Appendix — De Filippo v. Ford Motor Co.

Beorvme Sour, u. 3. |

FiLED

QCT 14 1879

SUPREME COURT OF THE UNITED reyes —

October Term, 1975

No. 75-229

ARMEN DEFILIPPO AND SHELDON FLEISHMAN,

t/a A&S. A PARTNERSHIP.

Petitioners

7

Forp \MlIoTOR COMPANY

Respondent

PETITIONERS’ SUPPLEMENTAL BRIEF

UNDER RULE 24(5) AND APPENDIX

WALTER \V. RABIN

HurRD BARUCH

1500 Walnut Street

Philadelphia, Pa. 19102

Counsel for Petitioners

Of Counsel:

MELTZER & SCHIFFRIN

1500 Walnut Street

Philadelphia, Penna. 19102

THE LEGAL INTELLIGENCER, 66 NORTH JUNIPER STREET, PHILA. PA. 19107 (215) 561-4050

Petitioners’ Supplemental

Brief under Rule 24(5)

Petitioners fiie this supplemental Brief, under Rule

24(5), to call the Court’s attention to an unreported deci-

sion of the Ninth Circuit Court of Appeals, filed Septem-

ber 18, 1975, which was unavailable to Petitioners’ coun-

sel at the time they filed their prior Petition for Certiorari

and Reply Brief. That decision is Helix Milling Company

v. Terminal Flour Mills Co. and General Foods Corpora-

tion (9th Cir. No. 73-1831), a copy of which is attached

hereto as an Appendix.

The threshold issue raised in our Petition for Certi-

orari is whether the Third Circuit erred in holding that a

specific anticompetitive purpose is a requisite of a group

boycott conspiracy under Section 1 of the Sherman Act.

We argued that such a holding was not only in contraven-

tion of the holdings of this Court, but was in conflict with

the holding of the Ninth Circuit Court of Appeals in United

States v. Hilton Hotels Corp., 467 F.2d 1000 (9th Cir.

1972), cert. den., 409 U.S 1125 (1973). We respectfully

submit that the holding of the Helix case, supra, further

confirms the split between the Third and Ninth Circuits.

This split is of particular significance since the Third

Circuit relied upon the language of the Ninth Circuit in

Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke &

Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969), cert. den., 396

U.S. 1062 (1970), to support its holding.

In the Helix case plaintiff contended that as a conse-

quence of a contract. combination or conspiracy between

the defendants plaintiff was excluded from the Pacific

Northwest flour mill market, and that this constituted a

violation of Section | of the Sherman Act (i.e., a group

boycott). The District Court granted a summary judgment

in defendants’ favor, and the Cowrt of Appeals reversed.'!

1. Plaintiff also there asserted a violation of Section 7 of the

Clayton Act. The District Court likewise granted summary judg-

ment, upon this cause of action, which the Court of Appeals

affirmed.

2

While the facts of the Helix case are dissimilar to

those in our case (and we would submit not nearly so

strong from the plaintiff ’s viewpoint), the legal issue, as

to whether a specific anti-competitive purpose is re-

quired, is the same.

The Court in Helix arrived at the opposite conclusion

from the Third Circuit in the instant case, and found that

evidence of a specific anti-competitive purpose is not re-

quired. In so holding the Ninth Circuit (A-6) quoted the

following language of this Court in United States v. Grif-

fith, 334 U.S. 100, 105 (1948):

“It is... not always necessary to find a specific

intent to restrain trade or to build a monopoly in or-

der to find that the anti-trust laws have been violated.

It is sufficient that a restraint of trade or monopoly

results as the consequence of a defendant’s conduct

or business arrangements.”

The Court in Helix further stated (A-8) that:

“We are not unmindful of the fact that Helix has

abandoned its allegation that defendants acted with

the specific anticompetitive purpose of excluding it

from the market. We hold that such a specific intent

need not be proven in the particular circumstances

of this case.”

In Helix defendants relied upon the Seagram case

(which the Court there referred to as the Hawaiian Oke

case), just as the Third Circuit did in the instant case.

The Ninth Circuit distinguished that case (A-5) in the

following language:

“Defendants argue that our decision in Hawaiian

Oke precludes a finding of a forbidden restraint of

trade. Hawaiian Oke permitted the decision of a

manufacturer to switch distributors for its product

even though this meant excluding its former distri-

butor from the market. This conclusion was condi-

tioned, however, on the absence of ‘an adverse pur-

3

pose or effect on competition.’ 416 F.2d at 78.” (Em-

phasis added).

