PROFESSIONAL BEAUTY SUPPLY, INC., a Minnesota Corporation, v. NATIONAL BEAUTY SUPPLY, INC., a Minnesota Corporation, Appellant, v. LA MAUR INC., Appellee.
No. 78-1229
United States Court of Appeals, Eighth Circuit
Decided Feb. 27, 1979.
594 F.2d 1179
Submitted Sept. 14, 1978.
The second injury proposition is as much to the advantage of the employer and his interests as it is for the benefit of the employee. It protects that employer who has hired, say, a one-eyed worker who goes and loses his other eye and becomes a total disability. The employer without this sort of thing would have to pay total permanent disability compensation. Then, on the other hand, this also protects the worker with one eye from being denied employment on account of his being an extra risk. Now, by simply taking this up in this way it is possible to protect both the employer and to protect the one-eyed employee also.
This statement and other statements made in dicta in Lawson indicate that the Supreme Court felt that the statute was enacted because it encouraged the hiring of handicapped workers. The rationale was that the employer did not have to be concerned that he would be directed to pay permanent total disability when the permanent total disability was partially the result of a preexisting injury. I do not disagree with that rationale, but the Supreme Court did not say, even in dicta, that subsection (f) should apply only when the first injury was obvious to the employer when the employee was hired. Nothing in the statute nor in the Lawson case makes this artificial distinction between “manifest” and “latent” preexisting conditions. Common sense dictates that an employer who knew nothing about the prior injury when he hired the worker should not be penalized for the effect of the prior injury. In my opinion
Robert L. Barrows, of Leonard, Street & Deinard, Minneapolis, Minn., for appellee; Charles A. Mays, Minneapolis, Minn., on brief.
Before HEANEY and STEPHENSON, Circuit Judges, and HANSON,* Senior District Judge.
STEPHENSON, Circuit Judge.
National Beauty Supply, Inc. (National) appeals from the dismissal by the district court1 of its third-party complaint against
This action was originally commenced by Professional Beauty Supply, Inc. (Professional) against National. In its complaint, Professional, a wholesaler of beauty supplies, alleged that National, also a wholesaler of beauty supplies, demanded that La Maur, a manufacturer of beauty supplies, grant National an exclusive dealership for La Maur‘s products in Minnesota. It was further alleged that as a result of these demands Professional was terminated as a La Maur dealer on April 2, 1973. In Count I of its complaint Professional claimed that the acts of National were done to monopolize or in an attempt to monopolize or to combine or conspire with another person to monopolize a part of trade or commerce in violation of federal antitrust law,
On this appeal National states that after filing an answer and undertaking initial discovery it became apparent that Professional‘s entire claim was based on the alleged joint wrongdoing of La Maur and National. At that time National requested and was granted permission to file a third-party complaint against La Maur. In its third-party complaint National alleged that “La Maur solicited National to become a distributor of La Maur‘s products in the State of Minnesota,” and that “National had no responsibility for, or control over La Maur‘s decision to terminate Professional.” National further alleged that in the event it is found liable to Professional for violation of either federal or state antitrust laws, it is entitled to contribution from La Maur to the extent of at least one-half of the recovery. On appeal, National also argues that since it had no control over La Maur‘s decision to terminate Professional, it is at most secondarily liable to Professional and is thus entitled to indemnification from La Maur. Finally, National alleged that La Maur had a duty, which it failed to perform, to reveal to National the nature and extent of all business relationships between La Maur and others which might be unlawfully interfered with if National were granted an exclusive dealership in Minnesota. Thus, National claims that La Maur‘s failure to make such disclosure entitles it to indemnification from La Maur in the event National is found to have tortiously interfered with Professional‘s business relationships.
