Petition — Ackerman-Chillingworth v. Pacific Electrical Contractors Ass'n

78-703 | OCT on

No. 78- (

In The

Supreme Court of the United States

October Term, 1978

ACKERMAN-CHILLINGWORTH,

Division of MARSH & McLENNAN, INCORPORATED,

a Delaware corporation, ef al.,

Petitioners,

v.

PACIFIC ELECTRICAL CONTRACTORS

ASSOCIATION, a Hawaii corporation, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

WILLIAM M. SWOPE

ROBERT A. ROWAN

1000 Bishop Street

Honolulu, Hawaii 96813

Counsel for Petitioners

Of Counsel:

CADES SCHUTTE FLEMING & WRIGHT

1000 Bishop Street

Honolulu, Hawaii 96813

satis tant nines te sce

. —

SUBJECT INDEX

I I ii gre cme ene chow dws 0 vases slses

I aha Boece g oa ow ae ha sdeniae eieckus

QUESTIONS PRESENTED ..................20000

STATUTES AND RULES INVOLVED ..............

py eg Ay eddy | ko

REASONS FOR GRANTING THE WRIT............

I. THE DECISION BELOW PRESENTS

IMPORTANT QUESTIONS CONCERNING

THE CONTINUED VIABILITY OF THE

SUPREME COURT’S ANNOUNCED

POLICY OF HOLDING GROUP

BOYCOTTS PER SE VIOLATIONS

OP THe SHERMAN ACT. .......0.c..cce0e.

A. This case presents a unique opportunity

to clarify the law of group boycotts and

the application of the per se rule. ...........

B. The decision below is in direct conflict

with Supreme Court decisions holding

group boycotts to be per se violations of

ca deb kw dcnsaacamndies a

C. The decision below misstates the role of

respondents’ alleged “purpose” to even a

7

8

URES GE PONE GEIGER. nn 5 ccc ccc ccces 10

D. Review is required to prevent confusing

and inequitable application of the per se

rule m the flower courts... ........6..0cc00e-

II. THE DECISION BELOW IS IN DIRECT

CONFLICT WITH THE DECISIONS OF

THIS COURT AND OTHER CIRCUITS

HOLDING SUMMARY PROCEDURES

INAPPROPRIATE IN COMPLEX

ANTITRUST LITIGATION WHERE

MOTIVE AND INTENT PLAY

a eee

11

Ill. THE DECISIONS BELOW, BY

SANCTIONING RESPONDENTS’ USE OF A

LABOR AGREEMENT TO ENHANCE

THE COMPETITIVE STATUS OF ODA

AND PECA, HAVE CREATED A

DANGEROUS PRECEDENT WITH

APPLICATIONS FAR BEYOND THE

ES ON Kien seh wed ina ee ees 14

Ge gh Sere dunes e's sewed oye 6s 15

APPENDIX (In Separate Volume)

COURT OF APPEALS OPINION ...... APPENDIX A

DISTRICT COURT OPINION ......... APPENDIX B

DENIAL OF PETITION FOR

0 Ber nee APPENDIX C

STATUTES AND RULES............. APPENDIX D

TABLE OF AUTHORITIES

CASES:

