Opinion ID: 501682
Heading Depth: 2
Heading Rank: 2

Heading: Defendants' Standing Arguments

Text: 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.