Petition — Gough v. Rossmoor Corp.
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Supreme Court, 0.
FILED
DEC 99 1978
In the Supreme C |
MICHAEL ROQAK, JR, CLERK
OF THE
United States
October TERM, 1978
No. 78 “10 02
Kerry M. Gove, Trustee in Bankruptcy of Louis
Rosen dba Watnut Creek F'uRNITURE,
Petitioner,
vs.
Rossmoor Corporation and CRESTMARK
CaRPET AND Drapery CoMPANY,
Respondents.
PETITION FOR A WRIT OF CERTIORARI
to the United States Court of Appeals
for the Ninth Circuit
MaxweE.u KeItH
50 California Street
San Francisco, California 94111
Telephone: (415) 981-1361
ANTHONY J. MERCANT
Mercant & O’Brien
111 West St. John Street
Community Bank Building
San Jose, California 95113
Attorneys for Petitioner
BOWNE-PERNAU WALSH ¢ 1045 SANSOME ST. © S.F.,CA 94111 © (415) 981-7882
SUBJECT INDEX
Page
en NI I oe cae abe oe cece nace’ 1
on ag win Gs cng edwin ote dca es 3
es Ra re oS 5 ain in gece sc Dac ows's a 5
ns lg ace cata pawl’ ss ous os 5
en oe kn wwe Va cu pwahivacwn'wn esa 5
es Sel oaks on As wpa wdaes ss ydeaece cs 5
Se ISIS se SR 5
ge ee Se ee 7
ee eee fe te el. Secs Fale woe vt )
RS REN aioe a 9
3. The conspiracy in restraint of and in monopolization of
NE a or cay neg Ge See nek viencdes ot 10
s a. Coercive means were used to further the conspiracy 13
% OE TET ee 13
j B. Commmeat Ge proceewingy ............................ 14
C. Changing defenses of the defendants................... 19
The reasons for granting the writ .......................... 20
I. This court should review decisions which apply doctrines
to exempt conspiracies in restraint of trade from the
ESSE EE ae ae a 20
A. The relevant market need not be shown in a hard
core section 1 conspiracy case since Congress has
prohibited the entry into coercive conspiracies whose
purpose and object is to suppress or exclude compe-
tition in any appreciable part of interstate commerce 20
1. The Sherman Act prohibits the entry into a con-
spiracy to prevent interbrand competition in any
appreciable part of interstate commerce ...___. 20
B. This court has heretofore resisted all efforts to shift
judicial attention away from the purposes, scope and
A A he aN hE TMB A: phat 8
means of the conspiracy to suppress competition 24
C. The means used by the conspiracy here are also in
per se violation of the Act........... .. 26
1. The refusal to deal was a per se violation eeaee 26
ii
SuByect INDEX
Page
2. Repondents were effecting a stay out of Rossmoor
policy ....... EY Noumea hy idee rae 27
3. The respondents were Suing Ogi tel eee 28
D. Competition in a $50,000,000 retirement community
is subject to judicial protection under § 2 of the Sher-
man Act
1. A community is a significant part of commerce
SN rae er ee 29
2. Relevant market is definable in terms of where
sellers seek to compete ......................, 30
3. The barriers erected by sellers may define a rele-
vant market
E. Relevant market is not a test when conspiracy or
attempt to monopolize is in issue ............... 31
F. Relevant market does not allow the appellate court
to order judgment for the respondents... ....... 32
II. This court should enforce rules which prevent litigants
from urging as error their own submission or offers .... 33
A. Litigants are estopped from obtaining the benefits
of their own errors
B. In any event, judgment n.o.v, cannot be entered for
defendants because they failed to make a motion
within 10 days after the findings of the jury ........ 36
III. Judgment cannot be enforced when based on an appellate
court entering findings of fact contrary to the trier of fact 36
IV. The opinion in _— III violates the doctrine of law of
the case UT eT Oy oe
Conclusion
ee
a as —
lii
TABLE OF AUTHORITIES CITED
Cases
Page
Albrecht v. Herald Co., 390 U.S. 145 (1968) ................ 22
Associated Press v. United States, 326 U.S. 1 (1945) ........ 21, 24
Bigelow v. RKO Radio Pictures, Inc., 327 U.S, 251 (1946) .... 38
Binderup v. Pathe Exchange, 263 U.S. 29] (1923) .......... 22, 24
Board of Trade of the City of Chicago v. United States, 246
Me, TR CI aia oo Dias pot tes Pies ba kh ea Bs 32
Brown Shoe Co. v. United States, 370 U.S. 294 (1962)... 30
Cataphote Corp. v. DeSoto Chem. Coatings, Inc., 450 F.2d
769 (9th Cir, 1971), cert. denied, 408 U.S, 929 (1972) .... 35
Cone v. W. Va. Pulp & Paper Co., 330 U.S. 212 (1947) ...... 36
Continental TV, Inc. v. GTE Sylvania, Inc., 433 U.S. 36
CONEY bias Oe Wea ree bas see aes 21, 22, 27
De Voto v Pacific Fidelity Life Ins. Co., 516 F.2d 1 (9th Cir.
| A ee rere te ne ey ee a Ee, 22
Donnelly Garment Co. v. N.L.R.B., 123 F.2d 215 (sth Cir.
Wie ERS Sek Re ep een tas erat as 40
Eastern States R.L.D. Associates v. United States, 234 U.S. 600
PE sic oc te hag on once bh k been Paes Cae 24
Fashion Originators’ Guild of America v. Federal Trade Com-
mission, 114 F.2d 80, affirmed, 312 U.S. 457 (1941) ........ 21
Fount-Wip, Inc. v. Reddi-Wip, Inc., 568 F.2d 1296 (9th Cir.
MR ey vcain eh dati ke ad i a9 i et raha 22, 28, 35
Gamco, Inc. v. Providence Fruit & Produce Bldg., 194 F.2d 484
Hey aaa ae Sa aR TS SRO 4 30, 31
Globe Liquor Co. v. Roman, 332 U. S. OTE (IO). fies 36
Gough I, Rosen v. Rossmoor Corporation, 487 F.2d 373 (9th
Cin 1973) . we . 2, 20, 22, 30, 33, 40
Gough II, eats v. ‘amen Comevation, 533 F.2d 453 (9th
Cir. 1976) cert. denied 429 U.S. 857 ....... 6... eee 2, 40
Gough III, Gough v. Rossmoor Corporation, erg yg
2d .. (9th Cir. 1978), 1978-2 Trade Cases, { 62,
she | oon ..1, 2, 23, 36, 40
Hospital Building Co, v. Trustees of Rex —" 425 U.S. 738
Co Ga ern ren ctor five res 0 22
In re Carmona, 224 F.Supp. 497 1 (8D Ca. 1960), sfiruct 336
F.2d 518 (9th Cir, 1964) . eats 40
ot 6 28.6 2S ORS SOOT Cie 2.078 03 ELS, SA 8
iv
TABLE OF AUTHORITIES CITED
CASES
Page
International Salt Co. v. United States, 332 U.S. 392 (1947) .. 21
Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959)
Fi Gils eV ne We nals ariths Wo SPOS 6 hE o a's wake aul ial oR 21, 25, 26
Knutson v. Daily Review, Inc., 548 F.2d 795 (9th Cir. 1976),
oust. dented, G33 US. GRO (1677) «0... cdc ts csevce tween 35
Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir. 1964) .... 32
Lorain Journal v, United States, 342 U.S. 143 (1951) . .27, 29, 31, 39
Mandeville Island Farms, Inc, v. American Crystal Sugar Co.,
een ore rer a 21
May Department Stores v. Reynolds, 140 F.2d 799 (8th Cir.
eh a eee 40
Mutual Fund Investors v. Putnam Management Co., 553 F.2d
OD 06. Ck 1) is. sie a eee ee 35
National Society of Professional Engineers v. United States,
> 1g Oe ED Accs Fan'eeh inca ceeumeuee 22
Neely v. Martin K. Eby Construction Co., 386 U.S. 317 (1967) 36
Pfizer, Inc. v. Government of India, .. U.S. .., 98 S.Ct. 584
CUES 2 2 saas Che's Gas canoes ea oe een 23
Quemos Theatre Co. v. Warmer Bros. Pictures, 35 F.Supp. 949
PUN ND” 8 Fis x 455 cas x os Vala ar oe 22
Radovich v, National Foootball League, 352 U.S, 445 (1957)
SOL: vba COL ea canard cates Chee vMltes Tee 23, 25, 26
Ronald Fabrics Co. v. Verney Svenvebik Mills, Inc., 152 F.
me ee CE, |) bn oceans oe eee 22
Roth v. McAllister Bros., Inc., 316 F.2d 143 (2d Cir. 1963) . 35
Scarano v. Central Ry. Co, of New Jersey, 203 F.2d 5
WOM on ec, os Si ee 0 (2a 35
pererecn Oil Co. of New Jersey v. United States, 221 U.S. 1
Story Parchment Co, v. Paterson Parchment Paper Co., 28
Che a ee ee ee ae
Swift & Co, v. United States, 196 U.S. 375 (1905)
United States v. E. I. du Pont de Nemours & Co., 351 U.S, 377
BENIN «is: 25 wd cabs ava aakssascctt eee 31
v
TABLE or AuTHoRiITIES CrTED
CasEs
Page
United States v. First Nationa] Pictures, Inc., 282 U.S. 44
UT tua ys asks engscccesyebecronceregs 24
United States v. General Motors Corp., 121 F.2d 376 (7th Cir.
OE in er ereee 22
United States v. General Motors Corp., 234 F.Supp. 85, rev'd,
a ce cece rete e see esveeone, 22, 23, 26
United States v. Griffith, 334 U.S. 100 ............ cee uee, 30, 31
United States v. Kissel, 218 U.S. 691 (1910) ............005. 22
United States v. Marine Bancorporation, 418 U.S, 602 (1974) 30
United States c. Socony Vacuum Oil Co., Inc., 310 U.S, 150
ee 29
United States v. TopCo Associates, 450 U.S, 596 (1972) ..... 26
United States v. Yellow Cab Co., 332 U.S, 218 (1948) ..... 31, 32
Walker Process Eqpt. Inc. v. Food Machinery and Chemical
Corp., 382 U.S. 172 (1965) 0.0.0... ee ece eee e renee 31
White Motor Co. v, United States, 372 U. S. 253 (1063) ...... 22
William Goldman Theatres v. Loew’s, Inc., 150 F.2d 738 (3d
aaa Nawssovccespccesiccevescvces. 22, 30
Wood v. United Air Lines, 216 F.Supp. 340 (E.D.N.Y. 1963) 35
Woods Exploration & Prod. Co. v. Aluminum Co. of America,
438 F.2d 1286 (Sth Cir. 1971) ........-: cee eee eee eee: 30, 31
Zenith Radio Co, v. Hazeltine Research, Inc., 401 U.S. 321
cca c eres steven cee eraees 35
Constitutions
United States Constitution, Amendment VII................ 37
Rules
Federal Rules of Civil Procedure:
cy vv cer pod vsreccceee 15
SPY Ubalneessevnsrreceshsrcccceserecen, 4
— Se
vi
Statutes
Page | In the Supreme Court
12 U.S.C.:
a 5G udp sa Odd Das he dd Oe third Rawea 5 OF THE
SS Cc iin Randy hs bs une eben maida OEE 5 :
United States
IE Cee i ns a as os ehew ne cee Pals oa 5
Section 15 . a beste ties aa eee Tae ae
Clayton Act; No
EE eae ce oa Gwe 4 NK d oe RE RK ON ede 4,5, 15
eta ec occas oi hve SS See ae a ee
i Kerry M. Goven, Trustee in Bankruptcy of Louis
S rman Act: Rosen dba Watnut Creek FurnNITURE,
EE ed boa wie Skee ues ee wren ee Ty. a ee Sictiitiae
|” Ue Maat ee Cina MEO 2 Ry 3, 5, 29, 34 :
Vs.
RossMoor CorPoRATION and CRESTMARK
CARPET AND Drapery CoMPANy,
Respondents.
PETITION FOR A WRIT OF CERTIORARI
to the United States Court of Appeals
for the Ninth Circuit
Kerry M. Gough, petitioner, prays for a writ of certi-
orari to review the judgment of the United States Court
of Appeals for the Ninth Circuit entered in the above-
entitled case on August 9, 1978, petition for rehearing de-
nied on October 27, 1978.
CITATIONS TO OPINIONS BELOW
The opinion of the Honorable United States Court of
Appeals for the Ninth Circuit reversing the judgment of
the trial court on behalf of plaintiff is officially unreported
and appears in 1978-2 Trade Cases, {] 62,202. It is attached
te =
2
hereto as Appendix A. The order denying a petition for
rehearing, for a hearing en banc and motion for a new trial
is attached hereto as Appendix B herein. The judgment
of the trial court, which was reversed, entered February
23, 1977, is attached hereto as Appendix C herein. The
opinion of the trial court allowing judgment for petitioner
herein filed February 23, 1977, is attached hereto as Appen-
dix D. It is unreported.
The opinion below is the third opinion in this case and
will be referred to from time to time as Gough III. The
second opinion of the court of appeals is reported at 533
F.2d 453 (9th Cir. 1976), cert. denied, 429 U.S. 857. It will
be referred to as Gough II and is attached hereto as Appen-
dix EK. The judgment in favor of petitioner which the
opinion in Gough II reversed, entered November 4, 1974,
as attached hereto as Appendix F’, The opinion of the trial
court in favor of petitioner, filed October 8, 1974 is at-
tached hereto as Appendix G. The order of the District
Court denying respondents’ judgment n.ov. or motion for
a new trial filed December 6, 1974, is attached hereto as
Appendix H.
The opinion of the United States Court of Appeals for
the Ninth Circuit reversing the judgment on behalf of
respondents and entering judgment for petitioner is at-
tached hereto as Appendix I. It will be referred to herein
as Gough I. It is reported at 487 F.2d 373 (9th Cir. 1973).
The order of the panel in Gough I, entered December 28,
1973, changing the last paragraph of its opinion striking
the entry for judgment for plaintiff and remanding the
case to the trial court for further proceedings is attached
hereto as Appendix J,
3
The judgment of the trial court for the respondents
filed June 11, 1970 is attached hereto as Appendix K.
The jury’s special findings in answer to interrogatories
entered March 27, 1970 is attached hereto as Appendix L.
QUESTIONS PRESENTED
1. Whether a per se offense under §1 of the Sherman
Act exists when completely independent entities agree to
exclude competition in the sale of carpets ‘to purchasers of
apartment units at a retirement community projected for
10,000 units, involving $20,000,000 sales, use the means
of coercion to cause the refusal to allow carpet advertise-
ments at competitive prices in the community newspaper
upon independent newspapermen who fought the decision,
fraud the purchasers of the apartments, prevent all com-
petitive retailers from installing carpets prior to move-in,
and deprive the plaintiff of sales to the purchasers of the
apartments, the agreement being a substantial cause of his
going out of business.
2. Whether per se offense under $2 of the Sherman
Act exists when businessmen with totally divergent busi-
ness interests and duties toward the public agree to close
off a multi-million dollar retirement community, financed
by FHA commitments, from competition in the sale of
carpets, when, as a group, they control access to the poten-
tial purchasers of carpets at the very time of the sale of
the apartment units (manors).
3. Is the relevant market an indispensable element for
proof of a restraint of trade under the rule of reason; and,
if so, who has the burden of justifying the need of proof
of the relevant market? If it is indispensable, can the
+
respondents attack their own statement in an appellate
brief and their own interrogatories to the jury which define
the relevant market to be the above mentioned retirement
community.
4, Can the federal courts require an injured retailer
suing under the provisions of §4 of th< Clayton Act for
damages he proximately received from the impact of con-
duct designed to injure him to prove a relevant market
in order to recover damages which every finder of fact
has found to have been intentionally inflicted upon him by
a conspiracy among the defendants in restraint of trade.
5. Can a planned and partially developed retirement
community projected to be 10,000 newly built apartment
units, a shopping center, recreational facilities, and pos-
sessing entrance and exit gates be a relevant market
under the Sherman Act.
6. Can an appellate court, without violating the fed-
eral Constitution, make findings of fact directly in conflict
with the findings of a jury or a trial court.
7. Can a litigant raise on appeal as error matters which
attack his own theories and papers filed with the court as
a ground to urge reversible error and cause such a reversal.
8. May a motion for judgment n.o.v. be raised for the
first time in a petition for rehearing in an appellate court
without a showing of compliance with Fed.R.Civ.P. 50(b).
9. May a second appellate court reverse the rulings of
law entered by a prior appellate court in the same case.
5
STATUTES INVOLVED
The statutes involved are §41 and 2 of the Sherman
Act, 15 U.S.C. §§1, 2; §4 of the Clayton Act, 15 U.S.C.
§15. These are printed and attached hereto as Appen-
dix M.
STATEMENT OF THE CASE
A. THE TRIAL
1, The Parties
The action involves the effectuation of an agreement
to eliminate competition in the sale of carpets and drapes
at a retirement community located in Walnut Creek, Cali-
fornia, financed by federal mortgage commitments pursu-
ant to Sec. 312 of the National Housing Act. 12 U.S.C.
Sec. 1715(e). In 1950 Section 213 (12 U.S.C. § 1715(e)) was
added to the National Housing Act (12 U.S.C. § 1702). It
was intended to meet the housing needs of middle income
families and authorized the FHA to insure hundreds of
millions of dollars of mortgage loans. See Feperat Hovsina
ADMINISTRATION'S Decision Not To Require Burupers’ Cost
CERTIFICATIONS FOR Rossmoor Leisure Worip Devevop-
MENTS, Report To THE Conaress, Feb. 19, 1969, Comptroller
General of the United States, and Questions Recarprna
Loan Insurance CEeImLInGs AND LAND APPRAISALS FOR LARGE
CoopreraTIvE Hovstnc Communities, Report To THE Con-
cress, Feb. 27, 1970, Comptroller General of the United
States.
a. Defendants
Mr. Ross Cortese is President of Rossmoor Corporation.
It is an owner of the land which it sells to the public as a
part of a retirement community development. Rossmoor
Corporation is the builder of the living units and com-
6
munity facilities for the public as stockholders of Mutual
Corporations. It built the developments at Seal Beach,
California; Wheaton, Md.; Cranbury, New Jersey; Laguna
Hills, California and Walnut Creek, California (Pl. Ex. 1).
