Opinion ID: 410227
Heading Depth: 1
Heading Rank: 2

Heading: The Individual Antitrust Claims

Text: 32 In the first amended complaint appellants alleged a conspiracy operated to deprive Century of first-run motion pictures so that Stein would be forced to sell Century stock to some individual appellees at a depressed price. Appellants also claimed the unavailability of films caused corporate losses which in turn were passed on to appellants as guarantors of corporate loans. The trial court dismissed these individual causes of action on the ground that the Steins had no standing to sue as shareholders or creditors. The court found that the only injury alleged other than that resulting from a ripple effect was the forcing of Stein to sell an interest in Century, but that because there was no allegation that any such sale was made, the conspiracy did not have a direct effect on Stein. On motion for reconsideration, Stein attempted to amend his complaint to allege that he later sold 49 percent of Century's stock to an outside person for a depressed price of $10,000. The trial court denied the motion, stating that Stein's losses still were derivative of those sustained by the corporation. 33 Stein's standing to challenge appellees' alleged anticompetitive conduct raises a difficult issue that must be resolved by considering the factual allegations in light of the Supreme Court's two limitations on antitrust recovery, those of remoteness and duplicate recovery. We conclude that Stein has not alleged an antitrust claim upon which he may personally recover. 34 Despite the broad language of section 4 of the Clayton Act, that (a)ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws shall be permitted to sue for treble damages, 15 U.S.C. § 15 (1976), district and appellate courts have interpreted by reason of to impose a requirement of legal causation on a plaintiff's claim before granting standing to proceed. The Supreme Court has recognized that there is a point beyond which injuries are too remote to warrant wrongdoer liability, though it has declined to evaluate the application of any particular test to measure remoteness. Blue Shield of Virginia v. McCready, --- U.S. ----, ---- & n.12, 102 S.Ct. 2540, 2546-48 & n.12, 73 L.Ed.2d 149 (1982); cf. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977) (injury must be of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful). This circuit has long analyzed the remoteness of antitrust challenges under the target area test first enunciated in 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) and adopted most clearly in In re Multidistrict 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 which plaintiff must allege injury in the area of the economy in which the elimination of competition occurred, 481 F.2d at 128. See, e.g., Thomsen v. Western Electric Co., 680 F.2d 1263, 1267 (9th Cir. 1982); California State Council of Carpenters v. Associated General Contractors of California, Inc., 648 F.2d 527, 537 (9th Cir. 1980), cert. granted, 454 U.S. 1141, 102 S.Ct. 998, 71 L.Ed.2d 292 (1982); Solinger v. A & M Records, Inc., 586 F.2d 1304, 1310 (9th Cir. 1978), cert. denied, 441 U.S. 908, 99 S.Ct. 1999, 60 L.Ed.2d 377 (1979); Bosse v. Crowell, Collier & MacMillan, 565 F.2d 602, 606 (9th Cir. 1977); John Lenore & Co. v. Olympia Brewing Co., 550 F.2d 495, 499 (1977); Blankenship v. Hearst Co., 519 F.2d 418, 425-26 (9th Cir. 1975). 35 Appellant challenges a principal boycott against Century, the corporate motion picture distributor, because appellees allegedly deprived Century of the opportunity to bid for, to negotiate for, or to obtain first-run motion pictures. Although appellant himself was not in the threatened market for the distribution and licensing of first-run motion pictures, his standing under the target area test cannot be precluded at the outset. Appellant's case presents an aspect requiring careful scrutiny. Stein claims that appellees boycotted Century in order to depress the price of the shares, to force Stein to sell a one-half interest in Century, and to eliminate Stein from the business of exhibiting motion pictures. We need not decide, though, whether this additional contention brings Stein within that area of the economy endangered by a breakdown of competitive conditions in a particular industry, In re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d at 129; see McCready, --- U.S. at ----, 102 S.Ct. at 2549 (citing language). We need not, in the Supreme Court's remoteness formulation, examine the physical and economic nexus between the alleged violation and the harm to the plaintiff, and the relationship of the injury alleged with those forms of injury about which Congress was likely to have been concerned ... in providing a private remedy under § 4, McCready, --- U.S. at ----, 102 S.Ct. at 2548, because we find that granting Stein standing would violate the second statutory policy limitation on antitrust recovery, that of double recovery, see id. at ----, 102 S.Ct. at 2546. 