In re BEEF INDUSTRY ANTITRUST LITIGATION, MDL DOCKET NO. 248.
PONY CREEK CATTLE CO., INC., et al., Plaintiffs-Appellants,
Musselman Ranch Co., etc., et al., Plaintiffs-Intervenors-Appellants,
v.
The GREAT ATLANTIC & PACIFIC TEA CO. et al., Defendants-Appellees.
R. Dirk AGEE et al., Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
MEAT PRICE INVESTIGATORS ASSOCIATION, etc., et al.,
Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
Richard S. LOWE et al., Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
A. L. BLACK et al., Plaintiffs-Appellants,
v.
ALBERTSON'S, INC., et al., Defendants-Appellees (two cases).
CHAPARRAL CATTLE CORP., et al., Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
Burke PETERSEN et al., Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
Ronald BECKER et al., on behalf of themselves and all other
persons similarlysituated, Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
John O. VARIAN et al., Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., et al., Defendants-Appellees.
MEAT PRICE INVESTIGATORS ASSOCIATION et al., Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., etc., et al., Defendants-Appellees.
LITTLE RANCH CO., INC., et al., Plaintiffs-Appellants,
v.
The NATIONAL ASSOCIATION OF FOOD CHAINS, etc., et al.,
Defendants-Appellees.
Ronald BECKER et al., on behalf of themselves and all other
persons similarlysituated, Plaintiffs-Appellants,
v.
SAFEWAY STORES, INC., etc., et al., Defendants-Appellees.
Nos. 78-1817 78-1829.
United States Court of Appeals,
Fifth Circuit.
Aug. 17, 1979.
Ben L. Krage, Kasmir, Willingham & Krage, Dallas, Tex., for Pony creek, et al.
Lowell V. Summerhays, Robinson, Guyon, Summerhays & Barnes, Salt Lake City, Utah, for Varian, et al., Chaparral Cattle Corp., et al. and Petersen, et al.
Robert R. Eidsmoe, Gleysteen, Harper, Kunze, Eidsmoe & Heidman, Sioux City, Iowa, Burt A. Braverman, Frances Chetwynd, Washington, D. C., for Lowe, et al.
Lex Hawkins, Glenn L. Norris, Hawkins & Norris, Des Moines, Iowa, John A. Cochrane, Cochrane & Bresnahan, St. Paul, Minn., for Meat Price Investigators Ass'n, et al. and Becker, et al.
James W. Witherspoon, Donald L. Davis, Witherspoon, Aikin & Langley, Hereford, Tex., for Black, et al.
Joseph M. Alioto, Steven J. Cannata, Law Offices of Joseph L. Alioto, San Francisco, Cal., for Little Ranch Co.
W. Randolph Elliott, Baker, Glast, Riddle, Tuttle & Elliott, Dallas, Tex., for intervenors Powell Cattle Co., et al.
Jess B. Hawley, Jr., Hawley, Troxell, Ennis & Hawley, Boise, Idaho, for Albertson's, Inc., Skaggs-Albertson's.
Sheldon S. Toll, Honigman, Miller, Schwartz & Cohn, Detroit, Mich., for Allied Supermarkets, Inc.
Benjamin M. Quigg, Jr., Stephen W. Armstrong, James J. Rodgers, Morgan, Lewis & Bockius, Philadelphia, Pa., H. Dudley Chambers, Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., for American Stores Co. f/k/a Acme Markets, Inc.
Roy Lewis Shults, Mitchell, Silberberg & Knupp, Los Angeles, Cal., for Arden-Mayfair, Inc.
Sylvan Rapaport, c/o Borman's, Inc., Detroit, Mich., for Borman's, Inc.
George B. Haley, Jr., Kilpatrick, Cody, Rogers, McClatchey & Regenstein, Atlanta, Ga., Robert W. Coleman, Stalcup, Johnson, Meyers & Miller, Dallas, Tex., for Colonial Stores, Inc.
John D. Leech, Calfee, Halter & Griswold, Cleveland, Ohio, for First Nat. Stores, Inc.
David A. Rosen, Stein, Rosen & Ohrenstein, New York City, for Food Fair Stores, Inc.
H. Kenneth Kudon, Danzansky, Dickey, Tydings, Quint & Gordon, Washington, D. C., for Giant Food, Inc.
Kenneth A. Plevan, Skadden, Arps, Slate, Meagher & Flom, New York City, for The Grand Union Co.
Wilson W. Herndon, Strasburger & Price, Dallas, Tex., for Liaison Counsel.
Denis McInerney, Thomas F. Curnin, Cahill, Gordon & Reindel, New York City, for The Great Atlantic & Pac. Tea Co., Inc.
Theodore A. Groenke, Walter M. Jones, McDermott, Will & Emery, Chicago, Ill., for Jewel Companies, Inc.
Alexander E. Bennett, Norman Diamond, Washington, D. C., Wilson W. Herndon, Strasburger & Price, Dallas, Tex., for The Kroger Co.
Arnold M. Lerman, C. Loring Jetton, Jr., Wilmer, Cutler & Pickering, Washington, D. C., Jerry L. Buchmeyer, Thompson, Knight, Simmons & Bullion, Dallas, Tex., for Lucky Stores, Inc.
James F. Rill, Martin A. Rosen, Collier, Shannon, Rill, Edwards & Scott, Washington, D. C., John L. Hauer, Richard C. Levin, Akin, Gump, Hauer & Feld, Dallas, Tex., for The Nat. Ass'n of Food Chains.
Jeffrey S. Davidson, Fred H. Bartlett, Jr., Daniel Edelman, Kirkland & Ellis, Chicago, Ill., for Nat. Provisioner, Inc.
Franklin P. Auwarter, Kenneth J. Jurek, Mayer, Brown & Platt, Chicago, Ill., for National Tea Co.
Peter D. Standish, Weil, Gotshal & Manges, New York City, for Pueblo Intern., Inc.
Les J. Weinstein, Aaron M. Peck, McKenna & Fitting, Los Angeles, Cal., for Ralph's Grocery Co.
Richard W. Odgers, John B. Bates, Pillsbury, Madison & Sutro, San Francisco, Cal., W. B. West, III, William F. Carroll, Clark, West, Keller, Sanders & Butler, Dallas, Tex., for Safeway Stores, Inc.
Michael R. Murphy, Donald B. Holbrook, Jones, Waldo, Holbrook & McDonough, Salt Lake City, Utah, for Skaggs Companies, Inc., Skaggs-Albertson's.
Robert D. Paul, Goodwin, Proctor & Hoar, Boston, Mass., Stanley E. Neely, Locke, Purnell, Boren, Laney & Neely, Dallas, Tex., for The Stop & Shop Companies, Inc.
Geoffrey M. Kalmus, Nickerson, Kramer, Lowenstein, Nessen, Kamin & Soll, New York City, T. L. Caudle, III, Coke & Coke, Dallas, Tex., for Supermarkets General Corp.
