Opposition — Flex-a-Lite Corp. v. Schwitzer Division, Wallace-Murray Corp.

: ‘

Supreme Gourt, U.

FILED

MAR %6 1979

MIGHAGL RODAK, JR., CLERK

In the Supreme Court of the

United States

Ocroser Term, 1978

No. “TR - 1 3 1 5

Motown Recorp Corporation,

Petitioner,

VS.

Jack SOLINGER,

Respondent,

On Petition for a Writ of Certiorari to the

United States Court of Appeals for

the Ninth Circuit

Brief for Respondent in Opposition

Davw R. Harrison

465 California Street.

Room 600

San Francisco, California 94104

Telephone: (415) 397-2222

Counsel for Petitioner

Lone & Levir

Francis WILLMARTH

Raups M. Tener

Of Counsel

SORG PRINTING COMPANY OF CALIFORNIA, 346 FIRST STREET, SAN FRANCISCO 94105

SUBJECT INDEX

Page

REE EE CT 1

BEIT ER SS SSCS SEE 1

Nee a reeennsncosovensecseces 1

Statutory Provision Involved _20................ccccsssseeeeseeeeeeeees 2

aa. sssishinssonnensncovevcrecseee 2

Reason the Writ Should Be Denied ...........................eee 4

1. The Reversal of the Summary Judgment and Re-

mand for Findings Was Correct ........................0+-+-+- 4

2. Solinger Is Not a “Remote” Plaintiff, Since He

Was the Target of the Anticompetitive Acts,

and Within the Target Area of the Economy Af-

fected by Them a 4

3. Defendant Cannot Complain of the Ninth Circuit’s

“Foreseeability” Language, Which Limits Rather

_ Than Expands the “Target Area” Concept .......... 6

4. A Prospective Entrant Who Has Shown Sufficient

“Tntention and Preparedness” Has “Business or

Property” Giving Him Standing to Sue ................ 7

a. The Eighth Cireuit’s Duff Decision Does Not

Ne nc ccsccasavoesevecoee 9

b. The Solinger Decision Does Not'Sanction Dup-

i 9

Conclusion .

TABLE OF AUTHORITIES

CasEs Pages

Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477

NII: indi iniciiebiaieltassabiibieesecnenndiansciabialbinnistehienstescamsadeiganinacinn

cr

Calderone Enterprises Corporation v. United Artists

Theatre Circuit, 454 F.2d 1292, (2d Cir. 1971).......... 7

Conference of Studio Unions v. Loew’s Ine., 193 F.2d

51, (9th Cir. 1951), cert. denied 342 U.S. 919 (1952) 6

Duff v. Kansas City Star Company, 299 F.2d 320 (8th

SPL, AMI icin’ cicetignpciseubechehiiepi sep aihiabiniadesiceeguebninleiinniidibbiiibieees 9

Hawaii v. Standard Oil Co., 405 U.S. 251 (1972).......... i)

Hecht v. Pro-Football, Ine., 570 F.2d 982 (D.C. Cir.

1977), cert. denied ...... USS. ......, 98 S.Ct. 3069 (1978) 8

Helix Milling Co. v. Terminal Flour Mills Co., 523

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

RU ON leis sie sc bibetadcphavebabacipuoneiusssiuinaibiallcicdtéintetobih 8

Tllinois Brick Co. v. Illinois, 431 U.S. 720 (1977).......... 9

In Re Multidistrict Vehicle Air Pollution M.D.L. No.

31, 481 F.2d 122, (9th Cir. 1973), cert. denied 414

BI SI IU wcsthcictirda micantechijndeecbcacicndtiiadacaleichidilesbitenntnnbinctinnnl 5, 7

Long Island Lighting Co. v. Standard Oil Co. of

Calif., 521 F.2d 1269, (2d Cir. 1975), cert. denied 423

ra ee 5 INIT aah hstascttd Sess evusiticnitmnstiabecndansendcaepiahiesinie: 7

Solinger v. A&M Records, Inc., 586 F.2d 1304 (9th

RRs TTD = ic Gcasescindeencii dosha tanepliekieainlehionipnstielelensiccoadape iad 2, 6, 8, 9

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

NIT wsidsiicesuscichentsienstustarethscessiailtenssinapiihadiihddainensinastanlabiiiomeite 8

STATUTES

Section 4—Clayton Act, 15 U.S.C. § 15.020 4

Sh cise aU MN OD sis tincintninisadsSoonathinnerisnitabninteinaimuitbidaiin 2

SN Ts Ao SUR acisatins cesicls traps aniensnesnainctiensianincicde 4

In the Supreme Court of the

United States

OcroserR TERM, 1978

Motown Recorp CorporaTIon,

Petitwner,

vs.