Allen Bradley Co. v. Electrical Workers Local 3, 325

oF Re GRR ere rr ree 4

Alpha Distributing Co. v. Jack Daniel Distillery, 454

F.2d 443 (9th Cir. 1972), cert. denied 419 U.S. 842

Cate Rec ae ie ges 0S SON Ae ey h wwe oelene e's 11

Chicago Board of Trade v. United States, 246

Se oe ee ie Ea ccd ua eae ewes a 10

Connell Construction Co. v. Plumbers Local 100, 421

In a Sand he ald nie whale gis vaihrs 0 48 4

Cullum Electric & Mechanical, Inc. v. Mechanical

Contractors Ass'n, 436 F. Supp. 418 (D.S.C. 1976),

affa GOO F.2d S21 (4th Cir. 1978) ....o0 5 ccc ceveevess 12

DeFilippo v. Ford Motor Co., 516 F.2d 1313

(3d Cir. 1975), cert. denied 423 U.S. 912 (1975) ...... 12

E. A. McQuade Tours, Inc. v. Consol. Air Tour Manual

Comm., 467 F.2d 178 (5th Cir. 1972), cert. denied

a OE 2.0 vk aaa aeons Cee awe «eee ee 12

Eastern States Retail Dealers’ Ass’n v. United States,

Ee irae ssa oN a end dee cab hese bea ou 8

Fashion Originators’ Guild v. FTC, 312

Ue EEE on Ss otek hued wa oC een cawes 5, 8

Helix Milling Co. v. Terminal Flour Mills Co.,

523 F.2d 1317 (9th Cir. 1975), cert. denied 423 U.S.

a cnsnabs ap ne, HIE EP EO ES OT ee he 11

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

Liquors, Ltd., 416 F.2d 71 (1969), cert. denied 396

U.S. 1062 (1970), reh. denied, 397 U.S. 1003

UME 6d a 00 WOKS MAE NS id ORAS oA KERR ES S, 9, ii, 12

Keifer-Stewart Co. v. Joseph E. Seagram & Sons, Inc.,

See A EP oats hn do cok ie ee as sda Ra s

Klor’s, Inc. v. Broadway-Hale Stores, lne., 359

a re rar hy eae Seas cere 5, 8, 9

Klor’s, Ine. v. Broadway-Hale Stores, Inc., 255

sae Oe CORE SMe BON oes ba vb nass taascarvenes 9, 10

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

(6th Cir. 1972), cert. denied 409 U.S. 1001 (1972)..... 12

Mazaleski v. Treusdell, 562 F.2d 701 (D.C. Cir. 1977) .. 14

Mutual Investors, Inc. v. Putnam Management Co.,

ee Re: | ar 11

National Society of Professional Engineers v.

United States, 98 S. Ct. 1855 (1978) ............068. 10

Norfolk Monument Co. v. Memorial Gardens, Inc.,

Se a CUE bce are aC es kin way ae nee unt 2kks 14

Poller v. Columbia Broadcasting System, 368

ite SD ih tg ho Gee yh eG 84 hes aoe ke 14

Radiant Burners, Inc. v. Peoples Gas, Light and Coke Co.,

TR OR heen nr eer 5

Radovich v. National Football League, 352

A EE sa noc an ka sky see DAA EKER RS aR KS 9

Schmidt v. McKay, 555 F.2d 30 (2d Cir. 1977) ......... 14

Staren v. American National Bank & Trust Co.,

Pe i Re ae eee 14

Sulmeyer v. Coca Cola Co., 515 F.2d 835 (5th Cir. 1975),

corte. Gemvem 406 U.S. SE4 (IGT) 2. nc cccecsvccccces 12

Taxi Weekly, Inc. v. Metropolitan Taxicab Bd. of Trade,

et ae Cy PO cis do co teevccevenesssoas 12

United States v. General Motors Corp., 384

oh Se PE cose seca ve cee eahen as Sieeruwess 5, 8, 9

Worthen Bank & Trust Co. v. National BankAmerica,

Inc., 485 F.2d 119 (8th Cir. 1973), cert. denied 415

Ty OO CA scans kvacdudc tee uodevuseneo ane 12

SECONDARY AUTHORITIES:

Barber, Refusals to Deal Under the Federal Antitrust

Lawe, 106 U.PA.. L. BEV. SAT (IBGB) «nn occ cccscucass 12

Bird, Sherman Act Limitations on Noncommercial

Concerted Refusals to Deal, 1970 Duke L.J. 247 ..... 11

Handler, Recent Developments in Antitrust Law:

1958-1959, 59 COLUM. L. REV. 843 (1959) ........... 10

Horsley, Per Se Illegality and Concerted Refusals to |

Deal, 13 B.C. IND. & CoM. L. REV. 484 (1972) .... 8, 11

L. Sullivan, Antitrust § 90 at 258-59 (1977) ............ 11

Note, A Return to the Rule of Reason in Group Boycott

Cases?, 42 U. COLO. L. REV. 467 (1971) ............ 9

Note, Boycott: A Specific Definition Limits the

Applicability of a Per Se Rule, 71 Nw. U.L.

RV. CIS CENT con dod bss dnnneeneseen sae sees 8, 11

Woolley, /s Boycott a Per Se Violation of the Antitrust

Laws?, 27 RUTGERS L. REV. 773 (1974)........... 9, 10

STATUTES AND RULES:

Pet, R. Civ. B.. GO). « ccvicvecescastv esse 3, 14

Sherman Act, 15 U.S.C. § 1 (1976)............. 2,3, 8, ll

In the

Supreme Court of the United States

OCTOBER TERM, 1978

NO. 78—

ACKERMAN-CHILLINGWORTH,

Division of MARSH & McLENNAN,

INCORPORATED, a Delaware corporation,

et al.,

Petitioners,

VS.

PACIFIC ELECTRICAL CONTRACTORS

ASSOCIATION, a Hawaii non-profit

corporation, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Petitioners respectfully pray that a Writ of Certiorari issue

to review the judgment and opinion of the United States Court

of Appeals for the Ninth Circuit entered on March 22, 1978,

with rehearing denied on July 31, 1978. Petitioners are the

insurance agents and agencies named in Footnote 1 and re-

*Ackerman-Chillingworth, Division of Marsh & McLennan, Incorporated, a

Delaware corporation; Alexander of Hawaii, Inc., dba Mid-Pacific Insur-

ance Division, a Hawaii corporation; American Mutual Underwriters,

Ltd., a Hawaii corporation; Bayly, Martin & Fay of Hawaii, Inc., a Hawaii

corporation; Davies Insurance Agencies, Inc., a Hawaii corporation;

Stanley S. Hashimoto; Occidental Underwriters of Hawaii, Ltd., a Hawaii

corporation; Jack T, Osakoda and Raymond T. Tanaka.

