# USA Petroleum Company v. Atlantic Richfield Company

> Court of Appeals for the Ninth Circuit · January 6, 1994 · 13 F.3d 1276

URL: https://www.frixlaw.com/law-library/cases/9486315

## Case

- **Full name:** USA PETROLEUM COMPANY, Plaintiff-Appellant, v. ATLANTIC RICHFIELD COMPANY, Defendant-Appellee
- **Court:** Court of Appeals for the Ninth Circuit
- **Decided:** January 6, 1994
- **Citations:** 13 F.3d 1276; 94 Daily Journal DAR 304; 94 Cal. Daily Op. Serv. 160; 1994 U.S. App. LEXIS 131; 1994 WL 1944
- **Precedential status:** Published
- **Opinion:** Concurring in part by Reinhardt
- **Judges:** Alarcon, Nelson, Reinhardt
- **Cited by:** 103 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9486315

## How later opinions describe it (automated extraction)

- holding that only the record that was before the district court can be considered, and that the summary judgment record cannot be supplemented on appeal
- explaining the general rule that “a waiver will be excused if a new issue arises while appeal is pending because of a change in the law”
- finding waiver of a predatory-pricing theory under section 1 of the Sherman Act where the party only advanced a separate predatory-pricing theory before the district court
- holding that a doctor’s opinion one year after the ALJ decision was not probative to any issue on appeal