By 1967 it had built eleven “Mutuals (multi-unit apart-
ment houses called Manors owned by a cooperative corpora-
tion) at a cost of $47,427,000 at Walnut Creek (Pl. Ex.
1, Tr. 51).
Rossmoor Corporation is also a retailer of carpets and
drapes through Crestmark Carpet and Drapery which it
owns (Tr. 61). Crestmark’s business is to sell carpets and
draperies at the Rossmoor Leisure World Communities
(Tr. 55-56, 945-973).
Leisure World Foundation was incorporated as the repre-
sentative of the ownership group who must arrange exten-
sive mortgage insurance financing with the FHA. It thus
organizes the Mutuals and administers the community. It
hires the sales staff to introduce the project to the buyer
and sell shares of stock in the Mutual (Tr. 246, 546, 557,
360-362, 367-374). The Mutual is owned by the apartment
house or manor buyers as stock holders of a corpora-
tion (Id.).
Leisure World Foundation enters into formal agency
agreements with the Mutual Corporation creating a fiduci-
ary relationship between it and the Mutuals (PI. Ex. 33-2,
Tr. 471).
As part of its agency functions, Leisure World Founda-
tion operates a newspaper, the Leisure World News. In
September, 1965, it printed at Walnut Creek 7,000 copies
weekly, 5,500 of which are sent to future residents or pros-
pective residents (Pl. Ex. 51, Tr. 306).
7
When 90° of the shares to a Mutual have been sub-
scribed, contracts to build may be entered into between the
Mutual and the contractor. Here all construction contracts
were entered into with Rossmoor Corporation (PI. Ex. 11,
122, 183, Tr. 48-50, 491-498). At the time of the entry into
these contracts, agents of Leisure World are on the Board
of Directors of the Mutual Corporation and sign the con-
struction contracts (Pl. Ex. 11, 122, Tr. 401-407).
Significance attaches under FHA procedure whether the
sponsorship group is owned by or affiliated with the
builder. The agents of Leisure World Foundation for the
Mutuals asserted by affidavit to the FHA that there existed
no identity of interest between the Mutual Corporation
whose Board of Directors at that time consisted of agents
of Leisure World Foundation and Rossmoor Corporation
(Id.). This affidavit, whose falseness constitutes a fraud
on the United States, avoided the FHA requirement that
Rossmoor Corporetion submit actual construction costs to
the FHA and be limited in its profits as a builder of a con-
trolled housing project (Pl. Ex. 183, Tr. 411-416, Pl. Ix.
11, 122, Tr. 401-407; 12 U.S.C. § 1715r, Cr. 464-466).
Co-conspirator Golden Rain Foundation holds title to
the community facilities at the Leisure World Community
(Pl. Ex. 29, Tr. 475-476; Pl. Ex. 17, Tr. 222-223.
b. Persons
The President of Rossmoor Corporation is Ross Cortese.
A vice president of Rossmoor who testified at the trial was
Anthony Ceresa (Tr. 1027).
During the early period of Leisure World Foundation,
its president was Mr. L. M. Letson (Tr. 377). Its president
8
then became Mr. W. G. Simon (Id.). For a short time fol-
lowing the end of 1965 or early 1966 its president was Mr.
K. Selieu (Tr. 384-385).
Mr. E. L. Olsen was a secretary and Vice President of
Leisure World Foundation (Tr. 382). Mr. Nelson, Admin-
istrator of Walnut Creek, reported to Mr. Olsen and Mr.
Simon (Tr. 381-382). Mr. Robert Moon was a sales execu-
tive for Leisure World Foundation (Tr. 383) and for Ross-
moor (Tr. 961-962).
Vera Moorman was Executive Editor of the Leisure
World newspapers (Tr. 443; Pl. Ex. 37; Tr. 980-981). She
was also employed by Rossmoor Corporation (Tr. 978-979,
1106-1107). Mr. Douglas J. Krauter was Director of Ad-
ministration of Leisure World Foundation during the
period March 1966 to November, 1966 (Tr. 544), and Sys-
tems Analyst for it from November, 1964 to March, 1966
(Id.).
During the period of time September, 1963 to August,
1966, Mr. Robert A. Nelson was the Administrator of the
Rossmoor Leisure World Community, Walnut Creek (Tr.
355).
The editor of the Leisure World News, Walnut Creek,
was Mr. John L. Ferris (Tr. 237). Carl Cronin was its
advertising manager (Tr. 898).
Gerry Rathbun was sales coordinator between Crestmark
and Leisure World Foundation Sales (Tr. 120).
The sales manager of Leisure World Foundation for
Rossmoor Leisure World, Walnut Creek at most times
herein was Mr. R. Moreno (Tr. 120-121).
9
Mr. Cortese guaranteed the notes of Leisure World
Foundation to United California Bank for the sum of one
million dollars (Tr. 1052).
c. Plaintiff
Plaintiff was Louis Rosen. His carpets and furniture
store, Walnut Creek Furniture, was located in downtown
Walnut Creek, a mile away from Rossmoor Leisure World
(Tr. 586-587). He went out of business on September 5,
1967 (Tr. 617).
2. Relevant Market
Rossmoor Leisure World, Walnut Creek, is located on
2,000 acres of land in the City of Walnut Creek, California,
the old Stanley Dollar Estate (Pl. Ex. 102, Tr. 221-222).
Ground was broken in 1963 (Tr. 929). 10,000 to 12,000 units
were contemplated (Id.). Mr. Rosen testified that a retailer
could expect about a $2,000 carpet and drapery order on a
move-in (Tr. 645). The conspiracy involved here affected,
therefore, $20,000,000 possible sales of carpets and drapes.
Rossmoor Leisure World, Walnut Creek, is self-enclosed
and has its own shopping facilities, community recreation
facilities, medical center, churches, bank, police security
systems (Tr. 482-484). By the beginning of 1966, Mutuals 1
to 6 had been completed or were starting construction (Tr.
491-492). The first move-ins of the residents in the com-
munity occurred about October 30, 1964 (Tr. 458).
Since the Crestmark Carpet and Drapery concession was
located in the Administration Building where the Leisure
World sales personnel were located, it was an easy matter
for the Leisure World sales personne! to introduce the pro-
10
spective purchaser to the Crestmark Carpet and Drapery
salesman who was also the color consultant of Leisure
World (PI. Ex. 36, Tr. 63, 128-129, 877-881).
In selling stock to a prospective purchaser, the details
of the arrangements are explained by the Leisure World
Foundation sales personnel (Tr. 528-531). As part of the
introductory procedure, the potential purchaser is given a
copy of the Leisure World News (Tr. 534). It is used in the
sales literature package of Leisure World which the sales
staff mails to those interested (Tr. 534-535).
As of August, 1967, 2,918 apartment units had been sold
at Rossmoor Leisure World, Walnut Creek in three and one
half years, at a dollar figure of $58,360,000.00 (Pl. Ex. 102,
Tr. 221-222). As of the first of 1966 Rossmoor Leisure
World, Walnut Creek’s population was 3,274 (Tr. 458).
Pl. Ex. 74, Tr. 135-136, showed the extent of sales of
earpets by Crestmark by Mutual No. and manors. As of
October; 1967, Crestmark had sold 51% of the carpets at
the 542 manors in Mutual No. 1; in Mutual 2 (468 manors),
42%; in Mutual No. 3 (324 manors), 46%; in Mutual No. 4
(374 manors) 43%; in Mutual No. 5 (274 manors), 47%;
in Mutual No. 6 (176 manors), 43%; in Mutual No. 7 (188
manors), 53%; in Mutual No. 10 (244 manors), 52%; in
Mutual No. 11 (214 manors), 48%; in Mutual No. 12 (140
manors), 22%; and in Mutual No. 13 (12 manors), 8%.
3. The Conspiracy in Restraint of And In Monopolization
of Trade
In September, 1965, Leisure World News circulated a
letter to all advertisers in its Leisure World News stating
that, in part:
ll
The newspaper policy prohibits accepting certain types
of advertising. These are:
3. The newspaper does not accept carpet and drapery
advertising except the Rossmoor Leisure World com-
pany ads.”
This excluded Mr. Rosen’s advertisements. He had con-
tracted to advertise for a year in May, 1965 (Tr. 589-591,
Pl. Ex. 62, Tr. 235).
The policy was the subject of protest by other carpet
retailers, J. C. Penny’s, Capwell’s (Pl. Ex. 50 A, Tr. 294-
307).
It culminated other means taken to shut out competition
in the sale of carpets at Rossmoor Leisure World, Walnut
Creek. Crestmark’s carpet salesmen were not identified
to the purchaser of the manor, but were called color con-
sultants. (Tr. 126-129, Pl. Ex. 36, Tr. 63-65). The carpet
showroom was placed in the same building as the sales
building (Pl. Ex. 9, Tr. 231-232). Leisure World salesper-
sons were told to introduce the manor purchasers who had
to select paint colors to the Crestmark salesmen as “the
color consultants” (Tr. 128-129, 877-884). At the time of
the picking of the colors, the purchaser of the manor was
also told that only if he bought carpets through Crestmark
could he have the carpets laid prior to his moving in. If
he purchased elsewhere, he could not get his carpets in-
stalled until after the key was given to him (Tr. 156-158,
884). The Leisure World sales personnel were shown to
have been monitored in their conversations with prospective
purchasers by Leisure World managers to discourage any
information as to purchasing carpets and drapes from out-
12
side sources (Tr. 535-537). In order to insure the intro-
duction to the color consultant—carpet salesmen by the
Leisure World sales staff spiff payments were made by
Crestmark and it ran drawings, giving prizes to Leisure
World sales people (Pl. Ex. 39-1, 39-2; Tr. 149-150).
Further, Leisure World would give no information as to
the names of potential purchasers of manors to retailers.
Mr. Rosen had been looking for some way of reaching
the incoming buyers of carpets and furniture at Rossmoor
since his first knowledge of the potential market (Tr. 586-
590). He could not obtain information from Leisure World
(Id.). But in May, 1965, Carl Cronin, the Leisure World
News’ advertising manager, approached Mr. Rosen and
asked him to subscribe to an advertising contract. Mr.
Rosen was enthusiastic and signed a 52 week contract
for 26 advertisements (Pl. Ex. 62, Tr. 589-591). Mr. Rosen
then inserted advertisements specially designed for the
Rossmoor Leisure World market. He obtained floor plans
and showed by type of manor the actual prices for each
manor. They were below the Crestmark prices (Tr. 638).
Mr. Rosen had gone to Mohawk Carpet and had obtained
special purchase prices. He received roll prices on all
earpets that Mohawk would supply. Mohawk further
agreed to label the carpet by names that would be used
for each type of floor plan (PI. Ex. 65, 66, 67, Tr. 591-593).
The prices shown by Mr. Rosen were special prices avail-
able for Rossmoor purchasers alone (Tr. 637). Other re-
tailers of carpets who were also advertising or considering
advertising in the Leisure World News were J. C. Penny,
Capwell’s, Jackson’s Furniture, Sloanes, Redlick’s and
Harris of Concord (Tr. 446-447, 289-305).
13
a. Coercive Means Were Used to Further the Conspiracy
In July 1965, Mr. Cortese told Mr. Nelson, Administrator
of the Rossmoor Leisure World, Walnut Creek, to tell the
guy that runs the paper to get Rosen’s advertising out
of it (Tr. 518). The order was relayed to Mr. Ferris,
Editor and Mr. Cronin (Tr. 259, 283, 518, 901-908). The
newspaper staff revolted and attempted to have the order
rescinded (See Pl. Ex. 49, 50, 51, 50A; Tr. 444-447, 452,
289-306). Meetings were held at Walnut Creek (Tr. 297-
302, 436-437, 904-909). An argument was that the policy
was in restraint of trade (Tr. 905-906). It was urged to
be against the interest of the newspaper (Pl. Ex. 49, 50,
SOA, Tr. 289-306, 444-447). Mr. Nelson wrote letters to
Headquarters at Laguna Hills to protest the rule (Id.). Mr.
Rosen protested by letter dated August 10, 1965. (ef. Pl.
Ex. 54, Tr. 324). The policy continued from July, 1965.
The above quoted September policy statement cemented
the oral command of Mr. Cortese to Mr. Nelson. The only
advertisers of carpets tolerated in the Leisure World News
from July, 1965 to September, 1967 was Crestmark Carpet
(Tr. 454, 921). In July, 1965 Leisure World sales people
found that editions of the News containing Mr. Rosen’s
advertising had been scooped up so that the Rosen’s ad-
vertisement could not be sent with the sales literature
mailing (Tr. 534-538).
4. Effect of Conspiracy
Crestmark sold $551,977 carpets and drapes, fiscal year
1965, $835,897 worth of carpets and drapes in 1966, fiscal
year, and in 1967, $418,803 (Pl. Ex. 77; Tr. 214; Pl. Ex.
92); Mr. Rosen sold $29,000 carpets and furniture in the
second half of 1965, $19,152 in 1966 and $4,628 in 1967 (P1.
14
Ex. 88, Tr, 629-631). His first half 1965 sales were $5,292.
(Id.) In the fall of 1965 Mr. Rosen then achieved a spurt
in his sales of carpeting and furniture to purchases at
Rossmoor (PI. Ex. 88, Tr. 609). He attributed these sales
to the advertisements (Tr. 630-631). Before the advertise-
ments he was not selling carpets and drapes to purchasers
of the manors, and after the advertisements were stopped,
his sales dried up (PI. Ex. 88, Tr. 633-634). His first sale
of a carpet to a Rossmoor neweomer was June 26, 1965 (Tr.
640-641). He saw his advertisements in the hands of pur-
chasers (Tr. 597-598). A Crestmark salesman testified that
he saw Mr. Rosen’s ads in customers’ hands and was asked
questions about the advertisements (Tr. 894). Without the
advertisements, Mr. Rosen testified he could not sell to the
Rossmoor residents (Tr. 627-634, 639-640). The daily news-
papers did not reach the market he was after. (Id.) In
September, 1967 he closed his store (Tr. 617). He received
no good will, and lost money on the sale of his inventory
(Tr. 837).
B. COURSE OF THE PROCEEDINGS
The original complaint was filed on August 11, 1966 (Cr.
1-7). The supplemental complaint was filed on May 20, 1968
(Cr. 66-72). The Pre Trial Order was filed on July 31, 1969
(Cr. 109-124). Defendants filed a Pre Trial Statement and
Trial Memorandum (Cr. 93-99; 136-150). Defendants’ Pro-
posed Instructions to the Jury were added to the record
by order February 8, 1978.
Defendants’ Leisure World Foundation and Golden Rain
Foundation of Walnut Creek were named as defendants
and dismissed without prejudice in July 1969 (Cr. 73).
15
In March 1970 the case was assigned to a visiting court,
the Honorable Elbert Parr Tuttle, retired Chief Judge of
the United States Court of Appeals for the Fifth Circuit
and Senior Cireuit Judge. Trial commenced before a jury
on March 16, 1970 and continued until Mareh 27, 1970.
The trial court granted defendants request that the jury
answer special interrogatories under Fed.R.Civ.P. 49
(Tr. 1323, Appendix L herein). It is now admitted by de-
fendants that they designed these interrogatories whose
answers would govern the issues of fact in this case. In
their Memorandum of Defendants-Appellants in Opposition
to Plaintiff-Appellee’s Motion to Recall Supplemental
Briefs and to Augment Record on Appeal (dated Jan. 25,
1978) respondents stated at p. 9:
“,. defendants will admit that the meager record evi-
dence seems to favor the plaintiff’s view and will
assume for purposes of the present discussion that they
are the authors of the special interrogatories.”
The jury returned the answers to the special interrog-
atories as shown in Appendix L (Cr. 161-162). Counsel for
plaintiff then moved that a judgment be entered for plain-
tiff on the answers on the grounds that as a matter of law
there was interstate commerce (Tr. 1330). This motion was
denied (Id.). The trial court then ordered judgment to be
for defendants (Tr. 1332).
Following the order granting the judgment for the
defendant, plaintiff filed a motion for a judgment notwith-
standing the verdict or, in the alternative, for a new
trial (Cr. 163-185). Plaintiff urged that defendants were
liable to plaintiff under Section 4 of the Clayton Act as a
16
matter of law and that there was no evidence upon which
the jury could reasonably conclude that the conspiracy
among the defendants and Leisure World Foundation to
exclude plaintiff from the carpet or other business at Ross-
moor Leisure World, Walnut Creek did not have a sub-
stantial effect or was not in the flow of interstate commerce.
The defendants did not move to have the jury’s answers
set aside. This was so although it found the existence of
the conspiracy they urged as not having occurred. Their
post trial position was simply a legal justification for the
entry of a judgment based upon lack of interstate com-
merce (Cr, 186-216). No attempt was made to urge justi-
fication for the entry of judgment in the failure of proof
of a relevant market. To the contrary, defendants’ position
was that the interstate commerce involved was that of
plaintiff’s business. They conceded in their jury interrog-
atories and their post trial papers that the relevant mar-
ket could be assumed to be Rossmoor Leisure World. Their
emphasis was on lack of interstate commerce. Defendants
stated in their post trial memorandum at Cr. 199-200:
‘‘Nor can Plaintiff successfully argue that there is
any evidence to support an inference that Crestmark
or Rossmoor sought to monopolize the interstate car-
pet business. The evidence conclusively showed that
Crestmark made no sales of carpets and drapes out-
side of Rossmoor Leisure World, and actually sought
only that business.
It is submitted that Plaintiff’s simplistic approach ig-
nores a great body of law to the contrary and the in-
escapable fact that the relevant business and market
involved in this case was strictly local in character.’’
17
The motion of plaintiff for a judgment n.o.v. was denied
and judgment was entered for defendants (Appendix K).
The Court of Appeals reversed the judgment for respon-
dents here (Appendix I herein). It initially ordered that
judgment be entered for plaintiff. Thereafter, respondents
filed Appellees’ Petition for Rehearing including Motion
for Judgment Notwithstanding the Verdict, Motion for
New Trial and Suggestion for Appropriateness of Rehear-
ing en bane (Cr. 287-343).
The Court of Appeals thereafter entered its order deny-
ing the petition for rehearing, denying the suggestion for
a rehearing en bance, but eliminating its last sentence grant-
ing judgment for plaintiff (Appendix J).
