Petition — Weit v. Continental Illinois National Bank & Trust Co.

Supreme Court brief1981

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Supreme Court of the Anited States

Ocroser Term, 1981

JACK WEIT, JAMES B. COX and ROBERT W.

McLALLEN, on behalf of themselves and all others

similarly situated,

Petitioners,

CONTINENTAL ILLINOIS NATIONAL BANK AND

TRUST COMPANY OF CHICAGO, HARRIS TRUST

AND SAVINGS BANK, PULLMAN BANK AND

TRUST COMPANY, CENTRAL NATIONAL BANK

IN CHICAGO AND AMERICAN NATIONAL BANK &

TRUST COMPANY OF CHICAGO,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Frank J. Lux, Jr.

Biccam, Cowan, Manu Dr &

Lux Dix

180 North LaSalle Street

Chicago, IIlinois 60601

(312) 236-9119

(Counsel of Record

for Petitioners)

Dennis C. WaLpon

Wau T. Huycox

Wu R. Warnock

Roan & GROSSMAN

55 West Monroe Street

Chicago, Illinois 60603

(312) 263-3600

James E. Beck.iey

135 S. LaSalle Street

Chicago, Illinois 60603

(312) 236-4684

—— — ——— eee

La Salle Street Press — Chicago Printed in U.S.A.

QUESTIONS PRESENTED

In Intersiate Circuit v. United States, 306 U.S. 208 (1939),

this Court established that uniform, parallel pricing be-

havior is crucial circumstantial evidence of a price-

fixing conspiracy. Interstate Circuit recognized that when

parallel behavior of competitors pertains to price, it is in

the self-interest of the participants to maintain uniformity.

Accordingly, parallel price uniformity logically supports

an inference of conspiracy.

On the other hand, when parallel refusals-to-deal have

been scrutinized in subsequent cases, their value as circum-

stantial evidence has been given less weight. First National

Bank of Arizona v. Cities Service Co., 391 U.S. 253 (1968).

This is because a refusal-to-deal is contrary to the self-

interest of the participants, and an inference of conspiracy

does not necessarily follow. Any such inference will fall in

the face of evidence of reasonable business justification.

This case presents a disturbing “cross-over” in doctrine

in which the neutralization of parallel action evidence by

“reasonable” business explanations, a rule evolved in the

refusal-to-deal cases, has been applied to a case of uniform

pricing, virtually eliminating the teachings of Interstate

Circuit and in direct conflict with Ambook Enterprises v.

Time Inc., 612 F.2d 604 (2nd Cir. 1979), cert. dismissed,

101 S. Ct. 35 (1980).

Beyond this serious distortion the Sherman Act, the

other rulings of the divided Court of Appeals vitiate the

role of circumstantial evidence in conspiracy cases gener-

ally and improperly inject into ‘he pretrial process a rule of

trial practice designed only to eliminate the prejudicial im-

pact of evidence on a sitting jury. The affirmance of sum-

mary judgment in this class action price-fixing conspiracy

case thus presents four questions that impact the future

role of jury trials in antitrust litigation:

1. Whether the court below formulated a novel and

illegitimate standard for reviewing summary judgments

in antitrust litigation by relying upon First National

Bank of Arizona v. Cities Service Co., 391 U.S. 253

(1968), a refusal-to-deal case, and by disregarding

evidence of 14 years of price uniformity in a price-

fixing conspiracy case, in direct contradiction of Inter-

state Circuit, Inc. v. United States, 306 U.S. 208 (1939)

and in direct conflict with Ambook Enterprises, Inc.

v. Time Inc., 612 F. 2d 604 (2d Cir. 1979) cert. dismissed

101 S.Ct. 35 (1980).

2. Whether the court below improperly invoked a

trial rule designed to exclude relevant, yet prejudicial

evidence in the course of a jury trial, Rule 403 of the

Federal Rules of Evidence, to exclude highly probative

evidence of joint lobbying from consideration in oppo-

sition to summary judgment motions filed under a rule

of pre-trial procedure, Rule 56 of the Federal Rules

of Civil Procedure.

3. Whether the court below improperly relied upon

a long-discredited circuit court rule for criminal cases

in deciding that plaintiffs could not successfully resist

defendants’ summary judgment motions unless their

circumstantial evidence of a price-fixing conspiracy

excluded every rational inference other than guilt,

thereby disregarding the standard set in Holland v.

United States, 348 U.S. 121 (1954).

4. Whether the court below violated fundamental

legal principles long established by this Court, includ-

ing Poller v. Columbia Broadcasting System, Inc., 368

U.S. 474 (1962) and United States v. Diebold, Inc., 369

U.S. 654 (1962), and deprived plaintiff class members

of their basic constitutional right to a jury trial.

iii

TABLE OF CONTENTS

PAGE

TABLE OF AUTHORITIES .................00.- iv

r e 1

ee eee eee 2

STATUTES AND RULES INVOLVED ........... 2

STATEMENT OF THE CASE ................... 2

A. General Background ...................++: 2

1 e 3

C. Proceedings in the District Court 4

D. Proceedings in the Cireuit Court of Appeals 5

REASONS FOR GRANTING THE WRIT ........ 5

I. The Decision Below, in Formulating a Novel and

Illegitimate Standard for Reviewing Summary

Judgments in Price-Fixing Conspiracy Cases that

Eliminates the Probative Effect of Uniform Pric-

ing, is in Direct Conflict with a Controlling De-

cision of this Court and with Decisions of Other

Circuit Courts of Appeal. 6

II. The Court Below, in Using Rule 403 of the Federal

Rules of Evidence to Exclude Highly Probative

Evidence in Opposition to Defendants’ Summary

Judgment Motions, has Incorrectly Decided an Im-

portant Question of Federal Law which has not

Been, but Should be Settled by this Court ........ 14

III. The Decision Below, in Holding That Plaintiffs’

Circumstantial Evidence of a Price-Fixing Con-

spiracy Must Exclude Every Rational Inference

Other Than Guilt in Order to Defeat Defendants’

Summary Judgment Motions, is in Direct Conflict

with a Controlling Decision of this Court and with

Decisions of Other Circuit Courts of Appeal ..... 20

IV. The Decision Below, in Failing to Consider All

of Plaintiffs’ Evidence Opposing the Summary

Judgment Motions and in Failing to Draw In-

ferences from the Evidence Most Favorably to

Plaintiffs, is in Direct Conflict with Controlling

Decisions of this Court and with Decisions of

Other Circuit Courts of Appeal 23

CORPORATE noc cc ccccccccccccccccccccccvccccess 29

TABLE OF AUTHORITIES

Cases

PAGE(s)

Ambook Enterprises v. Time Inc., 612 F.2d 604 (2d

Cir. 1979), cert. dismissed, 101 S. Ct. 35 (1980) .....