Thus, the Ninth Circuit recognized that under Sea-

gram (or Hawaiian Oke) an anti-competitive effect is suf-

ficient to make out a case. The Third Circuit’s reliance

upon that case to support its holding that an anti-compet-

itive purpose is required, was, therefore, clearly mis-

placed.

We have been authorized by counsel in the Helix

case for defendant General Foods Corporation to state

to this Court that he intends to file a Petition for Certiorari

from the Ninth Circuit’s decision in Helix, in which he will

rely upon the Third Circuit’s decision in the instant case

as evidence of a split between the Ninth and Third Cir-

cuits. This Court would then have before it two petitions

for Certiorari from two diametrically opposed Circuit

Court decisions upon the same antitrust issue, com-

pounded by the fact that one of the two Courts relied upon

language of the other as a basis for its holding. We re-

spectfully submit that under these circumstances Cer-

tiorari should be granted to clarify the law upon this im-

portant issue.

Respectfully submitted,

Water W. Rasin

Hurp BaRucH

Counsel for Petitioners

Of Counsel:

MELTZER & SCHIFFRIN

1500 Walnut Street

Philadelphia, Pennsylvania 19102

(215) K] 66200

APPENDIX

Opinion of the United States Court of Appeals for the Ninth

Circuit in Helix Milling Company v. Terminal Flour

Mills Co. and General Food Corporation.

UNITED STATES COURT OF APPEALS

For THE NINTH CIRCUIT

Hevix MILLING COMPANY,

Plaintiff-Appellant,

US.

No. 73-1831

TERMINAL FLour MiLts Co.

AND GENERAL Foops CORPORATION, OPINION

Defendants-Appellees.

[September 18, 1975]

Appeal from the United States District Court

for the District of Oregon

Before: BROWNING and wriGHT, Circuit Judges,

and LINDBERG,* District Judge.

WRIGHT, Circuit Judge:

Plaintiff Helix Milling Company (Helix) appeals the

decision of the district court granting summary judgment

and dismissing its claim for damages under §1 of the Sher-

man Act [15 U.S.C. §1) and §7 of the Clayton Act [15

U.S.C. §18]. We affirm the decision of the district court

with respect to plaintiff ’s §7 claim but reverse and remand

with respect to its §1 cause of action.

Helix operated a mill in Oregon for flour and millfeed

which was destroyed by fire. Plaintiff alleged that the only

feasibie way to continue its milling and sales business was

to acquire the assets of an existing mill in the Pacific North-

west. The cost of constructing a new mill was considered

too great with respect to its limited profitability. Hence

Helix approached defendant General Foods with an offer

*Senior District Judge, Western District of Washington.

A-2

to purchase its Igleheart mill at Pendleton, Oregon (which

General desired to sell because it was not meeting its profit

objectives). About the same time, defendant Terminal Flour

Mills initiated negotiations with General to purchase the

Igleheart mill.!

General and Terminal ultimately reached an agree-

ment. General signed a contract to sell the Igleheart mill and

sent it to Terminal for signature. Helix then sued to enjoin

the acquisition and for damages for violation of §1 of the

Sherman Act and §7 of the Clayton Act as well as for pen-

dent claims based on unfair competition and trade defama-

tion.

General subsequently sought to revoke its acceptance

of Terminal’s offer to purchase. However, Terminal indi-

cated its acceptance of the contract, without signing it, and

cross-complained for specific performance. After three

years of litigation, Terminal dropped its cross-complaint

and moved for summary judgment on the grounds that

there could be no §7 violation without a completed acquisi-

tion and that the attempted acquisition could not have vio-

lated §1. The district court granted both motions.

Under Rule 56(c), F. R. Civ. P., summary judgment

should be granted where the record shows “no genuine

issue as to any material fact and that the moving party is

entitled to judgment as a matter of law.” As this court noted

in Bushie v. Stenocord Corporation, 460 F.2d 116, 119 (9th

Cir. 1972):

The showing of a “genuine issue for trial” is predicated

upon the existence of a legal theory which remains

viable under the asserted version of the facts, and

which would entitle the party opposing the motion

| Plaintiff offered to prove that at this time Terminal and

General were two of the five remaining competitors for the Pacific

Northwest flour and millfeed market, with Terminal holding

19.6% and General 10.3% of the market. It also alleged that

General held 8% and Terminal 64° of the submarket for sales to

the Defense Supply Agency, a market in which Helix had provided

56° of the sales prior to the destruction of its mill.

Pe

A-3

(assuming his version to be true) to a judgment as a

matter of law.