The appellate court stated that the jury’s answers to
the special interrogatories showed respondents to be con-
spirators who had entered into a conspiracy to exclude
plaintiff from the business of selling at retail in a local
market products produced in other states, and that they
had restrained plaintiff’s retail business to his damage
(Appendix I). The court also stated that the respondents,
by restricting plaintiff’s participation in retail transactions
(at Rossmoor Leisure World), and by eventually excluding
plaintiff entirely from this trade, diverted interstate ship-
ments of carpeting from plaintiff to themselves, thus in-
terfering with the natural flow of interstate commerce
(Appendix I).
Petitioner on remand moved to enter judgment on the
opinion and mandate (Cr. 244-273). Defendants opposed
the entry of judgment for plaintiff and filed their Memo-
18
randum in Opposition to Motion to Enter Judgment (Cr.
273-282).
The trial court thereafter ruled that the jury’s findings
were sufficient under law to enter judgment for plaintiff;
that the respondents had urged upon the appellate court
motions to enter judgment n.o.v. or for a new trial; that
since the appellate court under Neely may make final dis-
position of such motions; the ruling of the court of appeals
denying the petition for rehearing; declining to grant any
motions of respondents, and failing to order the hearing
of any motions of respondents, disposed of any attempt
to urge upon the trial court the very same matters already
submitted to the appellate court and acted upon in its
mandate (Appendix G herein). Thereafter, respondents
filed motions for a judgment n.o.v. or for a new trial
(Cr. 386-417). They were denied (Cr. 370-376, Appendix H).
Defendants below then appealed. The matter was then
heard by a different panel. It concluded that the remand
order of the court of appeals was an express direction to
hear all the arguments advanced by the respondents, in-
cluding the arguments for a judgment n.o.v. (Appendix
E herein).
On remand the trial court found that substantial evidence
supported the findings of the jury (Cr. 514-516, Appendix
D), and entered judgment for petitioner (Cr. 517-521,
Appendix C).
At the hearing of the oral arguments, during the third
appeal, the Court of Appeals requested briefing as to the
issue of relevant market (Order filed Jan. 12, 1978). Peti-
tioner thereafter filed his Motion to Recall Supplemental
Briefs and to Augment the Record on Appeal on the ground
19
that respondents were estopped to raise relevant market
as being other than Rossmoor Leisure World of Walnut
Creek (Filed Jan. 18, 1978). The Court of Appeals then
deferred action on this motion (Order, Feb. 8, 1978). The
motion was denied in the opinion (Appendix A herein).
C. CHANGING DEFENSES OF THE DEFENDANTS
At no time in the course of these proceedings, prior to
or at the trial, did defendants ever suggest that a combina-
tion or conspiracy in unreasonable restraint of trade under
Section 1 of the Sherman Act could not occur if the trier
of fact believed that Mr. Cortese ordered Mr. Nelson to in-
form the editor of the Leisure World News to kill Mr.
Rosen’s advertisement. The issues were conspiracy and lack
of interstate commerce. The Pre-Trial Order, Cr. 117-118,
contains no issue to be tried on the need to prove a relevant
market. In the Statement of Law section plaintiff stated
that a concerted agreement to preclude others from adver-
tising carpets and drapes in the Leisure World News and
to preclude his competition in other ways is in unreasonable
restraint of trade (Cr. 118). The Trial Statement of De-
fendants listed conspiracy, lack of any affect on interstate
commerce, and damages to be the issues (Cr. 136-150).
Defendants told the fact finder Mr. Cortese could not and
would not subvert the will of the Leisure World news-
papermen, that Leisure World and Rossmoor were distinct
entities (Tr. 37, 38, 41, 273-74, 996-997, 1254-1259, 92-94,
1074-1078, 330-332, 498, 503, 950-951, 974, 1036, 1045-1046,
1081, 1101-1102). Mr. Cortese was emphatic in his denial of
his ever having issued the exclusionary order (Tr. 1081).
Not one word concerning the relevant market appears
in defendants’ proposed jury instructions. Their instruction
20
No. 11 regarding attempt to monopolize adopts the rule
that only intent need be shown and that some act be done
in furtherance of the intent. Their instructions on the con-
spiracy issue do not speak in terms of reduction of com-
petition in a market. They, indeed, submitted “monopoliza-
tion” instructions to the court (Df’s Requested Instruction
No. 10).
On appeal, respondents stated in their Appellee’s Brief
in Gough I, No. 26,475, at page 4:
“The relevant market is the market which consists of
the sale at retail of ‘carpets and drapes and related
sales of household furnishings to residents or prospec-
tive residents of Rossmoor Leisure World, Walnut
Creek, California.’ (Complaint, Par. 10, Cr. 4).”
THE REASONS FOR GRANTING THE WRIT
I. This Court Should Review Decisions Which Apply Doc-
trines to Exempt Conspiracies in Restraint of Trade
from the Sherman Act.
A. The Relevant Market Need Not be Shown in a Hard
Core Section 1 Conspiracy Case Since Congress has
Prohibited the Entry into Coercive Conspiracies
Whose Purpose and Object is to Suppress or Ex-
clude Competition in Any Appreciable Part of
Interstate Commerce.
1. The Sherman Act Prohibits the Entry into a
Conspiracy to Prevent Interbrand Competi-
tion in any Appreciable Part of Interstate
Commerce.
Proper application of the antitrust laws imposes lia-
bility when independent business entities conspire or agree
21
to limit, prevent or exclude competition to them as to any
appreciable part of interstate commerce. Manifestly, appli-
cation of the per se rule is not limited to four categories
of means used as stated below.
The central issue of judicial attention is whether the
conduct is unduly restrictive of competitive opportunities
or commercial freedom. Standard Oil Co. of New Jersey
v. United States, 221 U.S. 1 (1911); Mandeville Island
Farms, Inc., v. American Crystal Sugar Co., 334 U.S. 219
(1948); Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359
U.S. 207 (1959); Associated Press v. United States, 326
U.S. 1 (1945); Continental TV, Inc. v. GTE Sylvania,
Inc., 433 U.S. 36 (1977), at n. 28.
Indeed the learned court below failed to focus upon the
declaration of this Court in International Salt Co. v.
United States, 332 U.S. 392 (1947) where this Court stated
at 396:
“. .. but also it is unreasonable, per se, to foreclose
competitors from any substantial market.”
The Court relied on Fashion Originators’ Guild of Amer-
ica v. Federal Trade Commission, 114 F.2d 80, affirmed,
312 U.S. 457 (1941) for this assertion. There Judge
Learned Hand had stated at 85:
“Price fixing is not, however, the only means unlawful
per se; the interest of the consumer is not all that
determines the ‘reasonableness’ of a contract ‘in re-
straint of trade’. It is also unlawful to exclude from
the market any of those who supply it—assuming that
there is no independent reason to justify their exclu-
sion—and it is no excuse for doing so that their
exclusion will result in benefits to consumers, or pro-
ducers who remain,”
22
Conspiracy in fact which is aimed at the elimination of
interbrand competition is to be distinguished from con-
spiracy implied at law when contractual provisions are
enforced on intrabrand dealers to promote interbrand
competition. Compare White Motor Co. v. United States,
372 U.S. 253 (1963), Continental TV, Inc. v. GTE Sylvania,
Inc., supra, with United States v. Kissel, 218 U.S. 601
(1910) ; Binderup v. Pathe Exchange, 263 U.S. 291 (1923) ;
United States v. Socony Vacuum Oil Co., Inc., 310 U.S. 150
(1940), 224, n. 59; United States v. General Motors Corp.,
384 U.S. 127 (1966); Albrecht v. Herald Co., 390 U.S. 145
(1968) ; Wm. Goldman Theatres, Inc. v. Loew’s, Inc., 150 F.
2d 738 (3d Cir. 1945); United States v. General Motors
Corp., 121 F.2d 376 (7th Cir. 1941) at 404; Gough v. Ross-
moor Corp., 487 F.2d 373 (9th Cir. 1973) ; De Voto v. Pacific
Fidelity Life Ins. Co., 516 F.2d 1 (9th Cir. 1975); Fount-
Wip, Inc. v. Reddi-Wip, Inc., 568 F.2d 1296 (9th Cir. 1978) ;
Ronald Fabrics Co. v. Verney Brunswick Mills, Inc., 152 F.
Supp. 136 (D.C.N.Y. 1946); Quemos Theatre Co. v. War-
ner Bros. Pictures, 35 F.Supp. 949 (D.C.N.J. 1940).
Under the rule of reason, purpose is a basic inquiry and
here the purpose has been found to be anticompetitive. It
is sufficient that a conspiracy has been entered into by inde-
pendent entities to foreclose a substantial interstate mar-
ket. National Society of Professional Engineers v. United
States, ........ Sh caus , 98 S.Ct. 13855 (1978).
As stated in Hospital Building Co. v. Trustees of Rex
Hospital, 425 U.S. 738, 746 (1976):
“Thus, since in this case the allegations fairly claim
that the alleged conspiracy, to the extent it is success-
ful, will place ‘unreasonable burdens on the free and
23
uninterrupted flow’ of interstate commerce, they are
wholly adequate to state a claim.”
In Pfizer, Inc. v. Government of India, ........ US. ........ :
98 S.Ct. 584 (1978) this Court stated at 588:
“The Court has noted that §4 has two purposes: to
deter violators and deprive them of the ‘fruits of their
illegality’, and ‘to compensate victims of antitrust vio-
lations for their injuries’.”
Respondents tried the case under these still vital state-
ments of antitrust law. The jury here found a purpose and
intent to exclude interbrand competition by withholding
information from the public in a 20 million dollar market.
Barriers of entry were created to competition in a market
. financed by federal mortgage guarantees. There can be no
basic distinction between Gough III and the District Court
in United States v. General Motors Corp., 234 F.Supp. 85,
unanimously reversed, 384 U.S. 127 (1966). The same
device of ignoring the purposes, scope and effect of a con-
spiracy was used to immunize a hard core conspiracy from
liability. It is clear that the learned court below is attempt-
ing the use of another doctrine in the long list of devices
asserted to exempt parties from antitrust liability in pri-
vate actions. This is contrary to this Court’s teachings in
Radovich v. National Football League, 352 U.S. 445 (1957)
that Congress has acted to punish or deter conduct in
restraint of trade and has declared a private cause of action
for this purpose.
B. This Court Has Heretofore Resisted All Efforts to
Shift Judicial Attention Away From The Purposes,
Scope and Means of the Conspiracy to Suppress
Competition.
In Binderup v. Pathe News Exchange, 263 U.S. 291
(1923) this Court reviewed the defense that since the dis-
tributors could severly terminate contractual arrangements,
there can be no restraint on interstate trade and commerce
when a combination or conspiracy accomplishes that which
the individual could lawfully do and it was applicable to
only a single merchant. But it was held that a combination
or conspiracy which suppresses the trade of a single dealer
by restraining his liberty to engage in business, as a neces-
sary corollary restrains interstate trade and commerce
and is in violation of the Act. To the contrary of the
doctrine of a relevant market as used below, Binderup
establishes that a combination and conspiracy which sup-
presses the trade of a single merchant is actionable without
more. See also Kastern States R.L.D. Associates v. United
States, 234 U.S. 600 (1914). Since Gough I held that an
appreciable part of interstate commerce was involved at
Rossmoor Leisure World in the retailing of carpets, Binder-
up compels the enforcement of the judgment here.
Next, in United States v. First National Pictures, Inc.,
282 U.S. 44 (1930), the Supreme Court rejected, out of
hand, the contention which has some surviving effect in
the opinion below, that it is no defense that the conspiracy
does not suppress all competition between the parties, and
is limited in its objectives.
In Associated Press v. United States, 326 U.S. 1 (1945)
it was urged that a combination should not be subject to
25
the prohibition of the Sherman Act unless the conspiracy
precluded the public from access to the product involved;
that a conspiracy can exclude others if the product is
otherwise available. This Court rejected this doctrine, then
called “indispensability.” This Court in Associated Press
said that the defense of availability of product in the
market place to immunize anticompetitive conduct would
make the Act a dead letter in all fields of business.
In Radovich v. National Football League, 352 U.S. 445
(1957) this Court struck down the attempt of the judiciary
to require plaintiff to prove a public injury apart from a
conspiracy in restraint of trade. The Court stated:
“In the face of such a policy this Court should not
add requirements to burden the litigant beyond what
is specifically set forth by Congress in those laws.”
Then, in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359
U.S. 207 (1959), the attempt to make availability of the
product to the public in the area of dispute under the
defense of lack of public injury was rejected. The Clayton
Act was held to specifically allow the recovery of damages
by asingle merchant regardless of access of the public to the
goods and wares to which he was unlawfully deprived. The
doctrine of relevant market to exempt the conspiracy to
exclude Mr. Rosen cannot be distinguished from the
doctrine of public injury which was used to exempt Broad-
way-Hale from liability. Both require a self answering
market analysis independent and apart from the objectives
and means of the conspiracy to deprive an interbrand
competitor of a free and untrammelled market place. But
it is that market place which Congress has guaranteed and
which the judiciary must enforce.
26
Clearly, the court below has failed to apply the rule of
Radovich, Klor’s and General Motors that there is no
defense to the entry into a conspiracy with a proven ob-
jective to exclude competition, by using an unlawful means
of refusal to deal.
As stated in United States v. General Motors, 384 U.S.
127, 146:
“The principle of these cases is that where business-
men concert their actions in order to deprive others
of access to merchandise which the latter wish to sell
the public, we need not inquire into the economic moti-
vation underlying their contract.”
C. The Means Used by the Conspiracy Here are Also
in Per Se Violation of the Act.
1. The refusal to deal was a per se violation.
Just as in General Motors and Klor’s, the trial record
here cannot be ignored. As such, it cannot be validly stated
that this record does not disclose a group boycott, a price
fixing agreement and an agreement to eliminate competi-
tion between members of a combination. There is no doubt
as to the showing of a refusal to deal. There is no anti-
trust principle which protects that refusal to deal because
the court can find only one competitor to the victim in-
volved in the conspiracy. This was the same situation in
Klor’s, supra. A group boycott exists for antitrust pur-
poses when a conspiracy imposes a refusal to deal which
has anticompetitive purposes or effects. Further, a re-
straint imposed on a supplier is deemed horizontal, not
vertical. United States v. TopCo Associates, 450 U.S. 596
(1972). Rossmoor r Crestmark are not suppliers to the
Leisure World News; they are advertisers, They have no
:
27
enforceable contractual right for the protection of trade-
marks or goodwill. Rather, they imposed a restraint on the
News. This Court in Continental T.V. v. GTE Sylvania,
Inc., 433 U.S. 36 (1977) stated that contractual provisions
in licensing or appointment arrangements are subject to the
rule of reason when the relationship of the parties show
that a manufacturer has valid business reasons for placing
restraints upon his dealer organization. In footnote 28,
this Court specifically excepted from such rule restraints
imposed by others on the manufacturer in order to protect
the parties from interbrand competition. Here the agents
for the retirement community whose function is to protect
the purchasers of manors can clearly not be restrained by
Mr. Cortese to protect his little side venture which was
really outside F'.H.A. perusal. Clearly, this conduct is no
more subject to judicial approval than Lorain Journal’s
similar edict. Indeed, the defendants told the court and
jury that they could not and would not interfere with the
community’s newspaper (Cr. 95, 117-118, 137; Tr. 1258).
2. Respondents Were Effecting A Stay Out Of
Rossmoor Policy.
The learned court below is really enforcing a division of
territory agreement in which Crestmark sought a deal that
if we do not compete in Walnut Creek, you cannot com-
pete at Rossmoor Leisure World. The court below is in
effect holding that Mr. Rosen should never have started
his plan to actively compete against Crestmark. But Mr.
Rosen, Penney’s and other retailers are protected in this
competition. A little protectionism is not within the rule
of reason. Such an implication runs directly against Lorain
Journal v. United States, 342 U.S. 143 (1951).
28
8. The Respondents Were Fixing Prices
Nor can the courts be blind to the price fixing involved
here. Over and over, petitioner asserted that his advertis-
ing showed lower prices than Crestmark’s; that this was
a major reason for the order of Mr. Cortese, to, “get that
guy out of the paper.”
Clearly, this is a consideration to be dealt with and not
ignored. General Motors involved a larger geographical
area than did the Rossmoor Leisure World, but in each
case the clear purpose and effect was to prevent access
of discounters to the market place. The final effect, as
heretofore indicated, is the demise of Mr. Rosen’s business.
But the purchasers of manors at Rossmoor Leisure World
were deprived of access to information in a paper used
as sales literature that Mr. Rosen had specially priced
carpets for use at their manors at prices below Crest-
mark’s. Relevant market is no more a defense here than
enforcing contracts were in General Motors.
It is noted that the decision below is in direct conflict
with a decision of another panel issued the same year,
Fount-Wip, Inc. v. Reddi-Wip, Inc., 568 F.2d 1296 (9th
Cir. 1978). There a plaintiff was allowed recovery for in-
juries sustained when a competitive licensor of aerosol
whipped cream and a dairy owned by the licensor com-
bined to refuse to deal with the plaintiff. This was so not-
withstanding the failure to have proved a relevant market
for the purposes of §2 of the Sherman Act or $7 of the
Clayton Act. The jury’s findings that the purpose and
object of the conspiracy was in restraint of trade was held
io have established a violation of the Sherman Act.
29
D. Competition in a $50,000,000 Retirement Commu-
nity Is Subject to Judicial Protection Under § 2 of
the Sherman Act.
1, Acommunity is a significant part of commerce
under Section 2.
Further departure from well established precedent is
seen in the rejection of Rossmoor Leisure World, Walnut
Creek as a relevant market. The court held that the trial
court had found this to be the relevant market. There was
substantial evidence that Rossmoor Leisure World at
Walnut Creek was a legally definable relevant market, and
this Court should prevent a gross injustice from occurring.
The decision below is in direet conflict with Lorain
Journal Co, v. United States, 342 U.S. 143 (1951) which
held that potential advertisers in a community of 11,325
dwelling units could not be the subject of a restriction by
the only newspaper in Lorain that they could not advertise
over a competitive radio station. The City of Lorain was
deemed a part of interstate commerce (342 U.S. 151, n. 6).
Rossmoor Leisure World is also a community. In order
to gain access to its neweomers merchants had to obtain the
attention of the carpet buyer before he was introduced
to the color consultant—Crestmark carpet salesmen.
The Court in Lorain stated at 152:
“Unless protected by law, the consuming public is at
the merey of restraints and monopolization of inter-
state commerce at whatever points they occur. Without
the protection of competition at the outlets of the flow
of interstate commerce, the protection of its earlier
stages is of little worth.”
