Court Opinion

ID: 9610866
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:48:10.953066+00
Date Added: 2024-06-11T18:03:05.650989
License: Public Domain

BISTLINE, Justice,
dissenting.
I.
The district court found that “Home-guard was wholly financed by Intermountain initially out of its General Fund which included retained earnings from the utility function and from which dividends to Inter-mountain stockholders were to be paid.” In other words, Intermountain was using state sanctioned, essentially guaranteed monopoly dollars to compete in an unregulated *240field.1 I cannot agree with the majority’s approval of this practice. The majority apparently believes that so long as the arena of competition is outside of the “distribution chain” of the monopolized product or service, the use of state-guaranteed monopoly dollars to compete with businesses that must borrow at current interest rates is not relevant to the question of whether there has been an attempt to monopolize. I find no authority for such a position, nor does the majority cite to any.2 In fact, it appears that:
“Notwithstanding the many cases that have treated the subject of antitrust practices, we have been cited to none that deal with the question of whether a utility already possessed of a legal monopoly may, in the service of that monopoly, avail itself of the peculiarities of utility rate-making to sell below cost in an underlying field of competition. No case has considered whether a subsidiary monopoly thus obtained offends the antitrust laws.” Southern Blowpipe & Roofing Co. v. Chattanooga Gas Co., 360 F.2d 79, 81 (6th Cir. 1966), cert. denied, 393 U.S. 844, 89 S.Ct. 126, 21 L.Ed.2d 114 (1968).
Although Southern Blowpipe was decided in 1966, the same paucity of case law on this precise issue persists today.
The majority states that the “leverage” given IGCP by its use of monopoly dollars “is not uniquely held by monopolists,” and concludes that such leverage “does not necessarily present a greater danger than would the use of the same financial power by a non-monopolist.” The majority here confuses the issue by assuming that the danger is posed only by the a mount of money used as leverage. The problem, however, stems not only from the amount of money, but also from its source. If regulated utilities, which have a virtually guaranteed income, are allowed to use ratepayer dollars3 to directly participate in secondary markets, then the “leverage” enjoyed by the utilities arises out of both the amount of money they are able to invest and the captive market which supplies those funds. Unlike natural monopolies or financiers with no monopoly but a great deal of capital, regulated utilities are not vulnerable to competition from other distributors. Consequently, these utilities’ funds are not as susceptible to market conditions. Furthermore, and more importantly, losses sustained by direct participation in secondary markets will, directly or indirectly, be borne by ratepayers, including those ratepayers with whose businesses the utility is competing in the secondary market.
The fact that a utility is not allowed to include non-utility costs in the costs used to calculate its allowable rate of return does not mean that rates will not ultimately be affected by utility speculation in secondary markets. A utility certainly has discretion as to how it allocates retained earnings, *241including the discretion to use part of those earnings to acquire new plant or provide increased service. Use of earnings for such purposes would, of course, defray the high cost of borrowing money for plant and services. The foregone opportunity costs of speculating in secondary markets could, therefore, be quite high. The fact that such costs are not considered for regulatory purposes does not mean that they should not be taken into account in determining whether utilities may compete in secondary markets without violating I.C. § 48-102. Furthermore, now that this Court has approved of utilities competing in secondary markets, we are faced with the spectre of utilities borrowing to finance their competitive efforts, and thus assuming the risks, including the risk of overextension or bankruptcy, which attend deficit financing. The fact that Intermountain limited its spending to retained earnings in this case should not blind us to the consequences of today’s decision. It is not the principal of the thing, it’s the principle of the thing.
As one commentator explains, “[4] Griffith W two-market situation exists when the defendant has monopoly power in one of the markets or on one level of the distribution chain. A violation of section 2 [attempt to monopolize] occurs when this monopoly power is misused in a second market, usually to gain a competitive advantage through the leverage resulting from its dominance in the primary monopoly market.” Hawk, Attempts to Monopolize— Specific Intent as Antitrust’s Ghost in the Machine, 58 Cornell L.Rev. 1121, 1156 (1973).
Although I would hold as a matter of law that regulated utilities may not use ratepayer dollars to directly compete in secondary markets, I will assume for the sake of argument that such competition is permissible so long as no attempt at monopoly is made in the secondary market. The monopoly’s preferred position in the primary market then affects only the quantum of proof required to show an attempt.