Quoting McGuire v. Columbia Broadcasting System, Inc.,

399 F.2d 902, 905 (9th Cir. 1968).

I. SHERMAN ACT CLAIM.

The plaintiff alleged that there was a Pacific North-

west flour and millfeed market as well as a submarket for

sales to the Defense Supply Agency for which it and Term-

inal’s sister corporation were the major suppliers. It

asserted that the only feasible means to re-enter the market

was to purchase an existing mill to supply its sales or-

ganization. It argued that the purchase of the only available

mill by Terminal would necessarily have excluded it from

the market and prevented it from resuming its pre-fire

competition with Terminal.

Helix further alleged that, but for the contract between

Terminal and General, it would have purchased the

Igleheart mill. Plaintiff argues that the acquisition of the

mill by Terminal would have violated both §1 of the

Sherman Act and §7 of the Clayton Act.

In essence then, Helix alleged that there was a

contract, combination or conspiracy to enter into an illegal

acquisition which necessarily would exclude Helix from the

Pacific Northwest flour and millfeed market and the re-

gional submarket for DSA sales.

A major purpose of §1 of the Sherman Act is to foster

competition and to protect the ability of competitors to

enter markets. In Associated Press v. United States, 326

U.S. 1 (1945), the Supreme Court held invalid an AP by-law

which permitted members to impose significant, often

prohibitive, penalties on potential competitors seeking to

join the organization. The Court stated:

Trade restraints of this character, aimed at the

destruction of competition, tend to block the initiative

which brings newcomers into a field of business and

A4

to frustrate the free enterprise system which it was the

purpose of the Sherman Act to protect.

326 U.S. at 13-14.

In a variety of contexts the courts have struck down

collaborative actions which prevented competitors from

entering a given market, Associated Press, supra; United

States v. General Motors, 384 U.S. 127, 145 (1966); Poller

v. Columbia Broadcasting System, Inc., 368 U.S. 464

(1962); Radiant Burners, Inc. v. Peoples Gas Light and

Coke Co., 364 U.S. 656 (1961); United States v. Griffith, 334

U.S. 100, 107 (1948); International Salt Co. v. United

States, 332 U.S. 392, 396 (1947) Cataphote Corp. v. DeSoto

Chemical Coatings, Inc., 450 F.2d 769, 774 (9th Cir. 1971),

cert. denied 408 U.S. 929 (1972); cf. Gough v. Rossmoor

Corp., 487 F.2d 373, 378 (9th Cir. 1973).

Here the plaintiff argues that the defendants combined

and used a contract of sale to exclude it from the Pacific

Northwest flour and millfeed market. In a closed market,

where the acquisition of existing production facilities is the

only economically feasible method of entry, an agreement

to acquire the only available facilities necessarily excludes

a potential entrant.

The issue before us then is whether the agreement and

contract between Terminal and General in November of

1969 was a restraint of trade or was merely “joint activity

having a primal, purpose and direct effect of accomplish-

ing a legitimate business objective [having] an incidental

and indirect effect upon the business of some competitors.”

United States v. Hilton Hotels Corp., 467 F.2d 1000, 1003

(9th Cir. 1972), cert. denied sub nom. Western Inter-

national Hotels Co. v. United States, 409 U.S. 1125 (1973);

Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors

Ltd., 416 F.2d 71 (9th Cir. 1969), cert. denied 396 U.S. 1062

(1970).

It is no answer that plaintiff's suit aborted the acquisi-

tion with the result that Terminal never controlled the

Igleheart mill and that the public retained the benefits of

A-5

two competing mills. See Poller, supra, at 473. The Sher-

man Act prohibits competitors from selecting who or what

their competition will be, Associated Press, supra. This is

particularly significant here where Helix alleges the exis-

tence of a submarket in which it was Terminal’s major

competitor and in which General played an insignificant

role.

Defendants argue that our decision in Hawaiian Oke

precludes a finding of a forbidden restraint of trade.

Hawaiian Oke permitted the decision of a manufaciurer to

switch distributors for its product even though this meant

excluding its former distributor from the market. This

conclusion was conditioned, however, on the absence of “an

adverse purpose or effect on competition.” 416 F.2d at 78.

A jury could find such an unreasonable restraint of

trade as a necessary consequence of the fact that Helix

would have purchased the mill but for General's decision

to sell it to Terminal, and that defendants’ course of action

would necessarily exclude competition from the market

because of the closed nature of the market.