30
That monopolization may occur in single communities,
or portions of them, is also clear from United States v.
Griffith, 334 U.S. 100, 106-107. Subsequent decisions make
it clear that a relevant market may be any commercially
significant section of the country where parties compete.
Brown Shoe Co. v. United States, 370 U.S. 294 (1962), at
336, United States v. Marine Bancorporation, 418 U.S. 602
(1974). Gough I has already ruled that Rossmoor Leisure
World is a significant section of the country. Brown Shoe
stated at 370 U.S. 337:
“Thus, although the geographic market in some in-
stances may encompass the entire nation, under other
circumstances it may be as small as a single metro-
politan area,”
2. Relevant market is definable in terms of where
sellers seek to compete.
In Marine Bancorporation, this Court defined the relev-
ant market as the area where the parties are in actual
and direct competition. Here that area is Rossmoor
Leisure World.
3. The barriers erected by sellers may define a
relevant market.
Further, barriers to competition are used to define the
relevant market. No discussion of this principle is found
in the opinion below, but it cannot be ignored as it is en-
trenched. William Goldman Theatres v. Loew’s, Inc., 150
F.2d 738 (8d Cir. 1945). Woods Exploration & Prod. Co.
v. Aluminum Co. of America, 438 F.2d 1286 (5th Cir. 1971),
1306 (1971); Gamco, Inc. v. Providence Fruit & Produce
31
Bldg., 194 F.2d 484 (1st Cir. 1952). In Gamco the court
stated at 487:
“. .. alternatives will not excuse monopolization”. ....
The Act does not merely guarantee the right to create
markets; it also insures the right of entry into old
ones.” at 488:
“But the latent monopolist must justify the exclusion
of a competitor from a market which he controls.
The court below further adopted the singular test of
defining the relevant market as the area where the pur-
chaser can reasonably turn to obtain the product. None of
this Court’s monopolization cases may be so limited. It may
also be where the sellers or suppliers seek to compete to
afford the lowest prices and the best quality to those they
wish to sell. The test is competition, not public injury. In
short, the opinion below misses the entire thrust of this
action; those with monopolistic advantage used conspiracy
and unlawful means as a way of excluding others. This is
actionable conduct. United States v. Griffith, 334 U.S. 100,
106-107 (1948). Lorain Journal Co. v. United States, 342
U.S. 143 (1951) (“The operator of the radio station, equally
with the publisher of the newspaper, is entitled to protec-
tion of that Act.” (at 155) )
E. Relevant Market is Not a Test When Conspiracy
or Attempt to Monopolize is In Issue.
Relevant market as involving the definition of the prod-
uct and the geographical extent of competition is a neces-
sary element for the offense of monopolization only, United
States v. E. I, du Pont de Nemours & Co., 351 U.S. 377
(1956) ; Walker Process Eqpt. Inc. v. Food Machinery and
Chemical Corp., 382 U.S. 172 (1965), United States v. Yel-
32
low Cab Co., 332 U.S. 218 (1948), Swift € Co. v. United
States, 196 U.S. 375 (1905); Lessig v. Tidewater Oil Co.,
327 F.2d 459 (9th Cir. 1964) ;
F. Relevant Market Does Not Allow the Appellate
Court To Order Judgment for the Respondents.
Justice will not tolerate the ad hoc use of the doctrine of
relevant market to allow the entry of judgment here.
Firstly, relevant market is not the same as the rule of rea-
son. Yet, the court below justified its imposition on the
validity of the judgment below as a part of the rule of rea-
son. But the rule of reason places the burden of vindication
of the adopted rule in restraint of trade upon the perpe-
trators, not the government or the private person. Board
of Trade of the City of Chicago v. United States, 246 U.S.
231 (1918). This rule allows the defense to establish pro-
competitive benefits. Its very statement shows its inappro-
priateness here. In Board of Trade the Court stated that
purpose or end sought to be achieved under the Rule of
Reason are relevant factors. If so, the judiciary cannot
allow a judgment to be reversed upon a standard which
demands factual inquiry when the record supports the very
facts this Court stated were relevant te determine unrea-
sonableness? Inquiry is not a door slamming proposition ;
it is investigative. Nothing here tolerated the finding that
the rule against outsider advertising in the Leisure World
News, in frauding the public at Leisure World, at diverting
trade by conspiracy is reasonable. Yet a judgment is to be
wiped out under its name. The proper administration of
justice prevents this result.
33
II. This Court Should Enforce Rules Which Prevent
Litigants From Urging as Error Their Own Submis-
sions or Offers.
A. Litigants are Estopped from Obtaining the Ben-
efits of Their Own Errors
It is respectfully submitted that the learned court below
has ignored entirely the manner in which this case was
tried. At no time until they learned that judgment was
going to be entered against it, did respondents ever ad-
vance the contention that this conspiracy involved here as
a Section 1 offense was subject to the rule of reason. They
conceded that the relevant market was Rossmoor Leisure
World, Walnut Creek.
Respondents failed to file a cross-appeal in 1970 or other-
wise abandon their view of interstate commerce during the
course of the appeal. This view emphasized the purely
local nature of the competition here and asserted Ross-
moor Leisure World to be the relevant market.
Their interrogatories to the jury defined the relevant
market to be Rossmoor Leisure World. The learned court
of appeals below ignored the issues of estoppel and waiver.
Its position was that plaintiff in the complaint had defined
the relevant market and it was denied. In fact, the com-
plaint raised unreasonable affect on interstate commerce
and alleged the conspiracy’s objectives, means and effects.
The failure to have found estoppel ignores the pretrial
order, the lack of any dispute at the time of trial, the
defendants proposed instructions which failed to make
any issue of fact or law as to a separate issue of relevant
market other than Rossmoor Leisure World, and admis-
sions in their Appellees’ Brief filed in Gough I.
34
The learned court below also makes reference to the
statements by plaintiff’s counsel to the jury as showing
that there wasw contested issue of a relevant market. The
following statements of plaintiff’s counsel are in direct
contradiction to this holding. At Tr. 1217:
“So if you find then that there is an agreement between
Leisure World operating a newspaper and Crestmark
to prevent Mr. Rosen from advertising for the benefit
of Crestmark, this is a violation of interstate com-
merce...”
At Tr. 1218:
“We have alleged that there is a violation of both
provisions involved here. Now under the first section
all we would have to do would be to prove to you that
there is an agreement.”
As to Section 2 of the Sherman Act, counsel stated at
Tr. 1219:
“Now, therefore, violation of §2 is a determination
that there is a relevant market which is a definable
marketing area to which there ought to be free com-
petition and free services made available and as to
which there can be a monopolization. Now the relevant
area we would say to you here, is Rossmoor Leisure
World. We have the bulletin for you. You can see
that it is a separate community, it is a community
mainly aimed at retirement people. It has its guard
house, community facility building, golf course, and it
is designed to operate pretty much like a city
operates.”
Clearly it appears that both parties in no way made an
issue of the relevant market as other than Rossmoor
Leisure World. It was not an issue under §1 of the Sher-
man Act. It was conceded by respondents under Section 2
35
of the Act since their attack was on lack of interstate com-
merce. It is to be further emphasized why this is the case.
There is no authority from this Court indicating that
relevant market is an issue in a conspiracy to suppress
competition case. The citations authorizing the reversal
of the judgment in the plaintiff’s favor refer to cases
after the trial in this case in March, 1970: Mutual Fund
Investors v. Putnam Management Co., 553 F.2d 620, 627
(9th Cir. 1977); Knutson v. Daily Review, Inc., 548 F.2d
795, 803 (9th Cir. 1976), cert. denied, 433 U.S. 910 (1977) ;
Cataphote Corp. v. DeSoto Chem. Coatings, Inc., 450 F.2d
769, 773 (9th Cir. 1971), cert. denied, 408 U.S. 929 (1972).
Clearly a litigant cannot require a trial on controverted
issue of fact and after reversal on appeal assume a contra-
dictory position, Intentional contradiction cannot be used
as a means of obtaining unfair advantages in a forum
provided for suitors seeking justice. See Zenith Radio Co.
v. Hazeltine Research, Inc., 401 U.S. 321 (1971); Scarano
v. Central Ry. Co. of New Jersey, 203 F.2d 510 (3d Cir.
1953); Roth v. McAllister Bros., Inc., 316 F.2d 143 (2d
Cir. 1963); Wood v. United Air Lines 216 F.Supp. 340
(E.D.N.Y. 1963).
For the antitrust laws to be otherwise interpreted means
that a wealthy and powerful defendant can exhaust the
plaintiff of small means when Congressional purpose is the
exact opposite. Are we now back to pre-World War II
statistics where virtually the only successful plaintiffs
were those with a government judgment on their behalf?
It is to be noted that in the Fouwnt-Wip case, supra, 568
F.2d 1296, another panel of the same circuit allowed a jury
verdict to be enforced for the plaintiff notwithstanding the
36
defendant’s contention that the defenses of release and res
judicata be considered. The failure to preserve the issues
were found. Here respondents are clearly allowed to blow
hot or cold depending on the latest appellate ruling.
B. In any event, Judgment n.o.v. Cannot be En-
tered for Mefendants Because They Failed to Make
a Motion Within 10 Days after the Findings of
the Jury.
The rule of this Court is express and prevents the
appellate court from entering judgment n.o.v. for the
respondents. Globe Liquor Co. v. Roman, 332 U.S. 571
(1948); Cone v. W. Va. Pulp & Paper Co. 330 U.S. 212
(1947); Cf. Neely v. Martin K. Eby Construction Co. 386
U.S. 317 (1967). In Neely, this Court stated, 386 U.S. 325-
226:
“The opinions in the above cases make it clear that an
appellate court may not order judgment n.o.v. where
the verdict loser has failed strictly to comply with the
procedural requirements of Rule 50(b), or where the
record reveals a new trial issue which has not been
resolved.”
Failure to have followed this rule has prejudiced peti-
tioner who would have had the case resolved in 1973 rather
than 1978, and now do not obtain a new trial.
III. Judgment Cannot be Enforced When Based on an
Appellate Court Entering Findings of Fact Con-
trary to the Trier of Fact.
Reversal of the trial court’s judgment in Gough III can-
not be tolerated if respect is given to the proposition that
those responsible for determining the credibility of wit-
37
nesses are the sole triers of fact. U.S. CONST., amend.
VII. The federal courts on appeal cannot reexamine the
facts found by the jury. Story Parchment Co. v. Paterson
Parchment Paper Co., 282 U.S. 555 (1931). The following
statements by the appellate court simply have no
foundation.
1. In order to meet the requirements for securing FHA
financing for construction of the housing, the Foundation
is formally independent of Rossmoor (Appendix A-2).
There is more than formal independence. The extensive
trial involved the issue of conspiracy among the defendants
who asserted that Leisure World Foundation and Ross-
moor were independent and distinct entities and that Ross-
moor in no way controlled Leisure World Foundation (Tr.
37, 38, 41, 273-274, 996-997, 1244-1245, 92-94, 1074-1078, 330-
332, 498, 503, 950-951, 974, 1036, 1045-1046, 1081, 1101-1102).
Otherwise, they have filed false affidavits with the F.H.A.
2. Here the concert of action was between a sole com-
petitor and that competitor’s parent and in no way in-
volved an agreement among competitors (Appendix A-13).
But Leisure World News is a member of that conspiracy
notwithstanding the fact it was an agent of the Mutual
Corporation and not Rossmoor Corporation. It has an
agents obligation to promote competition.
3. That agreement which only prevented advertising of
carpets in the News, did not deprive Rosen of an element
necessary to compete; other means of advertising, includ-
ing other newspapers, were readily available (Appendix
A-13).
38
But this was in dispute and is based on a reexamination
of the damage award. As heretofore shown, the record
showed complete barriers to the retailers attempting to
compete. Mr. Rosen could not obtain names of the pro-
spective purchasers of manors; the purchasers were intro-
duced to the carpet salesman as a color consultant. Only
Crestmark had the privilege of installation, conversations
were monitored, issues of the paper were destroyed, mail-
ings were scooped up, and the objective was to exclude.
The jury did not accept the proposition that other ad-
vertising was effective. The carpet purchaser had to be
contacted prior to the introduction of the Crestmark sales-
man as color consultant. The Leisure World News was on
the sales tables, in the sales rooms, or received in the mail.
The evidence was substantial that sales were made by
petitioner to Rossmoor purchasers in the fall 1965, and
then dried up. The jury found that the conspiracy reduced
Rosen’s sales, profits and was a substantial factor in
causing the closing of the store.
4. We do not know the extent to which the restraint
contributed to Rosen’s business failure (App. A-15).
But the jury found the extent and the reversal here
is not based on the failure of evidence as to proximate
cause. It is self-evident that a business is not going
to close if it has legitimate access to millions of dollars
of sales upon a record which showed sales success based
on a particular means of getting sales information to the
public. The Court of Appeals is, in effect, rejecting Mr.
Rosen’s testimony concerning his limited success. But
Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946),
39
expressly allows the awarding of damages based upon
profits during a pre-conspiratorial period of time.
4, There was no attempt to put him out of business
(Appendix A-15),.
But the answers to the interrogatories state specifically
that there was a common plan to prevent advertising at
Rossmoor Leisure World, such as to act as a restraint
upon plaintiff’s business. It awarded damages because it
found the closing of a business by unlawfvl restraint. The
court here is in direct conflict with Lorain Journal, 342
U.S. at 153-155.
5. Other newspapers and means of conveying his com-
mercial message were still open to him, and accordingly
he was not without suppliers of that which was denied to
him by the refusal to deal (Appendix A-15).
The jury found otherwise. The courts may not allow a
conspiracy to dictate on what terms competitors may com-
pete. Lorain Journal Co. v. United States, supra, 342 U.S.
at 154, n. 8.
6. It was not predatory to cause the foundation to bar
Rosen from advertising in the News (Appendix A-19),
But the free market allowed Rosen to advertise in the
newspaper he wanted to advertise in. Independent news-
men were against the policy. They testified that freedom
of the press had been interfered with, and argued that a
restraint of trade had occurred. Coercion had taken place.
The testimony of these men and what they stand for has
been totally disregarded. The substitution of free choice
40
by a coercive conspiracy is predatory. Lorain Journal Co.
v. United States, 342 U.S. at 149, 154, n. 8.
7. Access to Leisure World was not denied. Access to
the advertising columns of the News was denied, but that
was all (Appendix A-13, n. 8).
Access to Leisure World was denied in every conceivable
way it could be. The jury disagreed with the court of »
appeals. So, also, the radio station in the Lorain Journal
case should have been satisfied with its being told to stay
with Elyria advertisers.
IV. The Opinion in Gough III Violates the Doctrine of
Law of the Case
Gough I stated in 1973 that the jury’s factual findings
that defendants with the power and intent to exclude plain-
tiff from the Rossmoor Leisure World entered into a plan
to restrain plaintiff’s business established as a matter of
law that defendants had violated the Sherman Act (Ap-
pendix I-6). It also stated that the jury’s findings of
damages established as a matter of law that plaintiff had
the right to redress (Id.).
The trial court on remand following Gough IJ found that
the evidence to support these findings was substantial.
Clearly, Gough III in reversing Gough I is acting contrary
to the doctrine of Law of the Case. May Department Stores
v. Reynolds, 140 F.2d 799 (8th Cir. 1944); Donnelly
Garment Co. v. N.L.R.B., 123 F.2d 215 (8th Cir. 1942);
In re Carmona, 224 F.Supp. 497 (8.D. Ca. 1963), affirmed,
336 F.2d 518 (9th Cir. 1964).
41
CONCLUSION
This Court has always taught that private litigants
should be encouraged by the judiciary to bring their anti-
trust actions. The purpose of this encouragement is to
prevent restraint of trade and wrongs to the public by the
deprivation of free markets. The result in this record
shows, however, that facts are decided by the appellate
court and a subsequent panel has overruled a prior panel.
The Charter of Freedom has now been written to cause
unnecessary and complex trials whose effect is to further
allow disrespect for the Act. The opinion below represents
a serious change in the course of antitrust litigation and
on this record supports an unfair advantage taken by the
respondents.
Clearly, a petition for certiorari ought to be granted in
this case. In consideration of the history of this litigation
the Court should consider a per curiam affirmance of the
judgment for petitioner entered by the trial court.
December 12, 1978.
MaxweE.u Keira
Antuony J. MERCANT
Mercant & O’Brien
By Maxwe.u Kerra
Attorneys for Petitioner
(Appendices Follow)
——
Appendices
i dir i iit a
A-1
Appendix A
In the United States Court of Appeals
for the Ninth Circuit
No. 77-2047
Kerry M. Gough, Trustee in Bankruptcy |
of Louis Rosen, d/b/a Walnut Creek
Furniture,
Plaintiffs-Appellees,
vs.
Rossmoor Corporation, and Crestmark
Carpet and Drapery Company,
Defendants-Appellants :
[Filed August 9, 1978]
On Appeal from the United States District Court for the
Northern District of California
OPINION
Before: MERRILL, KILKENNY and CHOY, Circuit
Judges
MERRILL, Circuit Judge:
The question on appeal is whether, absent a definition of
the relevant market, the record supports a judgment that
appellants violated §§ 1 and 2 of the Sherman Act, 15 U.S.C.
§§ 1, 2. We hold that it did not and reverse judgment of the
district court.
A-2
THE CAST
Rossmoor Leisure World (Leisure World) is a co-opera-
tive housing development for retired adults, located in
Walnut Creek, California.
Rossmoor Corporation (Rossmoor) is the builder and
developer of Leisure World.
Leisure World Foundation (the Foundation) is a non-
profit corporation established to perform administrative
services for the residents of Leisure World and also to
perform organizational, promotional and sales functions
for Rossmoor. In order to meet the requirements for secur-
ing FHA financing for construction of the housing, the
Foundation is formally independent of Rossmoor.’ (Title to
the community recreational facilities is held in trust by
another independent foundation that appears less fre-
quently in the case: the Golden Rain Foundation.)