Michael E. Bress, Dorsey, Windhorst, Hannaford, Whitney, Halladay, Minneapolis, Minn., for Super Valu Stores, Inc.
Timothy J. Sargent, Bodkin, McCarthy, Sargent & Smith, Los Angeles, Cal., for Thriftmart, Inc.
Ronald L. Olson, Munger, Tolles & Ricker-Hauser, Los Angeles, Cal., for Vons Grocery Co.
Chester Bedell, John A. DeVault, III, Charles P. Pillans, Bedell, Bedell, Dittmar & Zehmer, Jacksonville, Fla., Charles P. Storey, John K. DeLay Jr., Storey, Armstrong, Steger & Martin, Dallas, Tex., for Winn-Dixie Stores, Inc.
Appeals from the United States District Court for the Northеrn District of Texas.
Before WISDOM, HILL, and FAY, Circuit Judges.
WISDOM, Circuit Judge:
These consolidated appeals involve the applicability of Illinois Brick Co. v. Illinois, 1977,
These appeals arise from thirteen private antitrust actions alleging that the concerted activities of the defendants violate the provisions of §§ 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. The complaints ask for treble damages and for injunctive relief under §§ 4 and 16 of the Clayton Act, 15 U.S.C. 15 and 26. The plaintiffs are cattlemen, ranchers, and feeders. The defendants are twenty-five retail food chains, a wholesale grocer, the retail chains' national trade association, and a beef industry price reporting publication.1 The plaintiffs in the various suits charge that the retail chains combined, primarily by using the trade association and the price reporting publication, to fix at artificially low levels the prices at which beef is purchased from slaughterhouses and meat packers, and ultimately from the producers cattle ranchers and feeders. The resulting depression in wholesale prices to retailers, passed up the chain of distribution, reduced the prices which the plaintiffs received in selling their cattle to the packers and slaughterhouses.
The Judicial Panel on Multidistrict Litigation assigned the cases to the District Court for the Northern District of Texas, for coordinated or consolidated pretrial proceedings. In re Beef Industry Antitrust Litigation,
The main issue is whether the complaints should have been dismissed on the strength of Illinois Brick. The plaintiffs/appellants also urge that the district court erred in striking from the complaints allegations of retail price-fixing. The plaintiffs in Pony Creek Cattle Co., Inc., et al. v. The Great Atlantic & Pacific Tea Co., et al. appeal partial summary judgments granted against them on their allegation that the statute of limitations was tolled because the defendants fraudulently concealed the alleged conspiracy. We agree with the defendants-appellees that the claims for damages, as pleaded, are within the ambit of the rule of Illinois Brick. Nevertheless we reverse and remand in all thirteen cases because the complaints state claims for damages within the "cost-plus" exception to the Illinois Brick bar. We reverse the partial summary judgments entered on the issue of fraudulent concealment in Pony Creek. In the Agee and Varian cases, we reverse the district court's order striking the allegations of retail price-fixing. In addition, we hold that the complaints in all the cases state claims for injunctive relief under section 16 of the Clayton Act.I.
These actions were dismissed on the pleadings. The allegations of the complaints therefore are taken as true for purposes of these appeals.
The plaintiffs are all cattle ranchers or feeders or both. Cattle are bred and raised on farms, ranches, and commercial feedlots. The animals are fattened for slaughter by feeding them a concentrated ration for fast growth. Ranchers either fatten the cattle themselves or sell to or place the livestock with feeders for fattening. Most fat cattle, say the plaintiffs-appellants, are purchased by slaughterhouses and packers directly from the ranchers and feedlots, although some are purchased by the slaughterers through auction markets. The cattle are then slaughtered and most of the beef is sold as either boxed or carcass beef to retail and wholesale grocers. The large retail food chains buy most of their beef directly from slaughterers and packers. The complaints do not allege a conspiracy between the slaughterers and packers and the defendants.
The plaintiffs allege that the wholesale or carcass price of beef, the price paid by the retail chains to packers and slaughterers, is established by the large retail chains acting in concert. For any given week, it is alleged, the wholesale price in a given area of the United States is set by the pricing decision of the A & P or Safeway Stores, Inc. or the Kroger Co. or one of the other defendants. In antitrust jargon, each wields monopsony power in its region or, with others, oligopsоny power.3 One designated retail chain in a given area will buy its beef in the regional wholesale market early in the week. The pricing decisions of the leading purchasers in the various regions of the nation are reported in the National Provisioner Daily Market and News Service, ("National Provisioner") or "Yellow Sheet", and thus become known to the entire wholesale beef trade. The other retail chains, it is alleged, then follow the price established by the regional leader in purchasing their requirements of beef for the period. The chains, according to the complaints, can dictate the wholesale price to the packers because they wield monopsony or oligopsony power and because the packers have no long-term storage facilities and therefore cannot withhold their product.4 The chains' power is augmented by their considerable cold-storage capacity: they can blunt price rallies by abstaining from the wholesale market and working from their stockpiles.
The price depressions thus engineered are directly "passed on" to the ranchers and feeders, according to the complaints. The plaintiffs allege that the cattlemen, like the slaughterers and packers Vis-a-vis the chains, are in no position to negotiate prices because they cannot, at least in the short term, withhold their product. A fattened steer or heifer, the complaints allege, must be sold within three weeks of the time it reaches choice grade. If the animal is not sold in that time it becomes over-fattened and hence less valuable. The supply of fat cattle is therefore inelastic in the short term. The cattlemen contend that they must take the price the packers quote. The packers, according to the complaints, bid prices derived directly from the Yellow Sheet (or, west of the Rockies, the Safeway) carcass price. Working from estimates of the percentage of an animal that will be carcass beef salable to the retain chains, the packers pay cattle prices based on the Yellow Sheet prices.5 Thus, the allegedly artificially low wholesale prices established by the retail chains' combination translate directly into artificially low prices for fat cattle.
The plaintiffs do not know when this alleged conspiracy began, but contend that it has been in operation since 1963 at the latest. The food chain defendants, according to the complaints, coordinate their efforts through meetings conducted by the National Association of Food Chains. The conspirators allegedly effect their price-fixing schemes by allocating to dominant chains geographical areas in which to exercise price leadership, and by controlling or manipulating the "Yellow Sheet". The elimination of price competition is further assured by alleged agreements concerning the conspirators' respective specifications for beef. The plaintiffs charge that the chains in any given region coordinate their specifications so that the chains do not compete with each other in purchasing beef of their respective specifications.
