Lead Opinion
OPINION OF THE COURT
In separate lawsuits, two independent service station dealers, Bogosian and Parisi, sued their respective lessors, Gulf and Exxon, alleging that the lease contracts imposed a tie-in in violation of § 1 of the Sherman Act. Each plaintiff also joined as party defendants fourteen other major oil companies whom they alleged, together with Gulf and Exxon, engaged in what they now argue was concerted action to unlawfully tie the leasing and subleasing of gas station sites to the purchase of gasoline supplied by each dealer’s -lessor. More specifically, plaintiffs alleged that, at least since 1957, and continuing to the present, “defendants, through a course of interdependent consciously parallel action, have required all dealers who lease, sublease, or renew such leases or subleases for one or more of defendants’ service stations to:
(a) license the use of the lessor’s trademark;
(b) sell only the lessor’s gasoline; and
(c) not sell gasoline purchased from any other source under the licensed trademark.”
Plaintiffs alleged that these restrictions forced them to buy gasoline at whatever price their lessor offered and prevented them from selling other brands of gasoline. They sought to maintain the suit on behalf of all present and former lessee gasoline dealers of the defendants.
After substantial discovery limited to the class action allegations, the district court refused to certify the class (
Should it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.
All of the orders granting summary judgment contained an express determination that, pursuant to Fed.R.Civ.P. 54(b), there is no just reason to delay and expressly directing entry of final judgment, although the actions were not wholly terminated by the orders. Subsequently, the district court filed a supplementary opinion expressing the reasons for its 54(b) determination. Plaintiffs timely appealed and defendants moved to dismiss the appeals contending that the entry of judgment was an abuse of discretion and should be vacated.
I. APPEALABILITY
A. Finality
Behind Rule 54(b) is the recognition that with the liberal joinder of claims and parties now permitted by the federal rules, the policy against piecemeal review implicit in the “single judicial unit” rule must be weighed against the untoward effects which can occur when decisions final as to some claims and some parties cannot be entered until the litigation is final as to all claims and all parties. The district court is not empowered to enter judgment on a decision which is not final. However, by determining that a final decision which terminates the action as to one or more but fewer than all parties or as to one or more but fewer than all claims is an appropriate judicial unit, the court can dispatch for appeal decisions which otherwise would not then be appealable because of the “single judicial unit” rule. Wetzel v. Liberty Mutual Insurance Co.,
Determination of whether multiple parties are involved within the meaning of the rule is not difficult. Prior to the 1961 amendment it was thought that a complaint charging an antitrust conspiracy against several defendants stated only one claim and dismissal of the complaint as to fewer than all defendants was not appealable under Rule 54(b). E. g., Steiner v. 20th Century-Fox Film Corp.,
The district court granted summary judgment and directed the immediate entry of judgment for all moving defendants except Gulf and Atlantic Richfield in
On the other hand, although Gulf has been wholly terminated in Parisi, it remains as a defendant in Bogosian, while Exxon, which is no longer a defendant in Bogosian, remains as a defendant in Parisi. If the rights and liabilities of Gulf and Exxon have not been wholly terminated then, assuming arguendo that the complaint states a single claim, the district court properly could not enter judgment for them and plaintiffs could not maintain this appeal as to them. Compare Backus Plywood Corp. v. Commercial Decal, Inc.,
If we were to view the suit brought by Parisi and that by Bogosian as a single unit, it would follow that judgment could not have been entered for Gulf because a live claim is pending against it in Parisi, nor for Exxon because a live claim is pending against it in Bogosian. The factors which militate toward this view are that both plaintiffs are represented by the same attorney, the suits are filed in the same forum, are before the same judge, and the complaints and the defendants are identical. On the other hand, the cases have not been consolidated for trial. It is therefore possible that the cases could be scheduled for trial at different times and be tried before different juries. The existence of this possibility strongly favors the construction that each civil action be regarded as a separate judicial unit for Rule 54(b) purposes. By its terms the rule is applicable when multiple claims or multiple parties are presented “in an action.” We hold, therefore, that, at least absent consolidation for all purposes of cases separately filed, each civil action is to be viewed as a separate unit. Since the order granting summary judgment for Gulf in Parisi and for Exxon in Bogosian wholly terminated the defendants respectively from those cases, the court was empowered to enter judgment upon the orders. We need not consider, therefore, whether the allegations of the complaint state a single or multiple claim for Rule 54(b) purposes.
B. Abuse of Discretion
Once it is determined that the district court was empowered to enter final judgment under 54(b), its decision to do so can be set aside only for an abuse of discretion. Mackey, supra,
In this case we have the benefit of the district court’s opinion explaining the basis for its particular exercise of discretion. We do not necessarily agree with all of the reasons proffered by the district court. We discuss only those which are important to our conclusion that its order was consistent with the sound exercise of discretion:
(1) No disposition of the pending claim which the district court might make could moot the issues presented by the appeal of the conspiracy claim.
(2) The questions presented by the appeal are not before the district court as to the defendants against whom live claims are pending.
We think that the question before us could be mooted by a disposition of the pending claim in the district court. As defendants argued, a resolution of the tie-in claim in favor of the lessor defendants will moot the “conspiracy claim.”
Defendants also contend that a district court decision in favor of plaintiffs would moot the claim involved in this appeal. They argue that plaintiffs can recover the full amount of their damages from the lessor defendants obviating the need to litigate against the nonlessor defendants. We cannot accept this reasoning. We know of no principle of law which would preclude suit by plaintiffs against alleged co-conspirators of defendants against whom a judgment has been obtained. The purpose of the antitrust laws would be ill-served if defendants implicated in a broad based unlawful conspiracy could avoid trial simply by pointing to the possibility of plaintiffs obtaining full monetary relief against other defendants in a related antitrust action. Moreover, eliminating the 13 nonlessor defendants from trial would preclude plaintiffs and the class from obtaining the injunctive relief sought against those defendants.