In Hawaiian Oke, the principal defendant was not in

competition with the plaintiff. In Poller and Bushie, the

defendants cancelled vertical arrangements with the plain-

tiffs in order to assume that business themselves. In Poller,

CBS allegedly cancelled its affiliation with a UHF station,

purchased a competing UHF license, and then purchased

the assets of its former affiliate at distress prices in order

.to operate a UHIF outlet for its programs in that market. In

Bushie, the defendant cancelled its regional distributorship

and opened a branch office to ~onduct a distribution busi-

ness itself.

In the former case, the Supreme Court concluded that

. if such a cancellation and purchase were part and

parcel of unlawful conduct or agreement with others

or were conceived in a purpose to unreasonably

restrain trade, control a market, or monopolize, then

such conduct might well run afoul of the Sherman

Law.

368 U.S. at 468-469.

AS

In Poller, the Court found that there was sufficient

evidence from which a jury might have concluded that CBS

intended to restrain trade in the relevant UHF market by

eliminating independent UHF and destroying its former

affiliate’s business, 368 U.S. at 470-473. The Court held that

it had been improper to grant a summary judgment and

remanded the case for trial. Id.

In Bushie, the court found that there was no evidence

that the cancellation restrained trade or was motivated by

anticompetitive intent, 460 F.2d at 119. All the plaintiff

adduced there was the fact of cancellation and the subse-

quent initiation of a branch office to conduct the distribut-

ing business.

The plaintiff here has alleged that the defendants

restrained trade by entering a contract for an acquisition

which would have violated §1 of the Sherman Act,2 and

the necessary effect of which would be to exclude plaintiff

from the markets in question. As the Court noted in United

States v. Griffith, 334 U.S. 100, 105 (1948):

Itis . . . not always necessary to find a specific intent

to restrain trade or to build a monopoly in order to find

that the anti-trust laws have been violated. It is

sufficient that a restraint of trade or monopoly results

as the consequence of a defendant’s conduct or busi-

ness arrangements.

A jury could find here such anticompetitive intent

from defendants’ action in agreeing to a course of action

which would necessarily exclude Helix from the market.

Associated Press, supra; General Motors, supra, and whose

successful attainment would result in an acquisition which

could be found to involve a violation of §1. The plaintiff

has alleged the necessary market and the substantial

shares of those markets held by General and Terminal. As

the Court noted in United States w First National Bank

* United States v. First National Bank and Trust Co. of

Lexington, 376 U.S. 665, 671 (1964).

A-7

and Trust Co. of Lexington, 376 U.S. 665, 671-672 (1964),

speaking of the railroad merger cases:

. where merging companies are major competitive

factors in a relevant market, the elimination of signif-

icant competition between them, by merger or consoli-

dation, itself constitutes a violation of §1 of the

Sherman Act.

Given the plaintiff ’s allegation and offer of evidence,

it was error to grant summary judgment.

The district court also noted that, in order to find a

combination in this case, it would have been necessary to

prove an agreement between defendants that neither of

their mills would be sold to Helix. This misstates the rule.

Proof of participation in a course of conduct that has the

necessary consequence of barring entry of competition into

the market would provide the basis for a finding of a com-

bination. Albrecht v. Herald Co., 390 U.S. 145, 149-150

(1968); Pearl Brewing Co. v. Anheuser-Busch Co., 339 F.

Supp. 945, 950 (S.D. Texas, 1972). The collaboration of the

person necessary to establish a combination need not even

be willing. Albrecht at 150 n.6.

Similarly, plaintiff introduced evidence that defend-

ants entered into a contract® to complete the acquisition,

signed by General, against whom enforcement was sought

by Terminal for three years following the initial agreement.

The plaintiff argues that this contract excluded it from the

market and that Terminal’s action in seeking specific per-

formance extended the exclusionary impact beyond the

period of the initial agreement. The effect on Helix is

alleged to be the same as though the acquisition had been

completed. It was excluded from the market in either event.

Hence there was evidence which, interpreted in the

light most favorable to the plaintiff, would support a

finding of a contract or combination to restrain trade. It

3We have held that the term “contract” should be inter-

preted broadly, Beverage Distributors, Inc. v. Olympia Brewing

Co., 440 F.2d 21, 30 (9th Cir.), cert. den. 403 U.S. 906 (1971).

AS

was error to prevent the plaintiff from attempting to prove

this claim.

Since such a finding of the exclusion of a competition

by collaborative action having the necessary effect of

restraining trade would violate the Sherman Act, no addi-

tional showing of “public injury” is necessary to support

a private action for damages. Radiant Burners, Inc. v.