1

spondents are the individuals, trade association and labor

union named in Footnote 2.

OPINIONS BELOW

The Opinion of the District Court for the District of Hawaii

is reported at 405 F. Supp. 99 (1975) and is printed as Appendix

B hereto. The Opinion of the Court of Appeals for the Ninth

Circuit is not yet reported and is printed as Appendix A

hereto. The Order denying rehearing is likewise not yet re-

ported and is printed here as Appendix C.

JURISDICTION

The Opinion and Judgment of the Court of Appeals for the

Ninth Circuit was entered on March 22, 1978. A timely Petition

for Rehearing was denied on July 31, 1978. This Court has

jurisdiction to grant a Writ of Certiorari under 28 U.S.C.

§§ 1254 and 2101, and under Rule 21 of the Rules of this Court.

QUESTIONS PRESENTED

1. Whether a collective bargaining agreement between a

trade association and a labor union mandating that all trade

association members and non-member electrical contractors

bound by that agreement must participate in a group workers’

compensation insurance plan is a per se violation of the Sher-

man Act, 15 U.S.C. § 1, when combined with an agreement or

understanding that all member and non-member electrical

contractors must utilize the exclusive services of the trade

association’s executive secretary as their insurance agent or

solicitor, thereby precluding the electrical contractors from

doing business or continuing to do business with petitioners.

2. Whether respondents’ conduct, if not illegal per se as a

.

?Pacific Electrical Contractors Association, a Hawaii non-profit corpora-

tion; International Brotherhood of Electrica! Workers, Local No. 1186;

Walter T. Oda and Akito Fujikawa. Petitioners do not seek review of the

Ninth Circuit's decision as to two of the original defendants in this action,

Insurance Company of North America (“INA”) and Pacific Employers

Insurance Company (“PEIC”), and accordingly, those parties are not

respondents herein.

to

concerted refusal to deal, is nevertheless an unreasonable re-

straint of trade in violation of the Sherman Act, 15 U.S.C. § 1.

3. Whether respondents’ agreement to refuse to deal with

petitioners and to compel others to do likewise can be saved by

an allegedly benign motivation.

4. Whether respondents’ alleged motivation, even if a rel-

evant question, can properly be adjudicated on a motion

for summary judgment, where coniroverted by competent

evidence.

STATUTES AND RULES INVOLVED

This case involves Section 1 of the Sherman Act, 15 U.S.C.

§ 1, and Rule 56(c) of the Federal Rules of Civil Procedure,

both of which are set forth in Appendix D,

STATEMENT OF THE CASE

A civil antitrust action was filed by petitioners on Sep-

tember 6, 1974 in federal district court pursuant to 15 U.S.C.

$§ 15 and 25, seeking treble damages and injunctive relief

under the Sherman and Clayton Acts. Petitioners’ complaint

also sought damages jor violations of the National Labor Rela-

tions Act, 29 U.S.C. §§ 158(b) (4) (ii) and 158(e).

Petitioners moved for summary judgment on the grounds

that the undisputed facts presented a per se violation of the

Sherman Act as well as a violation of the National Labor

Relations Act. Respondents cross-moved for summary judg-

ment asserting that the undisputed facts presented no viola-

tions of either Act, whether per se or otherwise.

The district court granted respondents’ motion for sum-

mary judgment on all counts of petitioners’ complaint.

Petitioners thereafter appealed to the Ninth Circuit solely on

the antitrust issues, pursuant to 28 U.S.C. § 1292(a) (1). The

Ninth Circuit affirmed the district court’s award of summary

judgment in respondents’ favor over a vigorous and incisive

dissent by Circuit Judge Shirley M. Hufstedler.

Petitioners are insurance agents and solicitors engaged in

the business of selling workers’ compensation insurance in

Hawaii. Respondent Pacific Electrical Contractors Associa-

tion (““PECA”) is a trade association composed of approxi-

3

mately 63 electrical contractors. Respondent Walter T. Oda

(“Oda”) is PECA’s executive secretary. Respondent Interna-

tional! Brotherhood of Electrical Workers, Local No. 1186

(“IBEW”) is a labor organization engaged in collective bar-

gaining with PECA. Respondent Akito Fujikawa (“Fuji-

kawa’”) is IBEW’s business agent. In addition to its 68 member

contractors, PECA also represents approximately 65 non-

member electrical contractors who employ IBEW personnel.