The complaints were filed in 1975. The cattlemen charge that the scheme violates section 1 of the Sherman Act, because it is a scheme "in restraint of trade and commercе". They also contend that the scheme was "an attempt to monopolize" and had the effect of monopolizing the wholesale beef market in violation of section 2 of the Act. The complaints also allege that the retail chains fix the retail price of beef to consumers. They request injunctive relief, under section 16 of the Clayton Act, and treble damages going back to the beginning of the alleged conspiracy. The Clayton Act's four-year statute of limitations would ordinarily operate to limit recovery to damages accruing within four years of the filing of the complaints.6 The plaintiffs, however, urged that the defendants and their co-conspirators fraudulently concealed the conspiracy from the beginning, and that the statute of limitations therefore did not begin to run until the plaintiffs discovered, in July 1974, that the alleged conspirators had indeed met to discuss the pricing of beef.7
In late 1975, before the instant actions were consolidated in the Northern District of Texas, that court entered partial summary judgments in the Pony Creek case, a suit originally filed in the Northern District of Texas, dismissing with prejudice the Pony Creek plaintiffs' claims for damages that accrued prior to June 5, 1971. In December of 1976, following the consolidation of the various actions in the Northern District of Texas, the defendants filed motions for partial summary judgment on the statute of limitations issue in the remaining suits. The district court denied those motions. The Pony Creek plaintiffs filed a motion to vacate the earlier partial summary judgments entered against them, but the district court has not acted on that motion.
In June 1977 the defendants in all the cases filed a joint motion for judgment on the pleadings based on the Supreme Court's opinion in Illinois Brick. They pointed оut the absence of any allegations that the plaintiffs had sold cattle directly to the defendant retail chains. The suits, they contended, were therefore barred by the general rule of Illinois Brick that only those parties who have dealt directly with members of a price-fixing conspiracy can maintain an antitrust action for damages against the price-fixers. The plaintiffs asked the district court to stay its ruling on the defendants' motion pending further discovery. Six months later, in December, 1977, the district court entered its order dismissing twelve of the suits for failure to state claims and striking the allegations of retail price-fixing. The court dismissed the remaining case the Little Ranch case in February 1977. All the cases were dismissed with prejudice.
II.
We address first the most important issue in these appeals: Did the district court err in dismissing the appellants' claims for damages?
A.
We meet at the outset questions about the applicability of Illinois Brick to these actions. The appellants' first line of attack on the district court's decision is the bold argument that Illinois Brick simply has no application to these actions. They also urge that, assuming Illinois Brick is relevant, the decision cannot bar damage claims against the National Provisioner and the grocery chain trade association because neither is a buyer or seller of beef. In the interests of clarity, our assessment of these contentions will begin with a discussion of the background and rationale of the Illinois Brick decision.
The Illinois Brick rule barring damages actions against alleged price-fixers by indirect purchasers has its genesis in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 1968,
Hanover Shoe barred defensive passing-on, the use of passing-on as a defense in an antitrust action. In Illinois Brick, the Court rеsolved a split of authority in the courts of appeals by ruling that, with few exceptions, indirect purchasers of an alleged price-fixer's product cannot maintain a treble damages action predicated on the offensive use of the theory that the price-fixer's overcharge to his customer was passed on to the plaintiffs. The plaintiffs were separated from the price-fixing offenders by two intervening transactions: the bricks moved from the manufacturers through subcontractors and general contractors to the consumers, carrying a four-cent-per-brick overcharge each time the brick changed hands. The court decided that if Hanover Shoe were to be followed, offensive as well as defensive use of passing-on must be barred. The Court noted that recognition of a "one-sided" limitation on a passing-on theory of damages would lead to a "serious risk of multiple liability". If offensive use of passing-on were permitted, a price-fixer could be held liable to an indirect purchaser for the amount of the overcharge passed-on to that purchaser by the price-fixer's direct customer yet, lacking a passing-on defense (under Hanover Shoe ), would be liable to the direct purchaser, his customer, for the full amount of the overcharge.10 Further, the Court concluded that the rationale of Hanover Shoe had not depended on the defensive context in which passing-on was asserted in that case. The "uncertainties and difficulties in analyzing price and out-put decisions" in the real world,
Because Illinois Brick adopted a unified "mutuality" approach to passing-on problems we must reject the appellants' argument that Illinois Brick has no application to these suits insofar as they seek relief for violations of Section 2 of the Sherman Act. Under Illinois Brick, the plaintiffs would be entitled to urge a pass-on theory of damages only if the defendant retail chains could use a passing-on defense to claims brought by the packers and slaughterers. Whether the plaintiffs can proceed on a passing-on theory of damages is, applying the mutuality principle, a question unaffected by their denomination of the claim. Absent exceptional circumstances, Illinois Brick and Hanover Shoe limit the use of passing-on theory in antitrust actions without regard to the parties' characterization of the offense.
The appellants' most ambitious contention is that Illinois Brick is entirely inapposite to price-fixing suits brought by sellers against indirect purchasers. They point out that Illinois Brick involved purchasers who charged price-fixing by a remote seller and contend that Illinois Brick should be limited to that type of case because the harm suffered by sellers in cases such as this one is much greater than the harm suffered by indirect purchasers in the paradigmatic Illinois Brick -type case. Especially is this so, they urge, when, as here, the alleged price-fixing conspiracy stands like a tollgate athwart the powerful "middle position" in the beef marketing system. The cattlemen's argument, we take it, is that the serious harm flowing from monopsony or oligopsony price-fixing at a middle tier in an industry's structure outweighs the considerations, avoidance of overlapping liability and concern about complexities and uncertainties of proof, that underlay Illinois Brick concerns that the Court may have overemphasized. See The Supreme Court, 1976 Term, 91 Harv.L.Rev. 70, 221-31 (1977).
The first step in assessing this argument is to examine the claim that the harm engendered by monopsony or oligopsony pricing of the kind alleged is, as a categorical matter, greater than that engendered by monopoly pricing. We focus first on monopsony or oligopsony pricing in general, without regard to the position occupied by the price-fixing combination in the productive chain. On this point, the appellants' contentions center on the harm suffered by the competitors themselves the sellers. In the case of monopoly price-fixing, they say, the damaged buyer has a choice: he can refuse to buy the affected product and buy, instead, a substitute. In the monopsony or oligopsony price-fixing case, however, the seller faces a Hobson's choice: he can sell into the rigged market and take the depressed price, or he can refuse to sell at all. In their case, say the cattlemen, this means destroying fat cattle or, in the long run, cutting back production or going out of business.
We might acknowledge the difference as a general matter, but we have no reason to believe that the damage caused by the typical monopsony or oligopsony price-fixing scheme is significantly greater than that caused by the usual seller price-fixing scheme. Both types of price-fixing are attended by restrictions in industry output and the consequent reallocation of resources to less valuable uses.11 The appellants argue that the reallocation process in the monopsony price-fixing case is inherently more likely than in the monopoly price-fixing case to cause business failures.12 Assuming this to be true, Arguendo, we do not think that this distinction is sufficient to warrant disparate treatment of monopoly and oligopsony for purposes of pass-on problems. If the Illinois Brick decision is grounded on a balancing of the deterrence and compensation policies of the treble-damages action against considerations of judicial economy and fairness to defendants a view of Illinois Brick that is crucial to the appellants' argument13 it seems to us that the Supreme Court chose to permit entire price-fixing schemes, in some circumstances, to go unremedied by private damage actions. If the Court felt that competing considerations outweigh the costs of leaving unremedied the totality of harm flowing from some monopoly price-fixing schemes, we find it difficult to believe that the incremental harm, in the form of possible business failures, that might flow from unremedied monopsony or oligopsony price-fixing schemes would tip the Court's balance in favor of enforcement in the purchaser price-fixing case. The increment is too insignificant in comparison with the total damage caused by price-fixing.