The second point we question is whether the issues before us on this appeal may again require attention by this court on a subsequent appeal. As we have indicated, two of the 15 defendants, Atlantic Richfield and Cities Service are not now before this court. A decision by this court in favor of plaintiffs on any issue would not bind the absent defendants. Nevertheless, if in that situation the district court were to decide either the summary judgment motion or class action issue against the absent defendants in a manner consistent with our decision as to the other defendants, the absent defendants could appeal that decision at the appropriate time, forcing us to consider these issues again. While we agree that such is the law, we do not agree that such an eventuality necessarily makes it inappropriate to enter final judgment without delay.
We have noted that with the advent of the 1961 amendment it is now possible in appropriate cases to enter final judgment as to some but fewer than all parties even though a single claim is involved. In that situation, it would be clear that the court of appeals might be forced to consider the same claim again as to the parties against whom no judgment had been entered at the time of the appeal. Thus, we conclude that that fact alone cannot make it inappropriate to enter final judgment as to some but fewer than all parties.
We have the benefit on this appeal of the joint brief of 13 defendants, 11 of whom are nonlessors with whom Atlantic Richfield and Cities Service are similarly situated. Although our mandate will not bind the absent defendants, we recognize, nevertheless, that the operation of stare decisis is unlikely to make full reconsideration of the issues decided on this appeal unlikely if and when those issues are tendered on a subsequent appeal.
In sum, the district court was faced with a complex antitrust case stating two theories, a conspiracy-tying allegation resolution of which was final as to 13 defendants, and a contract-tying allegation which was pending trial and involved two defendants. There is a possibility that decision on the contract theory pending trial could moot the question presented on the appeal from the conspiracy-tying theory. Nevertheless, a decision on that claim might take a number of years to reach, and, in the interim, the defendants would bear the uncertainty arising from the fact that they may be forced to defend a massive antitrust claim years in the future. More importantly, an appellate decision reversing the entry of summary judgment on the conspiracy-tying claim might necessitate a second trial, at least part of which would involve proof of the same alleged tying arrangement involved in the trial of the contract-tying theory. Moreover, because the summary judgment was granted on the basis of the pleadings, our need to examine the record at this stage is minimal. We will thus not be twice forced to master the complex factual situation underlying the claims of the existence of a conspiracy and the validity of the alleged tying arrangements.
The immediate entry of final judgment will promote a unified disposition of the substantive tying claims presented here as to all defendants without significantly delaying the disposition as to the two lessor defendants and without causing duplication of effort by this court. These matters lie at the heart of the tension between the conflicting policies inherent in Rule 54(b). We find no abuse of discretion in the district court’s implicit determination that the policy against piecemeal review was not unduly frustrated by immediately entering these judgments.
Defendants contend that assuming that the entry of judgment under Rule 54(b) was proper, there is no jurisdictional basis to appeal the earlier order of the district court denying class action certification. They argue that if we were to reverse the summary judgments, the issue would be moot, while if we affirm, the case merely reverts to the status ante. It is anomalous, they suggest, that our prior refusal to entertain the class action issue under 28 U.S.C. § 1292(b) should suddenly be reversed when the conspiracy-tying claim is appealed under Rule 54(b).
Defendants’ argument fails to take cognizance of Wetzel v. Liberty Mutual Insurance Co.,
II. SUMMARY JUDGMENT
A. Standard of Review
Plaintiffs contend that notwithstanding that the district court styled its order as one granting summary judgment, the order should be reviewed as one granting a 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. “It is a familiar principle that the label [which] a district court puts on its disposition of a case is not binding on a Court of Appeals.” Tuley v. Heyd,
The district court held that “[because] the complaint fails, as a matter of law, to state a cause of action under Sherman Act § 1 against [the nonlessor defendants], summary judgment will be granted and plaintiffs’ Rule 56(f) motion will be denied.”
It is clear from the district court’s opinion that it excluded everything but the complaint in granting the motions. Moreover, the record before us shows that the discovery which had been taken was directed solely toward the class action issues. The memorandum in support of plaintiffs’ Rule 56(f) motion indicated that the evidence which would support its theory of a combination or conspiracy was, as it usually is in such cases, in the hands of defendants and that summary judgment should not be granted without affording plaintiffs an opportunity for discovery on the issue of concerted action. “ [W]e have said that where the facts are in possession of the moving party a continuance of a motion for summary judgment for purposes of discovery should be granted almost as a matter of course.” Costlow v. United States,
The district court could dismiss for failure to state a claim upon motion for summary judgment, but a motion so decided is functionally equivalent to a motion to dismiss. Schwartz v. Compagnie General Transatlantiqne,
The standards by which the orders must be tested is whether taking the allegations of the complaint as true, Cooper v. Pate,
B. Sufficiency of the Complaint
The first amended Bogosian complaint made a number of allegations of unlawful practices which it alleged were accomplished by a “conspiracy” among defendants “through a course of interdependent consciously parallel action pursuant to a tacit understanding by acquiescence coupled with
“13. For many years past, the exact date being presently unknown to plaintiffs, but at least as early as 1957, and continuing to the present, defendants, through a course of interdependent consciously parallel action, have required all dealers who lease . . .”
“14. The leasing practices of the defendants, individually and collectively, through interdependent consciously parallel actions, as aforesaid, including the use of short-term leases, leases based on contracts for the sale of lessor’s brand of gasoline, and other contractual arrangements, have enabled the defendants to compel the lessee-dealers to purchase the lessor’s brand of gasoline and not to purchase any other brand of gasoline for resale.
“16. The unlawful, acts of defendants as aforesaid constitute an unreasonable combination in restraint of interstate trade and commerce in the marketing of gasoline in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
“17. By means of their unlawful acts and pursuant to and in furtherance of the above-described combination, the defendants have in substantial measure succeeded in jointly accomplishing the following:
“19. As a result of the defendants’ unlawful combination, plaintiff and the members of the class have suffered, and unless defendants are enjoined', will continue to suffer irreparable harm .”