36 The Supreme Court first expressed this policy in Hawaii v. Standard Oil Co., 405 U.S. 251, 262-64, 92 S.Ct. 885, 891-892, 31 L.Ed.2d 184 (1972), when it denied Hawaii standing to sue for injury to the state's general economy arising from anticompetitive activity, in part because it was unwilling to open the door to duplicative recoveries. The Court enforced this limitation most clearly in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). The Court there denied standing to an indirect purchaser who alleged that illegal anticompetitive overcharges had been passed on to it, because allowing such recovery would create a serious risk of multiple liability for defendants. Id. at 730-31, 97 S.Ct. at 2066-2067. See generally Handler, Changing Trends in Antitrust Doctrines: An Unprecedented Supreme Court Term-1977, 77 Colum.L.Rev. 979, 989-1004 (1977) (discussing related doctrines of standing, antitrust injury, and passed-on damages). 37 Hawaii and Illinois Brick thus focused on the risk of duplicative recovery engendered by allowing every person along a chain of distribution to claim damages arising from a single transaction that violated the antitrust laws. McCready, --- U.S. at ----, 102 S.Ct. at 2546. The prevention of possibly duplicate recoveries supports limiting the section 4 remedy. Id.; see Mid-West Paper Products Co. v. Continental Group, 596 F.2d 573, 583 (3d Cir. 1979); Calderone Enterprises Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir. 1971), cert. denied, 406 U.S. 930, 92 S.Ct. 1776, 32 L.Ed.2d 132 (1972); Ames v. American Telephone & Telegraph Co., 166 F. 820, 823 (C.C.D.Mass.1909); Berger & Bernstein, An Analytical Framework for Antitrust Standing, 86 Yale L.J. 809, 850-51 (1977). 38 Preliminarily, under this policy against multiple liability for passed on injury, the Steins have no standing as creditors or guarantors of Century, because their losses in these respects simply reflect the injury to the corporation, which forced it to default on the loans. 3 Stein's status as shareholder invokes a similar policy. 39 We have previously denied standing to injured creditors, employees, and shareholders of corporations against which anticompetitive conduct was directed. In Solinger v. A & M Records, Inc., 586 F.2d 1304 (9th Cir. 1978), cert. denied, 441 U.S. 908, 99 S.Ct. 1999, 60 L.Ed.2d 377 (1979), for example, we rejected the challenge of the president of an independent distributor of phonographic records and tape-recordings against two large manufacturers of recordings for their alleged anticompetitive territorial allocation scheme, which drove the distributor from the market. As an employee of the company, the plaintiff lacked standing because his loss of salary was not within that area of the economy the antitrust laws were designed to protect, id. at 1311. We noted that shareholders, officers, and employees of corporations are generally denied standing to sue, id. at 1311 n.8 (citing cases). See Program Engineering, Inc. v. Triangle Publications, Inc., 634 F.2d 1188 (9th Cir. 1980) (president of publisher of racing guide has no standing to challenge attempt by other publishers to monopolize market); Sherman v. British Leyland Motors, Ltd., 601 F.2d 429 (9th Cir. 1979) (president and sole shareholder of franchised automobile dealer could not maintain antitrust suit against automobile manufacturer and distributors for a distributorship reallocation scheme that resulted in the termination of the franchise, even though corporation became indebted to president on guarantees); cf. Gutierrez v. E. & J. Gallo Winery Co., Inc., 604 F.2d 645 (9th Cir. 1979) (loss of work arising from an alleged conspiracy to limit production and sale of produce is not sufficient to grant employees standing to challenge antitrust conspiracy); Contreras v. Grower Shipper Vegetable Association of Central California, 484 F.2d 1346 (9th Cir. 1973) (per curiam), cert. denied, 415 U.S. 932, 94 S.Ct. 1445, 39 L.Ed.2d 490 (1974) (same). Other circuits also generally deny stockholders and employees standing because the competitive injury is to the corporation. See, e.g., Jones v. Ford Motor Co., 599 F.2d 394 (10th Cir. 1979); Bravman v. Bassett Furniture Industries, Inc., 552 F.2d 90, 97-99 (3d Cir.), cert. denied, 434 U.S. 823, 98 S.Ct. 69, 54 L.Ed.2d 80 (1977) (discussing Third Circuit's corporate shareholder/officer standing cases); Pitchford v. PEPI, Inc., 531 F.2d 92 (3d Cir.), cert. denied, 426 U.S. 935, 96 S.Ct. 2649, 49 L.Ed.2d 387 (1976); Jeffrey v. Southwestern Bell, 518 F.2d 1129, 1131 (5th Cir. 1975); Mendenhall v. Fleming Co., 504 F.2d 879 (5th Cir. 1974); Martens v. Barrett, 245 F.2d 844 (5th Cir. 1957). See generally Sherman, Antitrust Standing: From Loeb to Malamud, 51 N.Y.U.L.Rev. 374, 378-80 (1976). 