Supplemental Brief — David Orgell, Inc. v. Josiah Wedgwood & Sons, Inc.

Ofirce - Suprame Court, U.S.

FILED

No. 80-1777 raat

IN THE MLEKANOER Sven

Supreme Court of the United States

of America

Octoser Term, 1980

Davip OrGELL, INC., PETITIONER

Vv.

Josiah WeDGwoop & Sons, INC., RESPONDENT

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

SUPPLEMENTAL BRIEF OF RESPONDENT

Roy L. SHULTS

MITCHELL, SILBERBERG & KNupP

EpwarbD M. MEDVENE

AMELIA K. SHERMAN

1800 Century Park East

Los Angeles, California 90067

(213) 553-5000

LEONARD S. SANDWEISS

1290 Avenue of the Americas

New York, New York, 10104

(212) 757-6360

Attorneys for Respondent

PANDICK PRESS. WEST COAST. 1945 S. FIGUEROA, LOS ANGELES. CALIFORNIA (213) 747-4321

.

TABLE OF CONTENTS

PRELIMINARY STATEMENT ...........ccccscesssssesesseesensesescsnsenenevenens l

I. THE BRIEF RELIES ON A MATERIALLY INCORRECT

STATEMENT OF THE FACTS ........cccccsesesesesesesesesesnsnenenes 2

Il. THE SOLICITOR GENERAL MANUFACTURES A

CONFLICT AMONG THE COURTS OF APPEAL ON

THE STATUTE OF LIMITATIONS ISSUE IN REFU-

SAL TO DEAL CASES BY MISREADING APPLI-

CABLE CASE LAW ......cccsssssssssssssssssessssssssssssssssssssesssnseees 3

Ill. THE REAL QUESTION IN THIS CASE IS WHETHER

THE STATUTE OF LIMITATIONS BEGINS TO RUN

ONCE A REFUSAL TO DEAL IS EVIDENTLY FI-

TABLE OF AUTHORITIES

CASES PAGE

Charlotte Telecasters, Inc. v. Jefferson-Pilot Corp., 546 F.2d 570

A: ARSE ee SR ae ee 5,

Imperial Point Colonnades Condominium, Inc. v. Mangurian, 549

F.2d 1029 ( Sth Cir. ), cert. denied, 434 U.S. 859 (1977) ........ 4,

In re Multidistrict Vehicle Air Pollution, 59\ F.2d 68 (9th Cir. ).

cert. denied, 444 U.S. 900 (1979). ...ccccce ccccccsccessecesseeeceeseeeeeees 2, 6,

Layne & Bowler Corp. v. Western Well Works, Inc., 261 U.S. 387

AR EIT SR A AE RE Re Ae

Pioneer Co., Inc. v. Talon, Inc., 462 F.2d 1106 (8th Cir. 1972 )...5,

Poster Exchange, Inc. v. National Screen Service Corp., 517 F.2d

117 (Sth Cir. 1975), cert. denied, 423 U.S. 1054 (1976) oo...

S.S. Monrosa v. Carbon Black Export, Inc., 359 U.S. 180 (1959)...

Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321

SIE TTT aadulhioc cdbeinccabdehaaibhdiebdauiiidienieliitebahenabvesiaetnbeeatnannabbinibesods 3,

RULES

BD EBs § TOC D) cviesecccevssccsosevsensesevannvovecvebeustvessoseseqeocncssooneapescnoeoceeee

OTHER AUTHORITIES

a 1 8p | en

No. 80-1777

IN THE

Supreme Court of the United States

of America

OctToBer TERM, 1980

Davip OrRGELL, INC., PETITIONER

Vv.

JOSIAH WEDGWooD & Sons, INC., RESPONDENT

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

SUPPLEMENTAL BRIEF OF RESPONDENT

Preliminary Statement

On August 10, 1981, respondent’s counsel received the

amicus curiae brief (“Brief”) filed by the Solicitor General of

the United States. Respondent submits this supplemental brief

pursuant to Rule 22(6) of the Rules of the United States

Supreme Court, in order to address substantial misstatements of

fact and law made in the Brief.

2

THE BRIEF RELIES ON A MATERIALLY INCORRECT

STATEMENT OF THE FACTS.