The district court held that the complaint failed to allege either a “contract or conspiracy,” and that the allegation of “interdependent consciously parallel action” did not plead the concerted action required to state a claim under § 1. Although the court recognized that, together with other evidence, consciously parallel business behavior may support an inference of conspiracy, it thought that an allegation of contract, conspiracy or combination is essential to state a claim. The court regarded the omission of the word “conspiracy” for the complaint to be a “deliberately employed strategy” by “experienced and learned attorneys in the field of antitrust litigation.” Thus, it reasoned that although it terminated plaintiffs’ actions for failure to plead the word “conspiracy” it was not resurrecting the requirement of pleading “magic words” which characterized common law pleading.
Plaintiffs argue that the complaint fairly read as a whole alleges a “combination,” and that such an allegation combined with a statement of the specific course of conduct alleged to be unlawful clearly states a claim. We agree.
Paragraphs 16, 17, and 19 of the second amended complaint [hereinafter complaint], quoted supra, expressly refer to an unlawful combination. It is unnecessary to restate defendants’ linguistic arguments to the effect that the word “combination” was not used to refer to an actual combination. Suffice it to say that their acceptance would hardly be consistent with the precept that the complaint be liberally construed.
Even if we had no doubt that plaintiffs’ substitution of “combination” for “conspiracy” was deliberate and purposeful, we would be unwilling to speculate at this stage as to plaintiffs’ theory. Plaintiffs’ complaint alleges an unlawful combination and their briefs have not sought to explain that allegation in terms other than that of a classic combination or conspiracy. We perceive no distinction between the terms combination and conspiracy which would distinguish the two complaints. Our reading-of § 1 cases indicates that the two terms are used interchangeably. As one commentator has noted, the cases have interpreted the statute as “present[ing] a single concept about common action, not three separate ones: ‘contract . . . combination or
The law is settled that proof of consciously parallel business behavior is circumstantial evidence from which an agreement, tacit or express, can be inferred but that such evidence, without more, is insufficient unless the circumstances under which it occurred make the inference of rational, independent choice less attractive than that of concerted action. Compare Interstate Circuit, Inc. v. United States,
“(1) a showing of acts by defendants in contradiction of their own economic interests . . .; and
“(2) satisfactory demonstration of a motivation to enter an agreement >>
Id. at 1314 (citations omitted).
Plaintiffs argue that, given an opportunity to conduct discovery, they will prove that both of these circumstances are present. They contend that independent self interest would indicate that each oil company seek to market gasoline to their competitors’ lessees, and that the failure to so compete can be explained only by a mutual understanding, tacit or expressed, that gasoline be marketed to lessee-dealers on an exclusive basis. The motivation to participate in such an agreement, of course, is the elimination of price competition among oil companies at the wholesale level. We need not, at this time, consider whether this theory would necessarily carry the day, for we are satisfied that, at the least, it does not appear to a certainty that plaintiffs can prove no set of facts which under Venzie would entitle them to reach the jury.
Defendants argue nevertheless, and the district court held, that the failure to allege an agreement is fatal to plaintiffs’ claim. We think that this position is based upon a misunderstanding of the limited role of the complaint in federal practice. It is not necessary to plead evidence, nor is it necessary to plead the facts upon which the claim is based. “To the contrary, all the Rules require is ‘a short and plain statement of the claim’ that will give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Conley v. Gibson,
The detailed statement of parallel lease provisions contained in plaintiffs’ complaint which are alleged to be the product of an unlawful combination clearly meets these requirements. It was not necessary for plaintiffs to plead the basis upon which that combination will be proven. The goals of efficient judicial administration are retarded, not advanced, when the pleadings are used as a battleground for legal skirmishes without the necessary factual development upon which to focus decision. Clark, Special Pleading in the “Big Case,”
Plaintiffs also contend that even if their complaints are construed not to allege a combination, that an allegation of interdependent consciously parallel action states a § 1 claim. Neither plaintiffs nor defendants offer a definition of interdependence, however. A situation of interdependence has been said to exist when, in a highly concentrated market, there is an awareness that, because of the limited number of sellers, any variation in price or price-related structures will necessarily have a demon
There is a lively debate, however, concerning the relationship of interdependence to collusion. On the one hand, Professor Posner, for example, has said that interdependence cannot occur without, and hence is a product of, collusion. See Posner, Oligopoly and the Antitrust Laws: A Suggested Approach, 21 Stan.L.Rev. 1562-76; 1591-92 (1969). On the other hand, Professor Sullivan has said that interdependence can exist apart from collusion, but that noncollusive interdependent activity can, under certain circumstances, amount to an unlawful combination. Sullivan, supra § 122; See Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. 655, 660-81 (1962).
If these theories are to be tested, it should be done on a fully developed factual record which probes the conflicting economic facts on which they are premised. The complaint is much too blunt an instrument with which to forge fundamental policies regarding the meaning of competition in concentrated industries. Cf. White Motor Co. v. United States,
C. Standing Under §§ 4 and 16
In their motions for summary judgment and on appeal, defendants argued that plaintiffs lacked standing under §§ 4 and 16 of the Clayton Act
The gravamen of the complaints is that defendants jointly imposed a system of lease arrangements which eliminated wholesale price competition among defendants on sales to independent dealer lessees. The fact that each plaintiff and class member had direct business dealings with only one defendant is not dispositive, for plaintiffs allege that it was the joint participation of all defendants in the unlawful scheme which made possible the charging of supracompetitive prices to each dealer by his supplier. Thus, this case is similar to
Plaintiffs allege that the purpose and effect of the tie-in practice is to eliminate wholesale competition thus affecting the price and other conditions surrounding their purchase of gasoline. The injury of which they complain is the immediate, direct and proximate consequence of defendants’ actions. Since the unlawful practices of which plaintiffs complain were imposed directly upon them, they are the logical suitors to vindicate the antitrust laws.
Defendants argue that the deposition testimony of Bogosian and Parisi establishes that neither has any claim against nonlessor defendants, that neither attempted to purchase gasoline from any defendant other than his lessor, and that neither made a claim of concerted action by his lessor with the other defendants.