Peoples Gas Light and Coke Co., supra, 364 U.S. at 660;

Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506,

517-18 (6th Cir. 1972), quotina Rogers v. Douglas Tobacco

Board of Trade, Inc., 266 F.2d 636 (5th Cir. 1959); Switzer

Brothers, Inc. v. Locklin, 297 F.2d 39, 47 (7th Cir. 1961).

See also Richfield Oil Corp. v. Karseal Corp., 271 F.2d 709,

727-28 (9th Cir. 1959).

Plaintiff, of course, must prove that it would have

purchased the mill but for the contract between Terminal

and General. This involves proof both that General would

have made the sale and that Helix would have been able

to purchase it and re-enter the milling and sales market,

see Martin v. Phillips Petroleum Co., 365 F.2d 629 (5th

Cir.), cert. den. 385 U.S. 991 (1966), reh. denied 386 U.S.

930 (1967).

Our holding is a limited one, given the unusual factual

context of this case. We are not unmindful of the fact that

Helix has abandoned its allegation that defendants acted

with the specific anticompetitive purpose of excluding it

from the market. We hold that such a specific intent need

not be proven in the particular circumstances of this case.

We are faced here with an allegedly closed market

where acquisition is the only feasible means of entry. Plain-

tiff alleges that but for the actions of the defendants, includ-

ing the aborted contract of sale, it would have purchased

the only available productive facility and resumed compe-

tition within the market in question. in such a factual

setting, where entry to the market by the plaintiff allegedly

is prevented by a merger or acquisition which would violate

§1 of the Sherman Act and where the defendants were

A-9

aware of the bid by the plaintiff, there is a Sherman Act §1

cause of action.*

II. CLAYTON ACT CLAIM.

The district court granted summary judgment for the

defendants on the Clayton Act §7 claim, basing its decision

on the fact that no acquisition had taken place. We affirm.

It has long been established that there is a private

cause of action for damages under §7, Carlson Companies,

Inc. v. Sperry and Hutchinson Co., CCH 1974-2 Trade Cases

©75-428 (8th Cir. 1974); Gottesman v. General Motors

Corp., 414 F.2d 956 (2d Cir. 1969); Dailey v. Quality School

Plan, inc., 380 F.2d 484 (5th Cir. 1967); Bay Guardian Co.

v. Chronicle Publishing Co., 340 F. Supp. 76 (N.D. Cal.

1972); Kirihara v. Bendix Corp., 306 F. Supp. 72 (D. Haw.

1969); Isador Weinstein Investment Co. v. Hearst Corp.,

310 F. Supp. 390 (N.D. Cal., 1970); Zenith Vinyl Fabrics

Corp. v. Ford Motor Co., 357 F. Supp. 133, 136 (E.D. Mich.

S.D. 1973).

A claim has been permitted, however, only in cases

in which an acquisition has been completed. In the only

case in which damages were sought for an uncompleted

merger, GAF Corp. v. Circle Floor Co., 329 F. Supp. 823,

829 (S.D.N.Y. 1971), the court held that no cause could be

allowed because the possibility of proving damages was

too remote. The Second Circuit affirmed on the ground that

no competitive injury had been alleged, 463 F.2d 752, 758-

759 (2d Cir. 1972). In Carlson, the court implied that only

a completed merger could provide a cause of action for

damages.

* We express no view as to whether the doctrine discussed

in Rex Chainbelt Inc. v. Harco Products, Inc., 512 F.2d 993 (9th

Cir. 1975), decided after this case was submitted, may affect any

claim to damages resulting from the assertion by Terminal of its

counterclaim and General Foods’ refusal to sell the mill to Helix

while that counterclaim was pending. See also Ansul Co. v.

Uniroyal Inc., 448 F.2d 872, 882 (2d Cir. 1971); Kobe v. Dempsey

Pump Co., 198 F.2d 416, 424-25 (10th Cir. 1952).

A-10

The language of §7 speaks in terms of a completed

acquisition rather than an attempted merger.5 We can

find no compelling reason for extending the reach of §7

to an uncompleted merger.

The decision of the district court is affirmed as to

plaintiffs §7 claim and reversed and remanded as to its

§1 claim.

5 15 U.S.C. §18 (1974):

“No corporation engaged in commerce shall acquire,

directly or indirectly, the whole or any part of the stock or

other share capital and no corporation subject to the jurisdic-

tion of the Federal Trade Commission shall acquire the whole

or any part of the assets of another corporation engaged also

in commerce, where in any line of commerce in any section

of the country, the effect of such acquisition may be substan-

tially to lessen competition, or to tend to create a monopoly.”