As the majority notes at one point in its opinion, a predatory pricing act such as selling below cost may form the basis for an inference of specific intent in an attempt to monopolize. The trial court specifically found that HomeGuard (IGCP) was selling below cost, yet the majority refuses to accept this finding, stating that evidence of the plaintiffs’ costs is insufficient. According to the majority, evidence of the defendants’ costs is the only method of proving that a defendant sold below cost. It is news to me, and may surprise some members of the bench and bar, that trial courts may not rely on circumstantial evidence to find a particular fact — which is clearly what the court did in this case in regard to the question of whether the defendant was selling below cost. The cost of materials and labor to the defendant may have been less than the cost of materials and labor to the plaintiffs, but once the plaintiffs put on their case this was a matter of proof for the defendant. In the absence of such proof, the trial court was free to conclude that defendant’s costs would roughly approximate the costs of plaintiffs for the same items. It may or may not surprise the bench and bar to find the Court drawing different inferences from the evidence presented than did the trial court, despite the occasionally invoked rule concerning deference to the findings of trial courts on factual matters. See Dalton v. South Fork of Coeur d’Alene River Sewer District, 101 Idaho 833, 623 P.2d 141 (1980); Javernick v. Smith, 101 Idaho 104, 609 P.2d 171 (1980); Higginson v. Westergard, 100 Idaho 687, 604 P.2d 51 (1979); Buckalew v. City of Grangeville, 100 Idaho 460, 600 P.2d 136 (1979); Roemer v. Green Pastures Farms, Inc., 97 Idaho 591, 548 P.2d 857 (1976); Prescott v. Prescott, 97 Idaho 257, 542 P.2d 1176 (1975); Comish v. Smith, 97 Idaho 89, 540 P.2d 274 (1975); Pierson v. Sewell, 97 Idaho 38, 539 P.2d 590 (1975); Planting v. Board of County Commissioners, 95 Idaho 484, 511 P.2d 301 (1973), Hollandsworth v. Cottonwood Elevator Co., 95 Idaho 468, 511 P.2d 285 (1973); Johnson v. Joint School District No. 60, Bingham County, 95 Idaho *242317, 508 P.2d 547 (1973); Church v. Roemer, 94 Idaho 782, 498 P.2d 1255 (1972); Ivie v. Peck, 94 Idaho 625, 495 P.2d 1110 (1972); Thompson v. Fairchild, 93 Idaho 584, 468 P.2d 316 (1970); Boise Junior College District v. Mattefs Construction Co., 92 Idaho 757, 450 P.2d 604 (1969); Huppert v. Wolford, 91 Idaho 249, 420 P.2d 11 (1966). As to the significance of below-cost pricing in attempt-to-monopolize cases:
“Pricing below cost is a severely anti-competitive tactic frequently engaged in by corporations with significant resources to drive weaker competitors from the field. While the consumer may be the immediate beneficiary of the price struggle, if the tactic succeeds he will eventually be subject to the economic strength and therefore the discretionary pricing of the survivor. In the meantime, competitors will be driven out, not by the superi- or efficiency of the larger entity, but rather by the greater resources which enable it to sustain temporary losses for a longer time.
“... There is little doubt that if a monopolist, other than a natural monopolist, were to engage in below-cost pricing with the purpose of acquiring or maintaining a monopoly, Section 2 would be violated.” Ovitron Corp. v. General Motors Corp., 295 F.Supp. 373, 378 (S.D.N.Y. 1969).
Although the majority downplays the significance of the trial court’s finding on this particular predatory pricing practice because of the lack of evidence on or analysis of defendant’s inventory and dates of purchase, this does not preclude the trial court from finding as it did. The defendant’s inventory and dates of acquisition and sale might be relevant if, for example, there were a possibility that the defendant had overstocked and was selling below cost merely to reduce inventory. The short length of time in which defendant competed in this particular market, however, makes such a possibility extremely unlikely. Furthermore, it is apparent that the trial court included both product and installation costs in determining whether IGCP sold below cost. Labor is unquestionably a “cost” in the insulation business, since installation is frequently tied to the product. Thus, even accepting the majority’s unreasonably narrow definition of “product” as used in I.C. § 48-104, the fact that IGCP’s overall retail business, which included installation services, operated at a loss, at a minimum supports the court’s finding that IGCP sold below “cost.” As to whether the record will support an inference that a dangerous probability of monopoly occurred, I refer again to Professor Hawk.
“The dangerous probability doctrine has not been utilized in two-market ‘misuse of monopoly power’ situations. Neither Griffith nor Otter Tail appears to require a dangerous probability of success in the nonmonopoly market, and lower courts have not imposed a dangerous probability requirement in Griffith situations. The absence of this requirement is justified on the grounds that the defendant already enjoys a monopoly in one market and that it is the leverage power itself which is allegedly the underlying evil in this situation.
“While the lower courts often have expressed indecision on whether an attempt to monopolize or actual monopolization is the proper offense, Griffith situations have almost invariably been examined under criteria different from those applied to attempt claims generally. This special treatment is likely to continue in the wake of Otter Taill[5] The typical Griffith attempt to monopolize case involves integrated producers with a monopoly on one level of production who engage in supply squeezes, price squeezes, boycotts, and other conduct directly harmful to competitors in one of the non-monopoly markets. The courts have displayed little hesitancy in finding an unlawful attempt or a sufficient attempt allegation under the Griffith misuse of monopoly power rationale. Meaningful recourse is rarely made to the Swift for*243mulation or to other familiar approaches to attempt to monopolize claims.
