Court Opinion

ID: 8973984
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:46:10.840318+00
Date Added: 2024-06-11T17:10:30.160257
License: Public Domain

RYAN, Circuit Judge,
dissenting.
My brother's opinion concludes that the district court correctly ruled that plaintiff does not have standing to sue for a violation of § 4(a) of the Clayton Act, 15 U.S.C.A. § 15(a) (Supp.1989), because, under Tennessee’s liquor licensing law, “[plaintiff] did not have a lawful interest in R & W.” Because I believe that the antitrust laws, as they have consistently been interpreted in the federal courts, do not require a plaintiff’s business interest to be licit for purposes of standing to sue under § 4, I must respectfully dissent.
This court has observed that a plaintiff must meet three prerequisites in order to have standing to sue under § 4:
1. Defendant has caused plaintiff injury in fact.
2. The interest plaintiff seeks to protect is arguably within the zone of interests protected by the relevant antitrust statute.
3. Plaintiff must allege an antitrust injury.
Riverview Investments, Inc. v. Ottawa Community Improvement Corp., 769 F.2d 324, 328 (6th Cir.), modified, 774 F.2d 162 (6th Cir.1985). The majority reasons, as the district court did, that plaintiff is without standing to assert a Clayton Act violation because his interest, if any, in the Red & White Liquor Store was undisclosed to the Tennessee licensing authorities and was therefore illegal under Tennessee law. Therefore, the reasoning goes, plaintiff is unable to show a “lawful” injury in fact, the first element necessary to demonstrate standing under § 4.
Plainly, Red & White Liquor Store suffered an antitrust injury which implicated interests within the zone protected by § 1 of the Sherman Act, 15 U.S.C.A. § 1 (Supp.1989), as a result of defendants’ conspiracy to control the transfer decisions of the Alcoholic Beverage Commission ("ABC”) for the competitive benefit of liquor retailers favored by defendants. Thus, the only real question presented is whether plaintiff was *321personally damaged by the injury suffered by Red & White.
Although the majority opinion declares that “appellant had an existing interest in R & W and was a competitor in the liquor sales market,” the district court did not actually make a finding on the issue of whether plaintiff was a partner in Red & White at the time the transfer application was denied. Instead, it concluded that any ownership interest plaintiff had in the liquor store was illegal because Tennessee law requires all persons with ownership interests to be listed as licensees on the liquor license. The district court implicitly held that plaintiffs putative business or property interest is defined by the extent of plaintiffs compliance with Tennessee law governing the transferability of its liquor licenses, specifically, the right to have the ABC consider a transfer application filed by him. Because the court found that the ABC would not grant such an application filed by plaintiff given that he did not hold a liquor license, the court concluded that plaintiff has no business or property interest in the ABC’s decision, and my brothers agree. This reasoning is flawed, however, because the premise is mistaken. Plaintiff had no particular interest in having a transfer application filed by him granted by the ABC; rather, his interest was in the approval of the transfer application of Red & White. If the ABC had not been influenced by defendants’ conspiracy, it presumably would have issued the transfer to Ms. Wise — in whose name the valid liquor license was issued— and ignored plaintiff since he had no license to be transferred.
By relying upon the “illegality” of plaintiff’s ownership to justify denying him standing to sue under § 4, the district court effectively recognized the defense of unclean hands.1 Thus, the legal question we should have resolved is whether a plaintiff’s illegal conduct, unrelated to the antitrust violation, will bar his recovery of treble damages from defendants who have violated the antitrust laws.
The federal courts have uniformly rejected the defense of unclean hands in antitrust actions. In Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 214, 71 S.Ct. 259, 261, 95 L.Ed. 219 (1951), the Supreme Court rejected the defense offered by defendant that the plaintiff was guilty of separate antitrust offenses not involving defendant.
If petitioner [plaintiff] and others were guilty of infractions of the antitrust laws, they could be held responsible in appropriate proceedings brought against them by the Government or by injured private persons. The alleged illegal conduct of petitioner, however, could not legalize the unlawful combination by respondents nor immunize them against liability to those they injured.
Id. More recently, several circuits have reaffirmed the unavailability of an unclean hands defense in antitrust actions by applying the rationale offered by the Supreme Court for rejecting the in pari delicto defense:
The reason why illegal conduct by an antitrust plaintiff cannot completely and automatically bar his claim is that