‘The relationships between the Foundation and Rossmoor on the
one hand, and the Foundation and the residents on the other,
involve a complex yr ingyen making possible the development
of the community, the financing of construction and the sale of
Leisure World residences. Leisure World, as it presently exists, did
not come into existence at one time. It resulted from a series of
development projects, each adding geographically to the com-
munity. For each project a mutual corporation was organized which
took from Rossmoor title to the land involved. Those who planned
to secure a residence in the project purchased shares in the mutual,
which shares entitled them to occupancy of a residence upon its
construction. Rossmoor and the mutual then entered into a purchase
and construction contract, and when 90 percent of the mutual stock
was sold construction commenced. The Foundation acts as an
administrative arm of the mutuals. At the outset of a new project
it is also involved in promotion and sale of stock in the mutual
and thus is closely aligned in interest with Rossmoor, whose interest
lies in the construction and sale of residences. With construction
completed the principal function of the Foundation has to do with
its responsibilities to the residents and mutual stockholders—the
handling of their residential concerns, the upkeep of common areas,
and management of community facilities,
a ee ee
A-3
Crestmark Carpet and Drapery Company (Crestmark) is
a wholly owned subsidiary of Rossmoor, formed for the
purpose of selling carpets and draperies to the Leisure
World residents. The Foundation has leased space in its
administration building to Crestmark giving it the exclu-
sive right to sell carpets and draperies from a site within
Leisure World.
The Leisure.World News (the News) is a community
newspaper owned and published by the Foundation. It is
primarily concerned with Leisure World events and is used
as a promotional device for prospective purchasers of
housing.
Louis Rosen was the owner of a furniture and carpet
store in Walnut Creek; appellee Gough is his trustee in
bankruptcy.
THE GRIEVANCE
In April, 1965, the Foundation began publishing the
Leisure World News. Rosen was solicited by the advertis-
ing manager and placed seven carpet, drapery and furniture
advertisements in various issues of the News. In July, 1965,
under a new policy, the News refused to accept further
advertisements from carpet retailers other than Crestmark,
and no further advertisements from Rosen were accepted.
Rosen then commenced this action, alleging violations
of § 1 and 4 2 of the Sherman Act, 15 U.S.C. § 1 and § 2. He
alleged that Rossmoor, the Foundation, Golden Rain Foun-
dation and Crestmark had conspired to restrain competition
by refusing to allow him to advertise in the News, and that
the conspiracy was with the intent of enabling Crestmark
to monopolize the market for carpets in Leisure World. He
A-4
sought treble damages under $4 of the Clayton Act, 15
U.S.C. § 15, for injuries suffered by him by reason of the
Sherman Act violations.
THE CASE
The case has been before this court on two prior
occasions.
The Foundation and Golden Rain Foundation were dis-
missed from the case prior to trial, although their status
as coconspirators was retained. Following trial to a jury
the issues were submitted to the jury in the form of inter-
rogatories, which were answered by the jury as follows:
“1. Did the defendants and Leisure World Foun-
dation or Golden Rain Foundation by means of a
common plan, scheme or design have the power and
intention to exclude plaintiff from the carpet and/or
other business in Rossmoor Leisure World?
Yes.
2. Did defendan‘s enter into a common plan, scheme
or design with Leisure World Foundation or Golden
Rain Foundation to prevent plaintiff from advertising
carpets in the Leisure World News such as to act as
a restraint on plaintiff’s business of selling carpets or
other merchandise at Rossmoor Leisure World?
Yes.
3. If your answer to either of the preceding ques-
tions is in the affirmative, did such restraint have a
substantial effect on interstate commerce or the flow
of interstate commerce?
No.
A-5
4. Has plaintiff suffered any monetary damage by
reason of its inability to advertise in Leisure World
News?
Yes.
5. If so, please indicate the amount opposite the
appropriate type of damage you find to have been suf-
fered. 4
Net Profits $18,143.00
Good Will 22,738.00”
Because of the jury answer to interrogatory No. 3, re-
lating to interstate commerce, the trial court entered judg-
ment for the defendants on the ground that the court lacked
jurisdiction under the Sherman Act. The first appeal to this
court was then taken. During the pendency of that appeal
Rosen was adjudicated bankrupt and appellee Gough, as
trustee in bankruptcy, was substituted as plaintiff-appel-
lant. On Gough’s appeal this court held that a substantial
effect on interstate commerce appeared as matter of law
and that it had been error to put the jurisdictional question
to the jury. Gough v. Rossmoor Corp., 487 F.2d 373, 377
(9th Cir. 1973). This court originally directed that the
case be remanded with instructions that judgment be en-
tered for the plaintiff in accordance with the jury’s find-
ings. Appellants sought rehearing and asked this court to
enter judgment notwithstanding the verdict on the ground
that the record did not support the jury’s findings and that
the findings did not support judgment in that no finding
had been made defining the relevant market, and that there
was nothing in the record upon which such a finding could
have been made. This court declined to rule upon appel-
lants’ motion for judgment but amended its original opin-
A-6
ion and remanded the case to the trial court for further
proceedings consistent with the opinion. 487 F.2d at 378.
On remand Rossmoor renewed its motions for judgment
n.o.v. and new trial.
The trial court ruled that it was foreclosed by this
court’s opinion from entertaining the post trial motions
and the second appeal to this court was taken, this time
by the defendants. We held that the trial court was not
foreclosed from entertaining the motions on their merits
and remanded with instructions that appellants’ motions
be entertained. Gough v. Rossmoor Corp., 533 F.2d 453
(9th Cir. 1975), cert. denied, 429 U.S. 857 (1976).
On the second remand the trial court denied the motions,
ruling that the evidence was sufficient to permit the jury
to find that there was a common plan between Rossmoor,
Crestmark and the Foundation, under which the Founda-
tion would cause the News to refuse to allow FP sen to
advertise his carpets in the News, which plan was atended
to lessen competition. Judgment was entered for Rosen in
treble the damages found by the jury, with interest, costs
and counse? fees. This appeal followed.
THE ISSUES
Appellants assign error in a number of respects,’ with
only two of which we shall concern ourselves. We find merit
in appellants’ contentions that appellee has failed to show
In addition to the issues discussed appellants contend (1) that
as integral parts of a single enterprise they are legally incapable
of conspiracy; (2) that appellee has failed to _— conspiracy
between Rossmoor and the Foundation; (3) that the evidence does
not support the finding or amount of damages; (4) that hearsay
evidence was improperly admitted.
A-7
violation either of §1 or §2 of the Sherman Act through
failure to present evidence defining the relevant market
and establishing that competition was unreasonably re-
strained in that market and that monopolization of the
market was attempted.
Before reaching the merits of these issues we must dis-
pose of two preliminary contentions of appellee.
Appellee first contends that these issues were not raised
before the district court and, that by the interrogatories
to the jury, appellants conceded that Leisure World is
the relevant market. We disagree.
Unless the alleged anticompetitive conduct is per se
unreasonable, the fact that the conduct restrained trade
in a relevant market is an essential part of a plaintiff’s
case (as we shall discuss later), and the burden of estab-
lishing it lies on him. Mutual Fund Investors v. Putnam
Management Co., 553 F.2d 620, 627 (9th Cir. 1977) ; Knut-
son v. Daily Review, Inc., 548 F.2d 795, 803 (9th Cir.
1976), cert. denied, 433 U.S. 910 (1977); Cataphote Corp.
v. DeSoto Chem. Coatings, Inc., 450 F.2d 769, 773 (9th
Cir. 1971), cert. denied, 408 U.S. 929 (1972). Lack of mar-
ket definition is not a matter of affirmative defense that
must be specifically pleaded.
Rosen, in his complaint, alleged that the market within
which defendants’ “monopolistic position” could be as-
sessed was Leisure World; this allegation was denied.
Rosen, in his pretrial brief, made reference to the evi-
dence by which he proposed to establish that Leisure
World was the relevant market. Following trial, in his
argument to the jury, counsel for Rosen stated that the
contested issue of relevant market pertained to Rosen’s
A-8
claims under both $1 and §2. An instruction submitted
by Rosen and objected to by appellants was given to the
jury, reading in part:
“The test here is whether the combination affects a
definable marketing or trade area, and whether it un-
naturally diverts the transportation of goods to or
from that area.”
As to the interrogatories, the jury was not asked to
define the relevant market. The interrogatories assumed
that Leisure World was the relevant market. When, as in
this case, the jury verdict is in response to written ques-
tions upon the factual issues, the effect of a failure to
present an issue to the jury is set forth in Rule 49(a),
Federal Rules of Civil Procedure. That rule provides in
part:
“Tf in so doing the court omits any issue of fact
raised by the pleadings or by the evidence, each
party waives his right to a trial by jury of the issue
so omitted unless before the jury retires he demands
its submission to the jury. As to an issue omitted
without such demand the court may make a finding;
or, if it fails to do so, it shall be deemed to have
made a finding in accord with the judgment on the
special verdict.”
Thus, here a court finding to the effect that Leisure
World was the relevant market was essential if the jury’s
findings were to have any legal effect. Under the rule
a finding to that effect is presumed and the question thus
is whether there is evidence to support such a finding. In
moving for judgment notwithstanding the verdict, both
before this court and before the district court, appellants
stressed the lack of evidence from which the relevant
market could be defined.
A-9
We conclude that the question of relevant market def-
inition was in the case from the outset and that failure
to question the jury respecting the matter did not amount
to a concession that Leisure World was the relevant
market.
Appellees’ second contention is that any question re-
specting relevant market has been resolved by law of the
case; that our remands on the prior appeals indicated that
the only question remaining was whether the evidence
supported the verdict of the jury. Since, under Rule
49(a), the jury findings do not stand alone, we read the
remands as calling for a decision on whether the evidence
supported all applicable findings—those of the court as
well as those of the jury. On the second remand, the
district court considered the merits of appellants’ post-
trial motions for the first time and the appeal from the
denial of those motions is now properly before this court.
We turn, then, to the merits of the issues before us:
whether, through failure to define the relevant market,
appellee has failed to establish either a restraint of trade
under $1 or an attempt to monopolize under §2 of the
Sherman Act.
A. Unreasonable Restraint of Trade
We turn first to $1. This section does not concern
itself with all injuries suffered by a competitor through
unfair or overzealous competition. Such injuries are gen-
erally matters for state law. Section 1 of the Sherman
Act is concerned with restraints on competition, and the
competition with which the Act is concerned is more than
that contributed by the plaintiff. To amount to an unrea-
A-10
sonable restraint of trade the anticompetitive conduct must
have an effect greater than its effect upon the plaintiff's
business. See, ¢.g., Mutual Fund Investors v. Putnam
Management Co., supra, 553 F.2d at 627. As it has often
been stated, “the antitrust laws * * * were enacted for
‘the protection of competition, not competitors * * *’”
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.
477, 488 (1977). The conduct must have an adverse impact
on the competitive conditions in general as they exist
within the field of commerce in which the plaintiff is
engaged. In Knutson v. Daily Review, Inc., supra, 548 F.2d
at 803, this court stated:
“A termination is not unlawful because of some
adverse effect on the distributor’s business, even if
the effect is the elimination of the distributor from the
market, The complaining distributor must show that
the refusal to deal was intended to or did bring about
some restraint of trade beyond the loss of business
suffered by the distributor or the market’s loss of a
distributor-competitor.”
Certain classes of restraints have been held to be per
se unreasonable. As stated in Northern Pacific Railway
Co. v. United States, 356 U.S. 1, 5 (1958) :
«“* * * there are certain agreements or practices
which because of their pernicious effect on competition
and lack of any redeeming virtue are conclusively pre-
sumed to be unreasonable and therefore illegal with-
out elaborate inquiry as to the precise harm they have
caused or the business excuse for their use. This
principle of per se unreasonableness not only makes
the type of restraints which are proscribed by the
Sherman Act more certain to the benefit of everyone
concerned, but it also avoids the necessity for an
A-11
incredibly complicated and prolonged economic investi-
gation into the entire history of the industry involved,
as well as related industries, in an effort to determine
at large whether a particular restraint has been
unreasonable * * *,”
Only four categories of restraints have been held to be
per se unreasonable: horizontal and vertical price fixing ;*
horizontal market division;* group boycotts or concerted
refusals to deal;* and tie-in sales. Our first question is
whether the restraint here fits any of these categories. It
does not fit easily, The only prospect would appear to be
the group boycott or concerted refusal to deal. There was
indeed a refusal by the Foundation (through the News)
to deal with Rosen in the sense that it refused to allow
Rosen to advertise in the News. There is some evidence
to support the jury’s finding that a concert of action on
the part of Rossmoor and Crestmark existed, which con-
cert perpetrated the refusal to deal by the Foundation and
for the purposes of this discussion we will assume that
such an agreement existed.
Such concert of action may suffice to create a conspiracy
but it cannot suffice to constitute such a concerted refusal
to deal as has so far been held to be per se unreasonable.
In all cases so far holding such restraints to be per se
150 (1940); Dr. Miles Medical Co. v. John D. Park & Sons Co.,
220 U.S. 373 (1911).
Ry e.g., United States v. Topco Associates, Inc., 405 U.S. 596
See, e.g., Silver v. New York Stock Exchange, 373 U.S. 341
1950)" rs, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207
‘See, e.g., Northern Pac.Ry. v. United States, 356 U.S. 1 (1958).
‘See, 0) United States v. Socony-Vacuum Oil Co., 310 US.
|
A-12
unreasonable, there has been some horizontal concert of
action taken against the victims of the restraint. In Mutual
Fund Investors v. Putnam Management Co., supra, this
court rejected the contention that the refusal to deal there
under fire constituted a per se illegal group boycott, stating
“At issue is an alleged conspiracy among vertically inte-
grated organizations and agreements among them are not
per se illegal.” 553 F.2d at 626.’
The Second Circuit has recently noted in its en banc
decision in Oreck Corp. v. Whirlpool Corp., F.2d
(1978) :
“It is important to distinguish between ‘horizontal
restraints’, i.e. agreements between competitors at
the same level of market structure, and ‘vertical
"See Ackerman-Chillingworth v. P. Electrical Contractors
Ass'n, .. F.2d ..,...m. 7 (9th Cir. Mar, 22, 1978) (discussing
characteristics of boycotts considered illegal per se). Although the
court in Ackerman-Chillingworth seems to classify Klor’s, Inc. v.
Broadway-Hale Stores, Inc., 359 U.S. 207 (1959), as a per se x)=
group boycott by vertically integrated conspirators, it should
noted that the conspiracy did involve horizontal concert of action
at the manufacturers’ level and that it was the manufacturers who
actually boycotted the plaintiff by refusing to sell their products
to it.
The Second Circuit appears recently to have concluded that as
a result of the decision in Continental T.V. v. GTE Sylvania, infra
n. 9, no vertical restrictions save price fixing are per se po
National Auto Brokers Corp. v. General Motors Corp., 572 F.2d 953
(2d Cir. 1978). Accord, H & B Equipment Co. v. International
Harvester Co., ... F.2d ..., . (slip opin. } Waren (5th Cir.
1978). The court in National Auto affirmed a directed verdict for
the defendants finding that the plaintiff had failed to meet its
burden of showing that the challenged “fleet allotment” system,
which assured each dealer of a minimum number of cars for
resale, violated the rule of reason—that it was “unreasonable in
view of ‘the facts peculiar to the business to which the restraint is
applied; its condition before and after the restraint was im d;
the nature of the restraint and its effect, actual or probable.’
Chicago Board of Trade v. United States, 246 U.S, 231, 238
(1918).” 572 F.2d at 960.
A-13
restraints’, i.e. combinations of persons at different
levels of the market structure such as manufacturers
and distributors. See United States v. Topco, Associ-
ates, 405 U.S. 596, 608 (1972). Horizontal restraints
alone have been characterized as ‘naked restraints of
trade with no purpose except stifling competition,’
White Motor Co. v. United States, 372 U.S. 253, 263
(1963) ; and, therefore, per se violations of the Sher-
man Act.”
eisai F.2d at ............. See also Sitkin Smelting & Refining
v. FMC Corp., 575 F.2d 440, 446 (3d Cir. 1978).
In Sullivan, Antitrust, at 259 (1977), the author states:
“If the per se rule respecting boycotts is to become coher-
ent, we must recognize that it applies only where com-
petitors engage together to inhibit others with whom they
compete by depriving those others of elements needed in
the competitive context.” Here the concert of action was
by a sole competitor and that competitor’s parent company,
and was in no way an agreement between competitors. The
agreement, which only prevented advertising of carpets
in the News, did not deprive Rosen of an element necessary
to compete; other means of advertising, including other
newspapers, were readily available.
We conclude that the restraint in our case does not fall
within any of the four categories of per se violation so
far recognized.
Appellee protests, however, that the restraint amounts
to a denial of access to the Leisure World market;* that
it is clearly anticompetitive in purpose with no competitive
*As we note later, access to Leisure World was not denied. A
to the advertising columns of the News was denied, but that war all
A-14
benefits claimed for it, and that this should be enough to
constitute it per se unreasonable.
The caution exercised by the Supreme Court when a
new category is sought to be added to those already
recognized as per se unreasonable was demonstrated in
White Motor Co. v. United States, 372 U.S. 253 (1963).
There the Court considered whether vertical market divi-
sion should be added. It refused to add it to the per se
list, stating:
“Horizontal territorial limitations, like ‘[g]roup
boycotts, or concerted refusals by traders to deal with
other traders’ (Klor’s v. Broadway-Hale Stores, supra,
(359 U.S. at] 212), are naked restraints of trade with
no purpose except stifling of competition. A vertical
territorial limitation may or may not have that pur-
pose or effect. * * * We need to know more than we
do about the actual impact of these arrangements on
competition to decide whether they have such a ‘per-
nicious effect on competition and lack... any redeem-
ing virtue’ (Northern Pac. R, Co. v. United States,
supra, p. 5) and therefore should be classified as per
se violations of the Sherman Act.”
372 U.S. at 263.”
Thus, White Motors, and Continental T.V. v. GTE Syl-
vania, supra note 9, warn us that additions to the limited
per se list are not to be made on an ad hoc basis. At least
they are not to be made without evidence supporting a
“In United States v. Arnold, Schwinn & Co., 388 U.S, 365 (1967),
the Court arrived at the opposite result, holding that vertical market
division was per se unreasonable. However, this decision was re-
examined in Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S.
36 (1977), and Schwinn was overruled. The Court stated:
“When competitive effects are shown to result from particular
vertical restrictions they can be adequately policed under the
A-15
determination that the restraint is such as to have a per-
nicious effect on competition. We cannot say, as matter
of law, that such would be the effect here. We do not
even know the extent to which the restraint contributed
to Rosen’s business failure. There was no attempt to put
him out of business or to prevent Leisure World residents
from doing business with him (such as could have been
achieved by a tie-in with the sale of mutual shares). The
restraint was limited to depriving him of the right to com-
municate with the Leisure World residents through the
advertising columns of the News. As we have noted, other
newspapers and means of conveying his commercial mes-
sage were still open to him, and accordingly he was not
without suppliers of that which was denied to him by the
refusal to deal. We cannot, without evidentiary support,
credit any implied finding that deprivation of advertising
in this one community newspaper had such a pernicious
effect on competition within the relevant market (whatever
that may be) as to warrant holding that restraint per se
unreasonable.
