Case Information
*3 Management Agreement. Pursuant to the
McKEE, Circuit Judge. terms of the SPR program, Sheraton *4 negotiated large-volume discounts with profiting from providing Workers’ vendors seeking to supply Sheraton- Compensation insurance, permitting managed hotels. Sheraton then required excessive numbers of complimentary the vendors to add a surcharge to the price rooms, and breaching other unspecified billed to the individual hotels for each contractual duties.
purchase. However, the surcharge was not Hancock’s suit proceeded to trial itemized, or even disclosed, on any bills or where a jury found for Sheraton on invoices that vendors sent to individual Hancock’s RICO claim, but found for hotels. Rather, the surcharge was remitted Hancock on its Robinson-Patman Act directly to Sheraton in the form of a claim. The jury also found for Hancock on “rebate.” The Management Agreement several of its state law claims, including provided that Sheraton was entitled to be claims that Sheraton had breached the reimbursed for the costs of providing these Management Agreement with regard to services. Sheraton claimed that these purchasing services, and providing rebates reimbursed it for the centralized Workers Compensation insurance. The purchasing services it provided under the jury further found in favor in Hancock on SPR program as well as associated its breach of fiduciary duty claim. The overhead costs. jury concluded that Sheraton breached an
The Management Agreement implied duty of good faith and fair dealing, between Sheraton and Hancock remained and that Sheraton was liable for its in effect until 1993, when differences misrepresentations to Hancock. The jury between the parties led to its termination. awarded damages of $750,000 on the Thereafter, Hancock filed this lawsuit. In Robinson-Patman Act claim (subsequently its complaint, Hancock alleged: violations trebled by the court), a total of of § 2(c) of the Robinson-Patman Act, 15 $10,732,000 on the breach of contract U.S.C. § 13(c); violations of RICO, 18 claims, $1,100,000 on the tort claims, and U.S.C. § 1961; and state law claims of $37,500,000 in punitive damages. The breach of contract, breach of fiduciary district court denied Sheraton’s motion for duty, and breach of the implied duty of judgment as a matter of law but granted a good faith and fair dealing; as well as remittitur thereby reducing the punitive fraud, and intentional or negligent damages to $17,415,000. The district misrepresentation. Hancock also claimed court then entered judgment in favor of that Sheraton failed to properly act as its Hancock in the total amount of agent in operating its reservation system, $31,497,000, but denied Hancock’s motion failing to limit usable denials, improperly for attorneys’ fees and taxation of costs
without prejudice. Sheraton appealed *5 from the judgment, and Hancock cross- purchase of goods, wares, or appealed from the remittitur. [2] For the merchandise, either to the reasons that follow, we will affirm in part o t h e r p a r t y t o s u c h and reverse in part. transaction or to an agent, representative, or other
II. DISCUSSION intermediary therein where A. ROBINSON-PATMAN ACT such intermediary is acting CLAIM in fact for or in behalf, or is subject to the direct or
Hancock’s Antitrust Standing indirect control, of any party Sheraton renews its argument that to such transaction other Hancock lacks antitrust standing to bring a than the person by whom claim under § 2(c) of the Robinson- such compensation is so Patman Act. [3] We must address that issue granted or paid.
before addressing the merits of the appeal
or cross-appeal. 15 U.S.C. § 13(c). “Congress enacted Section 2(c) of the Robinson- section 2(c), the Act’s brokerage
Patman Act provides:
provision, primarily to curb one particular
It shall be unlawful for any
abuse by large chain store buyers, namely
p e r s o n e n g a g e d
i n
the use of ‘dummy’ brokerage fees as a
commerce, in the course of
means of securing price
rebates.”
such commerce, to pay or
Environmental Tectoni cs v . W.S .
grant, or to receive or
Kirkpatrick, Inc.
