Petition — Knutson v. Daily Review, Inc.

Supreme Court, U. S

TILED,

— aaa ee 2

MAY 7 1977

In the Supreme C

OF THE

MICHAEL RODAK, JR, CLERK

United Statens —.-.—.

»

24 Ocroner Tere, 1976

Ne 96-1545

| “15

The Dairy Review, INe., a corporation, Bay Arba

PUBLISHING Co, a corporation, FLroyp L. Sparks, |

. an individual, Wit Crivcorr, an individual, |

Danias Chenawnp, an individual, Joux CLARK, an

indivielual,

¥ Petitioners,

Vs \

{

Doucias Ko KANUYsON, AnLeN N. BeNniiaM, Giborrrey

e Beaty, Lavra Dearre, Evan Francis Wincians,

Joserviu W. Berrutacme, Kenneru W. JACKSON, |

Jean KE. Nytanp, Danner AL Devrra, Winnarp B. |

Krirrreepar, Ronerr A. Derr,

> Kesponde we. |

: PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

; ior the Ninth Circuit

Micnuarin No. Reovrre,

THOMAS PAINE,

. a sas P

Ire lifornia Stree?

~

~

ean Calitornia 941

(C‘oumusel for Petitioners.

One Ca itornie Street

San Francisco California 94111

Of Counsel for Petitioners.

ab PERNAU- WALSH PRINTING CO.- 562 MISSION STREET - SAN FRANCISCO. CA 94106

Subject Index

Page

Opinions of the courts below ............. cc ceeceeeeeeees 2

EN dccuedssndsenecdévbunsceawbaucéensusanccontes 2

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IEE dukc0n566naes 600500606550040666 00 KER SOS 3

NE Wer CE cid cocineueneskdindeknekeneneeted 4

Reasons for granting the Wit .......ccccsccccccccccscces 8

A. Conflict with the applicable decisions of this Court .. 8

B. Conflict with the decision of another Court of Appeals 14

C. The lower court’s disregard of Rule 52(a), Federal

Rules of Civil Procedure, calls for an exercise of this

Court’s powers of supervision ..............000005. 16

PD cc Ce eee eee eekeadeaeess Renee 18

Table of Authorities Cited

Cases Pages

Albrecht v. The Herald Company, 390 U.S. 145 (1968) ... 12

Bigelow v. RKO Radio Pictures, 327 U.S. 251 (1946) ....

uiGs 6b Rhu eee ence Ge Me Ah adaneheesadanseens 9,10, 11,13

Brunswick Corp. v. Pueblo Bowl-O-Mat, Ince., ........ | an

ee DO ED cic ide uicceaWedenieenseuunnn 8,13

Cleary v. National Distillers & Chem. Corp., 505 F.2d 695

Dt Te Pn: ccceelvegucecevd mhekesesteduns seeeces 12

Dahl, Inc. v. Roy F. Cooper Co., 448 F.2d 17 (9th Cir.

DEE cbidscecededuevubesuldiededdeseneddeeneseiseess 12

Hanson v. Shell Oil Co., 541 F.2d 1352 (9th Cir. 1976) ... 11

Kestenbaum v. Falstaff Brewing Corporation, 514 F.2d 690

(5th Cir. 1975), cert. denied, 424 U.S. 943 (1976) ..... 14, 15

Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211 (1951) 12

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

Cir.), cert. denied, 385 U.S. 991 (1966) ............... 13

M. C. Manufacturing Co., Ine. v. Texas Foundries, Inc., 517

F.2d 1059 (5th Cir. 1975), cert. denied, 424 U.S. 968

DEE. ocddndhneeesuadiekiedetndeseensenseunedsceses 15, 16

Response of Carolina, Ine. v. Leaseco Response, Inc., 537

ee ee ED WE, UTED. bic Kn descdeeduncceec¥ecseues 15

Shumate & Co. v. National Ass’n of Securities Dealers, Inc.,

509 F.2d 147 (5th Cir.), cert. denied, 423 U.S. 868

ED: ge os ba Sen ican son heekuekesenseeeeeselassces 11

Story Parchment Co. v. Paterson Paper Co., 282 U.S. 555

SE Gvbeekpndadietes suneetsteseeseesabesesavenses 9,13

Yoder Bros., Ine. vy. California-Florida Plant Corp., 537

F.2d 1347 (5th Cir. 1976), cert. denied ...... US. .......

i CTS cindeneseucenes oanedecsssenacaeee 15

Zenith Radio Corp. v. Hazeltine Research, Ine., 395 U.S.