Respondent Wedgwood allegedly refused to sell a line of

its merchandise to petitioner Orgell in 1965 as a result of a

conspiracy with another defendant. That refusal was reiterated

in 1968, 1972, 1976 and 1977. The Solicitor General's Brief

omits any mention of the 1972 refusal, when: (1) petitioner

engaged the services of O'Melveny & Myers, one of the largest

and best law firms in Los Angeles, who wrote to respondent

threatening antitrust legal action if respondent did not sell to

petitioner; (2) respondent's attorney denied petitioner’s version

of the facts, but stated, citing authority, that even if it were

correct, petitioner’s claim would still not be actionable, and

invited petitioner's attorneys to show how he was wrong on the

law or the facts, in which case he would take the matter up

further with his client and advise accordingly; and (3) the legal

claim was dropped in that O’Melveny & Myers never again

communicated with respondent or its attorney, and neither did

petitioner until four years later, in 1976, when it again asked to

be sold the “Wedgwood” line. Only by omitting these facts

could the Brief argue in the context of this case that its version

of the applicable limitations rule was required

“| since} those plaintiffs most likely to bring suit more than

four years after an initial refusal to deal are the ones most

likely to lack alert antitrust counsel and, hence, least likely

to become aware of a prophylactic rule until the deadline

has passed.” (p. 6, n.4).

Even more importantly, omitting petitioner’s pursuit and

abandonment of its legal claim (and threat to sue) permitted

the Brief to overlook the finding in Jn re Multidistrict Vehicle

Air Pollution, 59\ F.2d 68, 72 (9th Cir.) cert. denied, 444 U.S.

900 (1979), “that AMF [plaintiff] itself was convinced by the

last quarter of 1964 that it was out of the market” which the

court employed in showing that the refusal to deal in that case

3

had by a pre-limitation period date become “irrevocable.

immutable, permanent and final” notwithstanding later ap-

proaches by AMF to some of the alleged conspirators. In this

case, similarly, the finality of respondent's decision not to deal

with petitioner was underscored, reinforced and acquiesced in

by petitioner’s own apparently carefully considered action in

dropping its legal claim against and threat to sue respondent.

THE SOLICITOR GENERAL MANUFACTURES A CON-

FLICT AMONG THE COURTS OF APPEAL ON THE

STATUTE OF LIMITATIONS ISSUE IN REFUSAL TO

DEAL CASES BY MISREADING APPLICABLE CASE

LAW.

The Solicitor General contends that, stancing alone, each

reiteration of a refusal to deal gives rise to a new claim for the

purposes of 15 U.S.C. § 15(b) in the Fourth, Fifth and Eighth

Circuits, but not in the Sixth and Ninth Circuits. To reach that

conclusion, he must ignore the realities of the cases he reviews.

lump together refusal to deal cases with monopolization and

tying cases, and imagine horribles which lack any support

whatever, in or outside of the record.

The governing rule is the one announced by this Court in

Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321,

338 (1971), and referred to by the Solicitor General ( Brief.

pp. 2-3). In a “continuing conspiracy” case, “each time a

plaintiff is injured by an act of the defendants a cause of action

accrues to him to recover the damages caused by that act and

. . aS to those damages, the statute of limitations runs from

the commission of the act.”

However, if there is “injury” of a particular kind, reitera-

tion simply confirms it, creating added damages but no new

claim. The claim accrues, and the statute begins to run as to

4

injury of a particular type, when an injury of that type has

unquestionably and ascertainably occurred. Zenith, supra, 401

U.S. at 338-39.

The Solicitor General’s “conflict” rests primarily on Fifth

Circuit cases involving tying and monopolization claims. Yet.

he overlooks the fact that in each, new affirmative acts took

place inside the limitations period aimed at altering quali-

tatively, consolidating and extending the allegedly anticompeti-

tive conduct, causing injury independent in character from that

previously suffered by the plaintiff. See, e.g., Imperial Point

Colonnades Condominium, Inc. v. Mangurian; 549 F.2d 1029,

1035 (Sth Cir. ), cert. denied, 434 U.S. 859 (1977) (tying case:

collection of and increases in rents within limitations period );

Poster Exchange, Inc. v. National Screen Service Corp., 517

F.2d 117, 123 (Sth Cir. 1975), cert. denied, 423 U.S. 1054

(1976) (court stressed it confronted a monopolization case

where one defendant conspired during the limitations period to

consolidate the other defendant’s monopoly position in return

for a share of the monopoly profits derived thereby ).