## Opinion text

REINHARDT, Circuit Judge,
concurring and dissenting:
I concur only in Part III of Judge Nelson’s opinion, which concludes that we have jurisdiction to determine whether the district court applied the correct predatory pricing standard. 1 However, because I do not believe that USA abandoned its right to pres *1291 ent evidence of below-cost pricing, I dissent from the rest of her opinion.
I.
At the outset, it is important to understand exactly what issue we have been asked to decide here, and how we got to this point. In 1986, ARCO moved for summary judgment on USA’s claim of a Sherman Act section one violation. ARCO claimed that a competitor had no standing to challenge a conspiracy to set maximum prices unless those prices were predatory, and that USA had failed to show that ARCO’s prices were predatory because it had failed to show a dangerous probability of successful monopolization. Under its motion ARCO could prevail only if a dangerous probability of successful monopolization is an element of a section one violation. USA conceded that it could not show a dangerous probability of successful monopolization. It opposed the summary judgment motion on two purely legal grounds. First, USA argued that a competitor has standing to challenge a per se illegal priee-fbáng scheme, regardless of whether the scheme involves predatory pricing. Second, USA argued that even if a competitor must show predatory pricing, a dangerous probability of successful monopolization is not an element of such a showing under section one of the Sherman Act. The district court rejected these arguments and granted summary judgment.
We reversed on the first ground. See USA Petroleum Co. v. Atlantic Richfield Co., 859 F.2d 687 (9th Cir.1988). We concluded that competitors had standing “to enforce the antitrust laws against price-fixing conspiracies,” regardless of whether the conspiracies involved predatory pricing. Id. at 697 . Accordingly, we did not reach the second question — whether predatory pricing under section one requires a showing of a danger of monopolization. The Supreme Court reversed our decision. See Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 , 110 S.Ct. 1884 , 109 L.Ed.2d 333 (1990). As we had, the Court considered only the first ground. It held that a competitor could not show antitrust injury from a vertical, maximum price-fixing conspiracy unless the conspiracy resulted in predatory pricing. See id. 495 U.S. at 338 , 110 S.Ct. at 1891-92 . However, the Court, understandably, did not resolve the second issue — whether a dangerous probability of successful monopolization is an element of predatory pricing under section one. See id. 495 U.S. at 332 n. 3, 340-41 n. 10, 110 S.Ct. at 1888 n. 3, 1892-93 n. 10.
Thus, the issue that we did not reach the first time the case was before us, and that the Supreme Court did not reach either, is before us again. Now is the appropriate time for us to decide it. It is purely legal in nature: whether a plaintiff alleging predatory pricing in violation of section one of the Sherman Act must show that a dangerous probability of successful monopolization exists.
Judge Nelson concludes, however, that the question was somehow mooted when the ease was in the district court over seven years ago. She contends that, while contesting ARCO’s summary * judgment motion on the dangerous probability issue, USA waived its right to present evidence regarding an entirely different element of predatory pricing — whether ARCO’s prices were set below cost. Judge Nelson would affirm the district court’s grant of summary judgment on the basis of that purported waiver. Yet whether ARCO’s prices were set below cost was simply not at issue at the time of ARCO’s summary judgment motion. That issue, like a number of others, was reserved for later determination, in the event that ARCO failed in its summary judgment motion. Judge Nelson does not suggest that USA had any obligation to present evidence with respect to ARCO’s pricing policies in response to that motion. Indeed, she explicitly states that USA had no such obligation. 2 Rather, she relies entirely on a few passing comments in USA’s brief opposing summary judgment and in its oral argument on the motion as her *1292 basis for finding that it waived a legal theory that is essential to its ease. In all fairness, USA’s unrelated comments simply cannot be taken out of context and transformed into a waiver of its right to rely on ARCO’s conduct in setting prices below cost. 3
Judge Nelson argues, erroneously, that USA “assert[ed] that both below-cost and below-market pricing theories were applicable, but announe[ed] that it would rely solely on the latter.” Opinion of Judge Nelson at 128. 4 USA did nothing of the kind. Instead, in the portion of its opposition to summary judgment quoted by Judge Nelson, USA merely explained that the Supreme Court in Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 585 n. 8, 106 S.Ct. 1348 , 1355 n. 8, 89 L.Ed.2d 538 (1986), had not set forth “dangerous probability of success” as an element of predatory pricing under section one. Any discussion of whether below-cost, below-market, or both theories were available was quite tangential to the issue raised by ARCO’s motion — whether USA needed to prove a dangerous probability of success.
ARCO’s motion specifically abstained from calling into question USA’s ability to prove particular price-cost relationships, and ARCO’s reply to USA’s opposition did not even discuss whether USA had to show below-market or below-cost pricing. USA had not yet been granted complete discovery on ARCO’s pricing policies, and ARCO desired to end the litigation without further discovery. To that end, ARCO tailored its summary judgment motion so that only a narrow class of evidentiary issues would have been relevant to its disposition — those evidentiary issues relating to the existence or non-existence of a dangerous probability of monopoly. If the district court ultimately concluded that a dangerous probability was un necessary, both parties understood that USA would have to conduct further discovery on the pricing issue. This would have been true whether the district court ultimately settled on a below-market or a below-cost standard. Under these circumstances, one cannot say that USA “had a full and fair opportunity to ventilate the issues” relating to whether ARCO set its prices below cost. Cool Fuel, Inc. v. Connett, 685 F.2d 309, 312 (9th Cir.1982).
II.