La Maur filed a motion under
Since this matter is before the court as an appeal from the dismissal of the third-party complaint, the facts alleged in the third-party complaint must be accepted as true and the district court‘s dismissal upheld only if it appears beyond doubt that National can prove no set of facts which would entitle it to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Quality Mercury, Inc. v. Ford Motor Co., 542 F.2d 466, 468 (8th Cir. 1976),
I. Contribution Under Federal Antitrust Law
We note at the outset that federal law governs the issue of whether there is a right to contribution in an antitrust case.3 El Camino Glass v. Sunglo Glass Co., [1977-1] Trade Reg.Rep. (CCH) ¶ 61,533 (N.D.Cal.1976); Sabre Shipping Corp. v. American President Lines, Ltd., 298 F.Supp. 1339 (S.D.N.Y.1969). The traditional federal common law rule is that contribution is not available from joint tortfeasors. However, National urges that we adopt a rule which would allow contribution from joint tortfeasors in federal antitrust cases. We believe that sound policy reasons dictate such a result and accordingly hold that under certain circumstances an antitrust defendant may be entitled to pro rata4 contribution from other joint tortfeasors.5
To our knowledge no circuit court has directly decided the precise issue before us.6 At least four federal district courts have confronted the issue and have unanimously held that there is no right to contribution under federal antitrust law. Olson Farms, Inc. v. Safeway Stores, Inc., [1977-2] Trade Reg.Rep. (CCH) ¶ 61,698 (D.Utah 1977); Wilson P. Abraham Constr. Co. v. Texas Indus., Inc., No. 75-2820 (E.D.La. Oct. 5, 1977); El Camino Glass v. Sunglo Glass Co., supra; Sabre Shipping Corp. v. American President Lines, Ltd., supra. See also Baughman v. Cooper-Jarrett, Inc., 391 F.Supp. 671, 678 n. 3 (W.D.Pa.1975), aff‘d in part, rev‘d in part, 530 F.2d 529 (3d Cir. 1976),
In Sabre Shipping Corp. v. American President Lines, Ltd., supra, the primary case authority relied on by the court was Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U.S. 282, 72 S.Ct. 277, 96 L.Ed. 318 (1952). Halcyon is a 1952 admiralty case which has been widely cited for the proposition that there is no federal common law right to contribution and that it should be up to Congress, rather than the courts, to alter the rule. E. g., Sabre Shipping Corp. v. American President Lines, Ltd., supra, 298 F.Supp. at 1344. However, the vitality of Halcyon was seriously eroded by Cooper Stevedoring Co. v. Kopke, Inc., 417 U.S. 106, 94 S.Ct. 2174, 40 L.Ed.2d 694 (1974), decided after Sabre Shipping. In Cooper Stevedoring, the Supreme Court limited the application of Halcyon to those cases where the joint tortfeasor from whom liability is sought is immune from tort liability by statute. In limiting the breadth of Halcyon, the Court stated: “[A] ‘more equal distribution of justice’ can best be achieved by ameliorating the common-law rule against contribution which permits a plaintiff to force one of two wrongdoers to bear the entire loss, though the other may have been equally or more to blame.” Cooper Stevedoring Co. v. Kopke, Inc., supra, 417 U.S. at 111, 94 S.Ct. at 2177. The Court further stated “[s]ince [plaintiff] could have elected to make [third-party defendant] bear its share of the damages caused by its negligence, we see no reason why [defendant-third-party plaintiff] should not be accorded the same right.” Id. at 113, 94 S.Ct. at 2178. As a minimum Cooper Stevedoring and earlier admiralty cases demonstrate that under certain circumstances the Supreme Court is willing to fashion a rule allowing contribution without express direction from Congress. See id. at 110-11, 94 S.Ct. 2174.
El Camino Glass v. Sunglo Glass Co., supra, relies on Sabre Shipping, and in addition discusses many of the policy reasons both for and against contribution in antitrust cases. We do not disagree with much of the court‘s discussion but do take exception to its conclusion that “[w]hile the above arguments in favor of permitting contribution are persuasive, the court concludes that on balance the ends of justice will be better served by holding that contribution is not available in an antitrust suit.” El Camino Glass v. Sunglo Glass Co., supra, Trade Reg.Rep. (CCH) at 72,112.