40 The prohibition against shareholder standing in the above cases is premised on the prohibition against duplicate recovery, in addition to considerations of remoteness. If the corporation is injured by an antitrust conspiracy or violation, the corporation is the proper party to sue, and injured shareholders and creditors of the corporation recover their losses from the corporation's recovery, as it is distributed or as reflected in stock prices. United Copper Securities Co. v. Amalgamated Copper Co., 244 U.S. 261, 37 S.Ct. 509, 61 L.Ed. 1119 (1917); see Scharmer v. Carrollton Manufacturing Co., 525 F.2d 95, 100 (6th Cir. 1975); Schaffer v. Universal Rundle Corp., 397 F.2d 893, 896 (5th Cir. 1968). If shareholders were permitted to recover their losses directly, there would be the possibility of a double recovery, once by the shareholder and again by the corporation. 4 41 Stein's claimed loss in depressed share prices directly reflected his share in the total depressed value of the corporation. His proper recourse would be to await the corporate suit, or to sue derivatively on behalf of the corporation to recover the corporation's losses. See Bravman v. Bassett Furniture Industries, Inc., 552 F.2d at 97; Berger & Bernstein, supra, 86 Yale L.J. at 814, 862-63. 42 The threat of double recovery exists even though Stein has alleged that the conspiracy was intended to or directed at injuring the corporation in order to drive him out of the industry as a shareholder. Regardless of whether the conspiracy was focused on Stein or Century, which might affect the policies behind the remoteness limitation embodied in our target area test, the conspiracy was carried out against the corporation, in the market for first-run motion pictures. In cases alleging that securities violations were committed against a corporation in order to depress its share prices, for example, such as to facilitate a tender offer, shareholders may only sue on behalf of the corporation for its damages. Cf., Madigan, Inc. v. Goodman, 498 F.2d 233, 239 (7th Cir. 1974). Although previous shareholder cases have not considered contentions that the boycott was intended to drive out the shareholder, that it would make no difference implicitly underlies our denial of standing in both Solinger and Program Engineering, though it is true that in those cases the corporation, not the plaintiff, was conceded to be the principal target. 43 Our recent decision in Ostrofe v. H.S. Crocker Co., 670 F.2d 1378 (9th Cir. 1982), does not support Stein's standing for the above reason. In that case we considered only the policy against remoteness, not double recovery. The injury suffered by the employee in that case was not shared by the corporation or any injured party; it entailed loss of salary. We emphasized that permitting Ostrofe to sue would have no negative consequences that might counsel denial of standing, because (t)here is no danger of duplicative recovery. The damages done to such an employee are done to him alone; the damages he sustains are not passed on, nor possibly included in the losses of others. Id. at 1385 (footnote citing Illinois Brick omitted). Unlike Ostrofe, that danger of double recovery is manifest here. 44 The antitrust conspiracy was carried out against Century, not against Stein as a shareholder such that he suffered unique injury not shared by the corporation. A shareholder might have standing, for example, if he alleged he was injured by a boycott in the market for the sale of the shares of the corporation which depressed the price of the shares artificially without injuring the corporation. Cf., Peter v. Western Newspaper Union, 200 F.2d 867, 872 (5th Cir. 1953); Kolb v. Chrysler Corp., 357 F.Supp. 504, 507 (E.D.Wisc.1973). Stein alleged inimical antitrust injury only to the corporation; his losses from depressed share values mirror the corporate injury. 5 45 We must note that Stein's initial complaint did not contain a specific prayer for relief for the loss in share value, and only alleged in a single paragraph a conspiracy against Century to force Stein to sell part of his shares. Stein's attempted clarifications were contained in an amended complaint submitted with a motion for reconsideration after the trial court had heard and granted dismissal motions. The district court did not abuse its discretion in refusing to permit such late amendment. Mende v. Dun & Bradstreet, Inc., 670 F.2d 129, 131 (9th Cir. 1982); Jordan v. County of Los Angeles, 669 F.2d 1311, 1324 (9th Cir. 1982). As in Mende and Jordan, here Stein provided no satisfactory explanation for his failure to fully develop his contentions originally, and the amended complaint was brought only to assert new theories, if anything, and was not premised upon new facts. Even construing Stein's allegations most broadly and accepting his view of the conspiracy, though, we are constrained to deny Stein standing as an individual to challenge appellees' conduct. Stein, under any of his theories, cannot show that he has suffered losses not reflective of those suffered by Century. 46 The dismissal of appellants' individual claims as creditors and shareholders, along with the dismissal of Century's assigned claim, must be AFFIRMED.