American Securit Co. v. Hamilton Glass Co., 254 F.2d

, cate ga dees ghetadeewes cs

Beatrice Foods Co. v. United States, 312 F.2d 29 (8th

re ee ae

Bieghler v. Kleppe, 633 F.2d 531 (9th Cir. 1980) ......

Bray v. Safeway Stores, Inc., 392 F.Supp 851 (ND.

SE EL day cele en se pasdoeescoanesdéee

Cackling Acres, Inc. v. Olson Farms, Inc., 541 F.2d

242 (10th Cir. 1976), cert. denied, 429 U.S. 1122

T G

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980)

Central National Life Insurance Co. v. Fidelity and De-

posit Company of Maryland, 626 F.2d 537 (7th Cir.

PUTT. Sob Da AD DEERE Repo enh es cdcbccveeuseunce

rene

Continental Bank v. Wa- Ho Truck Brokerage, 122 Ariz.

414, 595 P.2d 206 (Ct. App. 1979) ................

C-0-Two Fire Equipment Co. v. United States, 197 F.

2d 489 (9th Cir. 1952), cert. denied 344 U.S. 892

/ ⁵ͤ „ .es

First National Bank of Arizona v. Cities Service Co.,

ES on eres canescens

Holland v. United States, 348 U.S. 121 (1954) ........

Household Goods Carriers’ Bureau v. Terrell, 452 F.2d

Es FEL . en

PAGE(S)

Inland Oil c Transport Co. v. United States, 600 F.2d

„ f f PP res mre, Acre

In re Folding Carton Antitrust Litigation, 1980-2 Trade

Cases f 63,460 (N. D. IIl. 1980) .................-..

Interstate Circuit, Inc. v. United States, 306 U.S. 208

D e

Maiorana v. MacDonald, 596 F.2d 1072 (Ist Cir. 1979)

Modern Home Institute, Inc. v. Hartford Accident a

Indemnity Co., 513 F.2d 102 (2d Cir. 1975) ........

Morrison v. Nissan Motor Co., 601 F.2d 139 (4th Cir.

„%

National Society of Professional en v. United

re eee

New Jersey Life Insurance Co. v. Getz, 622 F.2d 198

rr neee

Norfolk Monument Co. v. Woodlawn Memorial

Gardens, Inc., 394 U.S. 700 (1969) ................

Pevely Dairy Co. v. United States, 178 F.2d 363 (8th

ccc

PPP. aie ;

Reading Industries, Inc. v. Kennecott Copper Co., 477

F.Supp. 1150 (S.D.N.Y. 1979) af d on other grounds,

631 F. 2d 10 (2d Cir. 1980), cert. denied, 49 U.S.L.W.

r e

Spectrum Financial Companies v. Marconsult, Inc. 608

re eee eee

Tose v. First Pennsylvania Bank, 1981-1 Trade Cases

United Mine Workers of America v. ear a

ff Feary eee

5, 7, 8, 9-10,

11, 13

26-27

PAGE(S)

United States v. Barnes, 604 F.2d 121 (2nd Cir. 1979),

cert, denied, 446 U.S. 907 (1980))0ĩ˖ãiñ·fꝗi

United States v. Brown, 605 F. 2d 389 (8th Cir. 1979)

United States v. Burkeen, 350 F.2d 261 (6th Cir. 1965)

United States v. Bycer, 593 F.2d 549 (3rd Cir. 1979) ..

United States v. Conti, 339 F.2d 10 (6th Cir. 1964) ..

United States v. Dennis, 625 F.2d 782 (8th Cir. 1980)

United States v. Diebold, Inc., 369 U.S. 654 (1962) ....

United States v. Finis P. Ernest, Inc., 509 F.2d 1256

eee eee

United States v. Houde, 596 F. 2d 696 (5th Cir. 1979)

United States v. Page, 580 F.2d 916 (7th Cir. 1978)

United States v. Patterson, 644 F. 2d 890 (Ist Cir. 1981)

United States v Satrang, 621 F.2d 930 (8th Cir. 1980)

United States v. Socony-Vacuum Oil Co., 310 U.S. 150

/ es ceases eee

United States v Taylor, 599 F. 2d 832 (8th Cir. 1979)

Wahl v. Rexnord, Inc., 624 F. 2d 1169 (3rd Cir. 1980)

Wall Products Co. v. National Gypsum Co., 326 F.Supp.

e e eee ee

Webb v. Utah Tour Brokers Association, 568 F. 2d 670

eee eee eee eee

Weisberg v. United States Dept. of Justice, 627 F. 2d

Williams v. Borden, Inc., 637 F. 2d 731 (10th Cir. 1980)

Statutes and Rules

Sherman Act, 15 U.S.C. § 1 (1980)jꝓ7nſ;: 000s

Clayton Act, 15 U.S.C. 5 15 (1980)))0U0U!U!U . „

PAGE(s)

ER GE dno So can nevasséabdeeebeeldnes 2, 6, 14, 15,

16, 17, 19, 29

e ̃ i Onin sou ction gets catedooees 2, 14, 19,

23, 27, 30

Other Authorities

Dee . buhecseesoesees 14, 29, 30

II Areeda & Turner, Antitrust Law, Sec. 404bl, p. 274

„„

Be DGGE „„ „„de 15

Notes of Advisory Committee on Proposed Rules, Rule

403, Title 28, U. S. C., Rule 40oh0)0)Q i

No. 81-

IN THE

Supreme Court of the Anited States

Ocroser TERM, 1981

JACK WEIT, JAMES B. COX, and ROBERT W.

McLALLEN, on behalf of themselves and all others

similarly situated,

Petitioners,

CONTINENTAL ILLINOIS NATIONAL BANK AND

TRUST COMPANY OF CHICAGO, HARRIS TRUST

AND SAVINGS BANK, PULLMAN BANK AND

TRUST COMPANY, CENTRAL NATIONAL BANK

IN CHICAGO AND AMERICAN NATIONAL BANK &

TRUST COMPANY OF CHICAGO,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Seventh Circuit is reported at 641 F.2d 457 (1981)

(Fairchild, Chief Judge, dissenting). (Appendix A.) The

relevant opinions of the United States District Court for

the Northern District of Illinois, Eastern Division, are re-

ported at 467 F.Supp. 197 (1978) (Appendix B.) and 478

F.Supp. 285 (1979). (Appendix C.)