“According to traditional antitrust theory, anticompetitive dangers in a Griffith situation arise primarily from the leverage existing in a monopoly market and used to gain an advantage in a second market or distribution level. As monopoly power magnifies the anticompetitive effects of restrictive business conduct or increases the potential for abuse, a holder of such power operating in a second market or on a different level of the distribution chain should be subject to a stricter standard than that applied to a nonmonopolist operating either in one or in several markets. This higher standard is embodied in the Griffith test of misuse of monopoly power.
“The restrictiveness of the Griffith test makes it preferable to any of the conventional formulations of attempt offenses, such as specific intent and dangerous probability. Moreover, treatment of Griffith situations as a separate problem serves the welcome purpose of focusing attention on the controversial concept of ‘leverage’ upon which the courts base their severe attitudes toward Griffith situations.” Hawk, supra, 58 Cornell L.Rev. at 1155-58 (footnotes omitted).
At a minimum, the degree of proof of “dangerous probability” required to show an attempt by an existing monopoly to capture a secondary market should be less than the degree required to prove attempt by a non-monopoly. The record provides such proof in this case. To my mind there will always be a dangerous probability that an existing, state-sanctioned monopoly will succeed in an attempted monopolization (providing an attempt is otherwise shown), simply by virtue of its preferred position in its primary market. See, e.g., Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561, 568 (10th Cir. 1962), cert. dismissed, 371 U.S. 801, 83 S.Ct. 13, 9 L.Ed.2d 46.
II.
The majority’s analysis of the damage award will seem inconsistent to some. The majority rejects the trial court’s findings on liability on the theory that no conspiracy could have existed between Intermountain Gas and IGPC because they were so closely linked, but then criticizes the trial court because of its “failure to distinguish the revenue of Intermountain Gas Company prior to June 1, 1977, from the revenue of IGCP after June 1, 1977. No finding was made that IGCP was merely the alter ego of Intermountain Gas .... ” In any event, it is the use of monopoly funds to compete that causes the damage in this case, and there is no contention that IGCP did not continue to use Intermountain’s monopoly funds after it was separately incorporated.
The 15% profit figure supplied by the trial court is very reasonable — even conservative for the retail business, and the majority cites no cases which hold that incorporating a reasonable percentage profit based on known and proven sales figures is improper. The majority’s citation to Household Goods Carriers’ Bureau v. Terrell, 417 F.2d 47 (5th Cir. 1969), is inapposite. No sales figure were proven there— the amount of sales was simply guesstimated. In this case the record does disclose actual sales, and Household Carriers’ does not bar application of a reasonable profit percentage to those figures in the calculation of damages. As the majority notes but then ignores, “[wjhile the fact of injury must be established with reasonable certainty, a less rigid standard of proof is imposed with respect to the amount of damage caused by an antitrust violation, because economic harm in such actions is difficult to quantify.” (Footnote omitted.)
Since Intermountain Gas qua Homeguard qua IGCP was improperly in the insulation business to begin with, using total sales as a method of calculating plaintiffs’ lost profits certainly was reasonable. Any inquiry into the share of the market which Intermountain would have captured in the absence of forbidden practices is therefore unnecessary. And since the majority’s primary objection to the class certification under I.R. C.P. 23(b)(3) is the speculative nature of individual damages, once it is seen that the *244damage award was proper the class certification must, under our narrow scope of review, also be held to be valid. I do agree, however, that it was improper to award all of the damages to the nine testifying plaintiffs. This improperly excluded other members of the class, who should have been notified and allowed to petition for their proportionate share of the damages. I would remand for modification of the judgment to so provide, a procedure which the majority apparently does not view as appropriate, despite the fact that remand for recalculation of damages is the usual remedy if an improper formula is employed by the trial court in calculating damages. See Hafer v. Horn, 95 Idaho 621, 515 P.2d 1013 (1973). At a minimum, nominal damages should be allowed. Nominal damages may be awarded despite the impossibility of calculating actual damages, so long as a breach of contract or tortious conduct is shown. See Comfort Homes, Inc. v. Peterson, 37 Colo.App. 516, 549 P.2d 1087 (1976); State v. Larson, 539 P.2d 352 (Wyo.1975). See, e.g., Bowler v. Board of Trustees, 101 Idaho 537, 617 P.2d 841 (1980).
I dissent.

