Opinion ID: 403683
Heading Depth: 1
Heading Rank: 3

Heading: Dismissal of the Antitrust Counterclaim

Text: 16 1. The Standard for Rule 12(b)(6) Dismissals 17 We begin our examination of the dismissal of the antitrust counterclaim by observing that the motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted. Wright & Miller, Federal Practice and Procedure: Civil § 1357 at 598 (1969). In Barber v. Motor Vessel Blue Cat, 372 F.2d 626, 627 (5th Cir. 1967), we wrote that dismissal of a claim on the basis of barebones pleadings is a precarious disposition with a high mortality rate. See also Voter Information Project, Inc. v. City of Baton Rouge, 612 F.2d 208, 210 (5th Cir. 1980); Madison v. Purdy, 410 F.2d 99, 100-01 (5th Cir. 1969); International Erectors, Inc. v. Wilhoit Steel Erectors & Rental Service, 400 F.2d 465, 471 (5th Cir. 1968). 18 Within the strong framework of policy considerations that militate against granting motions to dismiss for failure to state a claim, 9 we have developed two primary principles that guide our review of a complaint so dismissed. First, we must accept as true all well pleaded facts in the complaint, and the complaint is to be liberally construed in favor of the plaintiff. Miller v. Stanmore, 636 F.2d 986, 988 (5th Cir. 1981); Voter Information Project, Inc., supra, 612 F.2d at 210; Madison, supra, 410 F.2d at 100. Second, a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Dike v. School Board of Orange County, Florida, 650 F.2d 783, 787 (5th Cir. 1981); Miller, supra, 636 F.2d at 992; Fadjo v. Coon, 633 F.2d 1172, 1174 (5th Cir. 1981). 19 These two principles are, however, subject to the following limitations. Although we must accept as true the well-pleaded allegations of a complaint dismissed for failure to state a claim, we do not accept as true conclusionary allegations in the complaint. Associated Builders, Inc. v. Alabama Power Company, 505 F.2d 97, 100 (5th Cir. 1974). Further, a complaint that shows relief to be barred by an affirmative defense, such as the statute of limitations, may be dismissed for failure to state a cause of action. United Transportation Union v. Florida East Coast Railway Company, 586 F.2d 520, 527 (5th Cir. 1978); Mann v. Adams Realty Company, Inc., 556 F.2d 288, 293 (5th Cir. 1977); Joe E. Freund, Inc. v. Insurance Company of North America, 370 F.2d 924, 924 (5th Cir. 1967); J. M. Blythe Motor Lines Corporation v. Blalock, 310 F.2d 77, 78 (5th Cir. 1962); Herron v. Herron, 255 F.2d 589, 593 (5th Cir. 1958). 2. The Tying Counterclaim 20 The essence of Avondale's counterclaim is that it deserves antitrust damages and equitable relief because the contract involves an illegal tying arrangement whereby Kaiser conditioned its sale of the insulation spray (the tying product) on Avondale's agreement to permit Kaiser to supply the aluminum tank portion of the cargo containment system (the tied product). The alleged tie, Avondale argues, violates sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and section 3 of the Clayton Act, 15 U.S.C. § 14. The difficulty arises because of the four-year statute of limitations provided by the Clayton Act. 10 In its counterclaim, Avondale admits that the contract with Kaiser that forms the basis of the present lawsuit filed in 1979 was executed on or about May 25, 1973-a date ostensibly outside the limitations period. The counterclaim on its face appears to reveal the existence of an affirmative defense to it, which would make the granting of a Rule 12(b)(6) dismissal proper. 21 Generally, an antitrust cause of action accrues, and the four-year statute of limitations begins to run, when a defendant commits an act that injures a plaintiff's business. There are two grounds for allowing an antitrust suit to be brought more than four years after the events that initially created a cause of action. These grounds are derived from Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971) and Hanover Shoe, Inc. v. United Shoe Machinery Corp. 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968). 22 The first ground is the continuing conspiracy or continuing violation exception that permits a cause of action to accrue whenever the defendant commits an overt act in furtherance of an antitrust conspiracy or, in the absence of an antitrust conspiracy, commits an act that by its very nature is a continuing antitrust violation. See Zenith, supra, 401 U.S. at 338-40, 91 S.Ct. at 806-07; 11 Hanover Shoe, supra, 392 U.S. at 501 n. 15, 88 S.Ct. 2236 n. 15. 