There is no conflict between these decisions and those

which hold that the simple reiteration of a refusal to deal in a

non-monopoly context does not start the statute of limitations

running anew. Contrary to the intimation of the Brief ( page 3,

n.4), substantial antitrust policy reasons support the distinction

between monopoly and non-monopoly situations. In the

former, the gravamen of the antitrust evil is the monopoly itself,

which a reiterated refusal to deal enhances and consolidates. In

the latter, the gravamen of the antitrus: evil is the simple refusal

to deal itself, which reiteration does nothing to enhance or

consolidate. The mere repetition violates no antitrust rule or

policy at that juncture qualitatively different from the original,

final refusal to deal. Tying is akin to monopoly, because each

exercise of the tie-in confirms the complete market control the

arrangement represents and creates new injury to competition in

the qualitative sense.

5

The Fourth and Eighth Circuit cases the Solicitor General

urges as conflicting with the Ninth and Sixth Circuits simply

establish that a refusal to deal must be unequivocally commu-

nicated to the plaintiff and injury result thereby; once that

happens, the cause of action accrues. In Charlotte Telecasters.

Inc. v. Jefferson-Pilot Corp., 546 F.2d 570 (4th Cir. 1976), the

issue was when a cause of action arose for the allegedly

anticompetitive award of a cable television franchise to a

competitor of plaintiffs. The court held that “exclusion from

participation in an industry constitutes a continuing conspiracy

unless the exclusion is final in its impact.” Id., at 572 (emphasis

added ).

The court found, however (/d., at 573) that the possibility

had been left open that other franchises would be granted, and

that the initial grant had been on a nonexclusive basis. Thus

the refusal to deal was not “final” until plaintiff was later

definitely informed that in any case it would not get a franchise.

The limitations period was held to run from the time the

plaintiff was so informed, even though the city council had at

that time stated it would give some thought to plaintiffs

request, but then did nothing.

In Pioneer Co., Inc. v. Talon, Inc., 462 F.2d 1106 (8th Cir.

1972), plaintiff had been doing business with defendant on an

order by order basis for five years. One of defendant’s salesmen.

allegedly pursuant to an anticompetitive conspiracy, verbally

informed plaintiff that defendant's sales agent would “no

longer sell” to plaintiff and that “all business relations were

terminated.” 462 F.2d at 1107. However, plaintiff's President

testified that he had received “no formal commitment from

anyone that orders would not be accepted.” Jd. His “first

notification” came when two orders he sent in were together

rejected in a letter mentioning no previous termination of

business relations and announcing a decision to “discontinue

sales to jobbers whose requirements have been modest.” Jd. at

1108. No subsequent orders were placed. The Solicitor Gener-

al’s discussion of Pioneer itself simply confirms that in holding

6

that the statute of limitations had not run until the “formal

notification” represented by the refusal of the orders, the court

properly measured the limitations period from the date when

the refusal to deal was unequivocally communicated, and

ascertainable injury occurred, which it held did not happen until

the orders were formally refused.

The teaching of Charlotte Telecasters and Pioneer is clear.

Where a defendant has purportedly refused to deal with a

plaintiff but, by its own words or conduct has either suggested

that the door remains open or has failed effectively to commu-

nicate the refusal, the plaintiffs claim has not accrued. Only

where the defendant refuses to deal and does so in a fashion

which clearly indicates that the decision is intended to be real

and final is the claim fixed; however, it is unquestionably fixed

at that point.

These principles are clearly in accord with the ruling in /n

re Multidistrict Vehicle Air Pollution, supra, 59\ F.2d at 68, the

decision which the Ninth Circuit relied on in affirming summary

judgment in respondent’s favor. There, as here, plaintiff sought

to do business with defendants. There, as here, plaintiff argued

that it hae made other, futile attempts to do business with

defendants during the limitations period. 591 F.2d at 71.

There, as here, and unlike in Charlotte Telecasters and Pioneer,

“whatever hope of business [plaintiff] may have clutched, its

source could not have been actions or words of the [defend-

ants}.” /d. at 72.

The mere fact that decisions can a/ways be changed was

not enough for the Ninth Circuit to conclude that the refusal to

deal with which it was concerned was other than “irrevocable,

immutable, permanent and final.” Thus, /n re Multidistrict does

not, as the Brief appears to contend on page 4, stand for the

proposition that any additional refusal to deal starts a new

limitations period. To the contrary, as above discussed, it holds

that if a new refusal follows a final refusal, the new one is but

an echo, causing no new damage and starting no new limita-

tions period. Indeed, the court cited for that very proposition

7

language in Jmperial Point Colonnades, supra, 549 F.2d at

1029: “{W]here all the damages complained of necessarily

result from a pre-limitations act by defendant, no new cause of

action accrues for any subsequent acts committed by defendant

within the limitations period because those acts do not injure

plaintiff.” In re Multidistrict, supra, 591 F.2d at 72 (emphasis

supplied ).

