828 F.2d 24 | D.C. Cir. | 1987
This action is the fourth in a series of antitrust suits spawned by the collapse of Laker Airways Limited. The core allegation in each suit is that a group of airlines, an aircraft manufacturer and the latter’s subsidiary conspired to drive Laker out of business, in violation of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2 (1982 & Supp. Ill 1985).
Plaintiffs in the present action, a group of 313 former Laker employees,
I.
Section 4 of the Clayton Act permits “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws” to bring a treble-damages action. 15 U.S.C. § 15(a). This language, however, has never been read literally to allow suit by every party affected by an antitrust violation’s “ripples of harm.” Blue Shield of Virginia v. McCready, 457 U.S. 465, 476-77, 102 S.Ct. 2540, 2547, 73 L.Ed.2d 149 (1982).
The first prerequisite to maintaining a § 4 action is that the plaintiff have suffered the kind of injury the antitrust laws were designed to prevent. “The antitrust laws ... were enacted for ‘the protection of competition, not competitors.’ ” Brunswick Corp. 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)) (emphasis in original). Thus, only harm stemming from a reduction in competition qualifies as injury cognizable under the antitrust laws. E.g., id.; see also Cargill, Inc. v. Monfort of Colorado, Inc., — U.S. -, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986) (extending Brunswick to claim for injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26 (1982)).
In addition to alleging “antitrust injury,” the would-be claimant must show that it is a “proper plaintiff.” See Cargill, 107 S.Ct. at 489 n. 5; Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535-46, 103 S.Ct. 897, 907-13, 74 L.Ed.2d 723 (1983). The Court’s guiding principle has been to exclude as plaintiffs those whose suits might “undermine[ ] the effectiveness of treble-damages suits.” Associated General, 459 U.S. at 545, 103 S.Ct. at 912 (citing Illinois Brick Co. v. Illinois, 431 U.S. 720, 745, 97 S.Ct. 2061, 2074, 52 L.Ed.2d 707 (1977)). Claims of remote victims could severely complicate an action by more direct ones, raising the latters’ costs of suit. Further, the interest in avoiding multiple recoveries may force courts to reduce awards to the direct victims. These impairments of direct victims’ incentive to sue could jeopardize the effectiveness of the treble-damage claim. Associated General, 459 U.S. at 544-46, 103 S.Ct. at 911-13; Blue Shield of Virginia v. McCready, 457 U.S. at 475 n. 11, 102 S.Ct. at 2546 n. 11; Illinois Brick, 431 U.S. at 745, 97 S.Ct. at 2074; cf. Cargill, 107 S.Ct. at 489-90 nn. 5, 6 (such concerns less relevant to suit for injunctive relief under § 16 of the Clayton Act, as duplicative lawsuits and multiple recoveries not involved). See generally Page, The Scope of Liability for Antitrust Violations, 37 Stan.L.Rev. 1445, 1483-98 (1985); Landes & Posner, Should Indirect Purchasers Have Standing to Sue Under the Antitrust Laws? An Economic Analysis of the Rule of Illinois Brick, 46 U.Chi.L.Rev. 602, 608-25 (1979).
Accordingly, once plaintiff has crossed the threshold by alleging a genuine antitrust injury (one deriving from a decrease in competition), the Court directs us to consider such factors as whether the injury is direct (compared to that of other victims), whether the claim for damages is “speculative,” and whether the case presents “the potential for duplicative recovery or complex apportionment of damages.” Associated General, 459 U.S. at 545, 103 S.Ct. at 912; see also id. at 538-45, 103 S.Ct. at 908-12.
While plaintiffs allege an antitrust injury, we find that the other factors control
II.
A. Antitrust Injury
The only market where an illegal restraint's alleged to have taken place is the transatlantic air transportation market. Amended Adams Complaint ¶ 46, Joint Appendix (“J.A.”) at 217-18. Plaintiffs supply services (their labor) to competitors selling in that market. While decreased competition will almost invariably harm consumers, its effects on suppliers such as plaintiffs are quite complex. Output is greater at competitive levels than in a cartelized market; everything else being equal, a competitive industry will require more employees, increasing job opportunities for persons such as plaintiffs. Indeed, plaintiffs represented at oral argument that none among them had managed to obtain employment comparable to that previously held with Laker. This suggests a direct loss from the contraction of output.
The effects do not stop there, however. Competition might conceivably raise wages. The more workers demanded (to handle higher output), the more lucrative the alternative occupations from which workers must be attracted, and the higher the wages needed to attract them. But competition also generates strong pressure to cut costs, including wages. Associated General, 459 U.S. at 539, 103 S.Ct at 909; cf. S. Morrison & C. Winston, The Economic Effects of Airline Deregulation 43-46 (1986).