JURISDICTION

The judgment of the Court of Appeals was entered on

February 11, 1981. The decision of the Court of Appeals

denying plaintiffs’ timely petition for rehearing with sug-

gestion for rehearing en banc was entered on April 13, 1981

and is unreported. (Appendix A-54.) The jurisdiction of

this Court is invoked pursuant to 28 U.S.C. 5 1254 (1).

STATUTES AND RULES INVOLVED

Section 1 of the Sherman Act, 15 U.S.C. 41; Section 4

of the Clayton Act, 15 U.S.C. § 15; Rule 403 of the Federal

Rules of Evidence and Rule. 56 of the Federal Rules of

Civil Procedure are set forth in Appendix F hereto.

STATEMENT OF THE CASE

A. General Background

The named plaintiffs in this class action antitrust suit

were holders of Mastercharge bank credit cards. They filed

this case in August, 1970, alleging violations of Section 1

of the Sherman Act, 15 U.S.C. Sec. 1. Jurisdiction was

predicated on 15 U.S.C. §15 and 28 U.S.C. 5 1337. The

complaint, as amended, alleged that the defendant com-

petitor banks conspired to issue their bank credit cards at

a uniform and artificiaily fixed interest rate. Plaintiffs

also alleged that the defendants used a manipulative inter-

change organization, the Midwest Bank Card System, Inc.

(“Midwest”), and then, the Interbank Card Association,

Inc. (“Interbank”) to further prevent an outbreak of com-

petition in bank credit cards, particularly in the area of

interest rates.

The plaintiffs are members of the class of card holders

issued cards by the defendant banks who had a balance in

their accounts during the month of August, 1970. Following

class certification under Rule 23 of the Federal Rules of

Civil Procedure, extensive discovery identified over 350,000

class members. Plaintiffs individually notified class mem-

bers by first class mail in October, 1977.

B. Summary of Facts

The factual background of this case is not disputed and

is fully described in the majority and minority opinions

below. See Appendix A-5 through A-11 and A-30 through

A441.

In summary, the plaintiffs’ evidence shows (a) uniform-

ity of price for bank card credit extended by the defendants

in an oligopolistic market for a period exceeding 14 years

(Appendix A-31, A-40.); (b) discussion of the interest rate

to be charged by the defendants prior to the formation of

their jointly controlled organization (Appendix A-34-35.) ;

all differences in their credit card operations (Appendix

A-38.); (d) joint lobbying activity by the defendants to

support their uniform rate (Appendix A-10, A-39.); and

(e) numerous opportunities over a period of years for rate

discussions between the defendants. (Appendix A-32.)

Plaintiffs also submitted the uncontroverted affidavit of an

economic expert which stated that “conscious cooperation”

among the defendants was the likely cause of the long-term

uniform pricing. (Appendix A-9.)

The defendants’ only evidence is represented by legal con-

clusions in sworn statements denying that they ever com-

bined or conspired to fix the price of bank card credit.

In support of these conclusions, the defendants each swore

that they had arrived at the uniform rate independently.

©. Proceedings in the District Court

Since August, 1970, plaintiffs have successfully resisted

namerous procedural and substantive attacks mounted by

the defendants, as illustrated by the following significant

events:

October 29, 1970: The defendants moved for summary

judgment on the issue of standing. The defendants with-

drew their motions for summary judgment on June 9, 1971.

January 29, 1974: Defendant American moved for sum-

mary judgment. On Juue 10, 1974, Judge McMillen denied

that motion, finding (Appendix D attached hereto, at D-2):

“This case at bar is distinguished from First National

Bank of Arizona v. Cities Service Co., 391 U.S. 253

(1968) where plaintiff was left with nothing more than

evidence of conscious parallelism, and defendant re-

butted the inferences from this circumstantial evidence

with a logical and persuasive defense. Furthermore,

the Cities Service decision is almost sui generis, and

we find and conclude that the inferences in the case at

bar are for the jury.” (Emphasis supplied.)

March 24, 1976: Defendant Pullman moved for summary

judgment. On July 14, 1976, Judge McMillen granted the

motion of defendant Pullman for summary judgment on

Counts V and VI of the Third Amended Complaint and

denied it with respect to Counts I through IV. Judge

MeMillen held (Appendix E attached hereto, at E-2):

“On the merits, we find that genuine issues of material

fact exist on Counts I through IV of the Third Amended

Complaint. Although the defendant’s affidavit cate-

gorically denies any acts which would give rise to

liability against it on these counts, the record is replete

with evidence of meetings and communications between

this defendant and the other defendants during the

defendants’ credit card operation. Cee, for example,

plaintiff’s Exhibits 6, 8, 71, 73, 8, 107, 111, 149 and 166,

Perkins Deposition, p. 30, Miller Deposition pp. 94-5,

Martindale Deposition, p. 87.” (Emphasis supplied.)

Following these two couit de~isions holding that genuine

issues of material fact existed, the defendant banks again

weoved for summary judgment before a different district

judge, Judge Leighton. to whom the cas: had been re

assigned. They finally succeeded. In two separate opinions,

Judge Leighton entered summary judgment for all de-

fendants and dismissed the case. (Appendices B & C.)

D. Proceedings in the Circuit Court of Appeals

On February 11, 1981, the Seventh Circuit affirmed the

entry of summary judgment for the defendants by a 2-1

panel vote, with Chief Judge Fairchild dissenting. On April

13, 1981, plaintiffs’ petition for rehearing with suggestion

of rehearing en banc was denied. (Appendix A-54.)

REASONS FOR GRANTING THE WRIT

This case raises important substantive and procedural

issues which, if allowed to stand, would constitute a signifi-

cant erosion of the constitutional right to trial by jury in

price-fixing conspiracy cases. The majority and district

court opinious below ignored the critical significance of

uniform pricing evidence in a price-fixing case, contrary to

Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939)

and in conflict with Am ooł Enterprises, Inc. v. Time Inc.,

612 F.2d 604 (2d Cir. 879), cert. dismissed, 101 S.Ct. 35

(1980), by resorting te a misguided application of First Na-

tional Bank of Arizona v. Cities Service Co., 391 U.S. 253

(1968), a refusal-to-deal case. Such rullification of the most

important evidence in a price-fixing case menaces both

civil and criminal antitrust enforcement.