12 23 The second ground involves situations where the defendant's antitrust act is revived outside the limitations period, as a basis for damages, because when the act originally occurred, the plaintiff's damages were speculative or unprovable. See Zenith, supra, 401 U.S. at 339-40, 91 S.Ct. at 806-07. 13 24 In the present case, Avondale invokes two versions of the continuing violation argument, as well as the speculative damages argument. Although these exceptions are ostensibly separate, there is some relation between them. Our decision in City of El Paso v. Darbyshire Steel Company, Inc., 575 F.2d 521, 523 (5th Cir. 1978), cert. denied, 439 U.S. 1121, 99 S.Ct. 1033, 59 L.Ed.2d 82 (1979), established a relationship between the continuing violation exception in Zenith and Hanover Shoe and the speculative damage exception in Zenith. In El Paso, we made application of one version of the continuing violation exception-the continuing benefits exception (receipt of benefits under the contract is a continuing violation of the antitrust laws)-contingent on whether antitrust damages were ascertainable at the time of the original antitrust violation. Because of this relationship, it is necessary for us to consider Avondale's speculative damages argument in the context of its continuing benefits argument. 25 A. Continuing Violations: The Acceptance of Benefits and Speculative Damages 26 Avondale argues that Kaiser committed a continuing violation of the antitrust laws by accepting benefits under its subcontract with Avondale. The prime example of these benefits is, according to Avondale, Kaiser's continued receipt of contract payments. Avondale's primary support for this argument is our decision in Imperial Point Colonnades Condominium, Inc. v. Mangurian, 549 F.2d 1029 (5th Cir.), cert. denied, 434 U.S. 859, 98 S.Ct. 185, 54 L.Ed.2d 132 (1977), where unit owners in a condominium complex claimed that a sales contract requirement that the condominium purchasers also accept assignment of a portion of a ninety-nine year recreational facility lease as a condition of purchasing a unit constituted an illegal tying arrangement. The recreational lease provided that the rent due under it could be adjusted, at the election of the defendants, 14 to maintain the real purchasing power of the rent. In 1969, the plaintiffs signed a sales contract with the incorporated lease provision; they brought suit in 1975 after the defendants imposed a rent increase. The plaintiffs sought damages and equitable relief, and the defendants pleaded the statute of limitations and laches. 27 We reversed the district court in Imperial Point and held that the plaintiffs' suit was not barred by the statute of limitations because every time the defendants increased the rent under the recreational lease, they accepted a benefit that was equivalent to committing an overt act in furtherance of the  'conspiracy among defendants the object of which was establishment of a continuing relationship with individual plaintiffs,'  549 F.2d at 1043 (quoting Baker v. F & F Investment, 420 F.2d 1191, 1200 (7th Cir.), cert. denied 400 U.S. 821, 91 S.Ct. 42, 27 L.Ed.2d 49 (1970)). 28 In the present case, Avondale seeks to analogize its situation to that of the condominium owners in Imperial Point, and argue that Kaiser's continued receipt of benefits under the contract constitutes a continuing violation of the antitrust laws. 29 We must reject Avondale's contentions under the limitations we placed on the continuing violation benefit exception in City of El Paso v. Darbyshire Steel Company, Inc., 575 F.2d 521 (5th Cir. 1978), cert. denied, 439 U.S. 1121, 99 S.Ct. 1033, 59 L.Ed.2d 82 (1979). 30 In El Paso, the City of El Paso, Texas, brought suit against several steel fabricators, claiming that the defendants conspired to submit a collusive bid on steel required for the construction of a city civic center. The contract between the defendants and the general contractor was executed in 1970 and El Paso sued in 1975. El Paso argued that because the defendants received benefits under the contract in the form of payments for deliveries of steel within the limitations period, the suit was not barred by 15 U.S.C. § 15b. 31 Our examination of the contract involved in El Paso revealed that 32 the rights and liabilities of the parties were finalized by the contract signed on September 4, 1970. On that date, the price, the quantity, and the delivery schedule were fixed by the terms of the contract. Any damages caused by the alleged conspiracy were provable with certainty on that date. 33 575 F.2d at 523. 