We conclude that the conduct here in question cannot
be said to be per se an unreasonable restraint of trade and
a violation of § 1.
If the agreement or practice is not one of those conclu-
sively presumed to be unreasonable, it must be proved to
be unreasonable, and this, as noted in Northern Pacific
Railway Co., supra, takes considerable proving. It is done
by resort to what has come to be called the rule of reason.
rule of reason, the standard traditionally applied for th -
— of anticompetitive practices challenged tender § 1 of 'the
433 U.S. at 59. We discuss the rule of reason later in this opinion.
ee
A-16
At the time of its announcement in Standard Ou Co, v
United States, 221 U.S. 1 (1911), and the elaboration of
the rule by Mr. Justice Brandeis in Chicago Board of
Trade v. United States, 246 U.S. 231, 238 (1918), to its
latest articulation in Continental T.V. v. GTE Sylvama,
433 U.S. 36 (1977), supra note 9, the rule of reason has
been primarily directed to a balancing of the competitive
evils of the restraint against the competitive benefits
asserted on its behalf.
However, the fact that no competitive benefits are
advanced in favor of a restraint (as would seem to be the
case here) does not automatically constitute it unreason-
able under the Sherman Act. As we have already noted, it
must first be established to be a restraint on competition
and this involves a consideration of the impact of the
restraint on the competitive conditions within the field
of commerce in which the plaintiff was engaged and upon
those commercially engaged in competition within it. As
one writer has put it:
“It is the process of competition with which the Act
is concerned, and a practice will not fall under its
ban unless it displays an adverse impact on that
process which is more than trivial.”
Sullivan, Antitrust, at page 178.
Before this study can even be conaenced, however, we
must know with what field of competition we are concerned
and the dimensions of that field. Market definition is
essential. As the Supreme Court stated, in Continental
T.V.v. GTE Sylvania, supra: “An antitrust policy divorced
from market considerations would lack any objective bench-
A-17
marks,” 433 U.S. at 53 n. 21. Thus in determining the
relevant market the courts are not free to accept whatever
market is suggested by the plaintiff as fitting most per-
suasively with his contention that his power to compete
effectively has suffered injury. See, e.g., Knutson v. Daily
Review, Inc., supra, 548 F.2d at 803-04.
There is nothing in the record from which a finding can
be based as to what the relevant market is in this case.
The interrogatories given to the jury assume that the
sale of carpets to the customers residing in Leisure World
is the relevant market and we have necessarily implied a
finding by the court to this effect. On its face this finding
strikes us as a dubious one. We know that Crestmark is
the only commercial establishment located in the Leisure
World complex. The commercial district of Walnut Creek,
in which Rosen was located, has not been defined. The
relevant geographic market is determined, in part, by
the area to which the purchaser can reasonably turn to
obtain the product. Case-Swayne Co. v. Sunkist Growers,
Inc., 369 F.2d 449, 457-58 (9th Cir. 1966), rev’d on other
grounds, 389 U.S. 384 (1967); see Sullivan, Antitrust, at
68. Here we do not know the extent to which this or other
commercial districts within reach were patronized by the
Leisure World residents or the ratio their patronage bears
to that of other Walnut Creek customers.
We conclude that appellee cannot prevail under the rule
of reason for failure to prove relevant market and an
injury to competition within that market. For failure of
proof in this respect appellants were entitled to judgment
notwithstanding the verdict on appellee’s claim under § 1.
A-18
B. Attempt to Monopolize
Turning to §2 of the Act we are confronted by appel-
lee’s allegation that the perpetration by Rossmoor and
Crestmark of the Foundation’s denial of advertising space
was pursuant to an attempt on the part of Rossmoor and
Cresamark to monopolize the Leisure World market in car-
pets.’® Appellee points out that under Lessig v. Tidewater
Oil Co., 327 F.2d 459 (9th Cir.), cert. denied, 377 U.S. 993
(1964), when an attempt to monopolize is charged it is not
necessary to establish market power on the part of the
would-be monopolist as is required when the claim is that
monopolization has actually been achieved, and accordingly
that
“When the charge is attempt (or conspiracy) to mo-
nopolize rather than monopolization the relevant mar-
ket is ‘not in issue.’ ”
327 F.2d at 474.
Since Lessig, the extent of proof required to establish
an attempt to monopolize has been before this court on
many occasions." The most recent pronouncement of the
prima facie requirements is provided by Janich Bros.,
Inc. v. American Distilling Co., supra, n. 11. This court
held there that a plaintiff must prove three elements: (1)
specific intent to control prices or destroy competition
‘The jury was instructed concerning both §1 and §2 of the
Sherman Act and we assume herein that the jury’s answer to
special interrogatory No. 1 constitutes a finding in favor of appellee
on the attempt to monopolize claim.
“Cornwell ity Tools Co. v. C.T.S. Co., 446 F.2d 825, 832
9th Cir. 1971), cert. denied, 404 U.S. 1049 (1972); Bushie v.
tenocord Corp., 460 F.2d 116, 121 (9th Cir. 1972); Moore v. Jas.
H. Matthews & Co., 473 F.2d 328, (9th Cir. 1973); Hallmark
Industry v. Reynolds Metals Co., 489 F.2d 8, 11-13 (9th Cir. 1973),
cert. denied, 417 U.S. 932 (1974); Knutson v. Daily Review, Inc.,
supra, 548 F.2d at 813-15; Greyhound Computer Corp., Inc. v,
A-19
with respect to a part of commerce, (2) predatory or
anticompetitive conduct directed to accomplishing the un-
lawful purpose, and (3) a dangerous probability of suc-
cess. 570 F.2d at 853. See also Marquis v. Chrysler Corp.,
supra, n. 11. We pointed out, however, that this circuit
has allowed a “short-cut method” of establishing liability,
in that proof of probability of success can be supplied
by inference drawn from proof of specific intent and that
proof of specific intent can in turn be supplied by infer-
ence drawn from proof of predatory or anticompetitive
conduct which constitutes an unreasonable restraint of
trade. Janich, supra, 570 F.2d at 854. To the same effect
is Knutson, supra, 548 F.2d at 814; Greyhound Computer,
supra n. 11, 559 F.2d at 504 n. 37.
The question thus is whether an inference of intent
to monopolize the trade in carpets with residents of Lei-
sure World can be drawn from the action taken here:
causing the Foundation to bar Rosen from advertising in
the News. This was not predatory. There is no indica-
tion that Crestmark intended to put Rosen out of busi-
ness. This being so, no inference of intent to monopolize
can be drawn from the anticompetitive conduct in ques-
tion unless it amounted to an unreasonable restraint of
trade under §1. While conduct which would, in the case
of a conspiracy, amonut to a per se violation of 41 would
constitute an unreasonable restraint of trade without
proof of market or market power, under the rule of rea-
son market definition is required to establish a 41 viola-
International Business Machines Com 559 F.2d 488, 504 (9th Cir.
1977), cert. denied, 46 U.S.L.W. (Us. Jan. 17, 1978); Janich
Bros., Inc. v. American ae Co., 570 F2d 848 (9th Cir 1977);
Marquis v. Chrysler Corp.,... F.2d ... (9th Cir. June 29, 1978).
A-20
tion, as we have previously noted. Thus, in the absence
of proof of relevant market and market power, the plain-
tiff must prove either predatory conduct or a per se vio-
lation of § 1 to prove an attempt to monopolize.” Without
these limitations the door to a 42 attempt would be open
far wider than necessary to meet the concerns expressed
by this court in Greyhound Computer, “ supra, and could
permit treble damage recovery where no remote possibility
of monopolization would appear to exist and where the
impact on competition of the conduct in question is limited
to its impact on the plaintiff.
We conclude that no inference of intent to monopolize
can be drawn from the anticompetitive conduct here in
question, and that appellants were entitled to judgment
notwithstanding the verdict on appellee’s claim under 4 2.
J udgment reversed.
‘*Janich puts it even more apn ops
“Where a plaintiff relies
establish an attempted monopolization claim and does not
show market power, specific intent to monopolize should ordi-
pve B Brcrer ees Mate Pony ed conduct is of a kind
clearly threatening to competition or y exclusionary.”
570 F.2d at 854 n. 4.
“The court in Greyhound Computer was concerned that:
“A single firm that did not control something close to 50 per-
cent of the entire market, see Twin City Sportservice, Inc. v.
Charles O. Finley & Co., supra, 512 F.2d at 1275, would be
free to indulge in any activity however unreasonable, pre-
datory, destructive of competition and without legitimate busi-
ness justification. Any concern not dangerously close to mono
oly power could deliberately destroy its competitors wi
impunity.”
559 F.2d at 504.
“More cally, there is support in the decisions and
legislative Liston for the conclusion that § 2 was intended to
prohibit unreasonable restraints of trade that exclude competi-
tion even when they are imposed by a single trader.”
559 F.2d at 504 n. 37,
A-21
CHOY, Circuit Judge, concurring:
I coneur in the majority opinion. However, I must make
one observation about the extent of proof necessary to
establish an attempt to monopolize claim. I agree with my
Brothers that three elements are necessary for a prima
facie claim: (1) specific intent to control prices or destroy
competition with respect to a part of commerce, (2) preda-
tory or anticompetitive conduct directed to accomplishing
the unlawful purpose, and (3) a dangerous probability of
success. We have so held in Janich Bros., Inc. v. American
Distilling Co., 570 F.2d 848, 853 (9th Cir. 1977), and Mar-
quis v. Chrysler Corp,, ........ | a Spree (9th Cir. 1978)
(Nos. 75-2815, 75-2881 and 75-3944, June 29, 1978) (slip
opinion at 2142).*
But in Greyhound Computer Corp. v. International Busi-
mess Machines, 559 F.2d 488, 504 (9th Cir. 1977), cert.
denied, 46 U.S.L.W. 3453 (U.S. Jan. 17, 1978), we held that
only two elements were necessary. We stated that “[a]
prima facie case of attempt to monopolize is made out by
evidence of a specific intent to monopolize ‘any part’ of
commerce [element (1)], plus anticompetitive conduct
directed to the accomplishment of that unlawful purpose
[element (2) ].” Id.
However, by holding that Crestmark’s actions were
neither predatory nor anticompetitive, we need not inquire
J also agree that this Circuit recognizes a “short-cut method”
of establishing liability by inferences drawn from proof of preda-
tory or anticompetitive conduct which constitutes an unreasonable
restraint of trade. See Janich Bros., 570 F.2d at 854.
A-22
B-1
into what additional element or elements would be neces-
sary for a successful claim. Appendix B
Hersert Y. C, Cuoy
UNITED STATES In the United States Court of Appeals
CIRCUIT JUDGE For the Ninth Circuit
No. 77-2047
Kerry M. Gough, Trustee in Bankruptcy |
of Louis Rosen, dba Walnut Creek
Furniture,
Plaintiff-Appellee,
Vs. ;
Rossmoor Corporation and Crestmark
Carpet and Drapery Company,
Defendants-Appellants.
4
[Filed October 27, 1978]
ORDER
Before: MERRILL, KILKENNY and CHOY, Circuit
Judges
The panel as constituted in the above case has voted to
deny the petition for rehearing; Judge Choy has voted to
reject the suggestion for a rehearing en bane and Judges
Merrill and Kilkenny have recommended such rejection.
The full court has been advised of the suggestion for an
en banc hearing, and no judge of the court has requested
a vote on the suggestion for rehearing en banc. Fed. R.
App. P. 35(b).
The petition for reheering is denied and the suggestion
for a rehearing en banc is rejected.
C-1
Appendix C
United States District Court
Northern District of California
No. 45531 GBH
Kerry M. Gough, Trustee in Bankruptcy |
of Louis Rosen, dba Walnut Creek
Furniture,
Plaintiff,
ee
vs.
Rossmoor Corporation, et al.,
Defendants. ;
[Entered February 23, 1977]
JUDGMENT FOR PLAINTIFF
The above entitled action having been tried before the
Honorable Elbert P. Tuttle, Judge, by designation, and a
jury, commencing March 16, 1970; and the jury having
answered the following stated interrogatories in the fol-
lowing ways:
“1. Did the defendants and Leisure World Foun-
dation or Golden Rain Foundation by means of a
common plan, scheme or design have the power and
intention to exclude plaintiff from the carpet and/or
business in Rossmoor Leisure World?
Yes Yes
a? cocaaiee
2. Did defendants enter into a common plan, scheme
or design with Leisure World Foundation or Golden
Rain Foundation to prevent plaintiff from advertising
C-2
carpets in the Leisure World News such as to act as a
restraint on plaintiff’s business of selling carpets or
other merchandise at Rossmoor Leisure World?
Yes Yes
Ol cccuiiaas =
3. If your answer to either of the preceding ques-
tions is in the affirmative did such restraint have a
substantial effect on interstate commerce or the flow
of interstate commerce?
Yes
No No
4. Has plaintiff suffered any monetary damage by
reason of its inability to advertise in Leisure World
News?
Yes Yes
a m
5. If so, please indicate the amount opposite the
appropriate type of damage you find to have been
suffered.
Net Profits $18,149
Goodwill $22,738
And the United States Court of Appeals for the Ninth
Circuit having on October 17, 1973 filed its opinion holding
upon the facts and the law applicable to this case, the
defendants are within the provisions of the Federal anti-
trust laws, specifically Section 4 of the Clayton Act, 15
U.S.C. §15; and the said Court having on December 28,
1973 amended its opinion.
And the Mandate of the United States Court of Appeals
for the Ninth Circuit having issued on March 12, 1974, and
C-3
the revised opinion of the United States Court of Appeals
for the Ninth Circuit stating:
“The judgment is vacated and the cause remanded
for further proceedings consistent with this opinion.”
And the plaintiff having filed his motion to enter judg-
ment based upon the answers to ‘he aforesaid interroga-
tories and upon the aforesaid opinion of the United States
Court of Appeals for the Ninth Circuit; and the defend-
ants having heretofore presented to the Court of Appeals
in their petition for rehearing their contentions of fact and
law which they urge in support of a judgment notwith-
standing the verdict and a motion for a new trial;
And the United States Court of Appeals for the Ninth
Circuit having denied defendants’ petition for rehearing;
And this Court having concluded that the judgment of
the United States Court of Appeals determined the mat-
ters raised by defendants on the merits by reason of the
denial of the petition for rehearing;
And this Court having granted judgment for plaintiff
‘on October 30, 1974, filed November 4, 1974;
And the defendants having appealed to the United States
Court of Appeals for the Ninth Circuit on the ground that
the Court of Appeals did not preclude a determination on
the merits and that Court having filed its opinion on March
17, 1976, remanding the cause for the trial Court’s con-
sideration of the merits of defendants’ motions for judg-
ment n.0.v. and new trial;
And this Court having reviewed the record and having
entered ‘ts ruling that the evidence was sufficient to war-
rant the jury’s finding of the existence of a conspiracy in
C-4
violation of the Sherman Act and overruling the motion
for a verdict n.o.v. and denying motion for a new trial,
said ruling having been filed on the ......... day of January,
1977.
And it appears that plaintiff is entitled to judgment;
It Is Hereby Ordered, Adjudged and Decreed:
The judgment filed November 4, 1974 for the plaintiff,
Kerry M. Gough, Trustee in Bankruptcy for Louis Rosen,
d/b/a Walnut Creek Furniture, and against defendants
Rossmoor Corporation and Crestmark Carpet and Drapery
Co. is valid and enforceable, and pursuant thereto that:
(1) The plaintiff Kerry M. Gough have and recover from
defendants Rossmoor Corporation and Crestmark Carpet
and Drapery Co. the sum of $122,643, which is threefold
the damages found by the jury to be suffered by plaintiff,
with interest thereon at the rate of 7% as provided by law.
(2) Defendants shall pay reasonable attorneys’ fees pur-
suant to Section 4 of the Clayton Act and said sum shall
be $50,000.00 for the period until October 30, 1974.
(3) The sum of $1,400.00 for plaintiff’s costs and dis-
bursements in this action, pursuant to stipulation between
the parties, for the period until October 30, 1974.
(4) And the sum of $3,457.00 for plaintiff’s costs and
disbursements on the first appeal to the United States Court
of Appeals and as to which a partial satisfaction of judg-
ment has been filed with this court.
That this judgment further be entered for plaintiff Kerry
M. Gough, Trustee in Bankruptcy for Louis Rosen, d/b/a
Walnut Creek Furniture, and against defendants Rossmoor
C-5
Corporation and Crestmark Carpet and Drapery Co. for
the following:
(1) Defendants shall pay additional reasonable attor-
neys’ fees pursuant to Section 4 of the Clayton Act to cover
the preparation and filing of memorandum in this Court
in support of the jury’s answers to interrogatories pursuant
to the Court’s order dated March 29, 1976 in the sum of
$6,000.00.
(2) The sum of $400 for plaintiff's costs and disburse-
ments in this action subsequent to October 30, 1974.
Accordingly, judgment is hereby rendered in the amount
of $183,504.00 in the favor of plaintiff.
Dated at Atlanta, Georgia, this 14th day of February,
1977.
/s/ Expert P, Turrie
United States Court of Appeals
Circuit Judge, Sitting by
Designation in the United States
District Court for the Northern
District of California.
Approved As To Form:
/8/
Pettit, Evers & Martin
D-1
Appendix D
United States District Court
Northern District of California
No. 45531 GBH
Kerry M. Gough, Trustee in Bankraptey |
of Louis Rosen, d/b/a Walnut Creek
Furniture,
Plaintiff,
=
vs.
Rossmoor Corporation, ei al.,
Defendants.
[Filed February 23, 1977]
ON DEFENDANT’S MOTION FOR JUDGMENT
NOTWITHSTANDING THE VERDICT AND
ALTERNATIVELY FOR A NEW TRIAL
The principal basis for the defendant’s motion for a judg-
ment n.o.v. is that there was insufficient evidence for the
Court to submit to the jury the question of the existence
of “a common plan, scheme or design between the defend-
ants and Leisure World Foundation to prevent plaintiff
from advertising carpets in the Leisure World News such
as to act as a restraint on plaintiff’s business of selling
carpets or other merchandise at Rossmoor Leisure World.”
