Opinion ID: 374813
Heading Depth: 1
Heading Rank: 3

Heading: the codding complaint

Text: 37 Codding's amended complaint alleged five claims for relief against Hahn for violations of the Sherman Act and California law. Since jurisdiction of the two state law claims is pendent to the Sherman Act claims, it is only the three Sherman Act claims which concern this court. The first and third claims attempt to state causes of action under Sherman One and Two (15 U.S.C. §§ 1, 2) and the second claim attempts to state a cause of action under Sherman One. 38 The district court said that Codding's amended complaint consists of an enumeration of perfectly lawful acts embellished with conclusory and pejorative labels. C.R. 516. Aside from this, the court below offered little else as a basis for its dismissal of Codding's complaint. 39 Codding makes several general allegations which are incorporated into each of his three claims for relief. The relevant product market is claimed to consist of the planning, development and construction of commercial regional shopping centers, within the United States and the State of California and particularly in urban renewal areas. C.R. 551. Hahn is alleged to be the seventh largest developer of commercial regional shopping centers in the United States, with a 90% share of the California market of regional shopping centers. In addition to Hahn, the complaint claims that Sears (Sears, Roebuck & Co.) and Macy's (R. H. Macy & Co., Inc.) have also participated in the conspiracy against Codding. Sears is the world's largest retailer, whose wholly-owned subsidiary, Homart, is the sixth largest developer of commercial regional shopping centers. Both Sears and Macy's, another large retailer, want to establish retail outlets in Santa Rosa. As his injury, Codding alleges that his profits have been seriously impaired and his costs of doing business have increased as a result of Hahn's actions. In addition, Codding claims to have suffered an immense loss of good will and a substantial reduction in the value of his business. We now turn to the specific allegations of Codding's three claims for relief.
40 Codding argues that his first claim adequately states a cause of action for attempted monopolization under Sherman Two and for a combination in restraint of trade under Sherman One. In his complaint, Codding has listed seven examples of predatory behavior committed by Hahn which allegedly support the first claim. 17 41 Codding does not dispute Hahn's contention that some of these acts are immune from antitrust liability because (they) represent nothing more than the receipt of the benefits flowing from governmental action successfully solicited and induced by Hahn. All Codding does is to suggest that this court disregard Hahn's arguments on this point. We decline. The predatory behavior in paragraphs (b) through (e) consists of nothing more than the benefits incident to Hahn's selection as the developer of the downtown Santa Rosa project. Not only does Codding not attempt an explanation as to how these activities could support an antitrust claim, but he also fails to explain why Hahn's activities would not be protected under Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and the Noerr-Pennington doctrine. 42 This leaves three other allegations of predatory activity under the first claim: 43 (a) eliminating competition among themselves; 44 (f) selling land below cost to potential operators of retail stores; and 45 (g) refusing to consider competitors of Sears. 46 Codding does not even bother to discuss the first or the last allegation in his briefs. The elimination of competition is an essential ingredient in any antitrust action. Nevertheless, there must still be some factual basis for such a charge. Codding's complaint, even when considered in its entirety, fails to show how he has standing to base an antitrust claim on the last allegation. The only allegation of predatory activity which can support Codding's antitrust claim is (f) which deals with sales below cost. Since this also forms the basis of Codding's third claim, we will reserve our discussion on that issue until we reach the third claim.
47 Codding contends that his second claim states a cause of action under Sherman One. In reviewing this argument, it is important to keep the essential elements of the Sherman One cause of action in mind. These are: 48 (1) an agreement among two or more persons or distinct business entities; 49 (2) which is intended to harm or unreasonably restrain competition; and 50 (3) which actually causes injury to competition. 51 Kaplan v. Burroughs Corp., 611 F.2d 286, 290 (9th Cir. 1979). 52 It is alleged in the second claim that Hahn has entered into an agreement with Sears and Macy's for the purpose of developing a downtown shopping center in Santa Rosa. According to the complaint, both Sears and Macy's, either directly or through subsidiaries, are competitors of Hahn and Codding in the development and construction of downtown regional shopping centers. Under the terms of the agreement, Hahn is to have a 75% interest in the shopping center, both Sears and Macy's will each have a 10% interest, while The Robert Campbell Company will have a 5% interest. 53 Codding alleges that the purpose and effect of the agreement is to eliminate competition in the development of shopping centers in the Santa Rosa market. Sears, Macy's and Hahn, individually, had the ability to enter the market as potential competitors of Codding and one another. By agreeing among themselves, they have eliminated competition with each other. The joint venture agreement has injured Codding because it gave Sears, Macy's, and Hahn a competitive advantage in dealing with others, including Codding, which would not have occurred if the three strong competitors had independently pursued their aims. 54 From this, it appears that Codding's second claim does state a claim for relief. There is an agreement between Hahn, Macy's, and Sears, three distinct business entities. The purpose of the agreement is to restrain competition among themselves and to injure Codding and place him at a competitive disadvantage. While Codding may face a difficult task in attempting to show any antitrust injury to himself, we cannot say at this point that Codding can prove no set of facts in support of his theory. 55 Hahn argues that Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), supports the dismissal of the second claim. However, we believe that Brunswick is distinguishable from the present case, at least at this stage of the proceedings. The antitrust injury in Brunswick had no relationship to the size of either the acquiring company or its competitors. 429 U.S. at 487, 97 S.Ct. at 697. According to Codding's theory, his injury or potential injury is directly related to the size and market power of the three firms which have joined together. Codding may be able to prove an antitrust injury. See Brunswick, supra, 429 U.S. at 490, n.16, 97 S.Ct. at 694 n.16.