,
F.2d 667, 669 (3d Cir. 1939).
a comm ercial bribery claim. [4] Surprisingly, the Supreme Court has never
decided a § 2(c) commercial bribery case. [4] was not commercial bribery because the Sheraton insists that the SPR program rebates simply served to compensate it for the costs it incurred in operating the Hancock’s characterization of the SPR program. purposes of this appeal. program as commercial bribery for As a general principle, a critical Nevertheless, it accepts , 363 However, in dicta at 169 n.6 (“And although not Id. U.S. 166 (1960), the Court noted that § 2(c) does encompass commercial bribery. Federal Trade in Commission v. Henry Broch, Inc. mentioned in the Committee Reports, the was intended to proscribe other practices debates on the bill show clearly that § 2(c) the buyer.”) (citation omitted). such as the ‘bribing’ of a seller’s broker by Similarly, element of commercial bribery is the
breach of the duty of fidelity. For purportedly disinterested example, the Model Penal Code provides:
adjudicator or referee. Commercial Bribery and (2) A person who holds Breach of Duty to Act himself out to the public as Disinterestedly. being engaged in the business of making disinterested (1) A person commits a selection, appraisal, or misdemeanor if he solicits, criticism of commodities or accepts or agrees to accept any s e r v i c e s c o m m i t s a benefit as consideration for misdemeanor if he solicits, knowingly violati ng or accepts or agrees to accept any agreeing to violate a duty of benefit to influence his fidelity to which he is subject selection, appraisal or as: criticism. (a) partner, agent, or employee (3) A person commits a of another; misdemeanor if he confers, or (b) trustee, guardian, or other offers or agrees to confer, any fiduciary; benefit the acceptance of (c) lawyer, physician, which would be criminal accountant, appraiser, or other under this Section. professional adviser or informant; M ODEL P ENAL C ODE § 224.8. See United
(d) officer, director, manager
States v Dischner
,
incorporated or unincorporated
association; or Broch In a manufacturer sold apple (e) arbitrator or other concentrate at a price of $1.30 a gallon.
in
dicta
in
California Motor Transport
Although we once expressed skepticism
Co. v. Trucking Unlimited
,
encompasses commercial br ib er y.
[6]
Nevertheless, although § 2(c) of the
Robinson-Patman Act defines certain
conduct as illegal, it does not create a
The manufacturer sold through a broker
private right of action to sue for damages
and paid the broker a commission of 5%.
resulting from violations of the Act.
One buyer would not pay more than $1.25
Rather, the private right of action for a §
for the concentrate and the manufacturer
2(c) Robinson-Patman Act claim, as for all
refused to lower his price unless the broker
private plaintiff antitrust rights of action, is
agreed to take a cut in his commission
provided by § 4 of the Clayton Act.
from 5% to 3%. The broker agreed and
Genesco, Inc. v. T. Kakuichi & Co.
, 815
the sale was consummated at $1.25 with a
F.2d 840, 853 (2d Cir. 1987). Section 4 of
lower commission. The Court viewed this
the Clayton Act provides:
transaction as identical to one in which the
broker received a commission of 5%, the
Any person who shall be
normal commission, and then turned over
injured in his business or
a part of the commission, i.e., 2%, to the
property by
reason of
buyer. That would have been illegal under
anything forbidden in the
§ 2(c) as a payment in lieu of brokerage
antitrust
laws may sue
and, therefore, the Court found that the
therefor in any district court
reduction in commission in
Broch
was also
of the United States in the
a payment in lieu of brokerage.
district
in which
th e
See, e.g., Harris v. Duty Free Shoppers
America, Inc. , 532 F.2d 674 (9th Cir.
1976);
Rangen, Inc. v. Sterling Nelson &
v. Kentucky-Tennessee Light & Power Co.
,
Sons
,
including a reasonable purchased through that program. Hancock attorney’s fee. also argues that the increased cost put it at
a competitive disadvantage with regard to hotels owned by Sheraton.
15 U.S.C. § 15(a). However, in order to
However, we do not think that
recover treble damages under § 4(a) of the
paying inflated purchasing prices to
Clayton Act, a private plaintiff must do
vendors, without more, is “an injury of the
more than simply show “an injury causally
type the antitrust laws were intended to
linked to” a violation of the antitrust laws.
prevent . . . that flows from that which
Brunswick Corp. v. Pueblo Bowl-O-M at,
makes the defendants’ acts unlawful.”