Jack SOLINGER,

Respondent,

On Petition for a Writ of Certiorari to the

United States Court of Appeals for

the Ninth Circuit

Brief for Respondent in Opposition

OPINION BELOW

The opinion below is adequately set forth in the Petition.

JURISDICTION

The jurisdictional requirements are adequately set forth

in the Petition.

QUESTIONS PRESENTED

1. Is a Writ of Certiorari appropriate to review the

Ninth Circuit’s statement that an antitrust plaintiff must

2

be within the area of the economy that defendants should

have foreseen would be affected by their violations, in light

of the fact that plaintiff Solinger has alleged facts showing

that he was within the “target area” of the economy that

actually was affected by defendants’ violations, and was

himself the intended target?

2. Is a Writ of Certiorari appropriate to review the

Ninth Cireuit’s statement that plaintiff Solinger’s factual

allegations showed that his “intention and preparedness”

to buy IMS and enter the market was extensive enough to

constitute “business or property” protected by the antitrust

laws?

STATUTORY PROVISION INVOLVED

The statutory provision involved is adequately set forth

in the Petition.

STATEMENT OF THE CASE

This case was dismissed by the United States District

Court pursuant to a motion treated as one for summary

judgment, under Fed. R. Civ. P.12(b) (6) and 56. The Court

of Appeals for the Ninth Circuit affirmed the dismissal in

part, and reversed and remanded it in part.’

The plaintiff below is Jack Solinger, the former president

and general manager of Independent Music Sales, Ine.

(“IMS”). (R 003-004, 7 15). Until March of 1973, IMS was

the principal Northern California independent distributor

of phonograph records and tape recordings. As an inde-

pendent distributor, IMS was appointed by various record

and tape manufacturers, to distribute their products. These

manufacturers included defendants A&M Records, Ine.

(“A&M”), and Motown Record Corporation (“Motown”),

1. Jack Solinger v. A&M Records, Inc., et al 586 F.2d 1304,

(9th Cir. 1978).

3

the two most important manufacturers an independent dis-

tributor could represent. (R 005, 19). By early 1973, Mr.

Solinger had taken substantial steps to purchase. IMS from

its sole shareholder, and enter the record distribution busi-

ness. He had obtained detailed accounting projections show-

ing the feasibility of his proposal to buy and pay for IMS

(R 60-62, 212, 243-263) ; he had completed a final agreement

to purchase IMS which both he and IMS’ sole shareholder

were prepared to sign (R 60-62, 212-213, 264-279) ; he had

arranged all financing for the transaction (R 66-67, 213-214,

285-286) ; arranged for warehouse space, computer facil-

ities, and other facilities until he could relocate the physical

plant of IMS (R 213, 280-284) ; and begun discussions with

the teamsters’ union concerning jobs and wage scales at his

new site (R 213).

Solinger contends that a conspiracy was entered into

among the defendants to restrain trade and allocate trade

territories. He alleges that pursuant to this conspiracy,

defendant A&M refused to give its consent to Solinger’s -

acquisition of IMS, and IMS was then terminated by both

A&M and Motown as Northern California distributor. Sol-

inger contends that this was done because he refused to

cooperate in allocations of trade territories for A&M and

Motown products. He alleges that defendant Eric Mainland

Distributing Co., Inc. (“Eric-Mainland”) was then made

the new Northern California distributor for A&M and Mo-

town products; and that Eric-Mainland and the Southern

California distributor, Record Merchandising Company,

Ine. (“Record Merchandising”), then began to observe ter-

ritorial allocations. He alleges that as a result, IMS was

forced out of business, and that monopolies were thereby

created in the distribution of A&M and Motown records

and tapes in Northern California and in Southern Califor-

nia (R 008-009, {| 28, R 007, {| 24).

4

REASON THE WRIT SHOULD BE DENIED

1. The Reversal of the Summary Judgment and Remand for

Findings Was Correct.

Since this matter was decided as on summary judgment,

the plaintiff’s allegations must be accepted as being true.

The United States District Court must determine that no

genuine issue of material fact exists and that the moving

party is entitled to judgment as a matter of law2 The Dis-

trict Court made no findings whatsoever, and the Ninth

Circuit reversed the decision in part and remanded it for

that reason.®

In defendant Motown’s petition for certiorari, however,

defendant has characterized the facts in the manner most

favorable to it. Based on this characterization, it has at-

tempted to raise important questions of antitrust law, which

it urges this court to review.

Plaintiff Solinger contends that the decision of the Ninth

Circuit reversing the summary judgment in part and re-

manding the case was correct, for the reasons stated by that

Court, and that no significant questions of antitrust law are

presented to this Court.

2. Solinger Is Not a "Remote" Plaintiff, Since He Was the

Target of the Anticompetitive Acts, and Within the Target

Area of the Economy Affected by Them.