The record indicates that the reason plaintiffs did not seek to purchase gasoline from other oil companies was not their lack of desire to do so, but that they feared termination of their leaseholds if such an attempt were made, or that such an attempt would be futile. We also reject the argument that an antitrust plaintiff’s statement that he was not injured by alleged co-conspirators demonstrates his lack' of standing as to them. As the district court noted, “plaintiffs would not be expected to understand the legal ramifications or even be aware of the activities of the defendants which may have injured them.”
III. REFUSAL TO CERTIFY UNDER 23(b)(3)
Before certifying a class under Rule 23(b)(3), the district court must determine that the four prerequisites contained in 23(a) are satisfied, “that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” Before making its finding on predominance, the court must, of course, identify the issues involved in the lawsuit and which are common, and before making its finding on the superiority of the class action device, it must apply the fairness and efficiency criteria contained in the rule.
In Katz v. Carte Blanche Corp.,
A. Prerequisites to Maintaining Class Action
Although the district court did not discuss the prerequisites expressly, the structure of its opinion leads us to believe that it regarded them as having been met. Based upon our independent review of the record we conclude that all have been satisfied. We discuss each briefly:
(1) Numerosity. Estimates of the number of class members have varied between 100,000 to 2 million, but it is conceded by all parties that the numerosity requirement has been met. (2) Common Questions. It is also clear that there are at least some issues of both fact and law which are common to the class as our discussion in the
B. Identification of Common Questions
1. The Elements of A Tying Violation a
The elements of a Sherman Act § 1 tying violation are well settled. As w'e indicated in Ungar v. Dunkin’ Donuts of America, Inc.,
Relying upon Ungar, defendants appear to argue that coercion is a requirement of proof in all tying cases. Neither Ungar nor any other case has so held. Rather, Ungar affirmed that under a long line of Supreme Court precedents a tying claim consists solely of the three elements quoted above. Assuming economic power over the tying product and a not insubstantial amount of commerce, the plaintiff need only show that a seller conditioned the sale of one product (the tying product) on the purchase of another product (the tied product). It has never been an element of plaintiff’s case to disprove, nor even a permitted defense, that the tied product is superior to others available on the market, or that even without the tie requirement plaintiff would have purchased the tied product. The short answer to defendants’ contention is, and has always been, that without a tie requirement, “[i]f the manufacturer’s brand of the tied product is in fact superior to that of competitors the buyer will presumably choose it anyway.” Standard Oil Co. v. United States,
The purpose of the rule against tying is to insure that a buyer’s choice is counseled
The rule for which defendants contend would be analogous to a rule in price-fixing cases either requiring plaintiffs or permitting defendants to prove that .the market set prices would have been ño lower than the fixed prices — a proposition long since put to rest. United States v. Socony-Vacuum Oil Co.,
b
A number of cases have recognized, however, that an illegal tie-in may exist even when the seller has not expressly conditioned the sale of one product upon purchase of another, if the existence of a tie-in can otherwise be established from business conduct. E. g., Advance Business Systems & Supply Co. v. SCM Corp.,
In Ungar, all of the franchise agreements avoided conditioning the sale of the allegedly tied products on the purchase of the franchise, and some affirmatively secured to the franchisee the right to purchase those products from other suppliers. Plaintiffs nevertheless claimed that this right was illusory because they were coerced into accepting unwanted products from the franchisor or its designee. The district court held that the “ ‘individual coercion mode of proof of use is inapplicable in a class context. . . . ’” and that “ ‘. [PJersuasion or influence may be the virtual equivalent of coercion where there is an unequal relationship between the parties .,’ [or [that] use of economic power in a class context may be inferred] ‘from the acceptance by large numbers of buyers of a burdensome or uneconomic tie.’ ”
Although in Ungar we spoke of coercion as being implicit in the leverage concept upon which the tying rule is premised, we were not articulating coercion as a separate legal element of proof. As we indicated in III B 1 a supra, leverage or coercion is implicit when plaintiff proves the conditioning of sales of one product upon purchase of another. We read Ungar to have required coercion to be proven only because the conditioning of the sale of one product upon purchase of another was not reflected in the agreement or in the operation of its terms. We refused to “con
c
All but one of the cases which we have found discussing coercion as an element of proof in a tying claim have application to the situation in which the existence of a tie-in is sought to be proved on the basis of a request or suggestion coupled with pressure, intimidation, in short — coercion.
One case, Capital Temporaries, Inc. v. The Olsten Corp.,
There have been several cases in which the claim that actual coercion was necessary to prove the existence of a tie-in has been rejected because the seller expressly conditioned sale of one product upon purchase of another. E. g., Hill v. A-T-O, Inc., supra; Aamco Automatic Transmissions, Inc. v. Tayloe,
2. The Existence of a Tie-In
In order to apply the legal standards stated above to the claims made here, it is necessary to first identify in greater depth the nature of the claims. The complaint indicates that plaintiffs seek relief on two distinct grounds. Plaintiffs contend that it is illegal for defendants to require as a condition to the leasing of a gas station site that the lessee purchase gasoline only from
a. Lease Claim
There is no single lease provision which requires that the lessee purchase all gasoline from his lessor. Plaintiffs contend that a constellation of lease provisions in each agreement accomplish the same result, however. These provide that the lease shall expire in 6 or 12 months, that lessee can make no alterations to the leasehold without lessor’s approval, that lessee must license the use of lessor’s trademark, that as a condition of the trademark, lessee not sell gas other than that provided by lessor from pumps bearing lessor’s trademark, that lessee pay rent as a percentage of gas volume sales subject to a minimum rent, and that the lease shall terminate whenever the lessee fails to purchase a stated quantity of gasoline.
Defendants- argue that these provisions would not prevent a lessee from installing his own pumps and tanks from which to sell other brands of gas. Plaintiffs assert that it is uneconomical to invest thousands of dollars in construction of tanks and pumps on a 6- or 12-month lease, that such alteration is grounds for termination, and that the minimum purchase quotas would insure termination if competing brands were sold.