All 128 contractors are bound by the terms of the PECA-

IBEW collective bargaining agreement.

Prior to the formation of the mandatory group insurance

plan challenged by petitioners, the 128 electrical contractors

represented by PECA purchased their workers’ compensation

insurance from approximately 22 different insurance carriers

through approximately 20 competing insurance agents and

solicitors, including petitioners. This competition has been

eliminated by the challenged agreement.

In May 1973, Fujikawa, representing IBEW, proposed to

PECA that all electrical contractors bound by the PECA-

IBEW labor agreement combine their workers’ compensation

insurance through a single insurance carrier or through a

Taft-Hartley trust fund.® Fujikawa’s stated purpose in making

this proposal was two-fold: (1) to improve claims processing

and benefits to its workers, and (2) to assist PECA financially

by allowing PECA to manage the proposed plan and thereby

derive needed revenues. It was Fujikawa’s expressed interest

in PECA’s financial situation which caused the district court to

rule that the resulting amendment to the collective bargaining

agreement was not immunized from antitrust scrutiny by fed-

eral labor law or policy. The district court’s ruling on ‘his

point, although contested by IBEW, was not disturbed on

appeal.®

*The Taft-Hartley trust approach was later abandoned as unworkable,

*Appendix B at 22-23; 405 F. Supp. at 113.

*Although the district court expressly found that IBEW's purpose was

“unmistakably tainted” under this Court's rulings in Allen Bradley Co. v.

Electrical Workers Local 2, 325 U.S. 797 (1945) and Connell Construction

C8 v. Plumbers Local 100, 421 U.S. 616 (1975), neither of the courts below

found this “tainted purpose” relevant to their antitrust analysis, not-

withstanding their apparent focus on “intent.”

4

Although PECA was initially reluctant to adopt Fujikawa’s

proposal, its interest perked when apprised of the substantial

revenues to be derived thereby. PECA’s interest originally

focused on the potential dividends which might be paid by the

insurance carrier, which could be used to offset PECA dues,

“with the inference,” according to Oda, “that non-members

would be forfeiting their dividends.” Later, concluding that

dividends were an unstable and speculative source of income,

Oda devised an alternative plan to generate revenue for

PECA. In return for being designated as the agent for the

plan, Oda pledged to rebate his net commissions to PECA,

Oda’s appointment as exclusive agent® for the group plan

and his promised rebates to PECA were not made part of the

formal amendment to the collective bargaining agreement;

they were, nevertheless, an integral part of respondents’

agreement as implemented. Article XIX to the PECA-IBEW

labor agreement merely provides that all contractors bound by

the labor agreement must participate in the group dividend

plan which “will be administered by PECA.”

The evidence presented to the district court, including

minutes of respondents’ various meetings and conferences,

was not accepted in its entirety by the district court or the

Ninth Circuit. However, both courts were forced to assume, at

least for purposes of summary judgment, that “a majority of

the PECA-member contractors and Oda agreed that hence-

forth the contractors would purchase insurance only through

Oda, compelling all signatory contractors to the collective bar-

gaining agreement to do likewise.”

Petitioners assert that this agreement, which, by its terms,

deprived the non-member contractors of their freedom to deal

with an agent of their choice and foreclosed a large segment of

the Hawaii insurance market from competition by petitioners,

is per se unlawful as a group boycott under this Court’s rulings

in United States v. General Motors Corp., 384 U.S. 127 (1966);

Radiant Burners, Inc. v. Peoples Gas, Light and Coke Co.,

364 U.S. 656 (1961); Klor’s, Inc. v. Broadway-Hale Stores,

Inc., 359 U.S. 207 (1959); and Fashion Originators’ Guild v.

®A “closed” plan in insurance terminology.

7Appendix A at 12, n. &. See also 405 F. Supp. at 111.

5

FTC, 312 U.S, 457 (1941).

The Ninth Circuit, disregarding the teachings of these

cases and relying instead on its own decision in Joseph E,

Seagram & Sons, Inc. v. Hawaiian Oke and Liquors, Ltd., 416

F.2d 71 (1969), cert. denied 396 U.S, 1062 (1970), veh. denied

397 U.S. 1003 (1970), ruled that respondents’ conduct was

lawful because, “PECA, Oda and the contractors agreed to

deal with Oda alone, not to improve Oda’s competitive position

as an insurance solicitor but to aid PECA and to improve the

quality of the contractors’ insurance plan."

In a well-reasoned dissent, Judge Hufstedler explained

that:

PECA was not just a trade association, nor was Oda simply

a trade association's executive secretary. . . . Oda was an

insurance solicitor selling INA/PEIC workmen's compen-

sation policies to 114 of the 128 electrical contractors,

PECA, as recipient of Oda’s commissions, in a very real

sense Was in the insurance agency business. (Appendix A,

dissent at 23),

* * »

Once it is recognized that, through Oda, PECA was in

the insurance sales’ business, the resemblance of this ar-

‘angement to the classic vertical boycott model emerges.