56 According to Codding, his third claim states a cause of action under Sections 1 and 2 of the Sherman Act. However, Codding only attempts to show how the third claim states a cause of action for attempted monopolization under Sherman Two. While we agree that the third claim states a claim for relief under Sherman Two, it cannot be construed as stating a claim under Sherman One. 57 All of the predatory acts alleged in the third claim are unilateral in nature. There is no averment of a contract, combination, or conspiracy as required by Section One. In the total absence of any allegation of agreement or concerted action, we have no trouble in concluding that Codding's third claim fails to state a claim for relief under Section One. 58 We turn now to the attempt to monopolize claim under Sherman Two. This has three essential elements. These are: 59 (1) a specific intent to control prices or destroy competition; 60 (2) predatory or anticompetitive conduct directed to accomplishing the unlawful purpose; and 61 (3) a dangerous probability of success. 62 Gough v. Rossmoor Corp., 585 F.2d 381, 390 (9th Cir. 1978), cert. denied, 440 U.S. 936, 99 S.Ct. 1280, 59 L.Ed.2d 494. The first element (specific intent) can be satisfied by inference drawn from proof of predatory or anticompetitive conduct which constitutes an unreasonable restraint of trade. Id. The third element (dangerous probability of success) can be satisfied by inference drawn from proof of specific intent. Id. 63 The third claim contains sufficient allegations of predatory conduct. Codding states that Hahn has sold land, commercial real estate buildings and developments, and services at prices below cost to certain chain department store companies. In addition, Codding's complaint states that these companies have been given concessions which have included free land, buildings, and off-site improvements, as well as discriminatory prices, discounts, allowances, rebates, commissions, and terms of payment not granted to other store owners on proportionately equal terms. Codding alleges that Hahn has financed this scheme by charging high and profitable prices in those geographic areas where he experiences little or no competition. This enables Hahn to charge unreasonably low and below cost prices in areas such as Santa Rosa where there are competitors like Codding. As this court said in Janich Bros., Inc. v. American Distilling Co., 570 F.2d 848 (9th Cir. 1977), cert. denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122:A business may choose to price at non-remunerative levels in order to exclude or drive out its rivals. Such 'predatory pricing' may be a means of obtaining or maintaining a monopoly position in violation of section 2 of the Sherman Act, 15 U.S.C. § 2. 64 (citations omitted) 65 570 F.2d at 855. Therefore, Codding's claim contains a sufficient averment of predatory conduct to satisfy the second requirement of a Section Two cause of action. Moreover, from this anticompetitive conduct, it is possible to infer the specific intent which is also necessary to support a Section Two claim. Gough, supra, 585 F.2d at 390; Hallmark Industry v. Reynolds Metal Company, 489 F.2d 8, 12 (9th Cir. 1973), cert. denied, 417 U.S. 932, 94 S.Ct. 2643, 41 L.Ed.2d 1028. Moreover, Codding has satisfied the third element, that is, dangerous probability of success. Market power can be relied upon to establish dangerous probability. Hallmark Industry, supra, 489 F.2d at 12. The allegation of a 90% share of the California market in regional shopping centers shows sufficient probability to withstand a motion to dismiss the complaint. 66 Hahn raises two arguments in response to the attempted monopolization charge. First, Hahn contends that sales of land below cost would not support a Sherman Act claim. And second, Hahn brings up a meeting competition defense. 67 Hahn cites two cases in support of his contention that sales of land below cost cannot support a Sherman Act claim. Pacific Engineering & Production Co. v. Kerr-McGee Corp., 551 F.2d 790, 796 (10th Cir. 1977), cert. denied, 434 U.S. 879, 98 S.Ct. 234, 54 L.Ed.2d 160; Hanson v. Shell Oil Co., 541 F.2d 1352, 1359 (9th Cir. 1976), cert. denied, 429 U.S. 1074, 97 S.Ct. 813, 50 L.Ed.2d 792. Neither case can be read as supporting Hahn's argument. 18 68 Likewise, Hahn does not gain any support from his meeting competition argument. This court is reviewing a successful motion to dismiss for failure to state a claim. Only the allegations of Codding's complaint are before us, and they, of course, cannot be read as establishing such a defense.
69 In summary, we hold that Codding's first claim was properly dismissed except insofar as the allegation of below cost pricing is included in his third claim. The second claim sufficiently states a cause of action under Sherman One, while the third claim adequately alleges a cause of action for attempted monopolization under Sherman Two. The second and third claims should not have been dismissed. 70 Our reversal should not be read as an approval or acceptance of Codding's theory of his case. It must be remembered that our review was limited to the allegations contained in Codding's complaint. Moreover, we were required to construe these allegations in Codding's favor. We reverse the dismissal of the second and third claims because we cannot say, at this stage of the proceedings, that Codding could prove no set of facts in support of his claims for relief. 71 REVERSED and REMANDED.