Inc.
,
As noted above, the Supreme Court standing. [7]
has not yet defined “antitrust injury,” for
purposes of a § 2(c) Robinson-Patman claim. However, Hancock argues that it As noted above, Sheraton manages the Hotel under contract with Hancock. suffered antitrust injury as a result of However, Sheraton also manages hotels Sheraton’s commercial bribery scheme, that it actually owns. Hancock also alleges i.e ., the SPR program. Hancock refers to that the rebate scheme put it at a this program as a “kickback” and claims competitive disadvantage to Sheraton- that Sheraton inflated Hancock’s owned hotels because. According to purchasing costs by adding SPR Hancock, “the rebate scheme impacted the surcharges and then collecting the Hotel differently than it did Sheraton- increased costs in the form of the rebates it owned hotels: The rebate program collected from Hancock’s vendors. increased the costs of the goods and According to Hancock, it suffered antitrust services [Hancock] purchased on behalf injury because it could only purchase of the Hotel, whereas the rebate scheme goods from vendors participating in did not impose a real cost on Sheraton- Sheraton’s SPR program, and it had to pay owned hotels, which simply ‘paid’ the these artificially inflated prices for goods
kickback to their corporate parent.”
*9
“Antitrust
standing and
its
It is now settled that a § 2(c)
terminological cousin, antitrust injury, are
plaintiff does not have
to prove
often confused.”
Triple M Roofing Corp.
competitive injury to establish a § 2(c)
v. Tremco, Inc.
,
competitive effect is not necessary to
prove a violation of section 2(c).”
Seaboard Supply Co. v. Congoleum Corp.
,
Hancock’s Br. at 23.
it.
our powers of reconciliation.” A The difficulty in distinguishing these commentator subsequently noted that the two interrelated concepts was summed up “court could hardly have been faulted, for by the district court in Wilson v. Ringsby the confusion it noted has been endemic to Truck Lines, Inc. , 320 F.Supp. 699, 700 these cases since the creation of the treble- (D. Colo. 1970). There the court candidly damages action.” Daniel Richman, Note, noted, “[w]e must confess at the outset Antitrust Standing, Antitrust Injury, and that we find antitrust standing cases more the Per Se Standard , 93 Yale L. J. 1309 than a little confusing and certainly beyond (1984).
has an anticompetitive effect does not *10 their business to non-union contractors. [9] mean that a given plaintiff has suffered an Plaintiffs alleged that the coercion resulted antitrust injury, or that a given plaintiff is in less business for firms employing union the appropriate party to seek recovery carpenters. The Court held that because under the antitrust laws. Accordingly, the carpenters’ unions were “neither a “[e]ven a plaintiff who can show antitrust consumer nor a competitor in the market in injury may lack antitrust standing. . . .” which trade was constrained,” their Barton & Pittinos, Inc., v. Smith Kline injuries were not the type of injury that the Beechum Corp ., 118 F.3d 178, 182 (3rd antitrust laws were designed to prevent. Cir. 1997). The Supreme Court explained Id. at 539. The carpenters’ unions may this in Associated General Contractors of well have had a cause of action under California, Inc. v. California State Council other statutes or common law, and a of Carpenters , 459 U.S. 519 (1983). different plaintiff may have had a cause of There, the Court said: action under the antitrust statues. However, the carpenters’ unions had no
[a] literal reading of [§ 4 of standing to sue under those laws. The the Clayton Act] is broad Court reached this conclusion even though enough to encompass every the Association’s cond uct had an harm that can be attributed anticompetitive effect. M oreover, firms directly or indirectly to the hiring union carpenters had clearly consequences of an antitrust suffered an anticompetitive injury because violation. Some of our prior the Association’s coercion made it more cases have paraphrased the difficult for those firms to win contracts. statute in an e quall y Yet, notwithstanding the anticompetitive expansive way. But before effect of the conduct in question, the Court we hold that the statute is as concluded that the plaintiff carpenters’ broad as its words suggest, unions had not suffered a sufficient we must consider whether antitrust injury. Congress intended such an open-ended meaning. In arriving at that decision, the
Court read the antitrust statues in light of their common law background and read a Id. at 529-30 (footnote omitted). “proximate cause element into § 4 Associated General Contractors involved [Clayton Act] actions.” Greater Rockford a number of carpenters’ unions that Energy , 998 F.2d at 394. As a result of alleged that A ssocia ted Ge nera l Associated General Contractors , § 4 of the Contractors, a trade association made up of Clayton Act has been given a narrowed general contractors, had coerced customers
and competing contractors to give some of The Association’s customers included
landowners who needed construction services.