(/d. at 24).

Judge Hufstedler further noted that the majority opinion com-

pletely ignored the affidavits submitted by INA specifically

stating that the exclusive use of a single agent was unneces-

sary to derive the legitimate benefits of a group insurance

program.,®

‘Appendix A at 10, n, 7,

*“Tt is obvious that all of the insurance for a safety group must be written by

a single insurance company, However, there is no requirement that all of

the insurance be written through a single insurance agent... .” Affidavit

of Edmond Rondepierre, Associate General Counsel of INA, Record on

Appeal at 907-08,

6

REASONS FOR GRANTING THE WRIT

I,

THE DECISION BELOW PRESENTS IMPORTANT

QUESTIONS CONCERNING THE CONTINUED VIA-

BILITY OF THE SUPREME COURT'S ANNOUNCED

POLICY OF HOLDING GROUP BOYCOTTS PER SE

VIOLATIONS OF THE SHERMAN ACT.

A. This case presents a unique opportunity to clarify the

law of group boycotts and the application of the per

se rule,

Although apparently not convinced by petitioners’ proof,

the Ninth Circuit’s opinion nevertheless assumed an exclu-

sionary conspiracy with both vertical'® and horizontal!! as-

pects which was foreed upon the non-member contractors

through the mandatory nature of the PECA-IBEW collective

bargaining agreement:

In this summary proceeding the District Court, despite

the dearth of evidence, assumed that a majority of the

PECA-member contractors and Oda agreed that hence-

forth the contractors would purchase insurance only

through Oda, compelling all signatory contractors to the

collective bargaining agreement to do likewise. 405 F.

Supp. at 111. In light of the factors discussed below, this

assumption would not lead to a different result in our appli-

cation of the standard of reasonableness. (Appendix A at

12, n. 8).

The issue presented to this Court is simply: Can such an

agreement, which on its face precludes petitioners from doing

business with both the conspiring PECA members and the 68

non-member contractors bound by respondents’ labor agree-

ment, be saved by an allegedly benign purpose “to aid PECA

The vertical agreement is among Oda/PECA as insurance agent, the

PECA members as insurance purchasers, and IRE W/ Fujikawa as repre-

sentative of the insurance beneficiaries, IBEW/Fujikawa’s “tainted” in-

tent to produce revenues for PECA was not disputed by the Ninth Circuit;

it was simply ignored.

''The horizontal aspect is the agreement among the PECA contractors to use

Oda exclusively and to compel the non-PECA contractors to do likewise.

and to improve the quality of the contractors’ insurance”?

Petitioners submit that while proof of exclusionary or coer-

cive intent may itself be sufficient to invoke the application of

the per se rule when coupled with proof of conspiracy and acts

in furtherance thereof, the converse cannot be true; /.e., the

alleged absence of anticompetitive intent cannot save a combi-

nation or conspiracy which by its terms compels the con-

spirators and others to cease business relations with strangers

to the group. !?

B. The decision below is in direct conflict with Supreme

Court decisions holding group boycotts to be per se

violations of the Sherman Act.

This Court has consistently ruled for over 70 years that

group boycotts and concerted refusals to deal are per se viola-

tions of the Sherman Act.'* The rationale underlying the adop-

tion of the per se rule is well-stated in Klor’s. In condemning

Broadway-Hale’s solicitation of agreements from its suppliers

not to deal with its competitor, this Court stated:

This combination takes from Klor’s its freedom to buy

appliances in an open competitive market and drives it out

of business as a dealer in the defendants’ products. It de-

prives the manufacturers and distributors of their freedom

to sell to Klor’s at the same prices and conditions made

available to Broadway-Hale, and in some instances forbids

them from selling to it on any terms whatsoever. (359 U.S.

at 213).

Commenting on the Klor’s holding in General Motors, this

Court noted:

This was not new doctrine, for it had long been recognized

that “there are certain agreements or practices which be-

cause of their pernicious effect on competition and lack of

any redeeming virtue are conclusively presumed to be un-

'2See, Horsley, Per Se Illegality and Concerted Refusals to Deal, 13 B.C.

IND. & Com. L. REv. 484 (1972); Note, Boycott: A Specitic Definition

Limits the Applicability of a Per Se Rule, 71 Nw. U.L. REV. 818 (1977).

SSee e.g., Eastern States Retail Dealers’ Ass'n v. United States, 234 U.S.

600 (1914); Fashion Originators’ Guild v. FTC, 312 U.S. 457 (1941);

Keifer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211

(1951).

reasonable and therefore illegal without elaborate inquiry

as to the precise harm they have caused or the business

excuse for their use,” and that group boycotts are of this

character. (384 U.S. at 146).

