Reply Brief — Axis, S. p. A. v. Micafil, Inc.

Supreme Court brief1989

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Text

No. 88-2095

IN THE

Sipreme Court of the United States

OCTOBER TERM, 1988

AXIS, S.PA.,

Petitioner,

—vV.—

MICAFIL, INC.,

Respondent.

REPLY BRIEF FOR PETITION

FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

GORDON B. SPIVACK

DAVID H. MARKS*

COUDERT BROTHERS

200 Park Avenue

New York, New York 10166

(212) 880-4400

Attorneys for Petitioner

Axis, S.p.A.

*Counsel of Record

TABLE OF CONTENTS

Table of Authorities

TABLE OF AUTHORITIES

Cases:

Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982)

Brunswick Corp. v. Pueblo Bowl-O-Mat Inc., 429 U.S.

O77 (ISTO) as aac nase eaaee ee eee eee

Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104

(TSG) 3. cc ncac cauna awe ceew eee ee ee

Coniey ¥. GIDSON, 3395 Uses SE ETT cc cece ce

Fishman v. Estate of Wirtz, 807 F.2d 520 (7th Cir. 1986)

Helix Milling Co. v. Terminal Flour Mills Co., 523 F.2d

1317 (9th Cir. 1975), cert. denied, 423 U.S. 1053 (1976)

Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207

(1959) 5 occ éns sdeasne cae beste etaee eee

Schewer v. Rhodes, 416 U.S. 232 (19 1a) sok ci vcn wees

State of South Dakota v. Kansas City Southern Indus-

tries, Inc., 1989-1 Trade Cas. (CCH) 68,635 (8th Cir.,

June 29, TSOP) vcd vavdessdusvnenee ee

PAGE

3, 4

Lo]

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

No. 88-2095

AXIS, S.p.A.,

Petitioner,

MICAFIL, INC.,

Respondent.

REPLY BRIEF FOR PETITION

FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

1. Antitrust injury is a requirement in every antitrust private

right of action. The target of a horizontal price fixing agree-

ment or a boycott has rarely found proof of antitrust injury dif-

ficult. The court of appeals’ decision in this action, however,

would create a frequently insurmountable hurdle for even such

‘*cjassic’’ plaintiffs. Thus, as noted in the Petition, the lower

court held that the reason Axis did not suffer antitrust injury

was solely because it could have suffered the same injury under

hypothetical facts, contrary to the facts alleged in the com-

plaint, that did not include any antitrust violation.

Nowhere in Micafil’s response to the petition does Micafil

contest this description of the test of antitrust injury imposed

by the court of appeals in this action. Indeed, Micafil admits as

much in its description of the appellate court’s hoiding (Br. in

Opp. at 6). While Micafil refers to a variety of factors and cases

that the court of appeals itself noted, they do not limit the stan-

dard to determine antitrust injury. That standard was the only

way in which the court of appeals could affirm the dismissal of

Axis’ action. Simply put, the complaint alleged that Axis would

not have been excluded by the patents but for the illegal acquisi-

tion. That acquisition, foreclosing Axis’ entry into the U.S.

winder machine market, violated the Sherman Act and the

Clayton Act. It was an unreasonable restraint of trade and sub-

stantially lessened competition in the U.S. market for winder

machines.’

Certainly neither Micafil nor the lower court contends that

the patent licenses which Micafil illegally acquired with the pur-

pose and effect of foreclosing Axis’ entry into the U.S. market

provide any non-statutory antitrust immunity. The patents are

like any other necessary asset” or license, acquisition of which

can violate both the Sherman Act and the Clayton Act.

2. Nor can Micafil deny the applicability of this definition of

antitrust injury to all Sherman Act cases, not just acquisitions.

The court of appeals clearly did not so restrict the definition

| Micafil’s references to what ‘‘the Complaint does not allege’’ (Br. in

Opp. at 4) imposes a standard for review of Rule 12(b)(6), Fed. R. Civ.

P., dismissals that this Court rejected in Conley v. Gibson, 355 U.S.

41, 45-46 (1957); Scheuer v. Rhodes, 416 U.S. 232, 236-37 (1973). The

complaint clearly alleges that the acquisition foreclosed and continues

to foreclases Axis’ entry into the U.S. market. In addition, the allega-

tions of the complaint that competition was substantially lessened in

the U.S. market is certainly broad enough to include an allegation that

competition would have been increased if Axis had acquired

Mechaneer by substituting a fourth major innovative competitor for an

underfinanced minor competitor. This Court’s recognition of such a

principle, as set out in cases cited at Petition at 12, is undisputed.

While those cases may each have been Government actions, they

clearly support the antitrust significance of Mechaneer as an entry

vehicle for Axis.