From an examination of La Maur‘s brief and the El Camino Glass and Sabre Shipping cases we discern five principal reasons advanced in support of the rule not allowing contribution. First, it is argued that it was the intent of Congress to exclude contribution. The essence of this argument is that since Congress put provisions for contribution in certain sections of the Security Acts of 1933 and 1934, but not in the Antitrust Acts, there was congressional intent to not allow contribution in antitrust cases. Furthermore, Congress has not acted in the face of the longstanding common law rule against contribution or the lower court decisions which hold that contribution is not available in antitrust cases.
We initially note that the antitrust statutes are not purported to be comprehensive and, possibly as a result, courts have not been prone to await congressional action to resolve many of the questions left unanswered by these statutes, such as the nature of the cause of action, apportionment of judgments, assignment, survival and limitations. Additionally, contrary to La Maur‘s assertions, it is our view that the presence of contribution provisions in the security laws is some indication that if the question were presented today, Congress would include a right to contribution as part of the
Second, it is contended that allowing contribution will interfere with the plaintiff‘s ability to maintain control of his lawsuit. The fear expressed, which is indeed a legitimate one, is that a defendant may attempt to complicate the issues and confuse the jury by impleading numerous third-party defendants or fundamentally alter the lawsuit by impleading a third-party defendant with financial resources far superior to the plaintiff or the original defendant. Without downplaying the seriousness of this fear, we are confident that such problems can be avoided by the district court‘s prudent use of its power to sever where necessary to insure justice. In the present case Professional has not objected to the adding of La Maur as a third-party defendant.
A third reason advanced is that a right to contribution might serve as a possible deterrent to settlement. We are not convinced that a holding permitting contribution need undermine the judicial policy in favor of settlement. The problem of how to treat a joint tortfeasor who has settled in good faith is not present in this case. However, in the proper case the court should be able to fashion a rule of contribution which will protect the rights of settling defendants. See, e. g., Herzfield v. Laventhol, Krekstein, Horwath & Horwath, 540 F.2d 27, 38-39 (2d Cir. 1976); Gomes v. Brodhurst, 394 F.2d 465, 468-70 (3d Cir. 1968). See also Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 348, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971) (if plaintiff recovered damages in settlement from one defendant he could not recover for the same damages from another defendant); Leach v. Mon River Towing, Inc., 363 F.Supp. 637, 642-43 (W.D.Pa.1973) (effect of release on amount of damages recoverable from remaining defendants); W. Prosser, Law of Torts § 50, at 309-10 (4th ed. 1971); F. James, Contribution Among Joint Tortfeasors: A Pragmatic Criticism, 54 Harv.L.Rev. 1156, 1161-62 (1941); C. Gregory, Contribution Among Joint Tortfeasors: A Defense, 54 Harv.L.Rev. 1170, 1172-73 (1941); F. Bohlen, Contribution and Indemnity Between Tortfeasors, 21 Corn.L.Q. 522, 567-68 (1936).
A fourth argument against contribution in antitrust cases is that antitrust suits are already enormously complex and, it is unwise to further complicate matters by adding the issue of contribution among defend-
The final reason urged by La Maur for a rule of no contribution is that the deterrent effect of the antitrust laws is increased by not permitting defendants to redistribute the cost of an antitrust action. We believe that the question of deterrence actually cuts both ways and on balance a rule allowing contribution is actually a greater deterrent. The fact that one tortfeasor may be held liable for all the damages arising from the antitrust violation necessarily means that other joint tortfeasors may go “scot free.” This possibility of escaping all liability might cause many to be more willing, rather than less willing, to engage in wrongful activity.
This possibility significantly increases where a large or powerful tortfeasor has sufficient economic influence to prevent a plaintiff from including it as a defendant. National alleges that this is precisely what happened in the present case. National claims that in their depositions the principal shareholders of Professional stated that they were persuaded not to name La Maur as a defendant because of La Maur‘s decision to renew Professional‘s franchise. Whether such allegations are true can only be determined upon further factual development. However, such allegations are indicative of the exact abuses which are encouraged by a rule which automatically denies contribution to antitrust violators and which could be avoided by the formulation of a rule allowing contribution in certain cases. To deny contribution would be to dilute the deterrent effect of the antitrust laws, since a participant in an antitrust violation could escape all responsibility for its wrongdoing.