The instant case presented the Ninth Circuit with a factual

situation not unlike that in Klor’s, with the added dimension of

a trade association-labor union contract and its intimidating

effect on the trade association’s non-member contractors. To

paraphrase the language of Klor’s, this combination took from

petitioners their freedom to solicit insurance business in an

open market, and effectively drove petitioners out of the con-

tractors’ workers’ compensation market. It deprived the con-

tractors, particularly the non-PECA member contractors who

derive no benefit from Oda’s rebate of net commissions to

PECA, of their freedom to purchase workers’ compensation

insurance through an agent of their own choice.

Despite the clarity of this Court’s earlier instructions to the

lower federal courts, and particularly the Ninth Circuit in

Klor’s, General Motors and Radovich v. National Football

League, 352 U.S, 445 (1957),'4 the Ninth Circuit again came to

its “own philosophical conclusions as to what restraints of trade

should be prohibited.”'® Relying primarily on its often-

criticized decision in Hawaiian Oke,'® the Ninth Circuit held

there was not even a triable issue of fact under the “rule of

reason,” let alone a per se violation of the Sherman Act be-

cause, in its view, respondents’ conspiracy was primarily

motivated by a legitimate economic purpose.

Relying on the same kind of reasoning that found

Broadway-Hale’s boycott of Klor’s “no more than a squab-

ble... by which the ‘public’ could [not] conceivably suffer

'4In reversing the Ninth Circuit's dismissal of Radovich’s boycott allega-

tions, this Court bluntly warned: “The law is its own measure of right and

wrong... , andthe judgment of the courts cannot be set up against it ina

supposed accommodation of its policy with the good intention of the parties

.... Ud. at 454, n. 10) (Emphasis in original).

'S Klor’s, Inc. v. Broadway-Hale Stores, Inc., 255 F.2d 214, 228 (9th Cir.

1958).

'6See, e.g., Woolley, 1s a Boycott a Per Se Violation of the Antitrust Laws?,

27 RUTGERS L. REV. 773 (1974); Note, A Return to the Rule of Reason in

Group Boycott Cases?, 42 U. Coo. L. REv. 467 (1971).

9

injury,”'? the Ninth Circuit affirmed summary judgment

against petitioners.

C. The decision below misstates the role of respondents’

alleged ‘‘purpose”’ to even a rule of reason analysis.

In deciding this case on the basis of respondents’ alleged

motivation, the Ninth Circuit not only dtsregarded the blunt

and emphatic pronouncements of this Court in group boycott

cases,'® but even misinterpreted the role of “purpose” to the

rule of reason approach.

As Justice Brandeis explained in Chicago Board of Trade v.

United States, 246 U.S. 231, 238 (1918), “purpose” is a relevant

factor in rule of reason analysis, “not because a good intention

will save an otherwise objectionable [restraint], or the reverse;

but because knowledge of intent may help the court to predict

consequences.”

Justice Brandeis’ point, obviously lost on the Ninth Circuit,

was recently crystallized by Justice Stevens in National Soci-

ety of Professional Engineers v. United States, 98S. Ct. 1355,

1363 (1978):

Contrary to its name, the Rule [of Reason] does not open

the field of antitrust inquiry to any argument in favor of a

challenged restraint that may fall within the realm of

reason. Instead, it focuses directly on the challenged re-

straint’s impact on competitive conditions.

The application of Justice Brandeis’ comments to group

boycotts is likewise succinctly stated in a recent commentary,

Woolley, /s a Boycott a Per Se Violation of the Antitrust

Laws?, 27 RUTGERS L. REV. 773, 790-91 (1974):

Whether or not the boycotter who excludes another from

the market has good or evil intentions is of little significance

to the victim or the consumer, or to the fair or efficient

manufacture and distribution of goods. It makes no sense

17255 F.2d at 235.

'®“Tn its unanimous decision in Klor’s the Supreme Court rather bluntly and

emphatically informed the lower courts that when in the past it proclaimed

the per se unlawfulness of group boycotts, it meant precisely what it said.

The prohibition is absolute. There are to be no exceptions, however ex-

tenuating may be the conditions generating the boycott.” Handler, Recent

Developments in Antitrust Law: 1958-1959, 59 COLUM. L. REV. 843, 862

(1959).

10

for an economic regulatory statute to hinge its regulation

on the subjective state of mind of the wrongdoer if its goal is

to preserve access to the market or intensity of competi-

tion.!®

D. Review is required to prevent confusing and inequit-

able application of the per se rule in the lower courts.

The Ninth Circuit’s 1969 decision in Hawaiian Oke, while

perhaps defensible if limited to its particular facts,?° has over

the past decade spawned a mutitude of irreconcilable lower

court decisions avoiding, in various ways, the unqualified in-

structions of this Court that group boycotts are per se offensive

to the policies of the Sherman Act.