The appellants urge that the Supreme Court has recognized that conspiracies aimed at sellers are especially abhorrent. None of the cases they cite, however, establish anything more than the unsurprising proposition that producers damaged by anti-competitive schemes have a remedy under the antitrust laws.14 As support for their contention that conspiracies at the strategic middle position or "bottleneck" in an industry's structure are especially disfavored, they cite the Supreme Court's decisions in American Tobacco Co. v. United States, 1946,
We conclude that there is nothing special about monopsony or oligopsony price-fixing cases that justifies treating them differently from monopoly price-fixing cases for passing-on purposes. Illinois Brick therefore speaks to the instant cases.
A final issue as to the applicability of the Illinois Brick rule concerns the appellants' cases against the National Provisioner and the National Association of Food Chains. The appellants argue that the Hanover Shoe-Illinois Brick limitations on the use of passing-on theory apply only to suits brought against firms that are in the chain of production. They theorize that the "central rationale" of the Hanover Shoe And Illinois Brick decisions is that firms dealing directly with the alleged price-fixer are likelier than firms remote in the produсtive chain to sue and that severe limitations on the use of passing-on theory are necessary lest direct-dealing firms be discouraged from bringing suit. Because the trade publication and the trade association do not buy or sell beef at all, the argument continues, there are no firms in the beef marketing system that deal directly with these defendants. The cattlemen, the appellants conclude, are as likely as anyone to bring suit against those defendants.
The argument rests on a faulty premise. The Illinois Brick decision rested on avoidance of overlapping liability and on concern about the complexities and uncertainties of proof that would attend general recognition of passing-on theories of damage. What is critical is not whether a defendant competes in the relevant industry but whether the plaintiff's action (or the defendant's defense) asserts a form of passing-on theory. The complaints in these cases do so. The National Provisioner and the National Association of Retail Chains do not buy or sell beef but the appellants' complaints charge that they conspired with firms that do buy beef to fix the purchase price of boxed and carcass beef. That the trade publication and trade association defendants do not market beef does not diminish the problems of overlapping liability and uncertainty of proof posed by the use of a passing-on theory of damages. The doctrine of Illinois Brick therefore applies to the complaints against these two defendants.
B.
Having determined that the Hanover Shoe-Illinois Brick Doctrine applies to the damages claims in their entirety we turn to the appellants' contentions that these actiоns fit recognized exceptions to the bar against use of passing-on theory.
1. The Co-Conspirator Exception.
Certain of the appellants contend that the complaints in these actions, liberally construed, allege a conspiracy between the retail chains, on the one hand, and the packers and slaughterers on the other.15 They argue for an exception from the Illinois Brick rule for cases involving a conspiracy between the remote price-fixers and the direct-dealing intermediary.
They argue, first, that cases involving conspiracy spanning two levels in the chain of distribution fit the exception recognized in Illinois Brick for cases in which the defendant owned or controlled its customer (the middleman). Illinois Brick,
Even if proof of a multilevel conspiracy would not bring the case within the "control" exception recognized in Illinois Brick, it is urged, we should recognize a distinct exception for vertical conspiracies. The appellants argue that the defendants remote from the plaintiffs in the chain of distribution do not run the risk of double liability if it is proved that the intermediary was an equal participant in the price-fixing conspiracy, for the co-conspirator intermediary could not recover in a suit against the remote seller or purchaser. This is so, they say, because "when parties of substantially equal economic strength mutually participate in the formation and execution of the scheme and bear equal responsibility for the consequent restraint of trade, each is barred from seeking treble damages from the other". Columbia Nitrogen Corp. v. Royster Co., 4 Cir. 1971,
As the appellees point out, however, the co-conspiracy theory now urged by the plaintiffs-appellants was not set forth in the complaints. The theory of the complaints, both before and after the Illinois Brick decision, was that the defendants conspired to fix the prices paid to packers and that the packers simply "passed on" the price depression to cattlemen. Certain allegations in the complaints refer to unnamed co-conspirators, and the appellants now contend that the packers and slaughterers are included among those unnamed co-conspirators. Various paragraphs in the complaints refer to the unnamed co-conspirators as nondefendant food retailers. Nothing in the complaints, however, suggests that packers or other intermediaries conspired with the defendants. In their joint reply brief the appellants cite paragraph 34 of the MPIA and Becker Amended Complaints as an example of a packer conspiracy allegation.17 That paragraph, however, states merely that most slaughterers and packers have standing agreements with the defendant chain stores to supply fixed quantities of beef each week, and that the Yellow Sheet or "Safeway" price paid the packers sets the price that the packers pay the plaintiffs for their cattle. This is merely an allegation of passing-on, not of conspiracy. No agreement to fix prices is alleged. If the act of passing-on sufficed to brand the intermediary as a co-conspirator the asserted exception would wholly swallow the Hanover Shoe-Illinois Brick, rule.
The appellants urge that the district court abused its discretion by failing to give them adequate opportunity to amend their complaints, after the Illinois Brick decision, to allege a vertical conspiracy, and by denying post-judgment requests for leave to amend. We do not agree.
Leave to amend pleadings should be granted liberally when previously unimportant factual issues gain significance as the result of rulings on a point of law handed down during the pendency of the litigation. E. g., Commissioner of Internal Revenue v. Estate of Donnell, 5 Cir. 1969,
The district court did not abuse its discretion in denying the post-judgment motions for leave to amend. Rule 15(a) of the Federal Rules of Civil Procedure requires that leave to amend be freely granted "when justice so requires". The Supreme Court has said that motions to amend may properly be denied when there has been undue delay in moving for leave to amend. Foman v. Davis, 1962,
(m)uch of the value of summary judgment procedure . . . would be dissipated if a party were free to rely on one theory in an attempt to defeat a motion for summary judgment and then, should the theory prove unsound, come back long thereafter and fight on the basis of some other theory.
Freeman v. Continental Gin Co., 5 Cir. 1967,
The Supreme Court in Foman also declared that denial of leave to amend is proper when the proposed amendment would be futile. Foman v. Davis, supra,
Nor do we think that allegations of conspiracy would bring these cases within an exception for suits alleging vertical conspiracy. It is true that some courts have acknowledged such an exception. E. g., Florida Power Corp. v. Granlund, M.D.Fla., 1978,
For these reasons we uphold the district court's refusal to permit post-judgment amendments to the complaints.
2. The "Cost-Plus" Exception.
The appellants urge that outright dismissal of their damage claims was error because the complaints stated good claims within the "cost-plus contract" exception in Illinois Brick.
The Supreme Court acknowledged in Hanover Shoe "that there might be situations for instance, when an overcharged buyer has a pre-existing 'cost-plus' contract, thus making it easy to prove that he has not been damagеd when the considerations requiring that the passing-on defense not be permitted in this case would not be present".
