approved by the ICC, the Supreme Court would have dismissed the injunctive claim. 70 Our view of the legislative history finds support in two Supreme Court cases. In Pan American World Airways v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963), the Court stated that the result in Georgia might today be different as a result of the Act of June 17, 1948, 62 Stat. 472, which gives the Interstate Commerce Commission authority to approve combinations of the character involved in that case and give them immunity from the antitrust laws. Id. at 306 n. 11, 83 S.Ct. at 482 n. 11. Similarly, in Square D the Court stated: 71 The legislative history of Reed-Bulwinkle explains that it was enacted, at least in part, in response to this Court's decision in Georgia.... In that case, after restating the holding in Keogh, the Court held that, although Georgia could not maintain a suit under the antitrust laws to obtain damages, it could obtain injunctive relief against the collective ratemaking procedures employed by the railroads. The Reed-Bulwinkle Act thus created an absolute immunity from the antitrust laws for approved collective ratemaking activities. 72 106 S.Ct. at 1927-28 (footnotes omitted). 73 In light of plaintiffs' waiver of claims that defendants failed to comply with the rate agreement, there is no need to remand the compliance issue to the district court. Indeed, if such claims were to go forward, the question would arise whether they should be referred to the ICC. Such a referral is what plaintiffs wanted to avoid by waiving claims of noncompliance with the rate agreement. In sum, the effect of Reed-Bulwinkle together with the waiver is that all rate-related claims should be dismissed. 15 V. ANTITRUST STANDING 74 Defendants argue that Pinney does not have standing to bring claims concerning the assessment of handling charges on self-unloaders, the refusal to let self-unloaders operate at docks owned by the railroads, and the refusal to sell or lease dock space to Litton. Defendants also argue that Litton lacks standing to recover for the refusal to grant Pinney a competitive rail rate, the assessment of handling charges on self-unloaders, and the monopolization of land transportation. 75 In the district court, defendants challenged Pinney's standing on certain claims, including apparently the ones on which defendants argue lack of standing now. But defendants did not challenge Litton's standing below. Plaintiffs argue that because of this the court should not address the arguments about Litton's standing. 76 It is the general rule ... that a federal appellate court does not consider an issue not passed upon below. Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 (1976). 16 This rule is not jurisdictional; the Supreme Court has referred to it as a practice and a rule of procedure. Hormel v. Helvering, 312 U.S. 552, 557, 61 S.Ct. 719, 721, 85 L.Ed. 1037 (1941). Deviations are permitted in exceptional cases or particular circumstances, id., or when the rule would produce a plain miscarriage of justice. Id. at 558, 61 S.Ct. at 722. The Supreme Court has declined to list comprehensively the circumstances that should prompt an appellate court to reach an issue not raised below. See Singleton v. Wulff, 428 U.S. at 121, 96 S.Ct. at 2877. Furthermore, the Court has stated that this matter is left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases. Id. We have carefully considered the case law of our circuit and elsewhere involving the exercise of this limited area of discretion and conclude that to the extent the issue is presented with sufficient clarity and completeness and its resolution will materially advance the progress of this already protracted litigation, we should address it. Alexander v. Aero Lodge No. 735, 565 F.2d 1364, 1370-71 (6th Cir.1977). We realize that the importance of our discussion of this issue has been largely subsumed by our rulings on the Keogh and Reed-Bulwinkle issues.
77 In Associated General Contractors of Cal., Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) (hereinafter AGC ), the Supreme Court took a fresh look at antitrust standing. See Southaven Land Co., Inc. v. Malone & Hyde, Inc., 715 F.2d 1079, 1085 (6th Cir.1983) (AGC was an obvious attempt to implement uniformity among the circuits). AGC did not repudiate the Supreme Court's previous antitrust standing cases, but rather tried to synthesize them. Our court has summarized the AGC factors: 78 (1) the causal connection between the antitrust violation and the harm to the plaintiff and whether that harm was intended to be caused; 79 (2) the nature of the plaintiff's alleged injury including the status of the plaintiff as consumer or competitor in the relevant market; 80 (3) the directness or indirectness of the injury, and the related inquiry of whether the damages are speculative; 81 (4) the potential for duplicative recovery or complex apportionment of damages; and 82 (5) the existence of more direct victims of the alleged antitrust violation. 83 Province v. Cleveland Press Publishing Co., 787 F.2d 1047, 1050-51 (6th Cir.1986) (quoting Southaven Land Co., 715 F.2d at 1085). Southaven said this list of factors is not exhaustive. See Southaven Land Co., 715 F.2d at 1085 n. 6. This reading of AGC seems correct. See 459 U.S. at 538, 103 S.Ct. at 908. 84 AGC's attempt to synthesize precedents reflected the Court's view that the antitrust standing doctrine is rooted in the common law. The Court argued that when Congress enacted the first antitrust laws in 1890, it assumed they would be subject to constraints comparable to well-accepted common-law rules. Id. at 533, 103 S.Ct. at 906. These include foreseeability and proximate cause, directness of injury, certainty of damages, and privity of contract. Id. at 532-33, 103 S.Ct. at 905-06. Like commonlaw adjudication, antitrust standing analysis must be done case-by-case: 85 There is a similarity between the struggle of common-law judges to articulate a precise definition of the concept of proximate cause, and the struggle of federal judges to articulate a precise test to determine whether a party injured by an antitrust violation may recover treble damages. It is common ground that the judicial remedy cannot encompass every conceivable harm that can be traced to alleged wrongdoing. In both situations the infinite variety of claims that may arise make [sic] it virtually impossible to announce a black-letter rule that will dictate the result in every case. 86 Id. at 535-36, 103 S.Ct. at 907-08. Therefore, while the AGC checklist is the starting point of antitrust standing analysis, a consideration of earlier cases is relevant to the interpretation of the AGC factors.