reading. We have . the antitrust laws were intended to [remedy]”). City of Pittsburgh v. West
synthesized
the Court’s
Penn Power Comp.
,
violation and the harm to the
plaintiff and the intent by
harm, with neither factor
the defendant to cause that
(2) whether the plaintiff’s
alone conferring standing;
for which the antitrust laws
alleged injury is of the type
were intended to provide
redress; (3) the directness of
the injury, which addressed
the concerns that liberal
speculative claims; (4) the
existence of more direct
principles might produce
application of standing
the
, 998
Lower
Lake Erie Iron Ore Antitrust Litig. Barton &
Pittinos
“[e]ven a plaintiff who can show antitrust
F.2d at 1166). Therefore, as noted above,
allowing him or her to sue under the
injury may lack antitrust standing, because
Contractors
] factors may weigh against
, 118 F.3d at 182 (citing condition of antitrust standing.” standing. It is “a necessary but insufficient
one element of the inquiry into antitrust
Monfort of Colorado, Inc. Cargill, Inc. v.
,
antitrust violations; and (5) The antitrust injury requirement of the the potential for duplicative antitrust standing inquiry is analogous to r e c o v e r y o r c o m p l e x the minimum standing requirement of a apportionment of damages. case or controversy within the meaning of
Article III, § 2 of the Constitution, while
the other
Associated General Contractors
Barton & Pittinos,
“The
Associated General
test has
*12
(4) because there are clearly “more direct
[13]
been regularly and consistently applied as
victims” of Sheraton’s alleged commercial
the passageway through which antitrust
bribery scheme. Vendors who may have
plaintiffs must advance.”
City of
been prevented from selling goods to
Pittsburgh
,
Even if we assume Hancock is correct as to factors (1) and (3), it surely drew sales or profits from can not survive an inquiry under factor non-favored vendors, but
the attendant reduction in competition and higher costs resulted in direct antitrust [11] “The causal connection between the injury to [Hancock].
antitrust violation and the harm to the
plaintiff and the intent by the defendant to
cause that harm[.]” “The existence of more direct victims “The directness of the injury. . . .” of the alleged antitrust violations[.]” *13 Complaint at ¶ 143. reversed because we concluded that the act being forced to pay higher prices as a it suffered an anticompetitive injury by Hancock is in an analogous situation to the result of reduced competition, we think carpenters’ unions in Associated General . There, customers suffered a Contractors violation had an effect on the carpenters’ union. There is an analogous situation excluded vendors to Hancock’s injury. here if we compare the injury of the more direct and more appropriate antitrust injury even though the alleged antitrust Although Hancock does allege that of state doctrine did not apply. commercial bribery has standing to press a company that obtains a contract through at 1066. We also noted that “it is generally agreed that a direct competitor of a In doing [16] so, we noted the difficulty of precisely defining standing under § 2(c). 847 F.2d limit the class of potential § 2(c) (citations omitted). Admittedly, we did not 2(c) claim against the briber.” Id. competitors. However, we mentioned commercial bribery plaintiffs to disfavored disfavored competitors having § 2(c) commercial bribery standing after stating:
Unlike the Sherman Act, which “[I]n order to proceed with a claim, a “protects competition , not competitors , . . plaintiff must be able to demonstrate that . the Robinson-Patman Act extends its it is within the class of those injured in protection to competitors.” Monahan’s their business or property, who, based on a Marine, Inc. v. Boston Whaler, Inc. , 866 variety of factors, are best suited to further F.2d 525, 528 (1st Cir. 1989) (emphasis in the purposes of the statute by remedying original). We think our discussion in the violation alleged.” Id . at 1066 (citing Environmental Tectonics is therefore also
quite helpful to this analysis. There, a company bribed foreign officials in order equipment to the foreign government’s air to receive a contract to supply aircraft The district [14] commercial bribery claim. force, and a competitor brought a § 2(c) court dismissed the action in its entirety on We [15] the basis of the act of state doctrine. of its internal affairs. Under the doctrine, in judgment on a foreign state’s regulation when a United States court appears to sit governmental acts in regard to matters judging the validity of a foreign state’s the courts of this country will refrain from within that country’s borders. The party
moving for the doctrine’s application has
the burden of proving that dismissal is an
[14]
The suit involved several claims in
appropriate response to the circumstances
addition to the § 2(c) commercial bribery
presented in the case.”