As we understand these cases, the Court meant the scope of the exception to be narrow, but it did not imply that only cases involving cost-plus contracts qualify. Commentators have observed that Hanover Shoe and Illinois Brick permit the assertion of passing-on in situations that are the functional equivalent of the cost-plus contract case. E. g., Note, Recovery by Indirect Purchasers and the Functions of Antitrust Treble Damages, 55 Texas L.Rev. 1445, 1454-57 (1978). "Although the Court intended the exception to have a 'narrow scope', any situation in which (the impact of) the overcharge is essentially determined in advance 'without reference to the interactions of supply and demand' would function in the same way." Note, Scaling the Illinois Brick Wall: The Future of Indirect Purchasers in Antitrust Litigation, 63 Cornell L.Rev. 309, 331 n.93 (1978) (citations omitted). When the impact of an overcharge on a middlemаn's pricing decisions can be so determined, the uncertainties involved in resorting to general economic theorems are avoided and the clarity of the evidence virtually eliminates the possibility of overlapping liabilities as the result of inconsistent verdicts in separate lawsuits. Functional equivalence is not lost simply because the proponent of passing-on theory cannot demonstrate that the middleman suffered no loss in volume as the result of raising the price to his customers.20 In the cost-plus contract case itself, the middleman is likely to have suffered a loss of volume and hence profits as a result of the overcharge. His higher selling price will likely have caused potential customers to forego his product. See Note, 63 Cornell L.Rev. 309, 329 n.87. The middleman's loss of volume and the indirect purchaser's absorption of the overcharge are wholly separable items of damage.
Applying these principles, we conclude that the district court erred in dismissing these actions. The dismissal, we emphasize, was on the pleadings. The question at the pleading stage is simply whether the allegations of the complaints state a case within the "cost-plus" exception. The complaints sufficiently allege that the impact of the retail chains' price changes upon the pricing decisions of the packers is determined in advance without regard to the interactions of supply and demand. The plaintiffs allege that the packers set the price of live cattle by strictly applying certain formulae to the Yellow Sheet or Safeway wholesale beef price. Under these allegations a plaintiff would be entitled, once he proved what the compеtitive wholesale price would have been for a given grade of beef in a given region at a given time, and once he established that the packer to whom he sold strictly applied a formula to the Yellow Sheet price for the particular sale, to damages in the amount of the difference between the price he actually received on that sale of fat cattle and the price he would have received absent price-fixing (computed by applying the packer's formula to the constructed competitive wholesale price). The packer's habitual use of predetermined formulae21 would enable measurement of the effect on prices for fat cattle of changes in wholesale prices.22 The plaintiffs have alleged the functional equivalent of cost-plus contracts.
We do not agree with the appellees that the packer pricing mechanism alleged is exactly analogous to the "fixed percentage markup" or cost-based pricing systems rejected by the Illinois Brick Court as exceptions to the passing-on rule. In Illinois Brick the Court refused to recognize an exception where middlemen "purport" to charge a fixed percentage markup.
We recognize that it might be said that we are engaging in "the process of classifying various market situations according to the amount of pass-on likely to be involved and its susceptibility of proof in a judicial forum". See Illinois Brick,
The appellees are correct in asserting that the proposed proof of damages is far from simple. It will require detailed proof as to individual transactions. Attention must focus on the type and grade of cattle sold, and on whether (and which) pricing formulae were used by packers in making particular purchases. The proof must be detailed and particular. But this is a complexity born of quantity. The Kinds of proof that will be involved, however, are not new to courts, and certainly not to antitrust courts. The cases as pleaded escape Illinois Brick only insofar as they avoid the use of general economic theory in tracing the effect of the defendants' price decisions, and only insofar as they can be proved, in the damages phase, with certainty. If, as to a particular transaction, it cannot be clearly shown that the purchasing packer applied a specific price formula, or if other details of a transaction, such as the quantity or grade of cattle, are not available, then the plaintiff cannot recover damages as to that sale.24
We reverse the district court's dismissal orders. Because the pleadings state a case within the cost-plus exception. We emphasize that we are not ruling that these plaintiffs are entitled to go to trial. The Supreme Court intended that it be determined early in the litigation whether (or to what extent) a party should be entitled to present a pass-on theory at trial. The defendants will have thе opportunity to raise that issue again by summary judgment motion. Given the strictures of Hanover Shoe and Illinois Brick, the district court may and should demand from the plaintiffs in each case a pretrial demonstration that they have definite and particularized proof that they will need to establish damages. Nor does our ruling imply that the plaintiffs may attempt to trace damages beyond the tier comprised of those who sell directly to the packers or slaughterers. Under the allegations of the complaint only those plaintiffs who sold directly to the packers or slaughterers that engaged in strict formula buying are entitled to maintain damage claims. The complaints do not allege that feeders or brokers "passed on" price depressions to ranchers or that they engaged in strict formula buying based solely on Yellow Sheet prices.
III.
The appellants also appeal the dismissal of their claims for injunctive relief on the basis of Illinois Brick. It follows from our ruling that it was error to dismiss the damage claims on the pleadings that it was also error to dismiss the claims for injunctive relief on the pleadings. Our disposition of the injunctive relief issue, however, rests on the broader ground that the Illinois Brick rule has no application to claims for injunctive relief.
We agree with the reasoning of Mid-West Paper Prods. Co. v. Continental Group, Inc., 3 Cir. 1979,
The appellees argue that injunctive relief is barred to indirect sellers or purchasers whose damage claims are barred by Illinois Brick because Illinois Brick holds that such persons are not injured within the meaning of section 4 of the Clayton Act. Section 4 and section 16, they point out, are coextensive except that section 16, unlike section 4, does not require an injury to the plaintiff's "business or property". It therefore follows, it is urged, that indirect sellers or purchasers barred from section 4 treble damages by the Illinois Brick rule are not threatened with legally cognizable injury within the meaning of section 16.
We disagree with the appellees' characterization of the Illinois Brick decision. Formally, it is true, both Hanover Shoe and Illinois Brick held that, with the exceptions previously discussed, the overcharged direct purchaser, and not the indirect purchaser who may ultimately bear part of the overcharge, suffers the full injury for purposes of section 4. Had those decisions even purported to rest on a divination of the original meaning of section 4 of the Act we would agree with the аppellees that Illinois Brick has clear implications for injunctive actions under section 16 as well. But neither Hanover Shoe nor Illinois Brick involved statutory construction in the ordinary sense. They are judicial glosses on an old statute, predicated on contemporary policy considerations. The implications of those decisions therefore reach only as far as the policy considerations informing them.
IV.
In its December 1977 order dismissing the actions, the district court granted the defendants' motion to strike allegations of retail price-fixing from the complaints. Those allegations charged the retail chains with conspiring to set artificially high prices for beef sold to retail consumers. The plaintiffs in all the suits appeal that action.