Se -G Sanehddbéncecacuneeedeetbaeneanenes 11, 12, 13, 17

a

TABLE oF AUTHORITIES CITED iii

Rules Pages

Federal Rules of Civil Procedure, Rule 52(a) ........ 3, 6, 16, 17

Statutes

Clayton Act:

es Oe ee SE cc cc agkwesckbeeeeuneneues 3,4

nS Ge Ge EY TED oc kdsbcnvescndsceuseee¥e 4

Sherman Antitrust Act:

re Oe coc cas cevestanuensebaseens 3, 4,5

Oe Ue SEE GED a c'én0 sun neseneeetdinesesess 4

Oe Cs SEED: Saeki daeusedsdcccedcecdeduccéxeseeunct 3

Texts

Areeda, Antitrust Violations Without Damage Recoveries,

oe ee a: Se EE Sure nS deccavasussteuneees 13

In the Supreme Court

Yuited States

OcToBER TERM, 1976

No.

Tue Datty Review, INc., a corporation, Bay Ama |

PUBLISHING Co., @ corporation, FLoyp L. Sparks,

an individual, Wii1amM CHILCOTE, an individual,

DauLas CLELAND, an individual, Joun Clark, an

individual,

Petitioners,

vs. .

Dove as K. Knutson, ARLEN N. BENHAM, GEOFFREY

Beaty, Laura Duarte, Evan FRANCIS WILLIAMS,

Josep) W. BerTHIAUME, KENNETH W. JACKSON,

JEAN E. NyLanpo, Dante. A. Dutra, WILLARD B.

KitTTrepGE, Ropert A. Dutra,

Respondents. }

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

Petitioners, The Daily Review, Inc., et al., (defend-

ants below) respectfully pray that a Writ of Certi-

orari issue to review the Judgment of the United

States Court of Appeals for the Ninth Cireuit entered

in the above-entitled case on December 2, 1976. A pe-

tition for rehearing and suggestion for rehearing

2

en bane was denied by the Court of Appeals on Feb-

ruary 8, 1977.

OPINIONS OF THE COURTS BELOW

A bifureated trial of this antitrust action was heard

by the District Court for the Northern District of

California, District Judge Charles B. Renfrew pre-

siding. A Memorandum of Opinion was issued by the

Court on September 6, 1974. That opinion is reported

at 383 F.Supp. 1346 (N.D. Cal. 1974) and a copy

thereof is attached as Appendix B to this Petition.

On December 2, 1976, the United States Court of

Appeals for the Ninth Circuit reversed the trial

court’s findings that certain of the plaintiffs had

failed to prove the fact of damage, sustained all other

findings of the trial court and remanded the case for

further hearings on damages. The opinion of the

Court of Appeals is reported at 548 F.2d 795 (9th

Cir. 1976) and a copy thereof is attached as Appendix

A to this Petition.

JURISDICTION

The Judgment of the Court of Appeals was entered

on December 2, 1976. The plaintiff dealers filed a pe-

tition for rehearing which was denied on December

30, 1976. Defendants also filed a petition for rehear-

ing and a suggestion for rehearing en bane which was

denied by the Court on February 8, 1977. Copies of

the Orders denying rehearing are attached hereto as

Appendix D and Appendix E respectively to this Pe-

3

tition. The jurisdiction of this Court is invoked pur-

suant to 28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. Does sympathy for antitrust plaintiffs justify

the elimination of the fact of damage as an element

of proof in antitrust suits brought under Section 4 of

the Clayton Act?

2. Can an “assumption”, unsupported by human

experience and contrary to the record in this case,

cure plaintiffs’ failure of proof on the fact of damage

issue ?

3. Does mere proof of an antitrust violation, aris-

ing from a contractual maximum resale price provi-

sion, warrant shifting the burden of proof on the fact

of damage issue to defendants?

4. Can a Court of Appeals overturn trial court

findings of fact, not found to be “clearly erroneous”,

through imposition of a factual “assumption” without

violating Rule 52(a), Federal Rules of Civil Proce-

dure?