The defendant Rossmoor Corporation was owned 95%
by Ross Cortese. It is the sole owner of the other defendant
Crestmark Carpet and Drapery Company. The defendant
D-2
Rossmoor was the developer and builder of the Rossmoor
Leisure World at Walnut Creek, a residential community
in which nearly 3,000 units had been sold at the time of the
events made the basis of this litigation. The Leisure World
Foundation was the entity which created the “mutuals,”
each consisting of a substantial number of residential units
which then borrowed the construction money for the units
to be built and, then, acting for the mutuals, contracted
with Rossmoor to build the units. The Foundation also
held a management contract for the management of the
Leisure World at Walnut Creek, that is, operating the
common facilities utilized in connection with the making
of Leisure World a complete community. It leased substan-
tial space in its headquarters building to Rossmoor’s wholly-
owned subsidiary, Crestmark Carpet and Drapery Com-
pany. The interrelationship of these entities is further
emphasized by the fact that the initial capital of Leisure
World in the sum of $1,000,000 was obtained by a bank
loan guaranteed by Cortese who was also president of Ross-
moor and of Crestmark.
The act of Leisure World in notifying the plaintiff Rosen
that it would no longer carry his advertisement for carpets
and that no such advertisements would be carried except
for Crestmark was contrary to the uniform recommenda-
tion of the persons actually operating the newspaper. It
clearly entailed loss of advertising income and thus entailed
a loss to Leisure World Foundation, its owner. It would,
of course, help Crestmark, and its parent corporation Ross-
moor and its owner Cortese.
While there is no direct evidence that the two defendants
made a formal commitment to each other that they would
Ree _
D-3
cause the Foundation to terminate Mr. Rosen’s advertising,
the fact that all of Cortese’s interests would benefit by such
action and that the Foundation would suffer would permit
the jury to infer that such common purpose existed. The
potential for giving effect to such a purpose appears from
the testimony of Mr. Cortese who, at one point in his
testimony, identified himself with Leisure World Founda-
tion when its chief administrator, Robert Nelson was hired.
The following questions and answers occurred on page
1084-1085 of the transcript.
“MR. KEITH: Q. When did you first start going
from Laguna Hills or the Southern California area to
Walnut Creek?
A. After I purchased the property.
Q. Do you recall when that was?
A. ’63.
Q. Then there came a time that an administrator
was appointed through Leisure World Foundation to
run the project, is that correct?
A. That is correct.
Q. What did you know about the subject matter?
A. Nothing.
Q. But you came at one point in time, you say in
1964, probably, and you met Mr. Nelson, is that correct?
A. Met him when we hired him. I don’t recall the
date or the year that he was hired.
MR. KEMP: Mr. Cortese, speak up.
D-4
MR. KEITH: Q. Who is we?
A. The Leisure World Foundation,” [Emphasis
added.]
It is true that Mr. Cortese subsequently changed his testi-
mony and said: “It wasn’t my prerogative to hire Mr. Nel-
son. It was the prerogative of the Leisure World Founda-
tion. We had nothing to do with it.” However, in light of
all the other circumstances testified to concerning the inter-
relationship between the several parties, it is clear that
the jury could have inferred that when Mr. Cortese stated
that he met Mr. Nelson “when we hired him” he was speak-
ing the truth, i.e., that he had a part, with the Foundation,
in hiring its administrator. The significance of this fact is
plain since it was Mr. Nelson who gave the orders to the
newspaper people to cut off the plaintiff’s advertising.
I conclude that the evidence adduced on behalf of the
plaintiff was sufficient to permit the jury to infer that there
was a common purpose and design between the two defend-
ants and Leisure World Foundation to cause the latter
to cut off the plaintiff’s advertising of carpets in the Leisure
World News with the intent to deprive him of an oppor-
tunity to compete for this substantial interstate business.
Having found that there was sufficient evidence to war-
rant the jury’s finding the existence of a couspiracy in
violation of the Sherman Act, objections to testimony touch-
ing-on statements of co-conspirators should be overruled.
Such evidence is admissible.
I also conclude that the evidence touching on the plain-
tiff’s damages was sufficient to warrant the jury’s consid-
eration and determination.
D-5
The motion for verdict n.o.v. is overruled as is also the
motion for new trial.
This 14th day of February, 1977.
/s/ Exsert P, Turrie
United States Circuit Judge
Sitting by designation
E-1
Appendix E
United States Court of Appeals
For the Ninth Circuit
No. 75-1138
75-1139
Kerry M. Gough, Trustee in Bankruptcy |
of Louis Rosen, dba Walnut Creek
Furniture,
Plaintiff-Appellee,
vs. P
Rossmoor Corporation and Crestmark
Carpet and Drapery Company,
Defendants-Appellants.
,
[March 17, 1976]
Appeal from the United States District Court
for the Northern District of California
OPINION
Before: WRIGHT and KILKENNY, Circuit Judges, and
CHRISTENSEN,® Senior District Judge.
WRIGHT, Circuit Judge:
This antitrust case appears before us for the second
time. At trial the jury returned a verdict for defendant
Rossmoor through answers to special interrogatories. On
appeal this court determined that one of the interroga-
tories was improperly submitted to the jury and that the
*Honorable A. Sherman Christensen, Senior United States Dis-
trict Judge for the District of Utah, sitting by designation.
B-2
jury’s answer was wrong as a matter of law. With this an-
swer disregarded, all remaining jury answers were in
favor of plaintiff Gough. Gough v. Rossmoor Corp., 487
F.2d 373 (9th Cir. 1973).
This court originally directed that
[iJn view of the jury’s findings with respect to sub-
stantive violation and damage, judgment should have
been entered for plaintiff. The judgment is reversed
and the cause remanded for this purpose.
Rossmoor petitioned for rehearing and included within
that petition motions for judgment n.o.v. and new trial. The
petition was denied, without reference to the motions in-
cluded therein. However, this court modified the order
quoted above, to read as follows:
The judgment is vacated and the cause remanded for
further proceedings consistent with this opinion.
487 F.2d at 378,
On remand, Rossmoor renewed its motions for judgment
n.o.v. and new trial. The trial judge, believing that he was
foreclosed by our modified opinion from exercising his dis-
cretion as to these motions, denied both of them.
The sole issue presented is whether the trial judge cor-
rectly determined that our order remanding “for further
proceedings consistent with this opinion” foreclosed his
subsequent exercise of discretion on the motions for judg-
ment n.o.v. and new trial. We hold that he did not.
That this court might have considered the motions for
judgment n.o.v. and new trial on their merits is made clear
by the Court in Neely v. Eby Construction Co., 386 U.S.
317, 323 (1967). However, more often than not this court
>
E-3
should refer such motions, arising for the first time on ap-
peal, to the trial court so that it can first pass on them. Jd.
at 323-26. See also Iacurci v. Lummus Co., 387 U.S. 86, 88
(1967).
Unless this court expressly or by clear implication dis-
poses of motions raised for the first time on appeal, it must
be presumed that they will be acted upon by the trial court
on remand. The above rule is necessary to insure that some
court consider the merits of the motions which a party is
entitled to present.
In the first appeal of the instant case, this court neither
expressly nor by clear implication ruled on the motions
presented in the rehearing petition. To the contrary, the
modification of the order from one requiring that “judg-
ment... [be] entered for plaintiff” to one remanding “for
further proceedings consistent with this opinion” strongly
implied that the motions were to be entertained below on
remand,
Gough directs our attention to certain language in our
earlier opinion regarding the jury’s factual findings on (a)
power and intent to exclude, and (b) damages. We said
those findings “established, as a matter of law,” that de-
fendants had engaged in illegal conduct which injured
plaintiff. 487 F.2d at 376. Gough argues that by this lan-
guage the court effectively denied the motions for judgment
n.o.v, and new trial. We disagree.
Read in context, the use of the term “matter of law” sug-
gests that the factual issues of power and intent, and dam-
ages, were as a matter of law properly presented to the
jury. By contrast, the interstate commerce issue should not
E-4
have been submitted to the jury, since “[t]he undisputed
facts cstablished that the necessary relationship to inter-
state commerce did exist.” 487 F.2d at 377.
Nowhere in the course of the opinion preceding the
phrase “matter of law” does this court set forth the evi-
dence in such a way as to support a conclusion that the
jury must, “as a matter of law,” have found for plaintiff.
Therefore, the “matter of law” language may mean that if
the jury’s answers were properly based on adequate evi-
dence, the judgment must under law be for the plaintiff.
If this interpretation is correct, the trial judge must now
decide, in entertaining the motions for judgment n.o.v. and
new trial, whether the evidence supported the jury’s an-
swers.
Assuming, without deciding, that Gough is correct in in-
terpreting the “matter of law” language as being in effect
a denial by this court of the motions presented, we would
still reverse. The number of possible interpretations of the
“matter of law” language suggests that none of them is
supported by “clear implication.” Thus the interpretation
suggested by Gough, even if correct, cannot foreclose the
exercise of discretion by the trial judge on remand.
Since the trial judge acted on the mistaken assumption
that he could not adjudge the motions for judgment n.o.v.
and new trial, we must remand so that he may do so. See
Fairmont Glass Works v. Cub Fork Coal Co., 287 U.S. 474
(1923) ; Southern Pac. Co. v. Guthrie, 186 F.2d 926 (9th Cir.
1951).
The cause is remanded for the trial judge’s consideration
of the merits of Rossmoor’s motions for judgment n.o.v.
and new trial.
Se Pe
F-1
Appendix F
United States District Court
Northern District of California
No. 45531 GBH
Kerry M. Gough, Trustee in Bankruptcy |
of Louis Rosen, dba Walnut Creek
Furniture,
Plaintiff,
~~
vs.
Rossmoor Corporation, et al.,
Defendants.
;
[Filed November 4, 1974]
JUDGMENT FOR PLAINTIFF
The above entitled action having been tried before the
Honorable Elbert P. Tuttle, Judge, by designation, and a
jury, commencing March 16, 1970; and the jury having an-
swered the following stated interrogatories in the following
ways:
“1, Did the defendants and Leisure World Founda-
tion or Golden Rain Foundation by means of a common
plan, scheme or design have the power and intention
to exclude plaintiff from the carpet and/or business
in Rossmoor Leisure World?
Yes Yes
No
2. Did defendants enter into a common plan,
scheme or design with Leisure World Foundation or
F-2
Golden Rain Foundation to prevent plaintiff from ad-
vertising carpets in the Leisure World News such as
to act as a restraint on plaintiff’s business of selling
carpets or other merchandise at Rossmoor Leisure
World?
Yes Yes
No
3. If your answer to either of the preceding ques-
tions is in the affirmative did such restraint have a
substantial effect on interstate commerce or the flow
of interstate commerce?
Yes
No No
4. Has plaintiff suffered any monetary damage by
reason of its inability to advertise in Leisure World
News?
Yes Yes
Te atten
5. Jf so, please indicate the amount opposite the
appropriate type of damage you find to have been
suffered.
Net Profits $18,143
Goodwill $22,738”;
And the United States Court of Appeals for the Ninth
Circuit having on October 17, 1973 filed its opinion holding
upon the facts and the law applicable to this case, the
defendants are within the provisions of the Federal anti-
trust laws, speciiically Section 4 of the Clayton Act, 15
U.S.C. §15; and the said Court having on December 28,
1973 amended its opinion;
a <a 8
a
.
ie
.
F.3
And the Mandate of the United States Court of Appeals
for the Ninth Cireuit having issued on March 12, 1973,
and the revised opinion of the United States Court of Ap-
peals for the Ninth Circuit stating:
“The judgment is vacated and the cause remanded
for further proceedings consistent with this opinion.” ;
And the plaintiff having filed his motion to enter judg-
ment based upon the answers to the aforesaid interroga-
tories and upon the aforesaid opinion of the United States
Court of Appeals for the Ninth Circuit; and the defendants
having heretofore presented to the Court of Appeals in
their petition for rehearing their contentions of fact and
law which they urge in support of a judgment notwith-
standing the verdict and a motion for a new trial;
And the United States Court of Appeals for the Ninth
Cireuit having denied defendants’ petition for rehearing;
And it appearing that plaintiff is entitled to judgment,
It Is Hereby Ordered, Adjudged And Decreed:
That judgment be entered for the plaintiff, Kerry M.
Gough, Trustee in Bankruptcy for Louis Rosen, d/b/a
Walnut Creek Furniture, and pursuant thereto that:
(1) The plaintiff Kerry M. Gough have and recover from
defendants Rossmoor Corporation and Crestmark Carpet
and Drapery Company the sum of $122,643, which is three-
fold the damages found by the jury to be suffered by
plaintiff, with interest thereon at the rate of 7% as pro-
vided by law.
(2) Defendants shall pay reasonable attorneys’ fees pur-
suant to Section 4 of the Clayton Act and said sum shall
be $50,000.00.
(8) The sum Of $.......cccccccccssccssees for plaintiff’s costs and
disbursements in this action.
(4) The sum of $3,457.72 for plaintiff’s costs and dis-
bursements on appeal, consisting of the following:
(a) $971.52 for costs as shown in the Mandate of the
United States Court of Appeals for the Ninth Circuit;
(b) $2,486.20 being additional costs taxed in the United
States District Court in connection with the appeal, pur-
suant to F.R.A.P. 39(e).
Accordingly, it is hereby ordered that the final judgment
in the amount of $122,643 be entered on behalf of the
plaintiff, together with costs in the amount of $
and attorneys’ fees in the amount of $50,000.00.
Dated at Atlanta, Georgia, this 30th day of October,
1974.
/s/ Exsert P. Turrie
Elbert P. Tuttle
United States Court of Appeals
Cireuit Judge, Sitting by
Designation in the United States
District Court for the Northern
District of California.
er
Sainte “Te a! RPI.
.
OA ee
ETN TORE PE tan ne.
G-1
Appendix G
In The United States District Court
For the Northern District of California
Civil No. 45531 GBH
Kerry M. Gough, Trustee in baskkenter |
of Louis Rosen, dba Walnut Creek
Furniture,
Plaintiff,
1. ;
Rossmoor Corporation, et al.,
Defendants. ;
[Filed October 8, 1974]
JUDGMENT ON MANDATE
FROM THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
This case originally came on for trial before a jury
upon interrogatories agreed upon between the parties. The
interrogatories and the answers given to them by the jury
were as follows:
“1. Did the defendants and Leisure World Founda-
tion or Golden Rain Foundation by means of a com-
mon plan scheme or design have the power and
intention to exclude plaintiff from the carpet and/or
other business in Rossmoor Leisure World?
“Yes.
“2. Did defendants enter into a common plan,
scheme or design with Leisure World Foundation or
Golden Rain Foundation to prevent plaintiff from
G-2
advertising carpets in the Leisure World News such
as to act as a restraint on plaintiff’s business of sell-
ing carpets or other merchandise at Rossmoor Leisure
World?
“Yes.
“3. If your answer to either of the preceding ques-
tions is in the affirmative, did such restraint have a
substantial effect on interstate commerce or the flow
of interstate commerce?
“No.
“4. Has plaintiff suffered any monetary damage
by reason of its inability to advertise in Leisure
World News?
“Yes.
“5. If so, please indicate the amount opposite the
appropriate type of damage you find to have been
suffered.
“Net Profits $18,143.00
“Goodwill 22,738.00”
It is apparent that the jury made findings to the effect
that the defendants and others had the power and design
to and actually did engage in conduct which acted as a
restraint on the plaintiffs’ business of selling carpets or
other merchandise at the locale involved. It is also clear
that the jury determined the monetary loss suffered by the
plaintiffs by reason of such conduct.
It is equally apparent that by answering question
number three in the negative the jury indicated that such
restraint did not have “a substantial effect on interstate
commerce or the flow of interstate commerce.”
AEG SR LET ny
&,
&
¢
f
:
A
G-3
On appeal the Court of Appeals for this Circuit held
that the answers to the interrogatories other than inter-
rogatory number three made irrelevant the jury’s response
to that interrogatory. The Court stated:
“For it is clear that the defendants’ anticompetitive
conduct in connection with such sales necessarily had
the ‘substantial economie effect’ upon interstate com-
merce in carpeting requisite to the exercise of federal
regulatory power. The retail transactions affected by
defendants’ conduct were essential to the continued
movement of a ‘substantial’ volume of carpeting from
the states of manufacture to the Walnut Creek Cali-
fornia area, citing Cartrade, Inc. v. Ford Dealers’
Advertising Association, swpra, 446 F.2d at 292.”
The Court of Appeals therefore set aside the judgment
in favor of the defendants which had been entered by this
Court based upon the jury’s responses to the interroga-
tories.
In its original order the Court of Appeals stated:
“In view of the jury’s findings with respect to sub-
stantive violation and damage, judgment should have
been entered for plaintiff. The judgment is reversed,
and the cause remanded for this purpose.”
Thereafter, the original defendants, the appellees, filed
a document entitled Appellees’ Petition for Rehearing
Including Motion for Judgment Notwithstanding the
Verdict, Motion for New Trial and Suggestion of Appro-
priateness of Rehearing En Banc. That document not only
undertook to reargue the merits of the original appeal,
but also, as indicated in the title, contended that the trial
court had erred in not granting their motion for directed
verdict and pursuant to what they contended to be the
G-4
teaching of Neeley v. Martin K. Eby Construction Co., 386
U.S. 317, they urged that the Court of Appeals itself enter
an order by way of judgment notwithstanding the verdict.
Further, also relying upon the Neeley case they urged that
the Court of Appeals order the grant of a new trial.
These two parts of the motion were based upon allega-
tions that there was not sufficient evidence to sustain the
jury’s finding of a conspiracy or the other elements of au
alleged anti-trust violation and further that there was
insufficient evidence to sustain the jury’s verdicts as to the
damages sustained from the anti-trust violations which
they found to exist.
Upon consideration of the petition the Court of Appeals
modified the last paragraph of the opinion by striking the
two sentences quoted above and substituting the following
as a separate paragraph:
“The judgment is vacated and the cause remanded
for further proceedings consistent with this opinion.”
The order then ended with the following language.
“The petition for rehearing is denied and the sug-
gestion for rehearing en banc is rejected.”
The appellant, the original plaintiff in the action, has
now filed his motion in this Court to enter a judgment in
his favor for the amount of damages ascertained in the
jury’s verdict, contending that this is the only action avail-
able to the Court under the remand from the Court of
Appeals. To the contrary, appellees, the original defend-
ants, contend that they may now have heard by the trial
court a new motion for judgment notwithstanding the
verdict and their motion for a new trial as an alternative.