87 (1) The refusal to grant Pinney a commodity line-haul rate and the imposition of handling charges on self-unloaders 88 The steel companies, who in the course of shipping iron ore paid the rail and handling charges, were the immediate victims of the defendants' refusal to grant Pinney a commodity line-haul rate and imposition of handling charges on self-unloaders at defendants' docks. Defendants argue that plaintiffs' damages from the handling charges are too indirect. The same argument can be made about Litton's damages from the rail rate. We must apply the five AGC factors to determine whether defendants' contention has merit. 89 The first AGC factor focuses both on the directness of the injury and the intention of the defendant. The leading case on directness of injury is Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), where the Supreme Court held that an indirect purchaser cannot sue a manufacturer for overcharges imposed on a middleman and passed on to the indirect purchaser. 90 In Illinois Brick the State of Illinois alleged that the defendant, a manufacturer of concrete block, engaged in a price-fixing conspiracy in violation of the antitrust laws. The defendant sold block to masonry contractors, who used the block in masonry structures that they sold to general contractors. The general contractors incorporated the masonry structures into larger structures that the state bought. The state sued the manufacturer for the amount of the overcharge that passed from the masonry contractors through the general contractors and then on to the state. 91 The Court held that the state did not have standing to sue the manufacturer for antitrust damages. The primary reason for this holding was that allowing indirect purchasers to sue would transform treble-damages actions into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed part of the overcharge--from direct purchasers to middlemen to ultimate consumers. 431 U.S. at 737, 97 S.Ct. at 2070. See id. at 741-45, 97 S.Ct. at 2072-74. Apportioning damages along the chain of distribution would weigh[ ] down treble-damages actions with ... 'massive evidence and complicated theories.'  Id. at 741, 97 S.Ct. at 2072 (quoting Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 493, 88 S.Ct. 2224, 2231, 20 L.Ed.2d 1231 (1968)). 92 The Court also refused to make an exception for businesses in which the direct purchaser typically passes on the entire cost of a certain component, for example an item that is resold without alteration. The Court reasoned that proving that this is the practice would also entail massive evidence and complicated theories. Illinois Brick, 431 U.S. at 745, 97 S.Ct. at 2074 (quoting Hanover Shoe ). 93 The other reason for the Court's allowing only direct purchasers to recover was that such a rule would best serve antitrust enforcement. Id. at 745-47, 97 S.Ct. at 2074-75. Because the injury to direct purchasers is usually greater than the injury to indirect purchasers, direct purchasers have a greater stake in the outcome of litigation and are more likely to sue. Id. at 747, 97 S.Ct. at 2075. Direct purchasers will have even more incentive to sue if they are allowed to recover the full amount of the overcharge. Thus, the Court elevat[ed] direct purchasers to a preferred position as private attorneys general.... Id. at 746, 97 S.Ct. at 2075. 94 While directness of injury favors the defendants, the other consideration in the first AGC factor, intent, tends to favor the plaintiffs. They allege that the object of defendants' ratemaking decisions has been to drive plaintiffs out of business. The Court stated that there no doubt are cases in which such an allegation [of defendants' intent] would adequately support a plaintiff's claim. AGC, 459 U.S. at 537 n. 35, 103 S.Ct. at 908 n. 35. The Court also cited an article for the proposition that the specific intent of [a] defendant to cause injury to a particular class of persons should 'ordinarily be dispositive' in creating standing to sue. Id. (citing Handler, The Shift from Substantive to Procedural Innovations in Antitrust Suits, 71 Colum.L.Rev. 1, 30 (1971)). The Court further cited an article that suggest[ed] that standing in a group boycott situation should be based on the purpose of the boycott. 459 U.S. at 537 n. 35, 103 S.Ct. at 908 n. 35 (citing Lytle & Purdue, Antitrust Target Area Under Section 4 of the Clayton Act: Determination of Standing in Light of the Alleged Antitrust Violation, 25 Am.U.L.Rev. 795, 814-16 (1976)). However, the Court stated that an allegation of improper motive ... is not a panacea that will enable any complaint to withstand a motion to dismiss. AGC, 459 U.S. at 537, 103 S.Ct. at 908. Thus, intent must be balanced with the rest of the AGC factors. 