Contribution is an equitable doctrine based on the principle of justice between the parties. See Dawson v. Contractors Transport Corp., 151 U.S.App.D.C. 401, 405-406 & n. 7, 467 F.2d 727, 731-32 & n. 7 (1972). “The governing principle of contribution throughout has been that one of two or more joint wrongdoers should not be required to pay more than his share of a common burden, or to put it another way, that no obligor should be unjustly benefitted at the expense of another.” Gould v. American-Hawaiian Steamship Co., supra, 387 F.Supp. at 170. In Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 138, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968), the Supreme Court cautioned against broad application of common law doctrines to prevent recovery if such application will defeat important public purposes. We are convinced that the result of automatically prohibiting contribution among antitrust defendants in all circumstances would be to allow a significant number of antitrust violators to escape liability for their wrongdoing and thereby undermine the policy of the antitrust laws.
The deciding factor in our decision is fairness between the parties. We conclude that fairness requires that the right of contribution exist among joint tortfeasors at least under certain circumstances. There is an obvious lack of sense and justice in a rule which permits the entire burden of restitution of a loss for which two parties are responsible to be placed upon one alone because of the plaintiff‘s whim or spite, or
In sum, we adopt for the Eighth Circuit the rule that contribution may be enforced among joint tortfeasors in an antitrust action. Because of the deterrent policy of the antitrust laws, even intentional tortfeasors may obtain contribution so that tortfeasors will not escape liability. Cf. Odette v. Shearson, Hammill & Co., supra, 394 F.Supp. at 958; Alexander & Baldwin, Inc. v. Peat, Marwick, Mitchell & Co., 385 F.Supp. 230, 238 (S.D.N.Y.1974); Globus, Inc. v. Law Research Serv., Inc., supra, 318 F.Supp. at 955 (contribution under the security laws even for intentional tortfeasors); sections 9(e), 18(b) of the Securities Exchange Act of 1934,
II. Indemnification Under Federal Antitrust Law
The subject of indemnification under federal antitrust law, like contribution, is governed by federal law. National claims that on remand it should be allowed to obtain indemnification from La Maur on the federal antitrust claim if it can prove that if any antitrust violation was committed, it was at La Maur‘s suggestion and urging, and thus La Maur was the “primary” wrongdoer and National was only “secondarily” liable. Indemnification, unlike contribution, permits a wrongdoer to escape loss by shifting his entire responsibility to another party. If indemnification were allowed, those found liable for breach of a statutory obligation might escape liability as effectively as if contribution were denied. We hold, therefore, that contribution may be allowed, but not indemnification. Thus, the loss will be apportioned among the joint wrongdoers so that the deterrent effect of the judgment will be felt by all culpable parties.
In Perma Life Mufflers, Inc. v. International Parts Corp., supra, 392 U.S. at 138-39, 88 S.Ct. 1981, the Supreme Court emphasized that the public interest and statutory aim of deterring antitrust violations and enforcing the antitrust laws are of paramount importance. To allow indemnification would dilute the deterrent impact of the antitrust laws. Only a realistic possibility of liability for damages will encourage compliance with the antitrust laws and will protect the public interest in preserving competition. Consequently, even if one joint tortfeasor bears greater responsibility for the wrongdoing, a person who violates the antitrust statutes should not be entitled to full indemnification from the more culpable third party.9
The only case cited by National as direct support of its position is Wilshire Oil Co. v. Riffe, 409 F.2d 1277 (10th Cir. 1969). Without accepting or rejecting the Tenth Circuit‘s analysis in that case, we note that it is distinguishable from the present case. In Wilshire, the court allowed a suit for indemnification by a corporation against its officers who had allegedly caused the firm to commit antitrust violations which resulted in the corporation paying fines, penalties, and other expenditures. The court was careful to point out that the indemnification suit was based on a separate state claim for breach of a fiduciary duty and the court was not deciding the question of whether indemnification is generally available in antitrust actions. Id. at 1284. In the present case no separate cause of action by National against La Maur under state law has been alleged in connection with the antitrust violation. We caution, however, that the threshold question in a claim for indemnification under a separate state law theory is whether allowing it would be inconsistent with the purpose of the antitrust laws. Under no circumstance should indemnification be allowed where such allowance would be inconsistent with the purpose of the antitrust laws.