Environmental
claim. However, the other claims are not
Tectonics
,
institutional response to the foreign
commercial bribery is actionable under §
relations tensions that can be generated
2(c).
Alberta Gas Chemicals, Ltd. v. E. I. Accordingly, we hold that Hancock DuPont De Nemours and Co. , 826 F.2d does not have antitrust standing to pursue 1235, 1240 (3d Cir. 1987)). Significantly, its § 2(c) Robinson-Patman Act claim. We the portion of the Alberta Gas Chemicals will therefore vacate the award of opinion we cited discusses both Brunswick $750,000 (subsequently trebled by the and Associated General . district court) on that claim.
Moreover, even if we focus on B. BREACH OF THE AGENCY Hancock’s allegation that it had to pay P R O V I S I O N O F T H E inflated prices because it was forced to MANAGEMENT AGREEMENT purchase only from “favored vendors,” and
ignore Hancock’s admission that Sufficiency of the Evidence.
“[v]endors unwilling to pay kickbacks . . . were competitively harmed[,]” we would Sheraton claims that there is still conclude that Hancock can not insufficient evidence to sustain the award establish antitrust standing under the fifth of $10,260,000 for breach of the agency factor in the Barton & Pittings analysis. provision of the Management Agreement. That requires us to consider whether an Sheraton maintains that there is no award of antitrust damages would be evidence of harm for that breach that is not duplicative, and Hancock’s antitrust also captured in the itemization of possible recovery is inextricably intertwined with d a m ages se t f orth in the jury its awards on the breach of contract and interrogatories on the verdict form. On breach of fiduciary duty claims. that form, the jury awarded $10,260,000 for breach of the agency provision, and
As noted above, Hancock asserted also separately awarded $250,000 for a number of state law claims arising from purchasing services and $222,000 for the SPR program. The jury found that Workers’ Compensation. It awarded no Hancock suffered $250,000 in damages damages for the other categories listed on related to the purchasing services program the verdict form: the frequent traveler and it also awarded $1,100,00 for program, the reservations system, “usable Sheraton’s breach of fiduciary duty. The denials” practices, complimentary rooms actions supporting those awards constitute practices, or for any other contractual duty. breach of contract and breach of fiduciary The relevant interrogatory asks jurors: duty. Allowing a separate recovery under “[w]hat damages, if any, do you award to § 2(c) creates insurmountable problems in plaintiffs for a breach of the Management apportioning damages along with the real possibility of cumulative damages. Contract concerning each of the following.
. . .” Hancock responds by arguing that Indeed, given the nature of Hancock’s claimed damages, duplicative
recovery is not only possible, it is exceedingly probable if not inevitable. *15 the evidence of the breach of the agency First, the jury made no finding of provision extended beyond the rebate wilful breach of contract and it was never payments, and suggests several possible instructed on applying principles of bases for the $10,260,000 award. We are disgorgement. Second, the jury verdict not persuaded. For example, Hancock includes a specific finding for breach of relies upon the Workers’ Compensation fiduciary duty and the jury listed an program. However, as noted, the jury amount of $1,100,000 as damages for that separately awarded $222,000 for that breach. Accordingly, we find no support program. Hancock cites the level of for the award of $10,260,000, and will usable denial practices and the frequent therefore vacate that award.
travelers program, which were itemized on
C. PUNITIVE DAMAGES
the verdict form. However, the jury
Sheraton challenges the punitive
awarded no damages for them. Hancock
also cites an unexplained and unquantified
damage award on several grounds. It
item that it refers to as a bogus relocation
argues that the award was not supported by
expense. However, no such item was
clear and convincing evidence, that the
listed on the verdict form. Lastly,
relevant jury instructions were erroneous,
Hancock argues that Sheraton swept
and that the award was excessive.
certain of its bank accounts and claims that
Sheraton argues on appeal that the
also supported an award of damages.