The Ninth Circuit has recently signified its intention to

decide such cases entirely on a “rule of reason” analysis. See,

e.g., Mutual Investors, Inc. v. Putnam Management Co., 553

F.2d 620 (9th Cir. 1977); Helix Milling Co. v. Terminal Flour

Mills Co., 523 F.2d 1317 (9th Cir. 1975), cert. denied 423 U.S.

1053 (1976); Alpha Distributing Co. v. Jack Daniel Distillery,

454 F.2d 443 (9th Cir. 1972), cert. denied 419 U.S. 842 (1974).

In the last cited case the Ninth Circuit specifically stated:

The critical inquiry in such “refusal to deal” cases is not

whether there was a refusal to deal, or whether a refusal to

deal was carried out by agreement with others, but rather

whether the refusal to deal, manifested by a combination or

19See also, Bird, Sherman Act Limitations on Noncommercial Concerted

Refusals to Deal, 1970 Duke L.J. 247, 289, reaching the same conclusion for

a somewhat different reason: “(OJne of the reasons urging adoption of a per

se rule was the difficulty in isolating the ‘real’ purpose motivating a certain

action.”

20Several commentators have viewed Hawaiian Oke as involving no more

than a switch in distributors, arguing that the effect of the defendants’

agreement was merely to replace one exclusive distributor with another,

the number of distributors in the market thereby remaining constant.

These commentators suggest that without any evidence of anticompetitive

effect, the application of the per se rule may properly depend upon whether

the defendants were motivated by an anticompetitive intent. See Note,

Boycott: A Specific Definition Limits the Applicability of a Per Se Rule, 71

Nw. U. L. REV. 818, 826 (1977); Horsley, Per Se Illegality and Concerted

Refusals to Deal, 13 B.C. IND. & Com. L. REV. 484, 498-99 (1972); L.

Sullivan, Antitrust § 90 at 258-59 (1977).

11

conspiracy, is so anticompetitive, in purpose or effect, or

both, as to be an unreasonable restraint of trade. (454 F.2d

at 452).

Relying to a large extent on the Hawaiian Oke decision,

and the pre-Klor’s law review article on which it was based,?!

the Third, Fifth, Sixth and Eighth Circuits?? have recently

required, as a prerequisite to the application of this Court’s per

se doctrine, proof of the complex issue of defendant's purpose

or motivation, as wel! as proof of exclusionary effect or public

injury—precisely the questions which the per se doctrine was

designed to avoid.?3 ‘

This situation, at the very least, has created confusion in

the law. The proliferation of commentaries attempting to ex-

plain these decisions have only added to the confusion. This

point is perhaps best made by the district court’s opinion in

Cullum Electric & Mechanical, Inc. vs Mechanical Contrac-

tors Ass'n, 436 F. Supp. 418, 428-29 (D.S.C. 1976) aff'd 569

F.2d 821 (4th Cir. 1978):

Despite pronouncements of the Supreme Court, a mul-

titude of lower courts have continued to evaluate alleged

boycotts under a “rule of reason” analysis rather than by

the per se doctrine employed by the Supreme Court in the

aforementioned cases. As one commentator has observed,

“the law in Washington, however, is quite different from

the law in the rest of the country.” Woolley, /s a Boycott a

Per Se Violation of the Antitrust Laws?, 27 Rutgers L.

21 Barber, Refusals to Deal Under the Federal Antitrust Laws, 103. U. Pa. L.

REV. 847 (1955).

22See DeFilippo v. Ford Motor Co., 516 F.2d 1313 (3rd Cir. 1975), cert.

denied 423 U.S. 912 (1975): BE. A. McQuade Tours, Inc. v. Consol. Air

Tour Manual Comm., 467 F.2d 178 (Sth Cir. 1972), cert. denied 409 U.S.

- 1109 (1973); Sulmeyer v. Coca Cola Co., 515 F.2d 835 (Sth Cir. 1975), cert.

denied 424 U.S. 934 (1976): Worthen Bank & Trust Co. v. National Ban-

kAmerica, Inc., 485 F.2d 119 (8th Cir. 1973), cert. denied 415 U.S. 918

(1974); Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506 (6th Cir.

1972), cert. denied 409 U.S. 1001 (1972).

23Not all of the Circuits have, however, adopted the broad limitations of

Hawaiian Oke. Most notably, the Second Circuit appears to have confined

Hawaiian Oke to its facts. See Taxi Weekly, Inc. v. Metropolitan Taxicab

Bd. of Trade, 539 F.2d 907 (2nd Cir. 1976).

12

Rev. 773 (1974). The article cited above catalogs and dis-

cusses a large collection of lower court decisions which

employ various theories to qualify the per se rule; these

cases, however, involve many factual situations which

might arguably appear to fall well within the category of

boycotts which the Supreme Court would consider per se

illegal. This apparent dichotomy between the Supreme

Court and lower court views of the law applicable to group

boycotts has prompted many other articles as well.

