Opinion ID: 763285
Heading Depth: 2
Heading Rank: 4

Heading: Standing Defense

Text: 125 The defendants also maintain that the franchisor and subfranchisor plaintiffs lack standing to bring antitrust claims because Re/Max International and Re/Max Northeast Ohio can show no antitrust injury and are not the appropriate parties to bring these causes of action. We disagree. 126 The question of the franchisor-plaintiffs' standing may be resolved by reference to Associated General Contractors of California, Inc. v. California State Council of Carpenters (AGC ), 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), and to Southaven Land Co. v. Malone & Hyde, Inc., 715 F.2d 1079 (6th Cir.1983). 127 Although a discussion of these cases will necessarily extend this already extensive opinion, we think they provide a useful background for our conclusion concerning the sometimes abstruse standing doctrine. In AGC, a union sued an association of employers, claiming that the association coerced its members and other employers to enter into business relationships with nonunion firms. The union alleged that this coercion diverted business opportunities from unionized firms, and thereby adversely affected the union itself. 459 U.S. at 520, 103 S.Ct. 897. The Court rejected the union's claim to standing on several grounds. First, although the union alleged a causal connection between the antitrust violation and the harm the union suffered, and also that the defendants intended to cause that harm, the Court held that the injury was not the type that the Sherman Act was meant to prevent because labor-relations issues fall under a separate body of labor law specifically designed to protect and encourage the organizational and representational activities of labor unions. Id. at 540, 103 S.Ct. 897. 128 Second, the Court said, the injury to the union was speculative and indirect: the union had alleged only unspecified injuries to its business activities, and the injuries were derivative of the injuries to the unionized contractors who lost jobs to nonunion firms. Id. at 541, 103 S.Ct. 897. If either the unionized association-member firms or the other coerced employers had suffered an injury attributable to the antitrust violation, they would have a valid antitrust cause of action. However, 129 [t]he existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general. Denying the Union a remedy on the basis of its allegations in this case is not likely to leave a significant antitrust violation undetected or unremedied. 130 Id. at 542, 103 S.Ct. 897. The speculative nature of the injury was confirmed by the lack of any allegation that the share of the contracting market controlled by unions had decreased, that the number of union members had declined, or that the union's dues or initiation fees had decreased. Moreover, there was no allegation that any employer was prevented from hiring a unionized contractor, as opposed to being forced to hire certain nonunionized firms. Id. 131 Third, the difficulty in computing damages if the union were granted standing stood as a final barrier to the union's claim. If the union had standing, the trial court would potentially face the daunting task of determining to what extent business was diverted from unionized contractors; identifying the union's damages; and apportioning damages among directly injured contractors, unions, and union employees. Id. at 545, 103 S.Ct. 897. 132 In Southaven, we summarized AGC 's test for antitrust standing as consisting of five factors: 133 (1) the causal connection between the antitrust violation and harm to the plaintiff and whether that harm was intended to be caused; (2) the nature of the plaintiff's alleged injury including the status of the plaintiff as consumer or competitor in the relevant market; (3) the directness or indirectness of the injury, and the related inquiry of whether the damages are speculative; (4) the potential for duplicative recovery or complex apportionment of damages; and (5) the existence of more direct victims of the alleged antitrust violation. 134 715 F.2d at 1085. In that case, the owner-lessor of retail commercial space, plaintiff Southaven, rented space for a grocery store to a wholesale-retail food, drug, and sundries merchant, defendant Malone. Malone, in turn, rented the space to a subtenant grocery store. Id. at 1080. When the subtenant declared bankruptcy, Southaven and Malone reached an agreement regarding the vacant space which released Malone from its obligations at the site in exchange for Southaven's resumed control of the site and the equipment therein. However, when Malone discovered that Southaven was going to lease the space to a competing grocery store, Malone rescinded the agreement, allegedly in order to preserve its monopoly in area grocery stores. Id. at 1081. 135 We held that Southaven did not have antitrust standing under the five-factor test. Although Southaven had alleged a causal connection between its injury and an antitrust violation and that Malone intended the harm, Southaven was not a competing grocery store and thus was not a customer or participant in the relevant market. Id. at 1086. Therefore, its injury was an indirect by-product of the anticompetitive conduct, and not inextricably intertwined with an injury to the relevant market. Id. at 1086-87. Additionally, grocery consumers and other grocery stores would have been better plaintiffs. Moreover, Southaven had alleged no direct injury: it had not lost any income from the property, either through Malone's default or an increase in rent promised by the new tenant. Read liberally, Southaven's claim for damages rested on the premise that it could charge more to tenants in a development that included a grocery store. We held that this was too speculative. Id. at 1088. 136 Here, however, the franchisor-plaintiffs have standing to pursue their claims. First, they have provided sufficient evidence that they suffered an antitrust injury caused by the defendants' anticompetitive conduct. Through the implementation of adverse splits, the defendants prevented Re/Max agents from earning their normal commission on most transactions, which in turn prevented Re/Max's 100% Concept from functioning, which prevented Re/Max from attracting top agents, which prevented Re/Max franchises from succeeding, which prevented Re/Max from earning revenue from those franchises and agents and from opening new franchises. While this chain of causation may be long, it is direct and unbroken. 137 Second, Re/Max's injury is of the type sought to be redressed by antitrust law. As we have indicated, sufficient evidence exists to conclude that adverse commission splits are anticompetitive. The defendants admit they intended to thwart, through the implementation of adverse splits, Re/Max's attempt to recruit defendants' agents. Although the policy was aimed more directly at Re/Max franchises, the effect was to deter agents from defecting to Re/Max, thereby impeding an innovative competitor's access to the market. Unlike in AGC, here, denying the franchisors standing would result in antitrust violations going undetected or unremedied, if in fact Re/Max franchises were barred from northeast Ohio markets. 138 Third, the franchisors' damages are not speculative. Their expert has sufficiently broken down lost revenue by year and by category, comparing the 100% Concept's lack of success in northeast Ohio with the pattern of marked growth seen in comparable areas where established brokerages have competed for experienced agents by raising their compensation, rather than implementing adverse commission splits. Certainly, the precision of these calculations is subject to question; however, unlike in AGC and Southaven, here there is concrete and measurable evidence of direct damages. 139 Fourth and fifth, there is evidence that the more direct victims of the defendants' alleged conspiracy are the Re/Max franchises, and their existence complicates the calculation and apportionment of damages. Thus, we hold that the franchisors may not include in their claim for damages management fees, commissions, franchise fees, or renewal fees that were lost because of the effect of the adverse-splits policy on existing Re/Max franchises. If, upon remand, the Re/Max franchise-plaintiffs are successful in showing the defendants' liability, the franchises should be fully compensated for any lost earnings they can prove. Once these franchises are made whole, the franchisor-plaintiffs will then be due their portion.