It was error to strike the allegations of retail price-fixing in the Agee and Varian complaints.25 These complaints allege that some of the plaintiffs have purchased beef as consumers at prices affected by the alleged conspiracy. Such an allegation is an adequate allegation of the injury to one's "property" within the meaning of section 4 of the Clayton Act. Reiter v. Sonotone Corp., --- U.S. ----,
It was not error, however, to strike the retail price-fixing allegations from the remaining complaints. With the exceрtion of the Agee and Varian complaints, none of the complaints alleged injury to the plaintiffs' business or property within the meaning of the Clayton Act. The appellants contend that they have adequately alleged injury to their businesses. They say that they intend to prove, under their allegations, that the alleged retail price-fixing conspiracy reduced consumer demand for beef, thereby derivatively reducing the retailers' and the packers' demand for the plaintiffs' fat cattle.
The appellants, however, lack standing to sue for such remote injury. Only those within the "target area" of an alleged antitrust conspiracy have standing to sue. E. g., Jeffrey v. Southwestern Bell, 5 Cir. 1975,
Shifting ground, the appellаnts argue that evidence of the alleged retail price-fixing conspiracy is highly relevant to their claims of monopolization and monopsony or oligopsony price-fixing at the wholesale level. The defendants' retail-level activities, they urge, are evidence of the defendants' monopoly power and proclivity to collude. Evidence of those activities is also essential, they contend, to painting for the jury a complete picture of the alleged conspiracy and of the industry in which it operates. They contend, in short, that they simply pleaded evidence.
This is not the place or time to debate the relevance of the retail price-fixing evidence. The district court had ample discretion, under Rule 12(f) of the Federal Rules of Civil Procedure, to order stricken from the complaint any redundant or immaterial matter. 5 C. Wright & A. Miller, Federal Practice and Procedure § 1382 at 807 (1969). Although unnecessary evidentiary details are usually not stricken from the complaint unless prejudicial or of no consequence to the controversy, Id.; see also Augustus v. Board of Public Instruction, 5 Cir. 1962,
V.
The plaintiffs in the Pony Creek action appeal the partial summary judgment entered against them on their claim that the defendants' fraudulent concealment of the alleged conspiracy tolled the four-year statute of limitations of section 4B of the Clayton Act. 15 U.S.C. § 15b.
The Pony Creek action was filed on June 5, 1975. Unless the statute of limitations was somehow tolled, the Pony Creek plaintiffs cannot recover for damages sustained prior to June 5, 1971. They allege in their complaint that they had failed to discover their cause of action before the June 1971 commencement of the limitations period because the defendants had fraudulently concealed it from them. Fraudulent concealment tolls the Clayton Act's statute of limitations. General Electric Co. v. City of San Antonio, 5 Cir. 1964,
The defendant Kroger Co. ("Kroger") moved for partial summary judgment on the fraudulent concealment claim. Kroger submitted with its motion evidentiary matter that, it contended, conclusively еstablished that the plaintiffs had known, or would have known through the exercise of due diligence, of the existence of their claims before June 5, 1971. The evidence consisted of copies of numerous articles and reports published in the late 1960's in newspapers and cattle industry trade journals, together with an affidavit attesting to the authenticity of the copies. The articles and reports publicized the dissatisfaction of livestock producers with cattle prices, as well as the charges of many cattlemen that the retail chains were colluding to depress prices. Many of the articles reported the filing, in 1968, of Bray, et al. v. Safeway Stores, et al., N.D.Cal.,
Finding no genuine issue of material fact, and mindful of the suggestion in part 1.80 of the Manual for Complex Litigation that issues such as fraudulent concealment be determined as early as possible in complex litigation so as to define the scope of discovery,26 the district court granted the motion.
The Manual's salutary principle notwithstanding, the question of when the statute of limitations began to run on the plaintiffs' cause of action is a factual one, E. g., Ciccarone v. United States, 3 Cir. 1973,
From the affidavit and exhibits it is abundantly clear that the plaintiffs knew or should have known in 1968 and 1969 of the allegations of the Bray complaint. The Bray case was widely publicized in numerous issues of numerous trade publications, including, as the district court noted, an issue of The American National Cattlemen's Association's weekly publication Beef Business Bulletin, which, according to the supporting affidavit, had at the relevant time a circulation of nearly 300,000. The Bray complaint itself was, of course, a matter of public record. It is of no moment that Kroger presented no direct evidence demonstrating that the plaintiffs were actually aware of the Bray case. Even assuming that the inferences of actual knowledge to be drawn from Kroger's presentation were insufficient for summary judgment purposes, the evidence was more than adequate to establish beyond doubt that reasonably diligent cattlemen in the plaintiffs' situation would have been aware, in the late 1960's, of the Bray allegations. Numerous federal courts have suggested that plaintiffs are chargeable with knowledge of the contents of public records. E. g., Dayco Corp. v. Goodyear Tire & Rubber Co., 6 Cir. 1975,
The plaintiffs' knowledge of the Bray complaint, however, is not As a matter of law tantamount to actual or constructive knowledge of their claim. Although the statute of limitations is not tolled simply because the plaintiffs lack much of the evidence supporting their potential claim, Prather v. Neva Paperbacks, Inc., 5 Cir. 1971,
The leap from the plaintiffs' knowledge of the Bray complaint to actual or constructive knowledge of their cause of action therefore involves factual issues. The defendants had the burden, as the moving parties, to demonstrate conclusively that the plaintiffs, through the exercise of reasonable diligence, would have discovered adequate ground for filing suit. The summary judgment evidence consistеd only of a demonstration that the plaintiffs should have been aware of the Bray complaint. There is no evidence in the record suggesting that the Bray litigation turned up any verification for the allegations before June 5, 1971, or that the plaintiffs had independent access before that time to any information, beyond the Bray complaint itself, that tended to verify their suspicions. At best, the materials on file might support an inference that the plaintiffs would have discovered adequate support before June 1971 had they been reasonably diligent. The inference, however, is not so compelling as to entitle the defendants to summary judgment. Because the defendants failed to demonstrate the absence of genuine issues of fact the partial summary judgment must be reversed.
We should emphasize that this ruling is dictated by the posture of the question and the nature of the defendants' summary judgment showing. The plaintiffs bear the ultimate burden of persuasion on the fraudulent concealment issue. The burden is a heavy one. Those who have learned of facts "calculated to excite inquiry" must inquire. Clement A. Evans & Co. v. McAlpine, 5 Cir. 1970,
The judgments below are REVERSED and the cases REMANDED for further proceedings consistent with this opinion.