Because I do not resolve this ease on the procedural grounds relied upon by Judges Nelson and Alarcón, I must reach the question they do not decide — whether a danger *1293 ous probability of successful monopolization is a necessary element of a predatory pricing violation under section one of the Sherman Act. I would hold that the district court erred in concluding that a dangerous probability of success requirement exists under section one.
The district court’s analysis confuses those standards which apply under section 2 of the act with those which apply under section one. When a plaintiff seeks to prove that a competitor has engaged in predatory pricing in violation of section two, that plaintiff must show that the defendant’s conduct carries with it a dangerous probability of successful monopolization. See William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1027 (9th Cir.1981), cert. denied, 459 U.S. 825 , 103 S.Ct. 57 , 74 L.Ed.2d 61 (1982). The plaintiff will face this hurdle because section two, which reaches unilateral conduct, only forbids monopolization and attempted monopolization. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767 , 104 S.Ct. 2731, 2739 , 81 L.Ed.2d 628 (1984).
Section one, by contrast, reaches a broader range of competitive evils, so long as they result from a conspiracy. See id. at 768-69, 104 S.Ct. at 2740-41 . Even where a predatory pricing scheme does not create a dangerous risk of monopolization, it can still have substantial anticompetitive effects by eliminating significant market participation. One need not drive out all or even most competitors in order to realize a gain from below-cost pricing. Such a scheme might drive out enough competitors to create a concentrated market structure, or, in an already-concentrated market, simply “cause [competitors] to raise their prices to supracompetitive levels within a disciplined oligopoly.” Brook Group v. Brown & Williamson Tobacco Corp., — U.S. -, -, 113 S.Ct. 2578, 2589 , 125 L.Ed.2d 168 (1993). Where such effects occur as the result of a contract, combination, or. conspiracy, a section one violation exists “even in the absence of incipient monopoly.” Copperweld, 467 U.S. at 769 , 104 S.Ct. at 2741 ; see Western Concrete Structures Co. v. Mitsui & Co., 760 F.2d 1013 , 1017-18 (9th Cir.), cert. denied 474 U.S. 903 , 106 S.Ct. 230 , 88 L.Ed.2d 229 (1985). 5
Given the aims and scope of section one of the Sherman Act, I would hold that a plaintiff can make out a predatory pricing claim under that section without showing that there is a dangerous probability of successful monopolization. Accordingly, I would reverse the district court’s grant of summary judgment and remand for further proceedings.
. Accordingly, I dissent from Judge Alarcon's opinion, which reaches a contrary conclusion.
. She states that: "It is true, as USA maintains, that USA had no duty under Celotex to adduce specific facts demonstrating below-cost pricing.” Opinion of Judge Nelson at 121. Yet Judge Nelson would affirm the district court's grant of summary judgment precisely because USA failed to present such evidence. See Opinion of Judge Nelson at 113 (“Because USA contends that it must show below-cost pricing and recoupment, failure of proof on below-cost pricing alone *1292 would provide a basis for affirming the district court.”). She claims to "merely conclude that, even if USA was not required to present evidence of below-cost pricing in response to ARCO's summary judgment motion, it waived the right to make such a showing.” Opinion of Judge Nelson at 123 n. 11. Yet this claim is inconsistent with the sentence quoted from page 113 of her opinion. In addition, as I demonstrate in the text and at note 3, USA did not waive the right to make a showing of below-cost pricing.
. Judge Nelson's treatment of USA's "Statement of Genuine Issues” seeks to work a similar transformation of ambiguous, unrelated comments into a waiver of the right to present evidence of below-cost pricing. In its “Statement,” quoted at page 118-119 of Judge Nelson's opinion, USA listed two "genuine issues," one corresponding to each of its theories of antitrust standing: (1) whether ARCO's scheme led to prices at "artificially low levels”; and (2) whether ARCO’s per se illegal vertical price-fixing scheme caused USA injuiy. Judge Nelson seeks to transform USA's allegation that ARCO set prices at "artificially low levels” into an admission that USA would only rely on below-market pricing. She states that "this is the only sensible reading of the allegation ... in light of USA's contention at the summary judgment hearing that it only needed to demonstrate below-market pricing.” Opinion of Judge Nelson at 119 n. 6. Yet if USA's passing comments at the hearing cannot suffice to create a waiver, its use of the intentionally ambiguous term “artificially low levels" — which obviously includes both below-market and below-cost prices — cannot be taken as a waiver, either.
. Judge Nelson also states that "USA's counsel conceded that it could not meet the predatoiy pricing standards under section 2 'even by the most liberal standard.’ " Opinion of Judge Nelson at 118. USA's concession was not an admission that it could not prove below-cost pricing. It was merely an acknowledgment that USA could not show a dangerous probability of successful monopolization, and thus that it could not show predatory pricing under section two. USA's counsel stated:
I believe there is no dangerous probability of monopolization and therefore the idea that this price is predatory, even by — even by the most liberal standard, is probably going to fail. And it’s for that reason, for those analyses, that looking even at all these cases, looking at the need to define the market for monopoly purposes, that we agreed to drop Section 2.
. In its recent decision in Brook Group the Supreme Court recognized that more stringent standards apply to predatory pricing claims under section two than to claims under the other antitrust laws. The Court explicitly distinguished between section two violations, which require a dangerous probability of success, and violations of the other antitrust laws, which require only a reasonable prospect of recoupment. See Brook Group, — U.S. at -, 113 S.Ct. at 2588 ; see also id. - U.S. at -, at 2587 (“[W]e interpret § 2 of the Sherman Act to condemn predatoiy pricing when it poses ‘a dangerous probability of actual monopolization,’ whereas the Robinson-Patman Act requires only that there be a 'reasonable possibility’ of substantial injury to competition before its protections are triggered.”) (citations omitted).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9486315. Public record. Not legal advice.