Other significant errors committed in this case com-

pound the potential threat to jury trials n complex

cases. The Court of Appeals, for example, improperly

seized upon Rule 403 of the Federal Rules of Evidence to

exclude concededly relevant evidence from its consideration

on the basis of anticipated jury prejudice at trial. This

Court has never sanctioned such a rianeuver. The divided

Court of Appeals not only condoned the triai court’s errors,

but it contributed an additional error by resurrecting an

unsound circuit court opinion dealing with the role of cir-

cumstantial evidence in criminal jury instructions. The

opinion relied on was not even cited by the defendants

in this action and has not been the law since it was dis-

credited by this Court in 1954 ir. Holland v. United States,

348 U.S. 121. Finally, contrary to the previous admonitions

of this Court in Poller v. Columbia Broadcasting System,

368 U.S. 474 (1962) and United States v. Diebold, Inc., 369

U.S. 654 (1962) and in conflict with the decisions of all the

circuit courts of appeal, the courts below failed to consider

all of tue evidence offered in opposition to the summary

judgment motions and failed to draw inferences from the

evidence in a lighi most favorable to plaintiffs. If left intact,

these errors portend significant problems for the future

administration of federal pretrial procedure.

To overturn and correct these serious errors perpetrated

in the proceedings below, and to obtain the jury trial to

which they are entitled, petitioners now seek the aid of

this Court.

I. The Decision Below, in Formulating a Novel and Ilegiti-

mate Standard for Reviewing Summary Judgments in

Price-fixing Conspiracy Cases that Eliminates the Proba-

ee is in Direct Conflict with

a Controlling Decision of this Court and with Decisions

of Other Circuit Courts of Appeal.

In formulating its antitrust analysis in this price-fixing

case, the Court below misapplied First National Bank of

Arizona v. Cities Service Co., 391 U.S. 253 (1968), a

refusal-to-deal case. As a result, the court transformed

the Cities Service decision into a rigid rule of an titrust law

which effectively overrules Interstate Circuit v. United

States, 306 U.S. 208 (1939). It is therefore necessary for

this Court to set forth again the doctrine to be applied

in antitrust cases involving parallel price behavior in the

context of summary judgment motions.

The novel and illegitimate doctrine applied in this case

originated in the District Court. The court held that the

probative value of the defendants’ parallel pricing be-

havior was eliminated by the defendants’ conclusory sworn

denials, and that “the burden then shifts to the plaintiffs

to come forward with significant probative evidence tend-

ing to support the complaint, to show that the rate set was

counter to defendants’ interest and accompanied by a

motive to enter into an agreement [or] to demonstrate a

‘plus factor’.” 467 F.Supp. at 211 (App. B-31, 32). (Empha-

sis supplied.) Judge Leighton concluded:

“The showing of parallel behavior under these cir-

cumstances, where each bank faced identical problems

of fraud, credit losses and large initial expense to

which reasonable businessmen would react in the same

fashion, does not provide a basis for the inference of

the conspiracy which plaintiffs allege.” 467 F.Supp.

at 210-211 (App. B-31). (Emphasis supplied.)

The majority of the Court of Appeals sanctioned this

analysis.“ 641 F.2d at 462 (App. A-13).

This disregard of price uniformity in a price-fixing con-

spiracy case not only destroys the very essence of such a

case when it is based primarily upon circumstantial evi-

The courts below thus required of plaintiffs a logical impossibility:

proof that a price-fix is contrary to the economic interests of the

price-fixers.

dence, but it also was clearly reversible error in light of

Interstate Circuit.

In Interstate Circuit, the collective pricing action of the

defendants was held to be sufficient circumstantial evidence

of conspiracy: “Each was aware that all were in active

competition and that without substantially unanimous ac-

tion with respect to the restrictions for any given territory

there was risk of a substantial loss of the business and good

will of the subsequent-run and independent exhibitors,

but that with it there was the prospect of increased prof-

its. There was, therefore, strong motive for concerted

action. 306 U.S. at 222. (Emphasis supplied.)

Although the Court mentioned that it was open to the

defendants in such a case to present evidence that their

actions actually arose from independent motives, there is

no hint that such evidence would be anything but contrary

evidence to be weighed by a jury. The inferences from uni-

form action in a price fixing case remain available to the

plaintiff and, like other circumstantial evidence, should

be weighed by the jury together with all the other evidence

in the case.

In Cities Service, this Court observed that evidence of

the defendants’ parallel refusal to deal with plaintiff did

not by itself support an inference of conspiracy. Manifestly,

this Court was not attempting to fashion a rigid rule for all

antitrust cases, whereby conclusory affidavits asserting in-

dependent business reasons automatically nullify eig eum-

stantial evidence of parallel business behavior. To the con-

trary, this Court carefully distinguished Interstate Circuit:

“The reason that the absence of direct evidence of

agreement in Interstate Circuit was not fatal is that

the distributors all had the same motive to enter into

a tacit agreement.” 391 U.S. at 287.

Contrasting the refusal to deal situation under considera-

tion in Cities Service, this Court stated:

“Here Waldron is unable to point to any benefits to

be obtained by Cities from refusing to deal with him

and, therefore, the inference of conspiracy sought to be

drawn from Cities’ ‘parallel refusal to deal’ does not

logically follow.” Id.

This Court, therefore, explicity recognized that evidence of

uniform pricing is clearer and more probative evidence of

a conspiracy than is evidence of parallel refusals-to-deal,

for good reason.

Proof of an antitrust conspiracy, like any conspiracy,

often depends on circumstantial evidence. Some circum-

stantial evidence of conspiracy is inherently stronger than

other circumstantial evidence. If a number of suppliers

refuse to deal with a potential customer, each may have

ood reasons for not doing so. When these reasons are

placed on the record, it may be difficult, without more, to

infer a conspiracy from the refusals-to-deal. This common-

sense evaluation of one limited type of circumstantial evi-

dence in refusal-to-deal cases is the rationale of Cities

Service and other cases relied on below such as Modern

Home Institute, Inc. v. Hartford Accident & Indemnity Co.,

513 F.2d 102 (2d Cir. 1975). See, Weit, 641 F.2d at 462,

464 (App. A-13, 18); 478 F.Supp. at 294 (App. C-22) ; 467

F.Supp. at 208, 209 (App. B-26, 27).