STATUTES INVOLVED

1. Section 1 of the Sherman Antitrust Act (15

U.S.C. §1):

“Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint of

trade or commerce among the several States, or

with foreign nations, is declared to be illegal...”

4

2. Section 4 of the Clayton Antitrust Act (15

U.S.C. §15):

“Any person who shall be injured in his busi-

ness or property by reason of anything forbidden

in the antitrust laws may sue therefor... and

shall recover threefold the damages by him sus-

tained, and the cost of suit, including a reason-

able attorneys’ fee.”

STATEMENT OF THE CASE

This is a private antitrust suit seeking treble dam-

ages and injunctive relief pursuant to sections 4 and

16 of the Clayton Act (15 U.S.C. §$15 and 26).

Respondents (plaintiffs below) are a group of news-

paper distributors of two newspapers published by

the corporate Petitioner, The Daily Review, Ine.

(‘DRI’). The individual Petitioners are manage-

ment officials of DRI. The complaint, filed on August

6, 1973, accused defendants of a number of offenses

under sections 1 and 2 of the Sherman Act (15 U.S.C.

§§1 and 2) arising in the context of newspaper

distribution.

Upon filing, this case was assigned to the Hon-

orable Charles B. Renfrew, United States District

Judge for the Northern District of California. Fol-

lowing extensive discovery, all parties waived trial by

jury and a bifurcated trial on the issues of liability,

impact and damages was held. That trial consumed

28 trial days and generated a Reporter’s Transcript

exceeding 4,000 pages in length. At the conclusion

of the liability phase of the trial, Judge Renfrew held

3

that a provision in the Dealer’s Agreement between

each plaintiff and DRI which required the dealer to

resell the newspaper “at the current subscription

rate” constituted vertical resale price maintenance per

se violative of section 1 of the Sherman Act (383

F.Supp. at 1357).. After finding the plaintiffs’ re-

maining claims unsupported by the evidence, the

Court set a date for trial of the injury and damage

issues, focusing on the plaintiffs’ loss of profit claims.

That trial consumed 8 days of testimony followed by

the filing of comprehensive post-trial briefs and pro-

posed findings and conclusions by all parties.

The trial court then rendered an 83 page decision

addressing each issue raised by the case. Judge Ren-

frew therein found that the plaintiffs had failed to

prove either the fact or amount of damages proxi-

mately caused by the existence of the contractual re-

sale price provision found violative of section 1 of the

Sherman Act:

“Based on an exhaustive review of the record and

for the reasons set out below, however, the Court

concludes that plaintiff’s proof of the fact of dam-

age falls short of that clearly required by Flint-

kote. Moreover, since plaintiffs’ estimate of the

amount of their damages is based on exactly the

same facts and theory offered on the question of

impact, the inadequacies which the Court finds in

that proof require that their damage estimates

be rejected as speculative and conjectural.” (383

F.Supp. at 1379)

Three independently sufficient grounds for this find-

ing of fact were stated and discussed. First, plaintiffs

6

‘failed to show a “reasonable probability” that they

would have increased their prices during the damage

period in the absence of the contractual restraint (383

F.Supp. 1379-81). Second, plaintiffs failed to prove

by credible evidence that they would realize higher

profits if they had increased their resale prices (Jd.

at 1381-83). Third, the “after” period during which

certain of the plaintiffs allegedly realized greater

profits, was “an artificial rather than a real market

experience thereby destroying the probative value of

the ‘before/after’ test relied upon by the plaintiffs.”

(Id. at 1383).

By a split decision’ the Court of Appeals reversed

the trial court on this issue and remanded for further

trial “of the amount of damages issue as to non-Argus

plaintiffs . . .” (548 F.2d at 813). The majority did

not hold Judge Renfrew’s findings on the weight and

credibility of the plaintiffs’ damage proofs clearly er-

roneous under Rule 52(a), Federal Rules of Civil

Procedure, or even seriously question the “infirmities”

in that evidentiary showing. Instead, the majority

relieved plaintiffs of the burden of proof on this

issue through the creation of a legal presumption

which rests upon profit rather than causation:

“Rather than imposing the nearly impossible bur-

den of proving what each dealer would have done

if he had been free to make his own pricing de-

cision, we assume that, absent evidence to the con-

trary, a dealer would have raised his prices

had it been profitable to do so; that is deal-

1A dissenting opinion was filed by the Honorable Russell E.