The district court held that since there is no single lease provision which expressly requires lessees to purchase gas from defendants, the lease tie-in claim presented disparate legal and factual questions because (i) it would be necessary to make “a factual determination in each and every lease that there was such economic coercion in fact as to constitute an illegal tie-in agreement; and (ii) maintenance as a class action would require the examination of over 400 various contractual forms used by the 15 defendants to determine whether the various leases have the effect of precluding purchase of gasoline from other than the lessor.
(i) Coercion
We cannot agree with the district court that proof of coercion is necessary to the existence of a tie-in on the theory under which the lease claim is brought. Plaintiffs do not contend that defendants pressured them into refraining from selling competing brands, but that the lease contracts themselves precluded them from doing so. Defendants acknowledge that the only way a lessee could sell other brands under the lease agreements would to be install his own pumps and tanks. Whether such a course is realistically open to a short term lessee is a common question of fact which can be developed by expert testimony concerning the relative costs and benefits of making such installations. Similarly, a lease provision which permits termination of the lease when a stated quantity of gasoline is not purchased from the lessor hardly leaves the lessee open to reject some or all of the lessor’s gas in favor of that of a competitor. If plaintiffs are able to show that the lease agreements in use by all defendants have similar clauses which have the practical economic effect of precluding sale of other than the lessor’s gasoline, they will have shown that the purchase of gasoline was tied in to the lease of the service station. Under these circumstances the lease agreement itself conditions the sale of one product (here a lease) upon purchase of another, and as we indicated in part III B 1 a, supra, proof of coercion is not a required element of plaintiffs’ case.
Assuming that plaintiffs do not have direct evidence of a conspiracy among the defendants, it will be necessary for plaintiffs to introduce evidence of the various lease agreements used by each defendant in order to show parallel business behavior from which a conspiracy can be inferred. If the action were not sought to be maintained on a class basis, a single plaintiff, in order to prove a conspiracy on this basis, would have to prove this much.
b. Trademark Claim
Plaintiffs contend that all gasoline of the same octane rating is fungible, that defendants, in fact, exchange their gasolines when convenient, and, citing Siegel v. Chicken Delight, Inc.,
defendants concede that a trademark protection clause in one form or another is contained in every lease agreement or arrangement between the defendant oil companies and their respective lessees.
These clauses, are the primary basis for plaintiffs’ claims of illegal tying agreements. In general, the trademark protection clauses, however worded, prohibit a lessee from selling any gasoline under the lessor’s trademark or brand name or from any of the pumps or tanks bearing lessor’s trademark or brand name or insignia, unless such gasoline is sold and supplied to lessee by the lessor.62 F.R.D. at 128 (footnote omitted)
The court also opined that “[I]f the sole question were whether such trademark protection clauses, however worded, constituted in and of themselves violation of the antitrust laws, a class action for determining the legality of such a clause might be appropriate.” Id. at 136.
We think that these statements indicate that the trademark claim presents a uniform question of law common to the class. Fairly read, plaintiffs’ contention is that the trademark protection clauses, both singly and in conjunction with other clauses evidence an antitrust violation. Even assuming that the court were correct in its conclusion that the lease claim is not appropriate for class determination, it nevertheless should have considered certification of the trademark claim under Rule 23(c)(4)(A).
3. Sufficient Economic Power Over the Tying Product (leaseholds) to Appreciably Restrain Competition in the Tied Product (wholesale gasoline sales)
The district court recognized that strategic land sites can be used as a tying product, but thought that in order to maintain a class action it would be necessary to determine that every oil company-leased station in the country was so strategically located as to be able to restrain competition
4. Existence of a Conspiracy
The district court was correct in concluding that this question is one common to the class.
5. Fact of Damage
If plaintiffs prove a violation of the antitrust laws they must still prove that they have suffered the “fact of damage” as a consequence of the violation in order to recover under § 4. The district court seems to have assumed that the fact of damage would have to be proven on an individual basis. For the reasons we will discuss, there is nothing in this record which persuades us that this necessarily is the case.
There are two distinct aspects to what in antitrust literature has come to be known as a requirement of fact of damage in private suits under § 4 of the Clayton Act. See Pollock, The “Injury” & “Causation” Elements of a Treble-Damage Antitrust Action, 57 Nw.L.Rev. 691 (1962). One of these is founded upon the recognition that some limitation must be placed upon liability stemming from violations which may have a widespread and unforeseeable ripple effect throughout the economy. Thus, notwithstanding the language of § 4 that “[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . . ,” as a matter of policy, courts have uniformly limited the private action to those plaintiffs whose injury is not too indirect, remote or incidental a consequence of a violation. This policy has been expressed under the rubric of “standing” and implemented under a “target area” test, see, e. g., Billy Baxter, Inc. v. Coca-Cola Co.,
The second aspect is comprised of two elements — that plaintiff suffered some loss in his business or property and that there is a causal relationship between the violation and the loss. Fact of damage in this sense is purely factual and does not involve questions of policy in its routine application. It advances no policy apart from the simple concept of causation — that plaintiff has suffered loss as a consequence of the violation. See Bigelow v. United States,
Since, as we have indicated, the second aspect of fact of damage is a simple concept of causation, any evidence which is logically probative of a loss attributable to the violation will advance plaintiff’s case. There is absolutely no requirement that the loss be personal or unique to plaintiff, so long as the plaintiff has suffered loss in his business or property, for as we have noted, this second aspect of fact of damage is not concerned with any policy of limiting liability. Thus, when an antitrust violation impacts upon a class of persons who do have standing, there is no reason in doctrine why proof of the impact cannot be made on a common basis so long as the common proof adequately demonstrates some damage to each individual. Whether or not fact of damage can be proven on a common basis therefore depends upon the circumstances of each case.