Circumstantial evidence of uniform pricing by oligopo-

lists stands on a different footing. Such evidence can sap-

port an inference of antitrust conspiracy because (1) the

adherence of all parties is necessary for maintenance of

the price, and (2) the arrangement, by keeping profits

higher than would otherwise prevail, is in the economic

self-interest of the parties. Interstate Circuit, Inc. v. United

States, 306 U.S. 208 (1939). Sworn denials of an agreement

do not destroy the logic of this rightful inference.*

These principles were applied recently by the Court of

Appeals for the Second Circuit in Ambook Enterprises v.

Time Inc., 612 F.2d 604 (2nd Cir. 1979), cert. dismissed,

101 S.Ct. 35 (1980). Ambook stands in stark contrast

to the opinions of the courts below in this case. The

plaintiff there, who advertised in newspapers and maga-

zines, complained of the uniform pricing policy of certain

publications which allowed a 15% discount only when adver-

tising was placed through an advertising agency. As in the

case at bar, the defendants submitted evidence denying the

existence of a conspiracy and the district court granted

summary judgment. The court of appeals for the Second

Circuit reversed, holding, in direct conflict with the opinion

in this case, that the fact that “agency ‘commissions’ remain

a uniform 15%” was sufficient evidence to support the com-

plaint against a motion for summary judgment. 612 F.2d

at 613.°°

The court in Ambook relied upon Interstate Circuit as

“the leading case for the proposition that an agreement can

be inferred from commonality of the conduct.” Id. Pointing

* If such sworn denials are allowed to stand as an absolute bar to

price-fixing cases based on circumstantial evidence, including par-

allel pricing, the only price-fixing cases which will survive are

those based upon direct evidence or sworn admissions. As Chief

Judge Fairchild noted, In]o conspirator today is going to

pwblicly agree to joint action, nor are they going to leave a

written record of their agreement.” 641 F.2d at 479 (App. A-51).

It should be noted that Ambook was a 2-1 decision, with the

majority reaching the same legal conclusions and based primarily

upon the same legal reasoning as found in the dissent in this case.

Conversely, the dissent in Ambook is very similar in reasoning to

the majority in this case.

out that Interstate Circuit found adequate evidence of a

conspiracy despite a lack of evidence of express agreement,

the court noted: “In the instant case, a conspiracy among

the media could be similarly inferred.” 612 F.2d at 614. The

court stressed the fact that the uniform pricing clearly re-

dounded to the economic benefit of the conspirators. The

15% system also benefited the agencies by the peace and

quiet of a uniform pricing policy. ... These advantages de-

pended, as in Interstate Circuit, upon substantially uniform

acceptance.” 612 F. 2d at 616. Stressing the strength of the

inferences which can be drawn in a uniform pricing situa-

tion, as compared with a refusal to deal case, the court stated,

“In the Cities Service case, the court indicated that one

factor to consider in determining if agreement should be

inferred from parallel conduct was whether agreement

benefited the alleged conspirators as the practice in Inter-

state Circuit clearly had.” 612 F.2d at 616.

In addition to Ambook, there are many authorities which

hold that in the uniform pricing situation, conscious paral-

lelism can be strong circumstantial evidence of conspiracy.“

As the issue was framed by the court in Reading Indus-

tries, Inc. v. Kennecott Copper Co., 477 F.Supp. 1150

(S. D. N. V. 1979), aff'd on other grounds, 631 F.2d 10 (2d

Cir. 1980), cert. denied, 49 U.S.L.W. 3911 (1981):

“(T]he question is not whether the defendants had legit-

imate reasons for their action, but whether they acted

* See, Cackling Acres, Inc. v. Olson Farms, Inc., 541 F.2d 242 (10th

Cir. 1976), cert. denied, 429 U.S. 1122 (1977); Morrison v. Nissan

Motor Co., 601 F.2d 139 (4th Cir. 1979); Wall Products

Company v. National Gypsum Co., 326 F.Supp. 295 (N.D. Cal.

1971); C-O-Two Pire Equipment Co. v. United States, 197 F.2d

489 (9th Cir. 1952), cert. denied, 344 U.S. 892 (1952); Bray v.

Safeway Stores, Inc., 392 F.Supp. 851 (N.D. Cal. 1975).

im concert, and here the legitimate business reasons

which the defendants suggest motivated their actions

do not defeat the possibility that the defendants acted

collusively. .. . That each of the defendants had inde-

pendent motives for holding the price of copper down

does not negate the possibility that they acted together

to effect them.” 477 F.Supp. at 1156-1157. (Emphasis

supplied.)

Chief Judge Fairchild’s dissent recognized this funda-

mental precept, but the majority of the panel, which sanc-

tioned the analysis of the lower court, did not. In response

to plaintiffs’ economic arguments and their urging that

the inference to be drawn from parallel pricing is stronger

than the inference to be drawn from parallel refusals-to-

deal, the court merely stated that both price-fixing and

boycotts are per se Section 1 violations, and that “There

is no basis for altering the standard for summary judg-

ment to conform to a lesser quantum of evidence in either

ease.” 641 F.2d at 465 (App. A-19).

The erroneous doctrine of this case is proliferating and

has been relied upon for the summary disposition of other

price-fixing cases. In Tose v. First Pennsylvania Bank,

1981-1 Trade Cases { 63,985 (3rd Cir. 1981), where the

defendants obtained summary judgment on the allegations

of a price-fixing conspiracy, the court discounted the exist-

ence of price uniformity and cited the language of the

majority opinion in this case that “parallel pricing or con-

duct lacks probative significance when the product in ques-

tion is standardized or fungible . . .” (Jd. at page 76, 124).

(Emphasis supplied.)* One of the district court opinions

in this case was relied on in granting summary judgment

in In re Folding Carton Antitrust Litigation, 1980-2 Trade

Cases f 63,460 (N. D. III. 1980). There, the plaintiff was re-

quired to show, in a price-fixing case, (1) acts by de-

fendants in contradiction of their own economic interests

and (2) satisfactory demonstration of a motivation to enter

an agreement.” (Id. at page 76, 430). (Emphasis supplied.)

This trend can only be expected to continue as hard-

pressed district judges seek ways to relieve their congested

dockets. The cumulative effect of such a trend condones

the per se illegality of tampering with price, which Justice

Stevens noted in National Society of Professional Engineers

v. United States, 435 U.S. 679, 692 (1978), is the “central

nervous system of the economy,” citing United States v.