G-5
The answer to this question seems to have been resolved
against the contention of the defendants-appellees by their
contentions presented to the Court of Appeals in connec-
tion with their petition for rehearing. Part III and Part
IV of their petition urged the Court of Appeals to enter
a judgment n.o.v. or, in the alternative, an order granting
a new trial. They based their contention that this was a
proper procedure on the case of Neeley v. Martin K. Eby
Construction Co., supra, and especially the Neeley case
discussion of Federal Rule 50(d).' Although the rule itself
states only that in the case of a party positioned as were
the parties here, the appellees had open to them the right
to argue that the judgment in their favor should have
stood even though this Court incorrectly applied the jury
verdict, by the process of requesting the appellate court
to grant a new trial, the language of the Supreme Court
extends to an appellee under such circumstances the
further right to seek in the Court of Appeals an order
for a judgment n.o.v. The Court said:
“Rule 50(d) is applicable 'to cases such as this one
where the trial court has denied a motion for judg-
ment n.o.v. [After the jury verdict responding to the
special interrogatories was filed the appellant here,
the original plaintiff, filed a motion for judgment n.o.v.
*Rule 50(d) provides:
“(d) Same: Denial of Motion. If the motion for judgment
notwithstanding the verdict is denied, the party who prevailed
on that motion may, as appellee, assert giounds entitling him
to a new trial in the event the y ape court concludes that
the trial court erred in denying the motion for judgment not-
withstanding the verdict. If the appellate court reverses the
judgment, nothing in this rule precludes it from determining
that the appellee is entitled to a new trial, or from directing the
trial court to determine whether a new trial shall be granted.
As amended Jan. 21, 1963, eff. July 1, 1963.” Rule 50(d) Fed.
R. Civ. P.
G-6
and for new trial. Both of these motions were denied
by the trial court.] Rule 50(d) expressly preserves to
the party who prevailed in the district court [Here
the appellees.] the right to urge that the Court of
Appeals grant a new trial should the jury’s verdict
be sect aside on appeal. Rule 50(d) also emphasizes
that ‘nothing in this rule precludes’ the Court of Ap-
peals ‘from determining that the appellee is entitled
to a new trial, or from directing the trial court to
determine whether a new trial shall be granted.’ Quite
properly, this rule recognizes the appellate court may
prefer that the trial judge pass first upon the ap-
pellee’s new trial suggestion. Nevertheless considera-
tion of the new trial question ‘in the first instance’
is lodged with the Court of Appeals and Rule 50(d)
is permissive in the nature of its direction to the Court
of Appeals: As in Rule 50(c)(1) there ts nothing in
Rule 50(d) indicating that the Court of Appeals may
not direct entry of judgment n.0.v. in appropriate
cases.” 386 U.S. 317, 323-324. (Emphasis added).
This course of events is precisely what happened in
this case. The plaintiff Rosen, complaining of the Court’s
interpretation of the jury verdict, filed a motion for judg-
ment n.o.v. and for new trial. These motions were denied.
Thus, the present appellees were the prevailing party on
that motion. Rule 50(c) expressly authorizes them to raise
in the Court of Appeals all of the contentions that they
now seek to make here which would authorize either a new
trial or a judgment in their favor based on the theory
that there was insufficient evidence to take the case to the
jury in the first place. Of course, all other grounds for the
granting of a new trial, such as objections to either the
admission or refusal of the admission of evidence, the
G-7
measure of damages and the like would properly be con-
tained in such motion.
In their motion for rehearing the appellees stated:
“The [appellate] court may either order a new trial
itself or return the case to the district court for a
ruling on the motion.” Citing Neeley at 328-24, 325
(sic).
In the language of the Court on page 329 it seems to be
decisive on the point.
“In our view, therefore, Rule 50(d) makes express
and adequate provision for the opportunity—which
the plaintiff-appellee had without this rule—to present
his grounds for a new trial in the event his verdict
is set aside by the Court of Appeals. If he does so
in his brief—or in a petition for rehearing if the
Court of Appeals has directed entry of judgment for
appellant—the Court of Appeals may make final dis-
position of the issues presented, except those which in
its informed discretion should be reserved for the
trial court. If appellee presents no new trial issues
in his brief or in a petition for rehearing, the Court
of Appeals may, in any event, order a new trial on
its own motion or refer the question to the district
court, based on factors encountered in its own review
of the case. Compare Weade v. Dichmann, Wright and
Pugh, Ince., supra.”
Here the order of the Court of Appeals stated unequiv-
ocally, following consideration of the petition for rehear-
ing, “the petition for rehearing is denied and the sugges-
tion for rehearing en banc is rejected.”
Thus, it is clear that the Court of Appeals declined to
grant the petition for the entry of a judgment n.o.v. or
G-8
the petition for the grant of a new trial. Neither did the
Court determine that these questions should be remanded
to the trial court for consideration. This Court construes
the order of the Court of Appeals as having decided these
issues on the merits, inasmuch as they were presented in
full and denied by the Court.
The Court concludes that the judgment in favor of the
defendants heretofore entered must be VACATED and
judgment entered in favor of the plaintiff for three times
the amount determined by the jury, together with costs
and attorney’s fees.
yer eo See a PEDAL. ee
H-1
Appendix H
In the United States District Court
For the Northern District of California
No, 45531-GBH
Kerry M. Gough, Trustee in Bank. |
ruptey of Louis Rosen, dba Walnut
Creek Furniture
Plaintiff,
vs.
Rossmoor Corporation, et al.,
Defendants. ;
[Filed December 6, 1974]
ORDER
Defendants having moved the court for judgment not-
withstanding the verdict and for a new trial, the court hav-
ing considered the motions,
IT IS ORDERED that said motions be and the same are
hereby Denied.
Dated: December 3, 1974.
Expert P, Tutte
Elbert P. Tuttle
United States Circuit Judge
(sitting by designation)
I-1
Appendix I
United States Court of Appeals
For the Ninth Circuit
No. 26,475
Louis Rosen, dba Walnut Creek :
Furniture,
Plaintiff-Appellant,
vs.
Rossmoor Corporation, Golden Rain ‘
Foundation, Leisure World Founda-
tion, and Crestmark Carpet and Dra-
pery Company,
ee |
[Filed October 17, 1973]
Appeal from the United States District Court
For the Northern District of California
Before: BROWNING, DUNIWAY, and GOODWIN, Cir-
cult Judges
BROWNING, Circuit Judge:
Plaintiff sued defendants for treble damages under sec-
tion 4 of the Clayton Act (15 U.S.C. § 15) for violation of
sections 1 and 2 of the Sherman A@#(15 U.S.C. §$1, 2).
The case was submitted to the jury on special interroga-
tories. The jury responded that defendants had entered
into a conspiracy to exclude plaintiff from the business of
selling at retail in a local market products produced in
I-2
other states, that they had restrained plaintiff’s retail busi-
ness to his damage, but that their acts had not had “a sub-
stantial effect on interstate commerce or the flow of
interstate commerce.” Because of this negative answer
regarding the effect of defendants’ conduct on interstate
commerce, the district court entered judgment for defend-
ants. We reverse.
Plaintiff was sole proprietor of a retail store selling
carpets, drapes, and household furniture in Walnut Creek,
California. Defendants are two members of a group of
corporations that buy and sell land and construct, sell,
furnish, and manage residential developments. These
developments are referred to individually and collectively
as “Rossmoor Leisure World.”
Defendant Rossmoor Corporation is the primary devel-
oper. Defendant Crestmark Carpet and Drapery Company
is a wholly owned subsidiary of Rossmoor that sells carpets
and drapes to residents of Rossmoor Leisure World, includ-
ing the development in the Walnut Creek area.
All the carpeting sold by plaintiff and defendant Crest-
mark to residents of the Walnut Creek Rossmoor Leisure
World during the relevant period was manufactured out-
side California and shipped to plaintiff and defendant
Crestmark either directly or through in-state wholesalers.’
‘Defendant Crestmark’s sales of carpeting and padding to resi-
dents of Rossmoor Leisure World at Walnut Creek exceeded
$380,000 in 1965, $565,000 in 1966, and $305,000 in 1967. The
volume of plaintiffs sales of carpeting io residents of the develop-
ment is not entirely clear from the record, but defendants conceded
at oral argument that such sales were not de minimis. Moreover,
plaintiff testified, and the jury necessarily found, that such sales
would have been substantially greater but for defendants’ acts,
ae
1-3
In response to interrogatories submitted under Rule
49(a), Fed. R. Civ. P., the jury found that defendants and
their subsidiaries had the power and intention to exclude
plaintiff from the business of selling carpeting to residents
of the Walnut Creek Rossmoor Leisure World; that they
entered into a scheme to prevent plaintiff from advertising
in the Leisure World News, a “house” newspaper for that
development, “such as to act as a restraint on plaintiff’s
business”; and that, as a result, plaintiff suffered some
$50,000 damages in loss of profits and good will. However,
to the question “Did such restraint have a substantial effect
on interstate commerce or the flow of interstate com-
merce?” the jury answered “No.’* Judgment was entered
for defendants on the ground that this last answer deprived
the court of jurisdiction under the Sherman Act.
The written submission to the jury read as follows:
The following questions are being submitted to you for your
answer in order to aid the Court in reaching a decision in this
matter.
You should recognize that your answers to these questions
will be the basis for the Court’s decision which will decide
whether or not the plaintiff is entitled to recover or not from
the defendants.
You are to answer the following interrogatories as applicable.
Before any question may be answered, all 12 of the jurors must
agree on the answer.
1. Did the defendants and Leisure World Foundation or
Golden Rain Foundation by means of a common plan scheme
or design have the ee and intention to exclude plaintiff
nor carpet and/or other business in Rossmoor Leisure
or
Yes », 4
2. Did defendants enter into a common plan, scheme or
design with Leisure World Foundation or Golden Rain Foun-
dation to prevent plaintiff from advertising carpets in the
1-4
The jurisdictional issue under the Sherman Act is dis-
tinct from the substantive issue of whether a given defend-
ant’s conduct was of the kind prohibited by the Act. Ras-
mussen v. American Dairy Ass’n, 472 F.2d 517, 521-24 (9th
Cir. 1973). The jurisdictional issue is one of constitutional
power. Congress intended to extend the substantive pro-
hibitions of the Sherman Act to the farthest reaches of its
power under the Commerce Clause, thereby mandating for
this nation a competitive business economy to the full
extent that Congress could do so under its constitutional
power to regulate interstate and foreign commerce. United
States v. South-Eastern Underwriters Ass’n, 322 U.S. 533,
558-59 (1944). The jurisdictional question, therefore, is
whether defendants’ conduct had a sufficient relationship
to interstate commerce to be subject to regulation by Con-
gress. Rasmussen v. American Dairy Ass’n, supra, 472 F.
- 2d at 521. This, in turn, depends upon whether defendants’
Leisure World News such as to act as a restraint on plaintiff's
business of selling carpets or other merchandise at Rossmoor
Leisure World?
Yes X
3. If your answer to either of the preceding questions is in
the affirmative, did such restraint have a substantial effect on
interstate commerce or the flow of interstate commerce?
ies
No X
4. Has plaintiff suffered any mon damage by reason of
its inability to advertise in Leisure Worl News?
Yes X
wa
; indi th
mdilgwiaoieuasa
Net Profits.............. $18,143.00
SIE 0g > vere piicaer. 22,738.00
1-5
conduct had a “substantial economic effect” upon interstate
commerce, or, “ ‘concerns more States than one’ and has a
real and substantial relation to the national interest” in a
competitive economy. Heart of Atlanta Motel v. United
States, 379 U.S. 241, 255 (1964), quoting Gibbons v. Ogden,
22 U.S. (9 Wheat.) 1, 196-97 (1824); see Rasmussen v.
American Dairy Ass’n, swpra, 472 F.2d at 522-23. See, gen-
erally, 1 von Kalinowski, Antitrust Laws & Trade Regula-
tion § 5.01[4] (1969).
The substantive issue, on the other hand, is whether
defendants participated in anticompetitive conduct of the
kind encompassed within the statutory terms “restraint of
trade,” “monopolize,” or “attempt to monopolize.” In terms
of this case, the substantive question was whether defend-
ants, with the power and intent to exclude plaintiff from
the Rossmoor Leisure World market, entered into a com-
mon scheme or plan to restrain plaintiff’s business by pre-
venting him from advertising in the Leisure World News,
and, if so, whether such conduct was the kind of anticom-
petitive conduct prohibited by the Act.
Thus, although the substantive and jurisdictional issues
are often confusingly described in terms of the “effect” of
particular conduct upon commerce, as if a common question
were presented, see, e.g., Las Vegas Merchant Plumbers
Ass’n v. United States, 210 F.2d 732, 739-40 n.3 (9th Cir.
1954), the substance of the two inquiries is quite different.
An unreasonable restraint on competition may have no
impact upon interstate commerce, or an impact so insig-
nificant that regulation under the Commerce Clause is not
justified as a means of protecting interstate commerce.
Page v. Work, 290 F.2d 323, 331-32 (9th Cir. 1961). Or con-
1-6
duct clearly having a substantial economic impact on inter-
state commerce may not violate the Act’s prohibitions
against unreasonable restraints of trade and monopoliza-
tion. Cartrade, Inc. v. Ford Dealers Advertising Ass’n, 446
F.2d 289, 292 (9th Cir. 1971).
When the issue is whether the defendant’s conduct vio-
lates the norms of the statute, the focus is upon commer-
cial competition: whether the defendant’s conduct- -“in” or
“affecting” interstate commerce or not—unreasonably
restrains competition in the :uarket place. When the issue
is whether jurisdiction exists, the focus is upon interstate
commerce: whether the defendant’s conduct—unreasonably
restrictive of competition or not—has a sufficient impact on
interstate commerce to justify regulation under the Com-
merce Clause.
In the present case, the jury’s factual findings that
defendants, with the power and intent to exclude plaintiff
from the Rossmoor Leisure World market, entered into a
common scheme or plan to restrain plaintiff’s business by
preventing him from advertising in the Leisure World
News established, as a matter of law, that defendants
had engaged in the type of anticompetitive conduct that
Congress intended to prohibit by the Sherman Act. The
jury’s further findings that plaintiff suffered monetary
damages in a determined amount by reason of defendants’
conduct, established, as a matter of law, that plaintiff was
among the class of private persons authorized by the
Clayton Act to seek redress for such conduct. Defendants
do not argue to the contrary.
SS Se. m
Qo Ae
~
a a gy Re > SPA tes es,
1-7
The sole question herein is jurisdictional : did defendants’
conduct have a sufficient relationship to interstate com-
merce to be within Congress’ power to regulate, and hence
to come within the Sherman Act?
Defendants argue that the jury’s specific finding that
defendants’ acts did not have a “substantial effect on inter-
state commerce or the flow of interstate commerce” is
conclusive of jurisdiction. We disagree.
It is doubtful whether the jurisdictional issue should
have been submitted to the jury, even had the evidence
been in dispute. Except where the jurisdictional issue and
the issues on the merits are factually “completely inter-
meshed,” McBeath v. Inter-American Citizens for Decency
Committee, 374 F.2d 359, 362-63 (5th Cir. 1967), it may
well be the court’s function to resolve factual disputes
relevant to jurisdiction on motion under Rule 12(b)(1),
Fed. R. Civ. P., rather than the jury’s function to resolve
such disputes in the trial of the case on the merits. See
Page v. Work, supra, 290 F.2d at 334; Bailey’s Bakery,
Ltd. v. Continental Baking Co., 235 F.Supp. 705, 714
(D.C. Hawaii 1964); 5 Wright & Miller, Federal Practice
& Procedure § 1350, at 556-58, 5 Moore’s Federal Practice
7 38.37 [2.-2], at 298-300; but see Marks Food Corp. v.
Barbara Ann Baking Co., 274 F.2d 934 (9th Cir. 1959).*
*Professor Moore summarizes the policy considerations supporting
this view as follows:
As a matter of policy, however, there is much to be said for
approaching problems of statutory coverage as triable to the
court when reasonably separable from the facts of violation.
The difference is this: if coverage is treated as substantive
for purposes of mode of trial, the issue of whether a cause of
action is stated must be left to the jury in cases in which
underlying facts are not in dispute, but different inferences
1-8
Even assuming, however, that the resolution of conflicts
in the evidence as to jurisdictional facts is the function
of the jur;, the jury must be given adequate instructions
as to the legal standard to be applied. Ratigan v. New
York Central R.R., 291 F.2d 548, 554 (2d Cir. 1961); 5A
Moore’s Federal Practice, supra, J 49.02, at 2206 n.7; 9
Wright & Miller, Federal Practice & Procedure, supra,
§ 2506, at 502. The interrogatory submitted to the jury in
this case (question “3,” supra note 2) did not inform the
jury of the constitutional tests for determining whether
the relationship between defendants’ conduct and interstate
commerce was such as to permit Congress to prohibit de-
fendants’ conduct. Nor was the general explanatory in-
struction given to the jury adequate to this purpose.‘
In any event, there was no conflict in the evidence as to
the facts relevant to jurisdiction. The undisputed facts
established that the necessary relationship to interstate
may be drawn from them. Thus on the same business arrange-
ments one case may be decided one way and another in a
different way, as the jury may find that the arrangements did
or did not affect commerce. . . . Surely these are matters that
should be treated as a matter of law so that the perimeter of
the statute can be worked out in the appellate courts. When
there is . . . in the case of the antitrust case a factual question
as to details of the defendant's business activities, such ques-
tions could be put to the jury as special interrogatories, or a
special verdict employed.
5 Moore’s Federal Practice § 38.36 [2.-2], at 300.
‘The only relevant portion of the instructions reads (Tr. 1310):
The Sherman Act applies to parties whose acts are in the
course or flow of commerce across state lines or whose acts,
although local, substantially affect interstate trade and com-
merce. By substantial the law means not de minimus—not
insignificant, an amount more than trifling. The amount of
interstate trade involved, if substantial, is not material, since
the Sherman Act brands as illegal the character of the restraint,
not the amount of commerce affected,
1-9
commerce did exist. In these circumstances, it was error
to submit the jurisdictional issue to the jury under Rule
49(a). Wirtz v. La Fitte, 326 F.2d 856, 858-60 (5th Cir.
1964); W. R. Grimshaw Co. v. Nevil C. Withrow Co., 248
F.2d 896, 902-03 (8th C
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