Smith, Chief Judge, United States District Court for the District

of Montana, sitting by designation.

7

ers are profit maximizers.” (548 F.2d at 812,

footnote omitted).

The effect of this assumption is to eliminate the

fact of damage as an element of proof in an antitrust

case. If an antitrust claimant could have earned

greater profit the trier of fact must find that he would

have earned greater profit unless the defendant proves

otherwise. The simplistic and artificial nature of such

a rule was noted by District Judge Smith in his dis-

sent:

“T think it could be said that it is the universal

intention of dealers to make a profit but that

there is an intent to profit does not warrant the

conclusion that all dealers are in fact ‘profit max-

imizers,’ 1.e., that they will do all things necessary

to make a maximum profit... .

“The fact is that some dealers do not do all things

necessary to maximize profits. That is why some

dealers profit much less than others, and some go

broke. Between the intent to profit and the pro-

duction of a maximum profit lie the factors of

energy, imagination, intelligence, and the willing-

ness to take a risk. If the presumption created

here goes as far as it must go to support the

conclusion, then, in my opinion, it is artificial. I

think the testimony in this case discloses the

artificiality of it.” (548 F.2d at 816; footnote

omitted ).

8

REASONS FOR GRANTING THE WRIT

Defendants respectfully submit that Section IV of

the majority opinion of the court below merits fur-

ther review by this Court because the rule there

promulgated (A) is in conflict with the applicable

decisions of this Court; (B) is in conflict with the

decisions of other courts of appeals on this issue; and

(C) disregards the limited authority of that court to

overturn findings of the trial court, calling for an

exercise of this Court’s supervisory powers.

A. CONFLICT WITH THE APPLICABLE

DECISIONS OF THIS COURT

The assumption of the fact of damage announced by

the court below conflicts with an unbroken line of

authority in this Court which requires that an anti-

trust plaintiff prove actual injury before recovery of

damages is permitted. As the Court recently restated

this principle in Brunswick Corp. v. Pueblo Bowl-O-

Mat, Inc.., ............ U.S. ........., 50 L.Ed.2d 701, at 712

(1977) :

“Plaintiffs must prove antitrust injury, which is

to say injury of the type the antitrust laws were

intended to prevent and that flows from that

which makes defendants’ act unlawful. The in-

jury should reflect the anticompetitive effect ei-

ther of the violation or of anticompetitive acts

made possible by the violation. Tt should, in short,

he ‘the type of loss that the claimed violation ...

would be likely to cause.” Zenith Radio Corp. v.

Hazeltine Research, Ine., supra, 395 US, at 125

”

9

Proof of the fact of damage, i.e., that actual injury

occurred which was proximately caused by violative

conduct has required a greater showing than proof.

of the amount of such damages. The differing stand-

ards of proof in antitrust cases were first articulated

in Story Parchment Co. v. Paterson Paper Co., 282

U.S. 555, 562 (1931):

“It is true that there was uncertainty as to the

extent of the damage, but there was none as to

the fact of damage; and there is a clear distine-

tion between the measure of proof necessary to

establish the fact that petitioner had sustained

some damage and the measure of proof necessary

to enable the jury to fix the amount. The rule

which precludes the recovery of uncertain dam-

ages applies to such as are not the certain result

of the wrong, not to those damages which are

definitely attributable to the wrong and only

uncertain in respect of their amount.”

In Bigelow v. RKO Radio Pictures, 327 U.S. 251, at

264 (1946), the Court established that the fact of

damage could be proven through the collation of cir-

cumstantial evidence which supported a reasonable in-

ference of actual injury proximately caused by the

defendants’ conduct.

“ .. a jury could conclude as a matter of just

and reasonable inference from the proof of de-

fendants’ wrongful acts and their tendency to in-

jure plaintiffs’ business, and from evidence of the

decline in prices, profits and values not shown to

be attributable to other causes, that defendants’

wrongful acts had caused damage to the plain-

tiffs.”

10

The Court cautioned, however, that “[i]n such a case,

even where the defendant by his own wrong has pre-

vented a more precise computation, the jury may not

render a verdict based on speculation or guesswork.”

(251 U.S., at 264).

Judge Renfrew’s description of the plaintiffs’ dam-

age proofs in this case demonstrates that those claims

were pure speculation and guesswork. (See 383 F.