District of Columbia standard of proof on
However, the sweeping of accounts
Hancock’s punitive damages claim applies
occurred after termination of the agency
and that, under that standard, punitive
provision.
Thus, none of
those
damages can be awarded “only if it is
e x p l a n a ti o n s s u p p o rt s a w a r d i n g
shown by clear and convincing evidence
$10,260,000 for breach of the agency
that the tort committed by the defendant
provision. A lte rn ati ve ly, H a n c o c k
was aggravated by egregious conduct and
contends that the jury could have awarded
a state of mind that justifies punitive
damages on the theory that a fiduciary
damages.”
Johanthan Woodner Co. v.
breach entitled Hancock to disgorgement
Breeden
,
evidence. Sheraton did not object to that
*16
instruction. We have held that this type of
determined that punitive damages should
error is fundamental error entitling a
be one and one-half times the relevant
defendant to a new trial; it is not subject to
compensatory damages. We adopt that
waiver.
Beardshall v. Minuteman Press
ratio for the purpose of calculating the
Int’l, Inc.
, 664 F.2d 23 (3d Cir. 1981).
judgment on remand for several reasons.
However, Sheraton submitted proposed
We review a grant of remittitur for
jury instructions that did not include an
abuse of discretion.
Gumbs v. Pueblo
instruction that entitlement to punitive
Int’l
, 823 F.2d 768, 771 (3d Cir. 1987).
damages must be established by clear and
We also afford
the district court’s
convincing evidence. Therefore, assuming
assessment of punitive damages a degree
that the instruction was wrong, it was
of deference since that court is familiar
tantamount to invited error.
U.S. v. West
with the evidence.
See Keenan v. City of
Indies Transport, Inc.
,
In ruling on Sheraton’s post-trial For the reasons stated above, we motion, the district court determined the amount of the punitive damages to be will vacate the award of $750,000 for $11,610,000. That included the award of violation of the Robinson-Patman Act, as subsequently trebled by the trial court to $10,260,000 for breach of the agency agreement. Since we are vacating the $2,250,000; as well as the award of award for breach of the agency agreement, $250,000 for purchasing services, and the we must concomitantly reduce the punitive $10,260,000 award for breach of the damage award so that it only reflects the agency agreement. We will affirm the surviving damages – $250,000 for awards of $222,000 for W orkers’ purchasing activities, and $1,100,000 for Compensation; and $1,100,000 for breach common law damages, or $1,350,000. [18] In of fiduciary duty, breach of the implied granting the remittitur, the district court
See State Farm Mut. Automobile Ins. *17 duty of good faith and fair dealing, and
intentional or negligent misrepresentation.
We will reduce punitive damages to
$2,025,000, for reasons already stated. We
remand to the district court with direction
to enter judgment consistent with this
opinion and for further appropriate
proceedings. [20]
Notes
[1] According to Sheraton, a usable denial occurs when a potential guest is denied a a v a i la b l e . S h e r a t o n ’ s B r . a s reservation when a room is actually appellant/cross-appellee, at 13.
[18] The district court noted that plaintiffs Co. v. Campbell, U.S.Sup.Ct. No. 01-1289 did not specify an amount for breach of (April 7, 2003) (stating that “in practice, W orkers’ Com pe nsa tion in their few awards exceeding a single-digit ratio computation of relevant compensatory between punitive and compensatory damages, and it therefore did not include damages, to a significant degree, will that amount in its calculation. satisfy due process.”).
[20] We have considered the remaining contentions of the parties and conclude that we can affirm the district court’s rulings on those issues without further discussion.