The method by which loss will be proven may depend upon the type of violation in-' volved and its impact on plaintiffs business or property. For example, if anticompeti-tive practices result in the destruction of plaintiff’s business, he may recover as damages lost profits or the going concern value of the business. See Zenith Radio Corp. v. Hazeitine Research, Inc.,
If, in this case, a nationwide conspiracy is proven, the result of which was to increase • prices to a class of plaintiffs beyond the prices which would obtain in a competitive regime, an individual plaintiff could prove fact of damage simply by proving that the free market prices would be lower than the prices paid and that he made some purchases at the higher price. If the price structure in the industry is such that nationwide the conspiratorially affected prices at the wholesale level fluctuated within a range which, though different in different regions, was higher in all regions than the range which would have existed in all regions under competitive conditions, it would be clear that all members of the class suffered some damage, notwithstanding that there would be variations among all dealers as to the extent of their damage. “[The] burden of proving the fact of damage under § 4 of the Clayton Act is satisfied by . proof of some damage flowing from the unlawful conspiracy . . . .” Zenith Radio, supra,
Since in this case neither the parties nor the district court focused upon the issues which would determine whether fact of damage may be proven on a class basis, we think the matter should be reconsidered by the district court in light of this opinion. If the district court should conclude that fact of damage cannot be proven on a class basis, it should also consider the problem, which we noted but did not reach in Link v. Mercedes Benz of North America, Inc.,
6. Damages
As we have already indicated, plaintiffs could elect to prove damages on the basis of
The district court also thought that plaintiffs’ proof of damages would be subject to the defense that, due to competition at the retail level, any lower wholesale price which would have obtained under a competitive wholesale market would be passed on to the consumer, leaving the dealer no better off. This fact, it thought, would require complicated and varying proof of local market conditions to prove loss of profit. The court is indeed correct that such an inquiry would be enormously complicated, posing a tremendous burden on the presentation of plaintiffs’ case. But it is precisely for this reason that the Supreme Court eliminated the “passing-on defense” in Hanover Shoe, Inc., supra,
With respect to the calculation of the amounts of damages, it would be necessary for each member of the class individually to prove the quantity of gasoline purchased at supracompetitive prices and the price paid. Nevertheless, it has been commonly recognized that the necessity for calculation of damages on an individual basis should not preclude class determination when the common issues which determine liability predominate. E. g., Philadelphia Electric Co. v. Anaconda American Brass Co.,
C. Comparative Fairness and Efficiency Criteria
The district court’s reasons for concluding that a class action would not be superior to the prosecution of numerous individual suits appear at
With respect to former lessees, however, plaintiffs proposed notice by publication in trade journals. If the names and addresses may be ascertained through reasonable effort, regardless of expense, plaintiffs must bear the cost of individual notice to every proposed member of the class. Eisen v. Carlisle & Jacquelin,
D. Class Action Issues: Conclusion
We conclude that the district court erred in identification of the issues which are common to the class. As we have indicated, all of the issues necessary to determine violation and, possibly the determination of the fact of damage as well, ate, under established legal principles, common and tria-ble on a class basis. We further conclude that the district court erred in evaluating the comparative fairness and efficiency criteria in making its finding of the superiori
The judgments of the district court will be vacated and the cases remanded for further proceedings consistent with this opinion. The order refusing class certification will be vacated and the cases remanded for reconsideration in the light of this opinion.
Notes
. Rule 56(f) provides:
. We recognize that whether the complaint fairly alleges concerted action in the form of a conspiracy or combination is one of the issues on this appeal. For present purposes in the
. Since the nonlessor defendants are not parties in the claim pending in the district court, mutuality is lacking. Nevertheless, we have indicated that a lack of mutuality will not preclude defensive use of collateral estoppel at least absent special circumstances indicating unfairness. Provident Tradesmen’s Bank & Trust Co. v. Lumbermen's Mutual Cas. Co.,
. “To avoid conflicts in panel decisions no subsequent panel may overrule a published opinion of a previous panel. Court in banc consideration is required to overrule a previous decision of this Court.” Internal Operating Procedures of the United States Court of Appeals for the Third Circuit at 13.
. Section 4, 15 U.S.C. § 15 provides:
Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.
Section 16, 15 U.S.C. § 26 provides inter alia :
Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties,against threatened loss or damage by a violation of the antitrust laws, .... when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity under the rules governing such proceedings, .
The parties have not pointed to any doctrinal distinctions between sections 4 and 16 which would require individual discussion of the issues under each. We will, therefore, for the sake of convenience, discuss both problems together under § 4.
. On first glance it may seem anomalous that we discussed nonjurisdictional issues prior to discussing standing. The' policy of limiting liability implicit in § 4 which has evolved under the rubric of “standing,” however, is a concept of proximate causation distinct from the concept of personal stake necessary to establish article III jurisdiction. Our discussion here deals only with the former concept which has been misnamed “standing.”
. Parisi was a lessee of Exxon from 1968-71, but is now, according to his deposition testimony, a lessee of Atlantic Richfield.
. We believe that proof that a not insubstantial amount of interstate' commerce is affected can be adduced on a common basis and consequently that element will not be further discussed.
. Neither in Ungar nor in this case are we faced with the situation in which the existence of a tie-in is attempted to be shown by a uniform writing extrinsic to the agreement.
. See note 11, infra.
. One case, Hehir v. Shell Oil,
. It follows from the foregoing discussion that if class certification is granted, plaintiffs will be
. If plaintiffs had direct evidence of conspiracy, it would be unnecessary to prove that each defendant actually imposed the tie-in upon its lessees, only that each agreed to do so. See United States v. Socony-Vacuum Oil Co.,
Dissenting Opinion
dissenting.
I agree with the majority that this court has jurisdiction of the appeal under 28 U.S.C. § 1291 and Rule 54(b), F.R.Civ.P., and that the plaintiffs have standing to sue non-lessors under §§ 4 and 16 of the Clayton Act. At that point, however, I part company with my brothers. In my view, the decision of the district court holding that plaintiffs have failed to state a claim under § 1 of the Sherman Act should be affirmed, as should its decision denying class certification.
I.
A.