95 The second AGC factor relates to the status of the plaintiff as consumer or competitor. As Pinney competes with defendants in the provision of dock services, and Litton also tried to enter that business, this factor also favors the plaintiffs. 96 The third AGC factor, the degree to which the damages involved are speculative, favors the defendants. To assess the effects of a hypothetical change in line-haul rates or handling charges, the district court would need to undertake the difficult and uncertain task of ascertaining demand elasticities, the input of the challenged charge and other costs in the prices charged by the plaintiff and its competitors, and the role of non-profit considerations in pricing decisions. See Illinois Brick, 431 U.S. at 742-43, 97 S.Ct. at 2072-73. Further, for Pinney and Litton to prove the extent of their losses from the unavailability of the commodity rail rate and from the imposition of handling charges, they would have to produce evidence on the following questions: What non-price factors (such as relationships with railroads, docks, and water transport companies) influenced the steel mills' purchase of transport for iron ore? Assuming plaintiffs can prove how much more demand there would have been for shipment by self-unloader, how much of the increase could Pinney and Litton have absorbed? Assuming that Pinney and Litton could have absorbed all the extra demand for shipping iron ore by self-unloader, would competitors have taken business away from them? If there were no competitors during the time in question, would new competitors have appeared to take advantage of the increased opportunities? Under Illinois Brick and AGC courts cannot be saddled with the time-consuming and speculative task of sifting through massive evidence to decide such questions. 97 AGC 's fourth factor, the potential for complex apportionment of damages between plaintiffs, also favors defendants. Pinney and Litton could themselves become adversaries: Pinney could argue that lower water transport charges would have caused increased demand for dock services, which would have led to higher charges for dock services; Litton could argue that cheaper dock services would have caused greater demand for shipment by self-unloaders, which in turn would have led to higher prices for Litton's services. 98 AGC 's fifth and final factor is the existence of more direct victims. Plaintiffs argue that the direct purchasers here, the steel mills, cannot sue because of Keogh. Thus, if Pinney and Litton cannot sue there will be no private attorney general to enforce the antitrust laws in this case. 17 While the steel mills cannot sue for antitrust damages, the mills do, however, have a role that takes antitrust policy into account. As Keogh mentions, the shippers can challenge rates under the ICA. In adjudicating such a challenge, one factor that the ICC will consider is whether the benefits to transportation policy of uniform rates, which are anticompetitive by nature, outweigh the procompetitive policies of the antitrust laws. Thus, it appears that this factor favors the defendants. 99 On balance, the AGC factors clearly favor the defendants. It is true that plaintiffs are defendants' competitors and that these claims involve allegations of intentional harm. However, it is more significant that plaintiffs are not the direct victims of the defendants' acts. Further, it would be an extremely complex, if not impossible task for the district court to cope with the problems of computation and apportionment of damages. Given these factors, we conclude that we must dismiss the handling charge claim as to both defendants and the rate claim as to Litton. 100 (2) The refusal to handle self-unloaders at railroad docks or to sell or lease docks to Litton 101 Defendants argue that Pinney cannot claim damages for the refusal to handle self-unloaders at railroad docks, because this would have sent the self-unloaders to Pinney. This argument finds support in a recent decision, Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), where the Supreme Court stated that a conspiracy to charge higher than competitive prices is an antitrust violation but actually benefit[s]  the conspirators' competitors. Id. at 583, 106 S.Ct. at 1354 (emphasis in original). 102 As for the refusal to sell or lease docks to Litton, defendants apparently overlooked the fact that this claim is not in Pinney's complaint. 103 (3) The monopolization of land transportation of iron ore 104 The district court dismissed Pinney's claim based on the monopolization of land transport, and defendants argue that Litton's claim is even more remote than Pinney's. Plaintiffs do not contest this argument. 105 Thus, for the reasons enumerated above, we reverse the holding of the district court and find plaintiffs Pinney and Litton lack standing to assert the claims addressed above.