34 The nature of the El Paso contract led us to two conclusions. First, we determined that the plaintiff felt  'the adverse impact of an antitrust conspiracy on a particular date,'  575 F.2d at 523 (quoting Zenith, supra, 401 U.S. at 339, 91 S.Ct. at 806 (1971)). Second, we held that the damages caused by the alleged conspiracy among the steel fabricators were provable by expert testimony concerning the value of steel in a freely competitive market. Therefore, the pre-limitations collusion amongst the steel fabricators could not be revived on the grounds that an antitrust cause of action does not accrue until damages can be reasonably established. See Poster Exchange, Inc. v. National Screen Service Corporation, 456 F.2d 662, 667 (5th Cir. 1972), cert. denied, 423 U.S. 1054, 96 S.Ct. 784, 46 L.Ed.2d 643 (1976). See also Zenith, supra, 401 U.S. at 339-40, 91 S.Ct. at 806-07. In El Paso, we distinguished Imperial Point as a case involving damages that were not ascertainable at the time of the execution of the contracts involved therein because the defendants could arbitrarily and unilaterally continue to engage in acts that amounted to overt acts in furtherance of their antitrust conspiracy. 575 F.2d at 523-24. 35 In so analyzing the El Paso case, we established the principle that the continuing benefits aspect of the antitrust statute of limitations was not applicable to those situations where antitrust damages were not speculative or unprovable. 36 The present case involves a contract similar to the one in El Paso. Kaiser agreed to supply Avondale with both the insulation spray and tank portions of the cargo containment system. The contract had fixed price, quantity, and delivery schedule terms. The rights and liabilities of both parties were established on May 25, 1973-the date on which the parties executed the subcontract. To the extent that Kaiser received benefits under the contract, such receipts were merely the abatable but unabated inertial consequences of some pre-limitations action, rather than from some injurious act actually occurring during the limitations period. Poster Exchange, Inc. v. National Screen Service Corporation, 517 F.2d 117, 128 (5th Cir. 1975), cert. denied, 425 U.S. 971, 96 S.Ct. 2166, 48 L.Ed.2d 793 (1976). We restated this proposition in Imperial Point : 37 (W)here a defendant commits an act injurious to plaintiff outside the limitations period, and damages continue to result from that act within the limitations period, no new cause of action accrues for the damages occurring within the limitations period because no act committed by the defendant within that period caused them. 38 549 F.2d at 1035 (emphasis in original). See also Barnosky Oils, Inc. v. Union Oil Company of California, 665 F.2d 74, 81-82 (6th Cir. 1981). 39 Avondale presents three arguments to attempt to show that its antitrust damages were speculative, and therefore, the continuing benefits theory applies and the contract in the present case is like the one in Imperial Point and unlike the one in El Paso. 40 First, Avondale argues that Kaiser offered one price in its bid to Avondale for the insulation spray and the tanks, and Avondale was consequently unable to tell to what degree the bid price represented the allegedly inflated price for the tied tanks. Assuming Avondale's contention about Kaiser's refusal to separate the price for the tying and tied products to be true, there was no greater difficulty in proving antitrust damages in 1973 than there is today. If Avondale sued in 1973, it could have sufficiently established the difference between the value of the tanks in a freely competitive market and the price actually paid to Kaiser by expert testimony, discovery from Kaiser, and the other bids that Avondale claims were submitted to it by Kaiser competitors. 41 The second argument that Avondale makes is considerably more complex and is related to the measure of antitrust damages in tying cases. In a tying arrangement, the ordinary measure of damages would be the difference between the price actually paid for the tied product and the price at which the product could have been obtained on the open market. Pogue v. International Industries, Inc., 524 F.2d 342, 344 (6th Cir. 1975). Further, (i)n an extraordinary case, the plaintiff might be able to establish a causal relationship between a tying arrangement and other kinds of economic injury. Id. at 345. Avondale contends that because its contract contained a changes provision that would cause a price fluctuation in the price that Avondale would ultimately have to pay for the entire cargo containment system, the price actually paid for the tied product under Pogue, supra, could not be calculated until all changes were performed. (The changes provision concerned the manner in which the parties agreed to handle any alterations of the specifications in the design of the gas containment system.) 