Supp., at 1379-1384). As Judge Smith, in dissent,

stated :

“T think that the trial court’s findings of fact are

sufficient and are supported by the evidence. The

trial court here simply did not believe the plain-

tiffs’ witnesses. The trial judge considered the

plaintiffs’ interests and motives in the case; the

lack of corroborating evidence; the plaintiff’s self-

contradictions; the times at which the claims here

made were first made. The court concluded:

..» Because of the paucity and doubtful ered-

ibility of the evidence on this question, plain-

tiffs have not satisfied their burden of proof on

the first element of the fact of damage... .

Knutson v. Daily Review, Inc., supra note 1,

1381.

Absent believable witnesses, the plaintiffs who

did have the burden failed...” (548 F.2d, at

816; footnote omitted).

While Bigelow would preclude a jury from rendering

a verdict on such evidence, the majority of the court

below would require a trial court, sitting without a

jury, to find for the plaintiff on the fact of damage

issue on that evidence.

11

The collation of factors, beyond mere proof of vio-

lation, relied upon by the Court in Bigelow, was also

relied upon to prove the fact of damage in Zenith

Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100,

at 123-25 (1969). In reinstating the trial court’s

award of damages arising from exclusion of Zenith

from the Canadian television market, the Court em-

phasized Zenith’s proven efforts to enter that market

and the practices of the patent pool to frustrate such

entry. The Court concluded that “[t]he trial court

was entitled to infer from this circumstantial evidence

that the necessary causal relation between the pool’s

conduct and the claimed damage existed.” (395 U.S.,

at 125).

The absence of any corroborating cir¢umstantial

evidence that plaintiffs would have increased their

prices but for the contractual price provision or, if

such increases had heen made, have received greater

profits (see 383 F.Supp., at 1379-1384) left the trial

court with nothing but the plaintiffs’ testimonial spec-

ulation. Awards on such insubstantial grounds have

been consistently condemned by this Court and lower

federal courts. See, e.g.: Hanson v. Shell Oil Co., 541

F.2d 1352, 1360-61 (9th Cir. 1976); Shumate & Co. v.

National Ass’n of Securities Dealers, Inc., 509 F.2d

147, at 153 (5th Cir.), cert. denied, 423 U.S. 868

(1975). As the Shumate court held:

“(With only his ipse dirit to establish the fact

of damage, Shumate would have this Court find

his testimonial speculation and contentions supply

the basis for a jury issue as to the fact of dam-

age. But more evidence than this is necessary

12

to demonstrate that there has been injury before

the jury can be allowed to consider the amount

that would properly compensate him for such in-

jury.”

The trial court’s requirement of proof of a reason-

able probability that injury occurred in a maximum

resale price maintenance case does not “create a

nearly insurmountable barrier to recovery” (548 F.2d,

at 812). Rather, it focuses attention on that aspect

of the defendants’ conduct which renders it unlawful

under the antitrust laws: the restraint of independent

traders’ freedom “to sell in accordance with their own

judgment.” Kiefer-Stewart Co. v. Seagram d&: Sons,

340 U.S. 211, at 213 (1951); Albrecht v. The Herald

Company, 390 U.S. 145, at 152 (1968). A reasonable

probability that the dealer’s pricing decision would be

different in the absence of the contractual provision

is essential to show that the restraint had any impact

upon the business of the plaintiff or upon competition

in the marketplace.

This requirement in a maximum resale price case

serves the same purpose as the requirement that a

plaintiff make a demand for supplies before he can

recover in a group boycott case [see e.g. Dahl, Inc.

v. Roy F. Cooper Co., 448 F.2d 17, 19 (9th Cir.

1971) ; Cleary v. National Distillers & Chem. Corp.,

505 F.2d 695, 697 (9th Cir. 1974)], or prove intent,

preparedness, and capability for market entry before

he can recover for exclusion from a market. [See e.g.

Zenith Radio Corp. v. Hazeltine Research, Inc., supra,

ee ee

—- oer ino )* O° Rew a

13

395 U.S., at 126, 127; Martin v. Phillips Petroleum

Corp., 365 F.2d 629, at 633 (5th Cir.), cert. dented,

385 U.S. 991 (1966).] Proof of actual, rather than

conjectural, injury is not unreasonable before an

antitrust defendant is subjected to treble damage lia-

bility. Such proof may be circumstantial and inferen-

tial, but justice surely requires more than the plain-

tiff’s profit expectations to establish the fact of

damage.