2 E.g., the flour mill in Helix Milling Co. v. Terminal Flour Mills Co.,

§23 F.2d 1317 (9th Cir. 1975), cert. denied, 423 U.S. 1053 (1976).

and one of the cases cited by Micafil is itself a Section 1 Sher-

man Act case involving alleged sham litigation.’

Micafil attempts to distinguish both Cargill, Inc. v. Monfort

of Colorado, Inc., 479 U.S. 104 (1986), and Fishman v. Estate

of Wirtz, 807 F.2d 520 (7th Cir. 1986), on the ground that those

cases involved allegations of ‘‘predatory efforts’’ which are not

alleged by Axis (Br. in Opp. at 8, 12). But, Micafil provides no

reasoned basis, and cites no case, for requiring the plaintiff

alleging predatory conduct under Section 2 of the Sherman Act

to meet a different (and lesser) test of antitrust iniury than the

plaintiff alleging directly injurious foreclosure or exclusion

from the market as a result of an unreasonable restraint of

trade in violation of Section 1 of the Sherman Act.

3. Axis is in exactly the same position as the target of the

boycott in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S.

207 (1959). Each of the manufacturers could have indepen-

dently decided not to sell to Klor’s without raising any antitrust

concern, but they could not agree to do so at the instance of

Broadway-Hale Stores. While Klor’s customers might well have

suffered antitrust injury from the boycott, it would be irratio-

nal to conclude that Klor’s, the target of the boycott, did not

suffer antitrust injury and thus had no antitrust remedy. While

Micafil contends that the court of appeals decision is of no gen-

eral import, it provides no support for the proposition that the

holding of a case applies only to its facts.

4. Similarly, Micafil turns Blue Shield of Virginia v.

McCready, 457 U.S. 465 (1982), on its head. As noted in the

Petition at 10, this Court specifically considered whether

McCready lacked antitrust injury because, absent the illegal

3 The Eighth Circuit’s holding in State of South Dakota vy. Kansas

City Southern Industries, Inc., 1989-1 Trade Cas. (CCH) 68,635 (8th

Cir., June 29 1989), is simply an application of long-standing antitrust

standing cases. South Dakota was merely a supplier to the target of the

conspiracy; South Dakota suffered indirect injury when the conspiracy

allegedly succeeded. The Eighth Circuit’s additional reliance on a lack

of antitrust injury is, however, an example of the potential for over-

broad application of the Brunswick dictum in Sherman Act cases.

conspiracy, McCready’s employer might have chosen insurance

that did not cover psychologists’ charges. This Court affirmed

McCready’s right to sue because McCready’s injury did flow

from that which made the defendants’ acts unlawful. Micafil

ignores the holding of McCready solely because this Court did

not reverse Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

U.S. 477 (1976). But it is not Brunswick’s holding that is the

basis of the lower court’s decision. It is the Brunswick dictum

upon which Micafil and the lower court rely.* As in McCready,

the lower court and Micafil ‘‘borrow selectively from Bruns-

wick... .’? 457 U.S. at 480 n. 16.

Moreover, in McCready, the defendants contended that only

the psychologists suffered antitrust injury. In allowing

McCready to sue for her damages, this Court did not hold that

the psychologists’ companion litigation, see 457 U.S. at 469 n.

4, should be dismissed since they did not suffer antitrust injury.

McCready’s right to sue did not prevent the psychologists from

having a similar right. Axis is in the same functional position as

the psychologists in McCready. The acquisition of Mechaneer

had the purpose and effect of foreclosing Axis’ entry to the

market, just as the refusal to pay for clinical psychologists

allegedly had the purpose and effect of denying them indepen-

dent access to the market. Both the psychologists and Axis suf-

fered antitrust injury.

The court of appeals held that Axis’ injury did not ‘‘flow

from’’ that which made the acquisition illegal, solely because

Axis could have suffered the same injury if facts contrary to

those alleged in the complaint had occurred. Micafil violated

Section 1 of the Sherman Act and Section 7 of the Clayton Act

because Micafil purposefully prevented the increase in competi-

4 Micafil’s brief in opposition demeans both the Third Circuit’s

Brunswick decision and this Court’s opinion in Brunswick reversing

the Third Circuit. Micafil insists this Court’s belief that ‘‘the antitrust

laws do not protect a competitor from increased competition”’ (Br. in

Opp. at 8) was so obvious that it alone would not have merited this

Court’s review. Yet, the ‘‘obvious’’ to Micafil was in fact specifically

rejected by the Third Circuit in Brunswick. That court had allowed the

plaintiff to recover treble damages based exclusively on an increase in

competition.

tion that would have resulted from Axis’ entry into the U.S.

market by Axis’ acquiring Mechaneer. The court of appeals’

denial of Axis’ ability to sue creates a standard which could

effectively eliminate most private rights of action. Micafil sim-

ply ignores this important holding. The petition should be

granted.

Respectfully submitted,