42 The plain language of the Avondale-Kaiser contract indicates that in no event could Kaiser order or approve changes under the changes provision. Although Avondale argues that the originator of each change actually performed is a factual matter to be determined at trial, it does not dispute Kaiser's characterization of the plain language of the agreement, except to note that in some circumstances, changes would occur automatically if particular agency regulations required them. The present contract, then, is much unlike the one in Imperial Point where the defendants alone could unilaterally and arbitrarily raise the rent due under the recreational lease. We also note without further comment, that in El Paso, we implicitly rejected an argument that the presence of a changes provision in a contract renders antitrust damages unascertainable. 15 43 More important, however, is the fact that Avondale does not allege that Kaiser ever sought an inflated price for the work ordered by Avondale under the changes provision. Under the terms of the contract, the compensation due to Kaiser for any changes made was to be either agreed on by the parties, or, in the absence of agreement, a fair and reasonable price. 44 Avondale argues in its reply brief that since the district court has not interpreted the 'fair and reasonable' provisions ... there is absolutely nothing in the record to indicate that what would be a 'fair and reasonable' cost for one contractor necessarily would be a 'fair and reasonable' cost for all others. Avondale reply br. at 12. This argument is equivalent to the tenuous position that the district court could interpret such a provision as allowing Kaiser to recover compensation for changes work (that it could not order or approve) amounting to an inflated antitrust-prohibited price. Avondale's argument must be rejected. 45 Any amounts due under the changes provision do not affect the plaintiff's antitrust damages, and, therefore, the fact that the charges under the changes provision could not, by definition, be ascertained when the contract was executed is irrelevant as to whether Avondale's antitrust damages were speculative. 46 Finally, Avondale appears to argue, without support, that its contract was not final under El Paso because Avondale had to perform corrective work within the limitations period to correct unsatisfactory work by Kaiser. Avondale misunderstands our holding in El Paso. What were considered final in that case were contract rights and liabilities for the purpose of assessing antitrust damages. Under El Paso's rationale-which established finality for purposes of assessing antitrust damages on the date that the rights and liabilities of the parties with regard to those damages were fixed so as to permit calculation of antitrust damages-any subsequent breach-of-contract damages (the corrective repairs) are irrelevant to the finality of the antitrust violation. 47 B. Continuing Violations: Initiation of Suit, Enforcement of Contract Provisions, Delivery of the Tied Product, and Unsatisfactory Work 48 Avondale also argues that Kaiser engaged in a number of continuing antitrust violations apart from its receipt of benefits under the contract. These alleged actions involve: (1) Kaiser's initiation of its suit to recover sums alleged to be owed to it under the changes provision, together with damages for breach of contract; (2) Kaiser's raising of the disclaimer of design responsibility and limitation of damages provisions of the contract in its answer to Avondale's counterclaim; (3) the fact that Kaiser never delivered the allegedly tied aluminum tanks until 1979; and (4) what Avondale claims was highly unsatisfactory work under the contract, thus compelling Avondale to perform additional work within the prescriptive period to correct inadequate performance. This fourth violation was also argued by Avondale to show that its rights and liabilities under the contract were not finalized, thus precluding our analysis of this case under the principle we espoused in El Paso. See our discussion above for our treatment of Avondale's argument in that context. 