. Intermountain did not seek or obtain the approval of the Public Utilities Commission prior to entering this secondary market. In fact, the P.U.C. ordered Intermountain to divest itself of a different retail business in IPUC Order No. 11507 (reversed for failure to give adequate notice in Intermountain Gas Co. v. Idaho Public Utilities Commission, 97 Idaho 113, 540 P.2d 775 (1975)).

. The majority does assert that Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), supports its conclusion that an anti-trust plaintiff must show (1) monopoly power, (2) an actual restraint of trade, and (3) restraint within the relevant distribution chain before the plaintiff may recover from a regulated utility. Otter Tail does not support these conclusions. The fact that an actual restraint was proven in Otter Tail does not mean that such is a requirement under I.C. § 48-102. The Court in Otter Tail specifically stated that “[t]he record makes abundantly clear that Otter Tail used its monopoly power in the towns in its service area to foreclose competition or gain a competitive advantage, or to destroy a competitor, all in violation of the antitrust laws.” 410 U.S. at 377, 93 S.Ct. at 1029 (emphasis added). Here, IGCP clearly gained an advantage over its competitors in the secondary market by virtue of its access to and use of Intermountain Gas’s monopoly dollars.

.The majority chooses to characterize these funds as “retained earnings” rather than ratepayer dollars. The funds originated from ratepayers, however, and the fact that they were not immediately disbursed to shareholders does not change that fact.

. United States v. Griffith, 334 U.S. 100, 68 S.Ct. 941, 92 L.Ed. 1236 (1948).

. But see majority opinion, supra.