Opinion ID: 414202
Heading Depth: 2
Heading Rank: 1

Heading: Exclusionary Conspiracy

Text: 61 Philips asserts that GBS and Shasta joined co-conspirators Paradata (a trade organization of Philips distributors) and its lawyer, and Xerox Corporation, its subsidiary Diablo Systems, and their officers, to eliminate Philips from the domestic market. Our review of the record reveals no significant probative evidence to support Philips' charge of conspiracy. 62 Xerox and Diablo Systems are guilty only of anticipating a shift in demand toward more efficient computers. These companies did not solicit GBS to drop the Philips line or otherwise restrict its existing relationship with Philips. Nor do we find them guilty of any other conspiratorial acts that would violate section 1. The crux of the claim against Paradata and its lawyer is that they sought to prevent Philips from marketing the P330 in Northern California without using GBS, its exclusive distributor in that area. This attempt by Philips dealers to maintain their distributing network indicates a desire to keep Philips in the American market, not to drive it out. They sought to exclude other distributors, not Philips. 63 The claim against GBS and Shasta is not as easily resolved. The district court's finding that they operated as a single business entity, and thus could not conspire in violation of the antitrust laws, concerns a frequently litigated issue. A section 1 violation requires, at the outset, concerted activity. Harvey v. Fearless Farris Wholesale, Inc., 589 F.2d 451 (9th Cir.1979). This requirement precludes liability for coordinated activity among multiple corporations operated as a single entity. Thomsen v. Western Electric Co., 680 F.2d 1263, 1266 (9th Cir.), cert. denied, --- U.S. ----, 103 S.Ct. 348, 74 L.Ed.2d 387 (1982); William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1055 (9th Cir.1981), cert. denied, --- U.S. ----, 103 S.Ct. 57, 74 L.Ed.2d 61 (1982); Murray v. Toyota Motor Distributors, Inc., 664 F.2d 1377, 1378-79 (9th Cir.), cert. denied, --- U.S. ----, 102 S.Ct. 2905, 73 L.Ed.2d 1314 (1982); Las Vegas Sun, Inc. v. Summa Corp., 610 F.2d 614, 617 (9th Cir.1979), cert. denied, 447 U.S. 906, 100 S.Ct. 2988, 64 L.Ed.2d 855 (1980); Harvey, 589 F.2d at 455. The single entity test is easily satisfied when corporate policies are set by one individual or by a parent corporation. See, e.g., Las Vegas Sun, 610 F.2d at 618; Harvey, 589 F.2d at 454, 457. At the other extreme, jointly owned corporations that compete in the marketplace, hold themselves out to the public as competing organizations, and set policy independently are as capable of conspiring to restrain trade as unrelated corporations. See Murphy Tugboat Co. v. Shipowners & Merchants Towboat Co., 467 F.Supp. 841, 859 (N.D.Cal.1979), aff'd, 658 F.2d 1256 (9th Cir.1981), cert. denied, 455 U.S. 1018, 102 S.Ct. 1713, 72 L.Ed.2d 135 (1982). 64 The relationship between GBS and Shasta does not fall clearly at either of these extremes. Finch and Parise, GBS's principal officers and its sole directors, held 90% of Shasta's stock and two out of three positions on its board of directors. Shasta and GBS shared offices and personnel. Finch and Parise participated, as directors, in general policy formulation for Shasta. On the other hand, they left much of the day-to-day operation to Shasta's president, Joseph Walsh. Philips claims that Finch and Parise swore they had little awareness of Walsh's management decisions. The cited portions of the record indicate that neither was much involved with policy decisions during the period in which the alleged conspiracy was to have been formed. Walsh was apparently given general control over Shasta's sales policies. In sum, the degree of control exercised by GBS is unclear. 65 On this record, the district court should not have decided the legal status of GBS's relationship with Shasta. We have found the single entity issue unsuited for resolution as a matter of law when faced with similar factual uncertainty. See Murray, 664 F.2d at 1379; Inglis, 668 F.2d at 1055; Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919, 927 n. 5 (9th Cir.1980), cert. denied, 450 U.S. 921, 101 S.Ct. 1369, 67 L.Ed.2d 348 (1981); compare Thomsen, 680 F.2d at 1266-67. GBS has raised a genuine issue of material fact that cannot be resolved conclusively on the basis of the evidence before us. 66 We need not reverse the district court's disposal of Philips' section 1 claim, however. On so clear a record, we are free to affirm the district court on any ground supported by the evidence before us. Turf Paradise, Inc. v. Arizona Downs, 670 F.2d 813, 821 (9th Cir.), cert. denied, --- U.S. ----, 102 S.Ct. 2308, 73 L.Ed.2d 1308 (1982); United States v. County of Humboldt, 628 F.2d 549, 551 (9th Cir.1980). Even if GBS and Shasta operated independently and could be guilty of conspiring, Philips has not pointed us to any probative evidence of either specific intent or conduct to eliminate it from the small business computer market. 67 Philips claims that GBS and Shasta formulated and undertook a plan to take Philips' marketing position in the United States and eliminate Philips as a competitor in the small business competitor [sic] market. The evidence, even when interpreted most favorably to Philips, does not support this claim. Philips lost the American market; it was not taken from it. GBS, far from seeking to eliminate Philips, urged Philips early on to add the Diablo to its product line. Only after Philips declined did GBS set up its marketing arrangement with Shasta. Philips points to GBS's plan to form NUCO systems to market Diablo's Ranger computer. This plan, however, which GBS claims was never pursued, did not itself drive Philips from the American market. Although the Diablo was clearly more attractive than the old Philips computers, GBS continued to maintain the infrastructure of its Philips distributorship. There is no evidence that either GBS or Shasta ever sabotaged Philips' sales. GBS sold 67 Philips computers in 1976, the year it began marketing the Diablo, up from 49 the year before. GBS's later declining sales of Philips computers was part of a nationwide decline from 832 computers in 1976 to 250 in 1978. In this same period the total annual sales of small business computers jumped from 27,000 to 38,000. GBS's poor sales were the result of an impersonal shift in demand that Philips did not anticipate, or at least did not respond to effectively. Philips cannot retrieve its lost market share by blaming GBS, which was merely the messenger with the bad news. 68 In view of these conclusions, the district court could properly have granted summary judgment against Philips had it reached beyond the intracorporate defense. We therefore affirm the district court's disposition of Philips' section 1 claim.