My first, and most fundamental, disagreement with the majority concerns the role of pleading and discovery in this kind of litigation. The majority says that a “complaint is much too blunt an instrument with which to forge fundamental policies.” But, if a complaint cannot even be depended on to state the essential theory of the litigation, I do not know how a court can correctly resolve the particular case, must less forge fundamental policies. This is not a pro se case. Plaintiffs’ counsel are competent, experienced and, in fact, nationally renowned attorneys in the antitrust field. Nor is this a case that was hastily terminated by summary judgment. The original complaints were filed in 1971, the Bogosian complaint was amended in 1972, and both complaints were amended in 1973. Now, six years after the action was commenced, the majority remarks that it is “unwilling to speculate at this stage as to the plaintiffs’ theory.” In my view, this case has long since passed the stage where anyone concerned — parties, lawyers, or judges— should have to speculate as to the theory of the litigation.
The majority’s precise holding is that “the ruling that the specific allegation of interdependent consciously parallel action made here fails to state a claim should be vacated so that the issue can be decided, if necessary, after the relevant facts are fully developed.” This is jurisprudential anarchy. Although the majority purports to act in the interest of efficient judicial administration, I fail to see how that interest is served by allowing what probably will be massive discovery prior to deciding whether the basic theory of the action is legally viable. The relevant facts should be fully developed after it is determined whether the claim is legally sufficient, not while that issue is still in doubt. Moreover, until the theory of the case is settled, it will not be known which are the “relevant” facts. Facts are only relevant insofar as they support a valid legal theory.
A motion to dismiss or for summary judgment for failure to state a claim seeks to obviate the necessity for time-consuming and expensive discovery in cases where the facts are irrelevant because no legal claim has been stated. Requiring discovery as a predicate to deciding such a motion defeats the very purpose of the motion. Although the majority says that further factual development will help to test the legal theory, I do not think that is the case here. The question is whether an allegation of interdependent consciously parallel action states a Sherman Act claim. Either it does or it does not. That may be a sophisticated question, but it is a question of policy, not of fact. The kind of adjudicative facts which will be developed by discovery in a particular case concerning particular plaintiffs and defendants in a particular industry will be of no help whatsoever.
I accept the principle that summary judgment is to be sparingly granted in complex antitrust cases. Primarily, this applies to cases where a cognizable claim has been stated and the question is whether there are disputed material issues of fact. I do not understand the principle as undermining
Federal procedure relies on notice pleading rather than fact pleading, but at a minimum, as explained by the Advisory Committee on Civil Rules in October, 1955, the pleader is required “to disclose adequate information as the basis of his claim for relief”. 2A J. Moore, Federal Practice ¶ 8.01[3] (2d ed. 1974). Conley v. Gibson,355 U.S. 41 , 47,78 S.Ct. 99 , 103,2 L.Ed.2d 80 (1957), teaches that “the defendant [be given] fair notice of what the plaintiff’s claim is and the grounds upon which it rests,’’ (emphasis supplied), and we have recently reiterated that the defendant is entitled to “fair notice of the claim asserted.” Joiner Systems, Inc. v. AVM Corp.,517 F.2d 45 , 47 (3d Cir. 1975).
Universe Tankships, Inc. v. United States,
B.
My reading of the complaint differs from the majority’s. After two or three amendments by skilled counsel, I think it is time to take the words of the complaint for what they actually say. By amendment to their complaint and pursuant to what the district court termed a “deliberately employed strategy”,
It is well settled, and indeed it is not here disputed, that conscious parallelism is not a violation of § 1 of the Sherman Act. Theater Enterprises, Inc. v. Paramount Film Distributing Corp.,
The crucial question is whether respondents’ conduct toward petitioner stemmed from independent decision or from an agreement, tacit or express. To be sure, business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. Interstate Circuit, Inc. v. United States, 306 U.S. 208 ,59 S.Ct. 467 ,83 L.Ed. 610 (1939); United States v. Masonite Corp.,316 U.S. 265 ,62 S.Ct. 1070 ,86 L.Ed. 1461 (1942); United States v. Bausch & Lomb Optical Co.,321 U.S. 707 ,64 S.Ct. 805 ,88 L.Ed. 1024 (1944); American Tobacco Co. v. United States,328 U.S. 781 ,66 S.Ct. 1125 ,90 L.Ed. 1575 (1946); United States v. Paramount Pictures, Inc.,334 U.S. 131 ,68 S.Ct. 915 ,92 L.Ed. 1260 (1948). But this Court has never held that proof of parallel business behavior conclusively establishes agreement or, phrased differently, that such behavior itself constitutes a Sherman Act offense.
If there is anything in this case that hearkens back to “magic words”, it is not, as the majority suggests, the requirement that a Sherman Act complaint allege concerted action of some kind. It is rather, the asserted power of the word “interdependent” to breathe vitality into a lifeless theory of recovery. Nowhere has the talismanic character of that word been explained to my satisfaction. Indeed, it seems to me that interdependence is implicit in the notion of conscious parallelism and that the added word is hardly more than a redundancy. In the usual situation of parallel business behavior, a businessman is conscious of what his competitor is doing and his action, or inaction, depends on what the competitor does. This is not a violation of the antitrust laws; it is, in fact, the essence of the competitive behavior that those laws seek to promote. Because his competitor takes the same attitude toward him, the two businessmen are mutually conscious of each other and their actions are “interdependent”. In a concentrated industry, such mutually conscious and interdependent conduct by several competitors may have anti-competitive effects. But it is not necessarily collusive, and I cannot understand how a proliferation of descriptive words changes the legal status of the conduct. Until there is a contract, combination or conspiracy, in restraint of trade, there is no § 1 violation. As the Supreme Court observed in Theater Enterprises: “Circumstantial evidence of consciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward conspiracy; but ‘conscious parallelism’ has not yet read conspiracy out of the Sherman Act entirely.”