We cannot now determine (and probably could not even after trial) whether plaintiffs’ gains from reduced competition predominate over their losses. An accurate assessment of the alleged cartelization’s effect would require computation of the present discounted value of the net change in their expected income streams.
We believe that plaintiffs can properly be said to have alleged an antitrust injury— the failure to secure employment comparable to their Laker jobs from the date of Laker’s folding to the filing of the complaint. Thus they have crossed the Brunswick threshold. But the ambiguity of cartelization’s effects on their welfare fatally affects their case under the remaining factors pinpointed by Associated General.
B. Directness of Injury
Comparison of this case with Associated General is complicated by “the absence of specific allegations” there. 459 U.S. at 541 n. 46, 103 S.Ct. at 910 n. 46. But the Court discerned two possible theories, one of which closely parallels the present case:
But the Court appeared to denigrate the significance of the final necessary link. It observed that the harm to the union was “even more indirect than the already indirect injury to its members, yet a number of decisions have denied standing to employees with merely derivative injuries.” Id. at 541 n. 46, 103 S.Ct. at 910 n. 46 (citations omitted) (emphasis added).
Plaintiffs here characterize the conspiracy as reaching the employees themselves. They claim that the illegal restraint weakened Laker to the point that it had to accept a coconspirator as receiver and that the coconspirator fired plaintiffs. Plaintiffs contend that this last step was vital to the alleged conspiracy because the competitive threat Laker posed would not die until the work force was dismantled.
This effort to remove the Laker link from the chain seems largely a matter of word play. The conspirators allegedly forced Laker to its knees. Whenever that happens to a firm, the web of contracts and relationships which form the essence of the firm will be dismantled. Astute counsel should not be able, merely by feats of characterization, to confer standing on all participants in that web.
However the final dismissal may be la-belled, the harm to plaintiffs is one step removed from the harm to Laker. It follows that their claim will be more difficult to develop and prove. See Posner & Landes, Should Indirect Purchasers Have Standing to Sue Under the Antitrust Laws? An Economic Analysis of the Rule of Illinois Brick, 46 U.Chi.L.Rev. 602, 609-15 (1979) (comparing cost to indirect purchasers and direct purchasers of bringing an overcharge case). These difficulties, already alluded to, are discussed further in parts II.C and II.D below. It is a natural consequence of the extra link in the chain.
Nine years ago this court plainly classified injuries such as plaintiffs’ as indirect: “Outside the context of professional sports, courts have regularly denied employees standing to sue for antitrust injuries to their employer, generally on the ground that any injury to the employee is ‘indirect.’ ” Smith v. Pro Football, Inc., 593 F.2d 1173, 1175 n. 2 (D.C.Cir.1978) (citation omitted). Cf. Illinois Brick, 431 U.S. 744-47, 97 S.Ct. at 2074-75 (indirect purchasers lack standing to raise antitrust claims).
In a rare handful of cases courts have found standing for employees in the absence of restraints in the labor market. In
One decision antedating Associated General is probably not susceptible of any principled distinction. In Dailey v. Quality School Plan, Inc., 380 F.2d 484 (5th Cir. 1967), the plaintiff was employed in the business of marketing magazine subscriptions to educational institutions under a “school plan,” by which such institutions use students to sell subscriptions to the public. He received a salary and commission. He lost his job following the acquisition of his employer in a merger, allegedly illegal, between two of the three largest firms in the field. The court appeared to apply two criteria. First, on the basis of plaintiff’s entitlement to commissions, it found that he operated as a business rather than as a mere employee. Second, it applied a vague “proximate cause” test and stated in conclusory form that the injury was direct enough. We doubt if the case survives Associated General: (1) the first point has no apparent significance under Associated General; (2) the classification of the injury as direct seems inconsistent with Associated General’s conclusion; and (3) the decision wholly disregards the other factors and policy values identified by Associated General as controlling.
Thus, in the absence of special circumstances not present here, the cases provide no support for suit by employees of a firm victimized by antitrust violations.
Finally, the general rule against employee standing in cases involving no restraint in the labor market finds support in Associated General’s suggestion that directness is a relative matter:
The existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general.
459 U.S. at 542, 103 S.Ct. at 910-11. Of course the entire logic of Associated General supports such a relative approach: it is in large part to preserve the effectiveness of the superior plaintiffs that the inferior ones are denied standing.
Here superior plaintiffs clearly exist — both Laker itself and consumers of transatlantic air transportation. Indeed, they have already asserted claims in their own rights, received substantial settlement payments, and vindicated the public inter
C. Speculative Damages
We have already suggested the speculative character, of plaintiffs’ damages. Their job losses are real ones, and, as noted above, the expansion of output to competitive levels would (other things being equal) tend to increase their wages. But cartel participants’ comparative laxity as to costs suggests that they may well ultimately secure more lucrative jobs than those that would have been available in the more competitive industry that would have resulted from the survival of Laker.