Socony-Vacuum Oil Co., 310 U.S. 150 (1940).““

The fundamental defect in the reasoning of the district

judge and majority opinion below is their complete failure

to recognize that this is not a refusal-to-deal case. The

plaintiffs are not required to prove actions by the defend-

ants against their economic self interest, because that is

not an issue in a price-fixing case. The circumstantial evi-

dence of uniform pricing, along with the mass of other

evidence adduced, entitles the plaintiffs to go to the jury.

Under Interstate Circuit and other cases, mere self-serving

protestations of innocence by the defendants’ officers can-

„ Such an unjustified variance from normal antitrust rules was

rejected in Beatrice Foods Uo. v. United States, 312 F.2d 29 (8th

Cir. 1963). In an opinion authored by then Judge Blackmun, the

court relied on Interstate Circuit (312 F.2d at 45) in affirming

a criminal conviction of price-fixing that involved the “highly

standardized commodity” of fluid milk. 312 F. 2d at 42.

This Court recently re-affirmed the per se illegality of any agree-

ment touching upon price. Catalano, Inc. v. Target Sales, Inc.

446 U.S. 643 (1980).

not defeat plaintiffs’ Seventh Amendment right to a jury

trial. The danger to enforcement of the antitrust laws posed

by the misapplication of Cities Service must be halted by

this Court.

II. The Court Below, in Using Rule 403 of the Federal

Rules of Evidence to Exclude Highly Probative Evi-

dence in Opposition to Opposing Defendants’ Summary

Judgment Motions, has Incorrectly Decided an Im-

portant of Federal Law Which has not Been,

but Should be Settled by This Court.

The only evidence in this case which the defendants did

not attempt to explain by “reasonable” business motives

was their joint lobbying for a common interest rate. This

joint effort culminated in the enactment of an [Illinois

statute establishing the maximum lawful cardholder inter-

est rate on revolving credit at 18% per annum. 641 F.2d

at 460-461 (App. A-9, 10); 473-474 (App. A-38, 39). Prior

to the statute, different interest rate maxima applied to the

different defendants. The majority below agreed with the

dissent that “an inference can be drawn that the banks

would not have worked together in lobbying for passage of

a bill in the legislature unless they had implicitly agreed on

an interest rate as well.” 641 F.2d at 466 (App. A-22).

Nevertheless, the majority excluded this evidence from con-

sideration on the Rule 56 motions, without citation to any

ease supporting their view, because “confusion of issues

{by the jury] is the probable result of admission of this

evidence.” 641 F.2d at 467 (App. A-24). This novel holding

flies in the face of United Mine Workers of America v.

Pennington, 381 U.S. 657 (1965), and totally misapplies

Federal Rule of Evidence 403, a rule of trial practice.

This Court’s footnote 3 in Pennington is well known:

“Tt would of course still be within the province of the

trial judge to admit this evidence, if he deemed it

probative and not unduly prejudicial, under the ‘estab-

lished judicial rule of evidence that testimony of prior

or subsequent transactions, which for some reason are

barred from forming the basis for a suit, may never-

theless be introduced if it tends reasonably to show the

purpose and character of the particular transactions

under scrutiny. [Citations omitted.]” 381 U.S. at 670-

671. (Emphasis supplied.)

All members of the panel below recognized that plaintiffs

do not claim an independent antitrust violation based on

the joint lobbying effort. Plaintiffs argue that the evidence

proves the purpose and character of defendants’ uniform

setting of the 18% interest rate. Similar evidence has been

used elsewhere for exactly that purpose under this well-

recognized exception to the Noerr-Pennington rule. See,

e. g., Household Goods Carriers’ Bureau v. Terrell, 452

F.2d 152, 161 (5th Cir. 1971); Webb v. Utah Tour Brokers

Association, 568 F. 2d 670 (10th Cir. 1977). The majority

even concedes that an appropriate cautionary instruction

could be fashioned at trial to meet defendants’ Noerr-

Pennington concerns, 641 F.2d at 467 (App. A-24), and

such limiting instructions have been found reliable and

effective. See, United States v. Brown, 605 F.2d 389 (Sth

Cir. 1979). Yet the majority in this case employed a rule

designed solely to eliminate the prejudicial impact of evi-

dence on a sitting jury in the process of deciding a pretrial

motion.

This position is indefensible. Rule 403 is meant to exclude

evidence at trial which tends to horrify, evoke sympathy or

increase a desire to punish due to prior bad acts, and

whose probative value is slight. 10 Moore’s Federal Prac-

tice § 403.10[1], at IV-75 (2d Ed. 1979). Plaintiffs believe

and the courts below agreed that the evidence of defend-

ants’ lobbying efforts is none of these and is clearly rele-

vant. Given the propriety and importance of this evidence,

the use of Rule 403 to exclude it from consideration in

opposition to summary judgment motions was plain error.

The stated purpose of Rule 403 is to allow the trial

judge, during the pendency of the trial, to balance “the

probative value of and need for the evidence against the

harm likely to result from its admission.” Notes of Ad-

visory Committee on Proposed Rules, Rule 403, Title 28,

USCA, Rule 403. In addition, “in reaching a decision

whether to exclude on grounds of unfair prejudice, con-

sideration should be given to the probable effectiveness or

lack of effectiveness of a limiting instru ion.“ Id. Thus

the trial judge is given the discretion, in the context of a

trial sitzation, as to what relevant evidence is to be excluded

under the Rule.

Obviously, the trial judge in reaching this helene will

and must consider the actual trial situation when the ques-

tioned evidence is introduced. The many factors bearing on

such an analysis include the nature and extent of the evi-

dence previously admitted and the sophistication of the

particular jury hearing the evidence. The court could also.

consider the method by which the evidence was to be

offered, either by obtaining a written offer of proof or by

reviewing the evidence outside the presence of the jury,

as well as the proposed limiting instruction under which

it is offered. If the question is close in his mind, the bal-

ance is to be struck in favor of admission. United States

v. Dennis, 625 F.2d 782 (8th Cir. 1980). The purpose, there-

fore, of Rule 403 is counter to the purpose for which it was

used by the Court of Appeals. Sitting outside the trial situ-

ation and unable to determine the competency of a jury

not yet selected, the majority below used a rule of trial

evidence to defeat the protections of a rule of procedure.

The fallacy of the court’s reasoning regarding Rule 403 is

shown in the fact that it is possible, although not probable,

that no jury would ever be empanelled. The plaintiffs are

entitled to waive their right to a jury at any time before

trial. The implications for this use of Rule 403 are there-

fore obvious and frightening—future plaintiffs may be

compelled to forego their right to a jury trial in a complex

case in order to insure that all of their evidence will be

considered.