49 The only specific support that Avondale offers to show that these acts constitute continuing violations concerns Kaiser's initiation of the suit. Avondale relies on Weber v. Consumers Digest, Inc., 440 F.2d 729, 731 (7th Cir. 1971), and Thomas v. Petro-Wash, Inc., 429 F.Supp. 808, 812 (M.D.N.C.1977), which held that antitrust conspirators engaged in an overt act in furtherance of the conspiracy for statute of limitations purposes when they filed suit to enforce the actual conduct that was claimed to be violative of the antitrust laws. Under a Zenith analysis, initiation of a suit in such situations would be an act that caused the plaintiff an antitrust injury. See 401 U.S. at 338-39, 91 S.Ct. at 806. In the present instance, however, Kaiser has instituted a suit to recover amounts allegedly owed to it under the changes provision of the contract and not to enforce the tie-in. If Avondale suffered antitrust damage, it was the result of a tying arrangement; initiation of a suit to recover the fair and reasonable price of changes that Kaiser could not even order or approve cannot be said to cause any of the antitrust injuries of which it complains. See Woodbridge Plastics, Inc. v. Borden, Inc., 473 F.Supp. 218, 222 (S.D.N.Y.), aff'd, 614 F.2d 1293 (2d Cir. 1979). 50 For the proposition that these four acts constitute continuing violations Avondale relies generally on Poster Exchange, supra, 517 F.2d 117 (5th Cir. 1975); Twin City Sportservice, Inc. v. Charles O. Finley & Company, Inc., 512 F.2d 1264 (9th Cir. 1975); and Baker, supra, 420 F.2d 1191 (7th Cir. 1970). Although these cases support the proposition that continuing violations of the antitrust law give rise to new causes of action for purposes of the antitrust statute of limitations, Avondale's reliance on them is misplaced because the harm that creates the new cause of action must be antitrust harm, i.e., a continuing injury to competition, not merely a continuing pecuniary injury to a plaintiff. Electroglas, Inc. v. Dynatex Corporation, 497 F.Supp. 97, 105 (N.D.Cal.1980) (emphasis in original). 51 In Poster Exchange, we held that the statute of limitations did not bar plaintiff's claim for relief based on overt acts in furtherance of an antitrust conspiracy, which acts amounted to continued exercise of monopoly power to prevent plaintiff from obtaining certain articles. See 517 F.2d at 125-26. In Twin City Sportservice, the Ninth Circuit held that the statute of limitations did not bar an antitrust challenge to an exclusive baseball stadium concession franchise even though the allegedly last damaging act (amendment of the contract) occurred outside the limitations period. Each time the parties dealt with each other exclusively because of the franchise agreement, the antitrust harm to the plaintiff recurred. See 512 F.2d at 1270. 16 Finally, in Baker, the Seventh Circuit found no statute of limitations problem where there was an antitrust conspiracy the object of which was the establishment of a continuing relationship with individual plaintiffs. 420 F.2d at 1200. 52 Assuming Avondale's allegations to be true, nevertheless, the acts that Kaiser committed can in no way be construed to represent separate antitrust violations that give rise to new causes of action under the antitrust laws. The antitrust laws were enacted for  'the protection of competition not competitors.'  Brunswick Corporation v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962)). See also Electroglas, supra, 497 F.Supp. at 105. The claimed injury to competition in the present case occurred when the alleged tie-in was formed, thus precluding Avondale from purchasing the aluminum tanks from one of Kaiser's competitors. The acts that Avondale alleges constituted continuing violations of the antitrust laws are acts that may have resulted in pecuniary injury to Avondale; they do not, however, constitute acts injurious to plaintiff as antitrust damage. 53 C. Tolling of the Statute of Limitations by Duress 54 Avondale next argues that the four year statute of limitations was tolled by Kaiser's duress and remained suspended at least until its discovery of the allegedly defective nature of the insulation spray in 1979. 