Nor is the level of competition in the industry the only relevant variable. In part plaintiffs’ economic fate was tied specifically to Laker; we cannot assume its indefinite survival in an exceptionally volatile industry characterized by frequent mergers and bankruptcies, see Adams v. Pan American World Airways, Inc., 640 F.Supp. at 685. Further, the prosperity of each of the 313 plaintiffs would depend on how long he or she would have remained with Laker, with what advancement, what salary increases, etc. Finally the court would need to consider each plaintiff’s prospects of obtaining comparable employment in aviation or other industries.
Plaintiffs in essence recognize the complexity of calculating their damages but claim that assessing “damages in this case is no more speculative, abstract or impractical than in personal injury cases where assessment of lost past and future earnings are routinely made by the jury.” Brief of Plaintiff at 39 (citing District of Columbia v. Barriteau, 399 A.2d 563 (D.C. App.1979)). But the present claim is in antitrust, not tort. Here injury turns on the impact of the alleged wrong on the relevant market itself, so that the fact finders cannot take a market structure as given, as they would in a personal injury litigation. Moreover, Associated General requires exclusion of marginally injured parties whose claims tend to complicate the litigation and thereby impair the effective enforcement of the antitrust laws. See, e.g., Associated General, 459 U.S. at 543-45, 103 S.Ct. at 911-12.
D. Risk of Duplicative Recoveries or Complex Apportionment of Damages.
In Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), the Supreme Court held that an indirect customer could not bring a treble-damage action for price increases deriving from sales to its suppliers in violation of the antitrust laws. Recognizing that multiple recovery should be avoided, it noted that allowance of indirect purchaser suits would compel apportionment of the recovery. Besides adding complexity to the case, this apportionment would cut down the direct purchasers’ recovery and diffuse the incentive to bring treble-damage actions. Id. at 735-48, 97 S.Ct. at 2069-76; see also Associated General, 459 U.S. at 544, 103 S.Ct. at 911-12.
The present case raises a similar risk of leading either to multiple recovery or to
Here, concededly, there is no common fund in the sense of the overcharge at stake in Illinois Brick. But the problem of conflicting premises is no different. In Laker I, Laker’s creditors, stockholders, and attorneys sought damages premised on a projection of high profits for Laker. In Laker II, Laker’s passengers asserted damages premised on Laker’s fares being exceptionally low. Laker’s employees now seek to collect damages premised on plentiful jobs and generous salaries and benefits. Without joinder it is impossible to avoid liability on inconsistent theories; with joinder would come increased complexity and litigation costs for the directly injured parties.
One may, indeed, conceptualize the case as involving claims on a single quantity of wealth — the increased consumer and producer surplus that a thriving Laker would have generated.
Nor is it an answer that Laker and its passengers have already settled their claims. Standing must be determined by uniform principles, not by accidents of sequence. A rule opening the door to marginal plaintiffs after settlement would virtually force defendants not to settle until all possible complainants were brought into the action or until the statute of limitations had run. Such behavior would clearly make it more difficult to prosecute antitrust violations and “undermine[] the effectiveness of treble-damages suits.” Associated General, 459 U.S. at 545, 103 S.Ct. at 912. Besides, allowance of the present suit would unequivocally expose defendants to the risk of multiple liability, an alternative the Court has emphatically rejected. Illinois Brick, 431 U.S. at 730-31, 97 S.Ct. at 2066-67 (citing Hawaii v. Standard Oil Co., 405 U.S. 251, 264, 92 S.Ct. 885, 892, 31 L.Ed.2d 184 (1972)). See also id. at 731 n. 11, 97 S.Ct. at 2067 n. 11 (recognizing that risk of multiple liability is particularly great where some parties settle).
The controlling factors under Associated General compel the conclusion that plaintiffs lack standing.
III.
Before the District Court defendant Union de Transports Aeriens (“UTA”) moved for sanctions against plaintiffs’ attorney for signing a complaint containing
The District Court denied UTA’s motion without explanation in a one-sentence footnote. Although the District Court’s treatment of this matter was lamentably terse, we may overturn its ruling only if it abused its “wide discretion” to determine whether grounds exist to support Rule 11 sanctions. Westmoreland v. CBS, Inc., 770 F.2d 1168, 1174 (D.C.Cir.1985). The record is not strong enough for us to find an abuse of discretion.
The decision below is
Affirmed.
. The persons named as defendants vary slightly from case to case.
. Laker Airways Ltd. v. Pan American World Airways, Inc., No. 82-3362 (D.D.C. filed Nov. 24, 1982); Laker Airways Ltd. v. Sabena, Belgian World Airlines, No. 83-0416 (D.D.C. filed Feb. 15, 1983); Laker Airways Ltd. v. Union de Transport Aeriens, No. 83-2791 (D.D.C. filed Sept. 22, 1983) [Available on WESTLAW, DCT database].