III. Contribution and Indemnification Under Minnesota Law
Counts II and III of Professional‘s complaint involve pendent state claims. Count II alleged that National violated Minnesota‘s antitrust statutes,
Minnesota is one of a minority of states where the common law has developed to allow contribution among joint tortfeasors under certain circumstances. Under Minnesota law, National will be entitled to contribution if it can show on remand that it was not guilty of conscious wrongdoing, even if there has been a finding that a violation of the Minnesota antitrust statutes has been committed. Cf. Skaja v. Andrews Hotel Co., 281 Minn. 417, 161 N.W.2d 657 (1968); Farmers Ins. Exch. v. Village of Hewitt, 274 Minn. 246, 143 N.W.2d 230, 235-39 (1966); Hardware Mut. Cas. Co. v. Danberry, 234 Minn. 391, 48 N.W.2d 567, 570-72 (1951) (application of contribution in personal injury cases). See also W. Prosser, Law of Torts § 50, at 306-08 & n. 68 (4th ed. 1971).
National also argues that it has stated a claim for indemnification under Count III, tortious interference with business relationships. In Minnesota, the leading case on indemnification is Hendrickson v. Minnesota Power & Light Co., 258 Minn. 368, 104 N.W.2d 843 (1960).10 In Hendrickson the court listed several situations in which indemnity is appropriate, two of which are relevant here:
(2) Where the one seeking indemnity has incurred liability by action at the direction, in the interest of, and in reliance upon the one sought to be charged.
(3) Where the one seeking indemnity has incurred liability because of a breach
of duty owed to him by the one sought to be charged.
Id. at 848 (footnotes omitted).
With regard to Count III, National, in its third-party complaint, alleged that if it is found liable it will be “by action at the direction, in the interest of, and in reliance upon” La Maur; that La Maur had a duty to reveal to National the nature and extent of the business relationship between La Maur and Professional that might be interfered with by granting National an exclusive dealership; and that La Maur breached that duty. Since National may demonstrate that it falls within one of the exceptions to the no indemnification rule listed in Hendrickson v. Minnesota Power & Light Co., supra, the district court acted prematurely in dismissing National‘s claim under Minnesota law for indemnification under Count III.
The issue, whether if sufficient evidence is presented by Professional to hold National liable under Count III, such evidence will also be sufficient to preclude National from receiving indemnification from La Maur under Minnesota law, is not free from doubt. Since the case must be remanded on other grounds, we believe that the best course is to have this determination made in the first instance by the district court after more complete factual development.
IV. Conclusion
As we have indicated, this case is before us on appeal from the grant of a motion to dismiss. We conclude that it cannot be said beyond doubt at this stage of the proceedings that National can prove no set of facts in support of its claim for contribution under the federal antitrust laws, and for contribution or indemnification under Minnesota law. We affirm the dismissal of National‘s claim for indemnification under the federal antitrust laws.
Affirmed in part; reversed in part, and remanded for further proceedings not inconsistent with this opinion.
HANSON, Senior District Judge, dissenting in part.
I respectfully dissent from the holding in Part I of the majority‘s opinion permitting contribution among joint tortfeasors in an antitrust action. I concur in the result reached in Part II of the opinion and in the Court‘s reasoning to the extent it is not inconsistent with my views expressed below concerning the issue of contribution. In view of the Court‘s holdings in Part I and Part II, I concur in the result reached in Part III of the majority opinion and in the judgment, but with the understanding that the district court retains discretion to dismiss pendent state claims.