the purposes of the antitrust laws are best served by insuring that the private action will be an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws. The plaintiff who reaps the reward of treble damages may be no less morally reprehensible than the defendant, but the law encourages his suit to further the over*322riding public policy in favor of competition.
Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 139, 88 S.Ct. 1981, 1984, 20 L.Ed.2d 982 (1968).
First Beverages, Inc. of Las Vegas v. Royal Crown Cola Co., 612 F.2d 1164, 1174 (9th Cir.), cert. denied, 447 U.S. 924, 100 S.Ct. 3016, 65 L.Ed.2d 1116 (1980); see also Burlington Industries, Inc. v. Milliken & Co., 690 F.2d 380, 388 (4th Cir.1982), cert. denied, 461 U.S. 914, 103 S.Ct. 1893, 77 L.Ed.2d 283 (1983) (“It is well settled that unclean hands is no bar to antitrust recovery”) (citing Perma Life, 392 U.S. at 138, 88 S.Ct. at 1985); Pinto Truck Service, Inc. v. Motor Dispatch, Inc., 649 F.2d 530, 534 (7th Cir.1981) (“Proof of the plaintiff’s unrelated unlawful conduct is not a valid ... defense to an antitrust charge”) (citing Perma Life, 392 U.S. at 140, 88 S.Ct. at 1985); Lamp Liquors, Inc. v. Adolph Coors Co., 563 F.2d 425, 431 (10th Cir.1977) (“violation of a statute in the abstract is unavailable to an antitrust defendant to allow an antitrust case to be halted at the threshold”) (citing Perma Life, 392 U.S. at 140, 88 S.Ct. at 1985).
Thus, it is clear from the decided cases that the district court erred by concluding that plaintiff lacked standing to sue under § 4 of the Clayton Act because his ownership interest in the liquor store was unlawful under Tennessee law. It should be noted, however, that this does not necessarily mean that the illegality of plaintiff’s interest in the store is irrelevant to the case at bar. In First Beverages, defendant introduced evidence showing that plaintiff’s shipping arrangements had violated certain ICC regulations and that the ICC would have soon discovered the violations. This discovery would have limited the profits plaintiff would have earned even if defendant had not illegally restricted the territories in which plaintiff could sell its product. 612 F.2d at 1173-74. The First Beverages court held that although plaintiff’s violation of the ICC regulations did not provide defendant with an antitrust defense, the jury could consider the evidence “to show that some or all of the alleged lost profits would never have materialized.” Id. at 1175. The court emphasized, however, that the use of plaintiff’s illegal conduct was acceptable only because “[t]he illegality was not attacked on an abstract level; instead, [defendant] tried to show that in fact the ICC would have intervened.” Id.
In sum, plaintiff’s noncompliance with Tenn.Code § 57-3-210 does not automatically preclude his standing to bring suit under § 4 of the Clayton Act. Nevertheless, it is at least conceivable that defendants could demonstrate that his failure to comply with the Tennessee statute would have prevented him from earning some or all of the profits which he claims the defendants’ conspiracy denied him. But the mere “abstract” illegality of plaintiff’s conduct is not enough to bar him from bringing suit under § 4 to attempt to prove his entitlement to an award of damages. Defendants must show that plaintiff would have realized no share of the profits earned by the Red & White store because he was not named as a licensee on the liquor license. It is not plaintiff’s compliance or noncompliance with Tennessee’s liquor licensing laws that is relevant here; rather, what is important is the existence or nonexistence of a direct economic stake in the ABC decision to deny the transfer. Only the latter is determinative of whether plaintiff suffered an “injury in fact” to his business or property by reason of anything forbidden in the antitrust laws.
Because the district court did not make a factual finding on the issue of whether plaintiff had an ownership interest at the time of the injury to the store, and because the evidence on the question is conflicting, it is not possible to determine whether plaintiff was injured in his business and property by reason of defendants’ antitrust violations. I would therefore remand the case for a determination of whether plaintiff had an ownership interest in Red & White.

. The Ninth Circuit has observed that courts have often confused the various illegality defenses which have been asserted in antitrust actions.
Such confusion results from the failure to distinguish such defenses from the other equitable defenses. “Unclean hands" refers to the plaintiffs wrongdoing against a third party with respect to the subject matter of the suit. In pari delicto refers to the plaintiffs participation in the same wrongdoing as the defendant.
Memorex Corp. v. Int'l Business Machines Corp., 555 F.2d 1379, 1382 (9th Cir.1977). It is clear that the defense asserted in the case at bar is of the first variety: wrongdoing by the plaintiff against a third party — here the state of Tennessee.