.Plaintiffs represent the full range of personnel employed by a major airline, from pilots and flight attendants to managers, administrators and reservation agents, to engineers, mechanics and shop personnel. Adams Complaint ¶¶ 3-300M, Joint Appendix (“J.A.") at 44-150.
. Plaintiffs vigorously assert that under the rubric of Associated General the defendant’s specific intent to injure plaintiff is also a factor in the proper-plaintiff analysis. Although plaintiffs’ position has some supporting precedent, see Los Angeles Memorial Coliseum Commission v. National Football League, 791 F.2d 1356, 1363 (9th Cir.1986), we read Associated General as saying only that a showing of such intent may be required to establish an antitrust violation (and thus necessary to avoid a motion to dismiss, see United States v. Columbia Steel Co., 334 U.S. 495, 522 & n. 19, 68 S.Ct. 1107, 1121 & n. 19, 92 L.Ed. 1533 (1948)), and may help focus the standing analysis. See Associated General, 459 U.S. at 537 & nn. 35-37, 103 S.Ct. at 908 & nn. 35-37.
. The study finds a negative effect on wages. For the airlines, of course, decartelization was an aspect of deregulation. Regulation of prices on a cost-of-service basis has an independent tendency to relax cost control efforts, as firms can keep only a portion of their cost savings, so the case is not a pure test of the effects of increased competition.
. Plaintiffs describe themselves as members of a "highly competent and highly motivated work force” willing to work for less than their counterparts employed by defendants. See Brief of Plaintiffs at 6. This does not support an inference that they are necessarily net losers from cartelisation. If they have those attributes, they will surely be attractive candidates for jobs opening up in the cartelized transatlantic market.
. The “expected" value of gains from cartelization would refer to the incremental wage income, discounted for the possibility that the plaintiff may secure no job because of the reduced output in the market as a whole.
. In the alternative theory, defendant association of contractors illegally coerced the victim landowners, who as a result switched to non-union contractors, who resisted plaintiff union's organizing efforts in order to avoid loss of business. The Court characterized this as involving injury from “the conduct of persons who are not victims of the conspiracy [the non-union con
. Unlike Illinois Brick, which flatly precludes indirect purchasers from bringing antitrust' actions in virtually all cases, Associated General does not go so far as to say that suppliers of an input never have standing to assert a claim for damages resulting from illegal restraints in their purchaser’s market. See 459 U.S. at 540-42, 103 S.Ct. at 909-11.
. A prior decision in Ostrofe, 670 F.2d 1378 (9th Cir. 1982), was vacated and remanded by the Supreme Court for reconsideration in the light of Associated General. See 460 U.S. 1007, 103 S.Ct. 1244, 75 L.Ed.2d 475 (1983). After the decision on remand, defendants applied for certiorari, but the case was dismissed at the request of the parties. See 469 U.S. 1200, 105 S.Ct. 1155, 84 L.Ed.2d 309 (1985).
. International Association of Heat & Frost Insulators & Asbestos Workers v. United Contractors Association, Inc., 483 F.2d 384 (3rd Cir. 1973), amended, 494 F.2d 1353 (3rd Cir.1974), bears some resemblance to Associated General, though with the opposite outcome. Accordingly, we also doubt its viability. We note, however, that there were allegations of anticompetitive effects in the labor market itself, through use of sham agreements to thwart the plaintiff unions’ organizational efforts. See id. at 392, 396.
. Plaintiffs argue that because their injuries are discrete from those of Laker and its passengers, the latters’ actions have not vindicated the public interest in antitrust enforcement, Le., their claims are not large enough to be an optimal deterrent. In fact, as we develop below, there is a high probability of substantial overlap between plaintiffs’ injuries and those of Laker and its passengers.
. Plaintiffs focus on their inability to obtain employment in the cartelized transatlantic air transportation market. We see no reason why they are so limited. All of them are qualified for employment in other air transportation markets, and many of their jobs with Laker have exact equivalents outside the air transportation industry.
Plaintiffs also claim to have suffered from emotional distress. If for some reason not revealed to us such injury qualified as an injury to plaintiffs' "business or property,” its measurement would further complicate the litigation.
. The extra producer surplus (especially for purposes of this case) includes any increments in plaintiffs’ wage income over what they would have been able to earn without Laker's presence in the market. A worker is of course a producer. The wage necessary to attract the marginal worker sets the wage of the inframarginal workers. The latter enjoy producer surplus consisting of the difference between the prevailing wage and the wage necessary to attract them to the jobs in question. As already noted, the survival of Laker would under some circumstances increase that wage. Thus the producer surplus at issue in Laker's survival encompasses the surplus not only of Laker but also of the inframarginal workers. Ascertainment of the likely allocation of total producer surplus between these (and other suppliers as well) would be a complex task, to say the least.