The term “standing” is used to describe two different

parts of Section 4 of the Clayton Act (15 U.S.C. § 15). These

elements of standing under Section 4 are that the plaintiff

must have suffered injury to his “business or property”,

and the injury must be “by reason of” an antitrust violation.

2. Fed. R. Civ. P. 56(c).

3. 586 F.2d at 1307-1308.

—=—,-

5

As a tool to determine whether a potential new entrant

into the relevant market has taken sufficient steps to have

a “business or property”, and therefore have standing to

sue, the Ninth Circuit has adopted the “intention and pre-

paredness” test.* To determine whether the cause of plain-

tiff’s damages was “by reason of” an antitrust violation, the

Ninth Circuit has adopted the “target area” concept—the

“target area” being the area of the economy that is endan-

gered by a breakdown of competitive conditions.’ A plaintiff

must be in the “target area” to have standing. Since the

intent of the antitrust law would be thwarted if existing

competitors could use anticompetitive means to keep new

competitors out of the market, the “target area” of the

economy must necessarily include both existing competitors

in the market and potential entrants who have shown suf-

ficient “intention and preparedness” to enter the market.

Tf the elements of standing are properly understood, and

if they are applied to the facts which plaintiff Solinger

alleged (rather than defendant Motown’s characterizations

of those facts), it is clear that Solinger is not a remote

claimant. Solinger has alleged facts showing he was the

actual target of the conspiracy, and therefore was a first

tier plaintiff. He was employed in and had a long back-

ground in the record business. He had taken every step up

to the actual signing of a contract to buy IMS and enter the

market. Motown’s characterization of Solinger as one “who

never risked or lost a penny” is inaccurate and not sup-

ported by the facts.

Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477

(1977), cited by Motown, is not in point. Brunswick was a

4. Id, at 1309-1310.

5. In Re Multidistrict Vehicle Air Pollution 481 F.2 122, 129,

(9h Cir. 1973) cert. denied, 414 U.S. 1045 (1973).

6.

Section 7 case, in which the plaintiff complained because the

defendant kept failing competitors of plaintiff in business

by acquiring them. The alleged violations resulted in a

furthering, rather than a diminution of competition, leading

this Court to conclude that the alleged Josses did not occur

“by reason of anything forbidden in the antitrust laws.”

429 USS. at 488. \

In contrast, Solinger’s Section 1 and 2 allegations of

conspiracy by defendants, for the purpose of preventing his

entry into the market and establishing territorial alloca-

tions among competitors, and resulting in elimination of a

competitor and of competition, certainly sets forth the kind

of injury the antitrust laws were designed to protect

against. The profits Solinger lost by reason of his exclusion

from the record distribution business directly “reflect the

anticompetitive effect ... of the violation” 429 U.S. at 489.

3. Motown Cannot Complain of the Ninth Circuit's "Foresee-

ability" Language, Which Limits Rather Than Expands the

“Target Area" Concept.

Some Ninth Circuit cases have defined the “target

area” as “the area of the economy that is endangered by a

breakdown of competitive conditions”’.* In theory, this

would allow recovery by a plaintiff situated in an area of

the economy actually endangered by antitrust violations,

whether or not an effect on that area of the economy was

foreseeable. In Solinger, the Ninth Cireuit has limited this

“target area” concept, and required in effect that the injury

occur within an area of the economy that both foreseeably

6. In Re Multidistrict Vehicle Air Pollution, supra; Confer-

ence of Studio Unions v. Loew’s Inc. 193 F.2d 51, 54-55, (9th Cir.

1951), cert. denied, 342 U.S. 919 (1952).

7

would have been and actually was affected by the antitrust

violation.’

Since Solinger alleges facts showing he was the actual

target of the anticompetitive acts, and the only area of the

economy involved in this case is the independent distribu-

tion of phonograph records and tapes which he was enter-

ing, he can easily meet target area tests based on actual

injury, foreseeable injury, or both. ,

Moreover, it is difficult to see how Motown can complain

about a test which restricts rather than expands the number

of antitrust plaintiffs who have standing.

The two cases cited by Motown for the proposition that

the Ninth Circuit’s “foreseeability” test has been rejected

by other circuits do not support that position.® Instead,

they hold that if a plaintiff is not within the “target area,”

it does not have standing even though its injury was fore-

seeable.

4. A Prospective Entrant Who Has Shown Sufficient “Intention

and Preparedness" Has "Business or Property" Giving Him

Standing to Sue.

As stated earlier, it would defeat the purpose of the anti-

trust laws if existing competitors in the market could repel

7. “Solinger must show that the injury oceurred within an area

of the economy that foreseeably would have been affected by the

antitrust violation alleged.” 586 F.2d at 1310-1311. This is econ-

sistent with the Ninth Circuit’s decision in Jn Re Multidistrict

Vehicle Air Pollution, supra, which held that farmers were not

within the target area, even though they alleged damages to their

crops caused by antitrust violations in the smog control device field.