This case presents the most extreme application of Rule

403, since the excluded evidence impeached the defendants’

self-serving affidavits supporting their motions. The defend-

ants argued that they needed the maximum interest rate

allowable in order to offset expected losses at the beginning

of their credit card programs and the courts below accepted

that rationale. See Page 7, supra.

Totally undermining that argument, however, is one

critical fact that was unheeded below: there was no gen-

erally applicable “maximum rate” in 1966. It was only

achieved in Illinois in 1967 as a result of the joint lobbying

effort of the defendants. 641 F.2d at 471 (App. A-32), 473-

474 (App. A-38, 39).

The national banks, having given and received signals

that the cardholder interest rate should uniformly be fixed

at ‘he mythic legal “maximum,” obviously were concerned

lest their state bank competitors undercut them as a result

of their perception that the allowable state bank rate was

a 7% add-on.“ By the time the banks issued their cards in

the fall of 1966, after a summer of countless communica-

tions and legal doubts, they had all managed to arrive at

an identical decision to charge their cardholders interest

at the rate of 18%. It is remarkable that they reached

precisely the same rate—with no period of competitive ad-

justment—when proceeding from such disparate regulatory

matrices. The fact that they achieved absolute uniformity

itself is convincing circumstantial evidence of price fixing.

„ The District Court’s insistence that plaintiffs prove that the

defendants acted against their own self-interest in fixing interest

rates perhaps aided its exclusion of this critical evidence.

The defendants, still uncomfortable with the fragile sta-

bility of their price uniformity, jointly hired and paid for a

lobbyist through Midwest in January 1967. That lobbyist

was successful in procuring legislation that enabled the

state banks to charge the same interest rate as the national

banks, although the banks’ lobbyist thought the bill was

unnecessary for the national banks. 641 F.2d at 474 (App.

A-39). The early draft of the Midwest bill set the maximum

cardholder interest rate at 24%, but later drafts settled on

18%. Id. The fact that the banks moved together from a

proposed 24% rate to an 18% rate also is strong circum-

stantial evidence of a conspiracy.

Passage of the “clarifying” legislation reinforced the

price-fixing conspiracy and allowed all of the defendant

banks, both national and state, to enjoy the “peace and

quiet of a uniform pricing policy.” (See Ambook, Page

11, supra.) Viewed in this light, the evidence of joint lobby-

ing is critical to an explanation of the motives and goals

of the defendants. The joint lobbying efforts demonstrate

the nature and character of the defendants’ activity just as

clearly as does the candid statement of John Perkins of

Continental that the defendants should “keep a lid on any

fast moves” (Plaintiffs’ Exhibit 54), or the report of Con-

tinental that Pullman “has changed their package, and are

now offering basically what we are proposing.” 641 F.2d

at 473 (App. A-37).

The court’s refusal to consider the joint lobbying effort

as evidence of the defendants’ overall price fixing conspir-

acy also stands in direct contradiction to the rule in United

States v. Diebold, Inc., 369 U.S. 654 (1962). Had the court

correctly undertaken to determine the admissibility of this

competent, relevant evidence on defendants’ motion for

summary judgment, the Diebold rule required such evidence

vo be viewed in the light most favorable to the plaintiffs. All

questions posed by such balancing of evidence on a motion

for summery judgment under Rule 56 therefore should

have been resolved in favor of the plaintiffs. By resolv-

ing all questions of probative value and prejudicial im-

pact of the excluded lobbying evidence against the plain-

tiffs, the court once again ignored the basic principles

governing motions for summary judgment.

The reference of the majority at 641 F.2d at 467, note

38 (App. A-23), to American Securit Co. v. Hamilton Glass

Co., 254 F.2d 889 (7th Cir. 1958) does not support its deci-

sion. The issue there was the competency of affidavit and

deposition testimony in support of a summary judgment

motion. In addition, because it was unclear that the affiants

would have been competent witnesses at trial, the court re-

fused to rely on the evidence and reversed the granting of

summary judgment. The evidence excluded in American

Securit thus was excluded because its very validity was in

doubt.

As plaintiffs have shown here, on the other hand, there

is no question as to the competence of the excluded evi-

dence. It is also plain that any judgment as to its admiss-

ibility must be made in light of the precise trial context

when it is offered, as Rule 403 contemplates.

This Court has never instructed the federal judiciary on

the place of Rule 403 of the Federal Rules of Evidence,

if any, in considering summary judgment motions under

Rule 56 of the Federal Rules of Procedure. The time to

do so is now so that the constitutional right to a trial by

jury is never defeated by a judge’s abstract guess, while

reading papers in chambers, that highly probative evidence

might possibly have a prejudicial effect on a nonexistent

jury. The ruling of the court below on this issue alone

mandates reversal.

III. The Decision Below, in Holding That Plaintiffs’ Cir-

cumstantial Evidence of a Price-Fixing Conspiracy

Must Exclude Every Rational Inference Other Than

Guilt in Order to Defeat Defendants’ Summary Judg-

ment Motions, is in Direct Conflict With a

Decision of this Court and with Decisions of Other

Circuit Courts of Appeal.

The majority below attempts to justify its weighing of

the evidence by reviving the long-dormant special rule for

circumstantial evidence in criminal cases enunciated in

Pevely Dairy Co. v. United States, 178 F.2d 363 (8th Cir.

1949): “. . . when the plaintiff or prosecution relies on

circumstantial evidence alone, the inference of unlawful

agreement rather than individual business judgment must

be the compelling, if not exclusive, rational inference.” 641

F.2d at 463 (App. A-15). If this standard were to apply to

the disposition of summary judgment motions in circum-

stantial evidence cases, then Rule 56 is turned on its head,

and it is plaintiffs’ evidence which is subjected to “a criti-

cal eye” and the defendants who receive “every reasonable

inference in their favor.”

The test set forth in Pevely and similar cases, however,

was laid to rest by this Court in Holland v. United States,

348 U.S. 121, 139-140 (1954). This Court held that a special

jury instruction in a circumstantial evidence case, requiring

that such evidence “exclude every reasonable hypothesis

other than that of guilt,” was “confusing and incorrect.” In

words which should apply even more strongly to motions

for summary judgment in a civil case than to a trial in a

criminal case, this Court stated:

“Circumstantial evidence in this respect is intrinsi-

cally no different from testimonial evidence. Admitted-

ly, circumstantial evidence may in some cases point to a

wholly incorrect result. Yet this is equally true of testi-

monial evidence. In both instances, a jury is asked to

weigh the chances that the evidence correctly points

to guilt against the possibility of inaccuracy or am-

biguous inference. In both, the jury must use its expe-

rience with people and events in weighing the proba-

bilities. If the jury is convinced beyond a reasonable

doubt, we can require no more.” 348 U.S. at 140.