Notes
The lawsuits involved in this appeal are: Petersen et al. v. Safeway Stores, Inc., et al.; Pony Creek Cattle Co., et al. v. The Great Atlantic & Pacific Tea Co., et al.; Lowe, et al. v. Safeway Stores, Inc., et al.; Meat Price Investigators Ass'n et al. v. Safeway Stores, Inc., et al.; Shoshone Tribe of Duckwater, et al. (formerly styled Agee, et al.) v. Safeway Stores, Inc., et al.; Black, et al. v. Acme Markets, Inc., et al.; Chapparal Cattle Corp., et al. v. Safeway Stores, Inc., et al.; Becker, et al. v. Safeway Stores, Inc., et al.; Varian, et al. v. Safeway Stores, Inc., et al.; and Little Ranch Co., et al. v. The National Association of Food Chains, et al
"Passing-on" usually means the process whereby a middleman in the chain of distribution who has been overcharged by a manufacturer or by a producer adjusts his prices upward in sales to a lower level in the chain to reflect the overcharge. This case presents the converse of that situation. Here the passing-on was the result of alleged depressed prices fixed by retailers and imposed upon the middlemen (slaughterhouses and packers). In turn, the middlemen passed-on the undercharge, the depression in prices, to the primary producers (cattle ranchers and feeders)
We use the term "monopoly" to refer to price-fixing by sellers; "monopsony" and "oligopsony" to refer respectively, to price-fixing by a single purchaser or by a group of purchasers, that is, the retailers/defendants in this case
Chainwide pricing decisions for a given region are made possible, according to the allegations of the complaints, by the chain's centralized buying practices. Purchases are made for an entire chain or for a large part of a chain, it is alleged, from a central location
As explained in Paragraph 28 of the Amended and Substituted Complaint in the Meat Price Investigators Association ("MPIA ") suit:
Cattle buyers for beef slaughterers figure the percentage of dressed meat on the live animal and give the cattle feeder a price for the live animal based on the Yellow Sheet or its west coast counterpart, the "Safeway price."
Section 4B of the Act, 15 U.S.C. § 15b, states, in relevant part:
Any action to enforce any cause of action under sections 15 or 15a of this title shall be forever barred unless commenced within four years after the cause of action accrued.
That information was allegedly disclosed during discovery in Bray, et al. v. Safeway Stores, et al., N.D.Cal.,
Before Illinois Brick, a strong case could have been made that the Hanover Shoe decision rested primarily on the Court's perception that the middleman, and not the remote purchaser, is the likeliest enforcer of the antitrust laws. Although it is probable that Hanover, like most middlemen, passed on much of the overcharge, recognition of a passing-on defense would have reduced the incentives for middlemen to sue. Professor Posner has observed: "The choice was thus between overcompensating Hanover and underdeterring United. The Court's preference for the former is consistent with the view that the primary purpose of antitrust damage actions is to deter violations of law." R. Posner, Antitrust Cases, Economic Notes and Other Materials 149 (1974). See Illinois Brick,
In Illinois Brick, however, the Court observed that the Hanover Shoe decision rested primarily on the difficulty-of-proof problem, and not on the deterrence rationale. Illinois Brick,
Normally the impact of a single change in the relevant conditions cannot be measured after the fact; indeed a businessman may be unable to state whether, had one fact been different (a single supply less expensive, general economic conditions more buoyant, or the labor market tighter, for example), he would have chosen a different price. Equally difficult to determine, in the real economic world rather than an economist's hypothetical model, is what effect a change in the company's price will have on its total sales. Finally, costs per unit for a different volume of total sales are hard to estimate. Even if it could be shown that the buyer raised his price in response to, and in the amount of, the overcharge and that his margin of profit and total sales had not thereafter declined, there would remain the nearly insuperable difficulty of demonstrating that the particular plaintiff could not or would not have raised his prices absent the overcharge or maintained the higher price had the overcharge been discontinued
A serious risk of overlapping liability would remain even under a rule permitting the offensive use of passing-on only in situations in which the defendant could use a passing-on defense, unless the scope of passing-on were narrowly restricted to cases in which the incidence of overcharges could be established with certainty. That risk would arise from the risk of inconsistent factfindings in separate lawsuits by direct and indirect purchasers. Note, Scaling the Illinois Brick Wall: The Future of Indirect Purchasers in Antitrust Litigation, 63 Cornell L.Rev. 309, 319 n.43 (1978). The magnitude оf that risk would vary directly with the speculativeness of the proof of the incidence of the overcharge. By narrowly limiting the use of passing-on to cases in which the overcharge can be traced with ease and certainty, see part II, B of this opinion below, the Supreme Court has all but eliminated this risk of duplicative liability
See generally J. Hibdon, Price and Welfare Theory 244-53 (Monopoly pricing); 264-67 (Monopsony) (1969); K. George & J. Shorey, The Allocation of Resources 150-52 (1978)
In the case of monopoly price-fixing, the price-fixing generally raises the price of all goods that incorporate the product subject to the price-fixing. If the conspirators sell directly to the consuming public, the only businesses adversely affected are those in industries that supply complementary goods. If the conspirators do not sell directly to the consuming public, then the product is but an input in the production of other goods or services. By raising the cost of that input, the price-fixing conspiracy might conceivably have the effect of driving marginal firms that use the input out of the market. The likelihood of this occurring depends upon the magnitude of the cost of the input relative to the purchasing firm's total costs of production and on the elasticity of demand for the firm's product. A fifteen percent rise in the cost of beef, for example, threatens the profitability of a steakhouse far more than that of a grocery store. The impact will be greatest in the rare case of a firm that simply buys and resells only the good affected by the price-fixing conspiracy
Most firms that sell directly to the typical monopsony or oligopsony price-fixing conspiracy, however, are in a position analogous to that of the single-product distributor who purchases his product from price-fixing conspirators. The good affected by the price-fixing conspiracy is likely to be the seller's only product or to represent a significant percentage of the seller's output. In general, the impact on a firm's revenues of a purchaser price-fixing scheme aimed at the product it sells is greater than the impact on a firm's costs of a monopoly price-fixing scheme affecting an input into the firm's product.
If Illinois Brick did not involve such a balancing, even implicitly, then the appellants' argument that the greater harm flowing from purchaser, as compared with seller, price-fixing, justifies special treatment of passing-on problems in monopsony cases loses its premise. Formally, at least, Illinois Brick involved no such balancing as suggested in the text. The Illinois Brick holding is essentially the rule of mutuality. That rule was justified almost entirely by reference to the problem of overlapping liability, and the Court's focus on the risk of overlapping liability was a result of its assumption that direct purchasers, as well as indirect, would likely sue the price-fixers. On the surface of it, then, Illinois Brick does not acknowledge that its pass-on rule involves any significant sacrifice of antitrust enforcement: in those cases in which the rule bars indirect purchasers from suing, the direct purchasers, it is assumed, will likely come to the fore
E. g., Zenith Radio Corp. v. Hazeltine Research, Inc., 1969,
Indeed, many of the allegations strongly suggest that all the non-defendant co-сonspirators adverted to in the complaints are food retailers. Paragraph 34 of the MPIA Amended and Substituted Complaint, for example, states in part:
b. Specifications have been established by the defendant retail food chains and other co-conspirators for the beef they buy. In most instances, the specifications for beef carcasses or parts thereof have varied . . . thus eliminating competition between and among the defendants and other co-conspirators.
c. The defendant food chains and other co-conspirators have allocated retail marketing areas . . . .
d. The defendant food chains and other co-conspirators have agreed not to compete with one another on a price basis in purchasing beef at wholesale . . . .
e. . . . Through uniform entry into the wholesale beef market or uniform withdrawal from the wholesale beef market, the defendant food chains and other co-conspirators have combined to monopolize to affect the demand for beef products and artificially depress the wholesale price of beef products to an unreasonably low level, which level is directly reflected by the Yellow Sheet price and the 'Safeway price,' and which prices are directly passed on to the beef producer.