The majority opinion of the court below rejects

these reasonable limits upon proof of the fact of dam-

age and converts the test of viable damage claims

from actual business decisions and conduct to abstract

economic theory. That opinion renders the antitrust

defendant in a vertical maximum price case an insurer

of the maximum profits which dealers might earn.

Such a result is contrary to Story Parchment, Bige-

low, Zenith and Brunswick. As Professor Areeda

stated in Antitrust Violations Without Damage Re-

coveries, 89 Harv. L. Rev. 1127 (1976):

“the desire to encourage private enforcement and

to penalize antitrust violations is no excuse for

awarding damages that are nonexistent, inconsis-

tent with antitrust policy, or unconnected with the

true rationale for imposing antitrust liability.”

The ruling of the éourt below is against the evi-

dence and contrary to the policy of section 4 of the

Clayton Act. That ruling mandates windfall recover-

ies without even a reasonable probability that actual

injury has been suffered. Treble damage liability for

actual injury caused is a sufficient penalty and deter-

14

rent. Treble damage liability for injuries which are

merely speculative or conjectural is unwarranted.

B. CONFLICT WITH THE DECISION OF ANOTHER

COURT OF APPEALS

The decision of the majority in the court below is

in direct conflict with the decision of the Court of

Appeals for the Fifth Circuit in Kestenbaum v. Fal-

staff Brewing Corporation, 514 F.2d 690 (5th Cir.

1975), cert. denied, 424 U.S. 943 (1976). In that case,

the plaintiff beer dealer charged Falstaff with impos-

ing a maximum resale price and then enforcing it

through arbitrary wholesale price increases equal to

one-half of any retail price increase initiated by

plaintiff. The court rejected the plaintiff’s claim for

loss of profits resulting from these wholesale price

increases :

“While Falstaff’s increase in price to Kesten-

baum may be classified as arbitrary, such increase

is not itself violative of the antitrust laws, nor

does it afford a hasis for proof of injury even

though it is coupled with a price ceiling require-

ment which is a per se violation, A prerequisite

to Kestenbaum’s recovery on this issue was a

showing that the price ceiling on sales by him,

disregarding the price charged to him, caused

injury. Not only did he fail to prove this, he es-

tablished that the wholesale price which Falstaff

allegedly fixed was a proper price. While the fact

of injury often involves evidentiary questions

which are properly for the jury fe.g., Story

Parchment Co. vy. Paterson Parchment Paper

15

Co., 282 U.S. 555, 562, 51 S.Ct. 248, 250, 75 L.Ed.

544, 548 (1931)], no jury issue exists where, as

here, the plaintiff fails to offer any competent

evidence to establish that the defendant’s wrong-

ful price-fixing activity produced injury to him.”

(514 F.2d, at 694)

The conflict between these two courts on this issue

is even deeper than this passage would suggest. The

majority in the court below has held that the trial

court must assume the fact of injury and then require

defendants to establish that a plaintiff would resell

at less than a ‘‘profit maximizing” price in order to

diminish the amount of damages recovered. The Kes-

tenbaum court not only avoided creating a legal pre-

sumption but held that the trial court should have

directed a verdict against the plaintiff. In doing so

the court stated:

“We recognize that leniency should be permitted

in showing damages in private antitrust actions,

however, a damage assessment based wholly on

speculation and guesswork is improper. L.y.,

Bigelow v. RKO Pictures, 327 U.S. 251, 264-65,

66 S.Ct. 574, 579-80, 90 L.Ed. 652 (1946). Be-

cause proper proof of injury and of damage

was missing, the district judge should have di-

rected a verdict for defendant on this aspect of

plaintiffs’ price-fixing claim.” (514 F.2d, at 659).

Accord: Yoder Bros., Inc. v. California-Florida Plant

Corp., 537 F.2d 1347, 1371-1372 (5th Cir. 1976), cert.

denied ............ . , (February 22, 1977) ; Response

of Carolina, Inc. v. Leaseco Response, Inc., 537 F.2d

1307, 1321-1323 (5th Cir. 1976); M.C. Manufacturing

16

Co., Inc. v. Texas Foundries, Inc., 517 F.2d 1059,

1063-1064 (5th Cir. 1975), cert. denied, 424 U.S. 968

(1976).