{Citations omitted]. These sources contain numerous cita-

tions to decisions in which lower courts, in one way or

another, have declined to adhere to the application of a per

se rule of illegality in cases involving allegations of group

boycotts. Reported decisions also indicate that this trend

has continued since the publication of the most recent of the

articles cited above [1974]. While a discussion of all of these

decisions might not prove to be a totally impossible under-

taking, it would certainly be fruitless to attempt to recon-

cile the various approaches taken therein. To state that the

law concerning group boycotts and Section 1 of the Sher-

man Act lacks consistency would be to understate the truth

by a wide margin. (Emphasis supplied).

It is respectfully submitted that this admitted confusion in

the lower federal courts requires clarification by this Court.

THE DECISION BELOW IS IN DIRECT CONFLICT

WITH THE DECISIONS OF THIS COURT AND OTHER

CIRCUITS HOLDING SUMMARY PROCEDURES IN-

APPROPRIATE IN COMPLEX ANTITRUST LITIGA-

TION WHERE MOTIVE AND INTENT PLAY SIGNIFI-

CANT ROLES.

In audition to the substantive antitrust issues, this case

presents the additional question of whether an adjudication

based ultimately on respondents’ alleged motivation, even if

relevant in group boycott cases, can properly be made on a

motion for summary judgment, particularly when the alleged

13

motivation is refuted by counter-affidavits.24 The most basic

requirement of Fed. R. Civ. P. 56(¢), that there be an absence

of any “genuine issue as to any material fact,” appears to

prohibit such an adjudication.

The lower federal courts have repeatedly held, in a variety

of contexts, that summary judgment is not a proper vehicle for

resolution of disputes involving motivation or intent or “con-

cerning state of mind and conflicting interpretations of per-

ceived events.””° This is particularly true “when [the] essential

facts are solely within the control of the moving party.”6

This Court has itself cautioned the lower federal courts on

several occasions that, “summary procedures should be used

sparingly in complex antitrust litigation where motive and

intent play leading roles, the proof is largely in the hands of the

alleged conspirators, and hostile witnesses thicken the plot.”?7

Iil.

THE DECISIONS BELOW, BY SANCTIONING RE-

SPONDENTS’ USE OF A LABOR AGREEMENT TO EN-

HANCE THE COMPETITIVE STATUS OF ODA AND

PECA, HAVE CREATED A DANGEROUS PRECEDENT

WITH APPLICATIONS FAR BEYOND THE INSTANT

CASE. ;

Although the district court expressly found that IBEW’s

stated purpose to assist PECA financially was “unmistakably

tainted” for purposes of the labor exemption, both of the courts

below relied on this very purpose to immunize the ensuing

labor and non-labor agreements from the antitrust laws. The

decisions below are not only illogical in this respect, but have,

in effect, created a precedent explicitly permitting a labor

agreement to be used to enhance the competitive status of a

non-labor group at the expense of its competitors in the

marketplace.

24See note 10, supra at 7.

°Schmidt v. McKay, 555 F.2d 30, 37 (2nd Cir. 1977); Accord, Staren v.

American Nat'l Bank & Trust Co., 529 F.2d 1257 (7th Cir. 1976).

26 Mazaleski v. Treusdell, 562 F.2d 701, 717 (D.C.Cir. 1977).

27Poller v. Columbia Broadcasting System, 368 U.S. 464, 473 (1962); Nor-

folk Monument Co. v. Memorial Gardens. Inc., 394 U.S. 700, 704 (1969).

14

Unless the Court of Appeals is reversed, its decision will

serve as an open invitation to others engaged in collective

bargaining to create similar anticompetitive schemes utilizing

the collective bargaining process to obtain a powerful advan-

tage over their competitors. Extension of the practices con-

doned by the Court of Appeals will not only affect the livelihood

of many thousands of insurance agents and reduce the services

they pro vide to the insurance consumer, but will dramatically

and adversely affect every other trade or business desiring to

deal with those bound by a labor agreement.

CONCLUSION

The importance of the questions presented, the admitted

confusion in the lower courts and the inherently anticompeti-

tive effect of respondents’ scheme require this Court’s review.

For the reasons stated above, petitioners urge this Court to

grant a Writ of Certiorari to review the decision of the United

States Court of Appeals for the Ninth Circuit.

Respectfully submitted,

WILLIAM M. SWOPE

ROBERT A. ROWAN

1000 Bishop Street

Honolulu, Hawaii 96813

Counsel for Petitioners

Of Counsel:

CADES SCHUTTE FLEMING & WRIGHT

1000 Bishop Street

Honolulu, Hawaii 96813

October 24, 1978.

15