However, the opinion did not speak of the foreseeability of dam-

ages to the agricultural area of the economy.

8. Calderone Enterprises Corp. v. United Artists Theatre Cir-

cuit, 454 F.2d 1292, 1295-1296 (2d. Cir. 1971); Long Island Light-

ing Co. v. Standard Oil Co. of California, 521 F.2d 1269, 1274 (2d

Cir. 1975), cert. denied 423 U.S. 1073 (1976). Both dealt with

second tier plaintiffs.

8

new entrants with impunity, and could use anticompetitive

devices against competitors preparing to enter the market

that they could not use once the competitor had entered.

In this regard, it makes no difference that the potential

competitor was (as in Solinger) purchasing stock of an

existing business’, or buying or leasing existing assets in

the market*®, rather than bringing new facilities into the

market. The plaintiff must, however, first give evidence of

sufficient “intention and preparedness” to enter the market

to constitute a “business or property”.

The Ninth Circuit has distinguished between the factual

questions of whether an antitrust violation occurred and

whether there was damage to plaintiff’s “business or prop-

erty”, from the legal question of causation—whether the

damage was “by reason of” the antitrust violation.’ There

are sound reasons of economics and judicial policy for this

distinction. The question of causation turns on an analysis

of the economic structure of an industry and the plaintiff’s

relationship to that structure. This is a relatively simple

determination to make, and the facts concerning it are

normally readily available and undisputed, Questions of

whether an antitrust violation has occurred, on the other

hand, pose notoriously difficult questions of fact and of

proof. Questions of almost equal difficulty are posed in the

determination of whether a plaintiff has shown sufficient

9. 586 F.2d at 1308.

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

1317 (9th Cir. 1975) cert. denied 423 U.S. 1053 (1976); Hecht v.

Pro-football, Inc. 570 F.2d 982 (D.C. Cir. 1976), cert. denied 98

S. Ct. 3069 (1978).

11. See Zenith Radio Corp. v. Hazeltine Research, 395 U.S.

100, 128 (1969).

12. 586 F.2d at 1309.

9

“intention or preparedness” to constitute “business or

property”. These are matters best left to the trier of fact.

A. THE EIGHTH CIRCUIT'S DUFF DECISION DOES NOT CONFLICT WITH

SOLINGER.

The alleged conflicts that exist between the Solinger de-

cision and the decision in Duff v. Kansas City Star Co.*

are essentially differences of fact. Such factual differences

in eases decided by the circuits do not lend themselves to

resolution by the Supreme Court. In any event, Solinger

took far more steps to enter business than the plaintiff in

Duff.

B. THE SOLINGER DECISION DOES NOT SANCTION DUPLICATIVE RE-

COVERIES.

Motown contends, citing Illinois Brick Co, v. Illinois, 431

U.S. 720 (1977), and Hawaii v. Standard Oil Co. of Cali-

fornia, 405 U.S. 251 (1972), that the Solinger decision would

sanction double recoveries. These two decisions are dis-

tinguishable from Solinger. Illinois Brick Co, v. Illinois

dealt with a suit by a second tier plaintiff, the State of

Illinois, for increased prices it suffered becaus. of antitrust

violations directed at its contractors. Hawai v, Standard

Oil is a parens patriae suit by a first tier plaintiff (the

State), but the damages claimed consisted essentially of

injuries suffered by second tier victims (its citizens), Solin-

ger’s suit, on the other hand, is for damages he himself

suffered as a first tier plaintiff.

Secondly, Motown asserts that IMS could sue to assert

the same claims that Solinger could. Had IMS sued, how-

ever, Motown no doubt would have claimed that IMS lacked

standing since it was in the process of selling to Solinger

and going out of business. Motown would therefore success-

fully avoid liability for violations of the antitrust laws,

13. 299 F.2d 320 (8th Cir. 1962).

10

simply because neither of its intended victims could sue

because of the existence of the other.

In any event, the question raised by Motown is entirely

hypothetical, since IMS has not sued and no longer can sue

(the statute of limitations having run). Even had IMS sued,

however, the problem of apportioning damages between

two first tier victims of the same conspiracy is not beyond

the capabilities of the United States Courts.

CONCLUSION

For the reasons set forth above, the Writ of Certiorari

should be denied, and the case should be remanded to the

United States District Court for the factual determination

referred to in the Ninth Cireuit Opinion.

Respectfully submitted,

Davw R. Harrison

465 California Street

Room 600

San Francisco, California 94104

Telephone: (415) 397-2222

Counsel for Petitioner

Lone & Levrr

Francis WILLMARTH

Ravpu M. Tener

Of Counsel