17 As far as we understand Avondale's argument, the duress it complains of emanates from two separate sources. First, Avondale complains of the duress inherent in the tying arrangement: Kaiser used its position as sole supplier of (the insulation spray) ... to cause Avondale, as a result of duress and coercion, to enter into the Kaiser subcontract. Avondale br. at 32. Second, Avondale claims that Kaiser used duress to prevent Avondale from bringing suit at an earlier time. Avondale does not allege any specific threat or action undertaken by Kaiser from which it could conclude the existence of this duress. Rather, Avondale's sole support for this aspect of its duress claim is that Avondale surely could reasonably conclude that institution of such litigation would trigger refusal by Kaiser to complete performance of the ... work. Id. 55 Both aspects of Avondale's duress argument are without merit. With respect to Avondale's claim that the duress was inherent in the tie, we observe that if Avondale's argument were accepted, then the four-year statute of limitations in antitrust actions would never begin to run in tying cases. This conclusion contravenes the plain language of 15 U.S.C. § 15b, which establishes a statute of limitations for antitrust actions, including tying actions. The essence of a tying arrangement is coercion and duress: In order to obtain the desired tying product, a party is virtually forced to accept the undesired tied product. Acceptance of Avondale's argument would effectively nullify the existence of a statute of limitations in tying cases. 56 The only support offered by Avondale for its argument that the tying arrangement inherently involved duress is McAlpine v. AAMCO Transmissions, Inc., (1977) Trade Reg.Rep. (CCH) P 61,359 (E.D.Mich.1977), which held that a material issue of fact was presented when the plaintiffs alleged that they did not bring their tying claim within the four-year period because the defendant fraudulently promised to cease its imposition of the tie-in as part of an earlier settlement agreement. Although the court mentioned without comment that (p)laintiffs also argue that ... defendants utilized duress to prevent plaintiffs from commencing suit on their tying claim, there was no indication that plaintiffs had merely assumed duress inherent in the tie. From the context of the court's discussion of the defendant's alleged fraud during the limitations period, the more probable inference is that plaintiff alleged specific acts of duress. In any event, the McAlpine court was far more concerned with the alleged fraudulent promise to stop tying activities. 57 As to Avondale's claim that Kaiser's duress consisted in Avondale's reasonable conclusion that if it sued Kaiser, Kaiser would refuse to perform, we are similarly perplexed. Our confusion owes not in the least to Avondale's reliance on cases that indicate the very restricted scope of the duress defense in antitrust statute of limitations contexts. See Cooper v. Fidelity-Phila. Trust Co., 201 F.Supp. 168, 170 (E.D.Pa.1962); Philco Corporation v. Radio Corporation of America, 186 F.Supp. 155, 162 (E.D.Pa.1960). More perplexing, however, is that Philco holds specifically that anticipated duress does not establish ... a legal defense. Id. at 162. Avondale, like the plaintiff in Philco, does not allege a single act or threat ... which could be construed as coercion. Id. Rather, Avondale relies exclusively on its anticipation of Kaiser's duress. This argument fails as a matter of law. D. Laches 58 Avondale's final argument with respect to its antitrust counterclaim is that, in addition to treble damages, it sought equitable relief in the form of a permanent injunction against Kaiser to restrain it from enforcing the provisions of the subcontract, and that the district court erred in dismissing its equitable claims on the basis of laches. 59 In an antitrust case, as in other types of cases, an analogous statute of limitations does not necessarily control the application in laches in claims brought in equity. Nevertheless, if the plaintiff's claim is brought outside the analogous limitations period, the bare fact of delay creates a rebuttable presumption of prejudice to the defendant. International Telephone and Telegraph Corporation v. General Telephone & Electronics Corporation, 518 F.2d 913, 926 (9th Cir. 1975). See also Bratton v. Bethlehem Steel Corporation, 649 F.2d 658, 667 (9th Cir. 1980); Boone v. Mechanical Specialties Company, 609 F.2d 956, 958 (9th Cir. 1979); Gruca v. United States Steel Corporation, 495 F.2d 1252, 1258-59 (3d Cir. 1974). The plaintiff who delays bringing suit must show that his delay is excusable and that there is no prejudice to the defendant. Russell v. Todd, 309 U.S. 280, 287, 60 S.Ct. 527, 531, 84 L.Ed. 754 (1940). 60 In the present case, Avondale argues that its delay in bringing suit was excusable because of Kaiser's duress. In our discussion above, we rejected both aspects of Avondale's duress argument. Because the pleadings show no excusable reason for Avondale's delay, its laches argument must fail.