Because I discern no compelling reason to allow contribution in antitrust causes, and strongly suspect that antitrust policy may be adversely affected by it, I would affirm the district court‘s dismissal of National‘s claim for contribution from La Maur under federal antitrust law.
As an initial observation, this cause of action is an inopportune one in which to fashion a broad rule allowing contribution among joint tortfeasors, in an antitrust action. The only violation of federal antitrust law alleged by Professional is found in Count I of its complaint. That count alleges a violation of Section 2 of the Sherman Act,
If found to be an antitrust violator under these circumstances, I believe that National is in a poor position to complain of any unfairness in being forced to assume the burden of restitution for the loss occasioned by its intentional wrongdoing, and it is in even worse position to complain about being penalized to the full extent of the treble damages allowed to a plaintiff by the Clayton Act. At least since Lord Kenyon‘s opinion in Merryweather v. Nixan, 8 Term.Rep. 186, 101 Eng.Rep. 1337 (K.B.1799), the common law has not allowed contribution in favor of an intentional wrongdoer on the theory that intentional wrongdoing is deterred by refusing to invoke equity to diminish the burden of liability otherwise incurred. See Wright v. Haskins, 260 N.W.2d 536, 538-39 (Iowa 1977). Whatever trend may exist in favor of contribution among nonintentional tortfeasors, the rule against contribution as between intentional wrongdoers is still generally adhered to. See W. Prosser, Law of Torts § 50, at 308 (4th ed. 1971).
With respect to Section 2 conspirators, the majority‘s partial reliance on trends in contribution law and equitable principles is misplaced.
I realize, however, that allegiance to common law rules cannot be allowed to undermine the purposes of the antitrust laws. Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 138-39, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968). In making the decision whether contribution is to be permitted or rejected in antitrust actions, the primary inquiry must be which course best furthers the public policy in favor of competition, or least detracts from it. Id. at 139, 88 S.Ct. 1981. The majority concludes that “[t]o deny contribution would be to dilute the deterrent effect of the antitrust laws, since a participant in an antitrust violation could escape all responsibility for its wrongdoing.” ante, at 1185. I am not convinced that this is so. First, the likelihood that a participant may escape responsibility for his antitrust violations is at best a speculative concern (particularly in non-class actions) since in any given case there may be any number of other potential plaintiffs who were damaged by the particular restraint of trade or monopoly in which the prospective third-party defendant has been a participant. Moreover, as the majority candidly observes, the question of deterrence “cuts both ways,” and it could well be argued that potential antitrust violators would be more likely to refrain from anticompetitive activities if they know that any injured party may impose the full burden of a treble damage recovery on them even though, for instance, the violator played a relatively minor part in a conspiracy to monopolize. See El Camino Glass v. Sunglo Glass Co., [1977-1] Trade Reg.Rep. (CCH) ¶ 61,533 (N.D.Cal.1976). Or, inversely, the possibility of dissipating the impact of a treble damage award among antitrust coconspirators may actually encourage anticompetitive activity. To me the arguments on either side of the deterrence question are inconclusive and as a result I find deterrence of potential violators insufficient as a basis on which to predicate a new rule permitting contribution.
In other respects, however, such a rule presents a substantial risk that antitrust lawsuits may become more difficult for trial courts to manage and, more importantly, the net result may be to deter private plaintiffs of relatively limited means from bring-
To a substantial extent, the enforcement of public antitrust policy depends on the attractiveness of litigation to private attorneys general. See Hawaii v. Standard Oil Co. of California, 405 U.S. 251, 262, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972). Mindful of this, the Supreme Court has recently shown itself to be sensitive to the danger of complicating issues in antitrust litigation to the point where a reduction in the incentive to sue is likely to result. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 745-46, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). Before formulating a rule which permits additional parties and issues to be joined in an antitrust case, we should be sure that we do not thereby counterbalance the motivation to sue provided by the treble damage award.
In any event, as the examples of the Antitrust Improvement Act of 1976,
* The Honorable William C. Hanson, Senior United States District Judge for the Northern and Southern Districts of Iowa, sitting by designation.