This view is logical as well as legal. The antitrust laws seek

to deter anticompetitive behavior. They also seek to encourage

prompt corrective action. If a refusal to deal pursuant to a

conspiracy is simply reiterated, the reiteration causes no new

anticompetitive or antitrust injury if neither the plaintiff nor the

marketplace had any reason to believe that the refusal to deal

was open to reconsideration. If a refusal to deal pursuant to

one conspiracy is reiterated pursuant to a different conspiracy,

then there is mew anticompetitive injury giving rise to a new

claim. If a refusal to deal is not merely reiterated but

expanded—applied to other products or markets—again, there

is a different injury and a new claim.

The Solicitor General recommends that the petition be

granted so that the Court may rule that each successive refusal

to deal begins a new limitations period, even where each new

refusal is merely a reiteration of prior refusals over a 13-year

period, and even where a disappointed retailer has during that

period hired a lawyer, threatened suit, and then dropped his

claim when rebuffed again. According to the Brief, someone in

the position of respondent (and not alleged to be a monopolist )

can never shake loose from a retailer who “won't take no” for

an answer. Every day for 13, or perhaps 25 or 50 years, the

retailer can, according to this view, start a new limitations

period running by simply writing another letter, or calling

again, perhaps just leaving a message. It would appear,

according to the Brief, that in such a situation the statute would

commence to run only when the supplier and/or the retailer

went out of business. In short, the recommendation in the Brief

should not be adopted because, among other reasons, it is

advanced to achieve a result that, respectfully, makes no sense,

particularly in a case like this one which does not involve a

claim of monopoly or monopolization.

The conflict the Solicitor General creates between the

Circuits is, as has been demonstrated, one the courts themselves

do not acknowledge. See generally L. Sullivan, Antitrust 775-76

(1977). Indeed, the “conflict” is the result of tortured readings

(and misreadings) of the applicable cases, and a failure to

appreciate the pertinent antitrust policies which are their foun-

dation.

Even in clear disputes of public significance, this Court has

always avoided granting petitions which present illusory rather

than true conflicts amongst the courts of appeal. It has

frequently returned to the language of Layne & Bowler Corp. v.

Western Well Works, Inc., 261 U.S. 387, 393 (1923), where it

stressed that in cases of such purported conflict, no writ should

be granted except “. . . in cases where there is a real and

embarrassing conflict of opinion between the circuit courts of

appeal.” This is in no sense such a case.

THE REAL QUESTION IN THIS CASE IS WHETHER

THE STATUTE OF LIMITATIONS BEGINS TO RUN

ONCE A REFUSAL TO DEAL IS EVIDENTLY FINAL.

The Brief suggests under “Question Presented” that re-

spondent contended and the Ninth Circuit ruled that suit has to

be brought “within four years of the initial refusal”. No such

contention and ruling has been made. The real issue is whether

the statute commences to run when a refusal has become final

and unequivocal, regardless of its subsequent reiterations. Such

a “final” refusal may or may not be the first refusal to deal. To

suggest otherwise, as the Brief, does, is to mischaracterize what

this Court is asked to review. And that is critical, because on

the real issue before this Court, there is no conflict among the

courts of appeal in the factual context of this case. Only by

presenting a false question can the Brief argue in favor of the

petition.

9

It is a commonplace that this Court does not decide

abstract questions of law or render advisory opinions. As Mr.

Justice Brennan has put it: “While the Court decides questions

of public importance, it decides them in the context of mean-

ingful litigation. Its function in resolving conflicts among the

Courts of Appeals is judicial, not simply administrative or

managerial.” S.S. Monrosa v. Carbon Black Export, Inc., 359

U.S. 180. 184 (1959).

CONCLUSION

Respondent is disturbed by the Solicitor General’s mis-

characterization of the applicable facts, cases and policies

involved in this proceeding. The courts are in harmony on the

application of the Clayton Act’s statute of limitations to the

varied antitrust claims that can be urged. Only the inter-

pretation which they have adopted—with which the decision

below is entirely consistent—serves both to further the objec-

tives of the substantive provisions of the antitrust laws and the

need for predictability and repose that the passage of a statute

of limitations addressed. The Court should reject the position

urged by the Solicitor General and deny the petition.

Respectfully submitted,

Roy L. SHULTS

MITCHELL, SILBERBERG & KNupP

EDWARD M. MEDVENE

AMELIA K. SHERMAN

LEONARD S. SANDWEISS

Attorneys for Respondent