In their brief in this court, plaintiffs rely primarily on Wall Products Co. v. National Gypsum Co.,
Like the majority, the plaintiffs have mistaken an issue of pleading for an issue of evidence. We are not presented with a situation where interdependent consciously parallel action — however that may differ from merely consciously parallel action— has been introduced as evidence of a prop
II.
Having said initially that it is “unwilling to speculate at this stage as to the plaintiffs’ theory,” the majority proceeds to “identify in greater depth the nature of the claims” and to conclude that the district court erred in denying class certification. For purposes of summary judgment, apparently, the exact theory of the case remains foggy to the majority, but for purposes of class action determination the detailed elements of the claim have become pellucid. If the exact nature of the legal theory is clear, then the case is ripe for a test of whether a claim has been stated. If the legal theory is not clear, then the question of class certification ought to abide the clarification of the issues.
This is not an ordinary class action. Plaintiffs do not seek to form a class of all Exxon dealers, or all Gulf dealers, or all Texaco dealers. They seek to form a truly titanic class of all present and former lessee gasoline dealers of 15 different oil companies. The only limitation on the class is that the dealers be located in areas having a population over 15,000. At the very least, the size and diversity of the asserted class raise serious questions about the propriety of class action treatment. Moreover, the members of the class are not consumers with individually small or de minimis claims. Nor are the class members persons who have been deprived of non-quantifiable civil rights. The class members are businessmen, more or less sophisticated, with significant and definite financial interests in the litigation. This is not, therefore, a case where it would be economically impractical to prosecute individual actions.
A.
The majority has concluded that the district court erred when it found that common questions would not predominate over individual ones, as required by Rule 23(b)(3). I disagree. Rather than paraphrasing, I prefer the exact language concerning our review of a predominance finding as stated in Katz:
If the district court has properly identified the issues common and diverse, we would undoubtedly defer in most instances to its conclusion as to predominance, since that requirement relates to the conservation of litigation effort, and the trial court’s judgment probably will be as good as ours. If the district court has applied the correct criteria to the facts of the case, then, it is fair to say that we will ordinarily defer to its exercise of discretion.
Katz v. Carte Blanche Corp.,
The majority says that the district court erred in identifying the issues which are common to the class. This is not to say that the district court, in its thorough treatment, failed to identify any issues in the case. Rather, this is a euphemistic way of indicating that the majority disagrees with the district court’s decision to require individualized proof on certain issues. I believe that the judicial structuring of the proof, especially in a complicated proceeding like this one, lies necessarily and unalterably within the discretion of the district court. Not only do I find no abuse of that discretion, but, on most points, my own analysis would track the district court’s quite closely-
The question of market power in the tying product, leaseholds, will similarly present diverse, not common, questions. The majority asserts that market power could be demonstrated by showing that “defendants controlled a majority of existing service stations and that because zoning restrictions and high capital costs make development of new stations difficult, the defendants have sufficient market dominance over existing stations to impose a tie-in.” I have at least two serious problems with this line of reasoning. To begin with, I have no doubt that plaintiffs could show that defendants control a majority of existing stations. This follows almost tautologically from the fact that plaintiffs have named as defendants most of the major companies in a concentrated industry. This element of proof can be satisfied in any reasonably concentrated industry simply by naming enough defendants. Secondly, I fail to see how zoning restrictions and capital costs could be established by common proof. Certainly zoning laws vary from city to city, and I have no doubt that the capital costs of developing a station do also.
The majority concedes that the quantum of damages would have to be individually established. But it finds “nothing in this record which persuades us” that the fact of damage would have to be individually proven, and directs the district court to reconsider the matter in light of the majority’s opinion. Although I agree with the majority that the propriety of proving the fact of damage on a common basis depends on the circumstances of the case, I find nothing in this record which persuades me that the fact of damage would not have to be individually proven. There is no reason why there might not be dealerships which suffered no damage at all as a result of defendants’ conduct, be it legal or illegal. As the majority observes, it is possible that “in certain areas the free market price would be no lower than the conspiratorially affected price.” For me, however, the issue is of little importance as I would not upset the district court’s predominance finding even if the fact of damage were a common question.
I do not dispute the fact that there may be common questions. For example, if a conspiracy had been alleged, that would present a common question subject to the same proof whether made on behalf of one plaintiff or a thousand. But the fundamental issue is not the existence of common questions, it is whether the district court abused its discretion in concluding that common questions would not predominate. This is not simply a matter of numbering the questions in the case, labelling them as common or diverse, and then counting up. It involves a sophisticated and necessarily judgmental appraisal of the future course of the litigation, as well as an evaluation of
In my opinion, the district court made no significant error in identifying the issues as common or diverse, it correctly applied the criteria of Rule 23 to the facts, and it clearly did not abuse its discretion in concluding that common questions would not predominate in this colossal but intricate proceeding.
B.
The majority has also concluded that the district court’s reasons for finding the class action not to be superior to other adjudicative vehicles were “erroneous”. Again, Katz articulates the standard of review of a finding on the issue of superiority: “[0]ur review looks first at whether the district court properly applied the relevant criteria to the facts of the case. If this has been done it is fair to say that we will ordinarily defer to its exercise of discretion.”
In this case the district court not only made the ultimate finding of lack of superiority, it expressly applied the subsidiary criteria, which the rule suggests as pertinent, to the facts. It found a significant class member interest in individually controlling separate actions which, as I have indicated, would not necessarily be impractical. It found that disparate factual considerations made concentration of the litigation in one forum not desirable or advantageous. And it found that management of the action would present “enormous difficulties.”
If, for some reason, this case falls outside of the Katz promise “ordinarily” to defer to the district court’s exercise of discretion, that reason is not stated by the majority. Nor am I aware of any reason why this case requires such a departure from settled precepts. I would hold that the district court properly applied the relevant criteria to the facts of the case, and that its finding on the question of superiority was well within the wide range of discretion which it had.
If the district court saw fit to reconsider its class action decision at a later point in the litigation, that would be within its power under Rule 23(c)(1). But I can see no basis at present for upsetting its denial of the class certification, and I would, therefore, affirm that denial.