"Another situation in which market losses have been superseded and the pass-on defense might be permitted is where the direct purchaser is owned or controlled by its customer. Cf. Perkins v. Standard Oil Co.,
That paragraph states:
Most slaughterers and packers have standing agreements with various receivers, including the defendant chain stores and other co-conspirators, for certain quantities of beef each week. With knowledge of their weekly requirements and of the prices quoted in the Yellow Sheet or the "Safeway Price," the packers and slaughterers directly pass down the price established by the defendant retail food chains. The packers and slaughterers in aggregate do not suffer any diminution of sales, purchases, margins or profits as a result of this artificially low price.
The only explanation given is the Chapparal plaintiffs' lame assertion that it took a long time to divine the meaning and implications of the Illinois Brick Decision
In Hanover Shoe the Court emphasized the inadequacy of economic theory to the task of tracing the incidence of an overcharge. See note 7 Supra. In Illinois Brick the Court elaborated on the point. The Court noted that economic theory provides a formula for determining the incidence of an overcharge, but that the analysis rests on "an array of simplifying assumptions" and assumes knowledge of the elasticities of supply and demand in the relevant market.
In Yoder Bros., Inc. v. California-Florida Plant Corp., 5 Cir. 1976,
Application of the Illinois Brick mutuality principle would suggest that, because under Yoder Bros. these defendants could not assert a passing-on defense at all in a treble damages suit brought by the packers and slaughterers absent proof that the packers and slaughterers suffered no loss of volume as a result of the alleged price-fixing, the cattlemen should be barred from using passing-on theory offensively against the defendants unless they demonstrate that the packers and slaughterers suffered no loss of volume. If this is so, then the bar against use of passing-on is absolute, for it would be impossible, not simply "virtually" impossible to make such a showing. Indeed, Yoder Bros. has the effect of eliminating the passing-on defense altogether, except perhaps in the very narrow case of a pre-existing, fixed quantity cost-plus contract.
We do not believe, however, that the Yoder Bros. Court's treatment of the pass-on issue is viable after Illinois Brick. The Yoder Bros. Court's very literal reading of Hanover Shoe to require parties asserting a pass-on defense to prove that the intermediary suffered no harm whatsoever rested, we think, on its view that the private treble damage action is of "overriding importance . . . in the antitrust enforcement scheme." Id. at 1375. Indeed, Hanover Shoe was plausibly read, before Illinois Brick, as resting on the view that the strong policy in favor of antitrust enforcement justifies buying enforcement at the expense of overcompensating plaintiffs. See note 6 Supra. In Illinois Brick, however, the Court denigrated the importance of the antitrust enforcement rationale in the decision of Hanover Shoe and characterized the difficulty-of-proof problem as the key to Hanover Shoe.
Post-Illinois Brick commentary, moreover, has generally assumed that the issue of the impact on the direct purchaser's sales volume of an overcharge should not be dispositive in a case involving the offensive use of passing-on theory. E. g., Note, Recovery by Indirect Purchasers and the Functions of Antitrust Treble Damages, 55 Texas L.Rev. 1445, 1455 n.69 (1977). See also, Note, Scaling the Illinois Brick Wall: The Future of Indirect Purchasers in Antitrust Litigation, 63 Cornell L.Rev. 309, 329 n.87 (1978).
Because these cases come up on appeal from dismissals on the pleadings, we are not concerned with the question whether packers and slaughterers in fact applied pricing fоrmulae without deviation, or with the question whether the formulae employed were such that a change in wholesale prices in a given region had a predetermined effect on the price offered feeders in the region by the packers and the slaughterers. We must assume, for purposes of these appeals, that the plaintiffs could demonstrate that both questions are to be answered in the affirmative
In Hanover Shoe the Court pointed out that in attempting to prove a pass-on a litigant would have to demonstrate that the intermediary would not have raised his price absent the overcharge.
That view was recently taken by the Third Circuit Court of Appeals in Mid-West Paper Products Co. v. Continental Groups, Inc.,
The appellees have suggested that the plaintiffs will have to trace their cattle through the chain of production to establish that the cattle they sold to packers and slaughterhouses were in turn sold, in carcass form, to members of the alleged retail chain conspiracy. If the prices allegedly established by the defendants were uniformly followed by the beef retailing industry, as the plaintiffs allege, however, tracing would be unnecessary. The plaintiffs' theory of damages is not in all respects a pass-on type of theory. Their theory, stated most broadly, is that the activities of the alleged price-fixing conspiracy depressed wholesale prices generally, and not simply the prices paid by members of the conspiracy, and that packers and slaughterers based their purchases of live cattle on the depressed wholesale price. It is immaterial whether or not a steer purchased from a plaintiff found its way into the hands of a conspirator retailer. It is enough if, as alleged, the conspirators' activities caused a general depression in wholesale prices and the intermediary purchasing from a plaintiff based his pricing decision on the depressed wholesale beef price
We disagree with the recent ruling of a divided panel of the Third Circuit Court of Appeals that one who deals with a nonconspiring competitor of price-fixing firms lacks standing to sue those firms for treble damages. See Mid-West Paper Products Co. v. Continental Group, Inc., supra note 23,
The Agee suit has been restyled Shoshone Tribe of Duckwater, et al. v. Safeway Stores, Inc., et al. We follow the parties' practice of referring to the case as "Agee "
Part 1.80 states in relevant part:
In some complex cases it becomes apparent at the preliminary pretrial conference or shortly thereafter that the determination of a legal question will expedite the disposition of the cause. This is particularly the case where the nature and scope of discovery and further pretrial proceedings would be substantially affected by the determination of the preliminary legal question. For example, in the electrical equipment civil antitrust cases the question whether fraudulent concealment would toll the running of the statute of limitations was one of the most important questions. It was very desirable to secure a determination of this question as early as possible, for if the statute was not tolled by fraudulent concealment, the discovery would be comparatively narrow in scope of time and a summary judgment on some or all issues could be rendered in many cases.
Manual for Complex Litigation 80 (1977).
Kroger, of course, did not have to demonstrate the absence of triable fact issues as to the allegation that the defendants actively concealed the alleged conspiracy. If the defendants established that the plaintiffs knew or should have known of their cause of action before June 5, 1971, the running of statute of limitations would not have been tolled even had the defendants affirmatively concealed the alleged scheme
That the Bray plaintiffs eventually succeeded (in 1975) in their lawsuit is of no consequence, for the Bray action might have disclosed nothing about the alleged conspiracy before June 5, 1971