The damage ruling of the court below conflicts

with principles of proof established by this Court

and followed by other courts of appeal. In doing so,

it turns the law of causation upside down. It rejects

the stricter standard of proof necessary for fact of

damage and shifts the burden to defendants to dis-

prove causation and profit maximization. It converts

permissible inferences which a jury might draw into

mandatory presumptions which the trial court, sitting

without a jury, must draw absent proof to the con-

trary.’ Such novel and far reaching consequences so

thoroughly in conflict with established principles jus-

tify review and correction by this Court.

C. THE LOWER COURT'S DISREGARD OF RULE 52(a), FEDERAL

RULES OF CIVIL PROCEDURE, CALLS FOR AN EXERCISE

OF THIS COURT’S POWERS OF SUPERVISION

As noted above, this case was the subject of a

protracted trial, numerous pretrial and _ post-trial

hearings and extensive briefing and argument on all

issues. District Judge Renfrew was directly involved

in all phases of those proceedings and had a daily

Even where substantial proof to the contrary exists, as it did

in instant case (see 383 F.Supp., at 1379-1384), that proof is

dismissed as going to the amount rather than the fact of damage.

(548 F.2d, at 812-813).

17

opportunity to view the witnesses, judge their de-

meanor and assess their credibility. Throughout those

proceedings he demonstrated a profound understand-

ing of the issues, evidence and conflicting interests

raised by the case. His conscientious approach is

manifested by the comprehensive Memorandum of

Opinion he filed in this case.

His findings on the issue of the fact of damage are

based upon an exhaustive analysis of the testimonial

and documentary evidence submitted by the parties.

Those findings were entitled to substantial weight

under Rule 52(a), Federal Rules of Civil Procedure

which provides that a trial court’s “findings of fact

shall not be set aside unless clearly erroneous.” The

majority of the court below did not hold Judge Ren-

frew’s findings on the fact of damage clearly erro-

neous—the Circuit Judges merely disagreed with the

trial judge and ordered him to assume that fact de-

spite the plaintiffs’ failure of proof. In doing so the

majority violated the express mandate of Rule 52(a)

and deprived the trial court, as finder uf fact, of its

discretion. This action calls out for correction under

this Court's supervisory powers, for the courts no

less than litigants should adhere to those rules of

practice. As this Court held in Zenith Radio Corp. v.

Hazeltine Research, Inc., supra, 394 U.S., at 123:

“In applying the clearly erroneous standard

to the findings of a district court sitting without

a jury, appellate courts must constantly have in

mind that their function is not to decide factual

issues de novo. The authority of an appellate

court, when reviewing the findings of a judge as

18

well as those of a jury, is circumscribed by the

deference it must give to decisions of the trier of

the fact, who is usually in a superior position to

appraise and weigh the evidence. The question

for the appellate court under Rule 52(a) is not

whether it would have made the findings the trial

court did, but whether ‘on the entire evidence

[it] is left with the definite and firm conviction

that a mistake has been committed.’ United States

v. United States Gypsum Co. 333 US 364, 395, 92

L Ed 746, 766, 68 S Ct 525 (1948).”

The ruling of the majority below is not based upon

the evidence but rather on its view of economic theory

and effective antitrust policy. Rejection of trial court

findings is not the proper means and the Court of

Appeals is not the proper forum for a policy decision

producing such a marked departure from established

authority on the issue of the fact of damage.

CONCLUSION

The assumption of fact announced by the majority

in the court below represents a sharp break from the

rulings of this Court and of the other Courts of

Appeals. The effect of this assumption is to elimi-

nate the fact of damage as an element of proof in pri-

vate antitrust lawsuits. The conflict between this case,

and the prior rulings of the Ninth Circuit, of this

Court, and of other federal courts leaves the control-

ling rule of law on this issue in serious doubt. Given

19

the central importance of this issue in all private

antitrust litigation, resolution of those conflicts by

this Court is essential.

Dated, San Francisco, California,

May 6, 1977.

Respectfully submitted,

MICHAEL N. KHOURIE,

THOMAS PAINE,

Counsel for Petitioners.

Broap, Knourre & ScHvuLz,

Of Counsel for Petitioners.

(Appendices Follow)