The fact that Holland discredited the special rule for

weighing evidence in circumstantial evidence cases is borne

out in numerous subsequent decisions. For instance, the

court in United States v. Conti, 339 F.2d 10, 12-13 (6th Cir.

1964) stated:

“Appellant’s contention that where the government

evidence is circumstantial, it must be such as to exclude

every reasonable hypothesis other than that of guilt,

has considerable support in the cases decided prior to

December 6, 1954. But, in Holland v. United States

. .. the Supreme Court stated that the better rule was

that where the jury is properly instructed on the stand-

ards for reasonable doubt, such an additional instruc-

tion on circumstantial evidence was confusing and

incorrect. Accordingly, this Court has ruled since that

date that it is not necessary that circumstantial evi-

dence be such as would remove every reasonable hy-

pothesis except that of guilt.”

Similarly, in United States v. Burkeen, 350 F.2d 261 (6th

Cir. 1965), where the defendant had urged the old cir-

cumstantial evidence rule, the court replied, “This is not

the law.” 350 F.2d at 264. The decisions of the Seventh

Circuit are in accord. United States v. Page, 580 F.2d 916,

919 (7th Cir. 1978) ; United States v. Finis P. Ernest, Inc.,

509 F.2d 1256, 1261 (7th Cir. 1975).

The Eighth Circuit itself, out of which Pevely arose, now

correctly applies this Court’s Holland decision. United

States v. Satrang, 621 F.2d 930, 931 (8th Cir. 1980); United

States v. Taylor, 599 F.2d 832, 838 (8th Cir. 1979). The

other circuits concur. See, e.g., United States v. Patterson,

644 F.2d 890, 893 (Ist Cir. 1981); United States v. Barnes,

604 F.2d 121, 156 (2nd Cir. 1979), cert. denied, 446 U.S. 907

(1980) ; United States v. Bycer, 593 F.2d 549, 551 (3rd Cir.

1979) ; United States v. Houde, 596 F.2d 696, 702 (5th Cir.

1979).

Holland and its progeny all involved criminal trials. If

circumstantial evidence is sufficient to convict a criminal

defendant in a jury trial, it certainly can support the denial

of a summary judgment motion in a civil case, particularly

in light of this Court’s admonition that inferences from the

evidence must be construed most favorably to the party

opposing the motion. United States v. Diebold, Inc., 369

U.S. 654 (1962). (See Pages 18-19, supra and 23, infra.)

Other than this case, not a single decision has been

found that rested a summary judgment decision upon the

Pevely treatment of circumstantial evidence. By resorting

to Pevely, a case not even cited by the defendants, the

majority resurrects a long-discredited rule that would

virtually eliminate jury trials in civil antitrust conspiracy

cases and hamper the use of circumstantial evidence in

criminal cases. This Court, exercising its ny au-

thority, must act to undo th’s result.

IV. The Decision Below, in Failing to Consider All of

Plaintiffs’ Evidence Opposing the Summary Judgment

Motions and in Failing to Draw Inferences from the

Evidence Most Favorably to Plaintiffs, is in Direct and

Fundamental Conflict with Controlling Decisions of

this Court and with Decisions of Other Circuit Courts

of Appeal.

This Court long ago articulated both the governing stand-

ard to be applied in deciding motions for summary judg-

ment under Rule 56 of the Federal Rules of Civil Procedure

and the reasons for erecting such a strict procedural safe-

guard. In Poller v. Columbia Broadcasting System, Inc., 368

U.S. 464 (1962), an antitrust case in which defendants ha

obtained summary judgment in the trial court, this Cour

reversed with the following warning:

“We believe that summary procedures should be used

sparingly in complex antitrust litigation where motive

and intent play leading roles, the proof is largely in

the hands of the alleged conspirators, and hostile wit-

nesses thicken the plot. It is only when the witnesses

are present and subject to cross-examination that their

credibility and the weight to be given their testimony

can be appraised. Trial by affidavit is no substitute

for trial by jury which so long has been the hallmark

of even handed justice.“ 368 U.S. at 473.

In the same year, this Court reversed another summary

judgment ruling in an antitrust case and announced un-

equivocally the proper treatment of competing inferences

from the same evidence on such a motion:

“On summary judgment the inferences to be drawn

from the underlying facts contained in [the affidavits,

attached exhibits and depositions submitted below]

must be viewed in the light most favorable to the

party opposing the motion.” Diebold, supra, at 655.

The Second Circuit applied the standard set forth by

this Court in the price-fixing antitrust context, based upon

parallel business behavior and circumstantial evidence, in

Ambook Enterprises v. Time Inc., 612 F.2d 604 (2d Cir.

1979), cert. dismissed 101 S. Ct. 35 (1980). In the majority

opinion, authored by Judge Friendly, the court held that:

“Summary judgment for the defendant can be sus-

tained in such a case if but only if the reviewing court

is satisfied that a properly instructed jury, giving full

weight to plaintiff’s evidence, drawing every reasonable

inference in its favor, and subjecting defendants’ evi-

dence to a critical eye, could not rationally have found

that plaintiff was entitled to any relief.” 612 F. 2d at

611 (Emphasis supplied.)

Decisions of other courts of appeals unanimously echoing

this fundamental concept of civil procedure are legion.*

The Seventh Circuit itself recently demanded that a rigor-

ous burden be met by the party moving for summary judg-

ment in Central National Life Insurance, Co. v. Fidelity and

Deposit Company of Maryland, 626 F.2d 537 (7th Cir.

1980).

Disregarding this long-standing authority, the majority

in this case considered only a portion of the evidence pre-

sented by the plaintiffs and then reviewed that evidence in

a light most favorable to the defendants. Such weighing

of the evidence on a pretrial motion, tantamount to a

trial im camera, once again must be condemned by this

Court.

* See, e.g., Maiorana v. MacDonald, 596 F.2d 1072, 1076 (Ist Cir.

1979); Wahl v. Rernord, Inc., 624 F.2d 1169, 1181 (3rd Cir.

1980) ; Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th

Cir. 1979); Kennett-Murray Corp. v. Bone, 622 F.2d 887, 892

(5th Cir. 1980); New Jersey Life Insurance Co. v. Getzs, 622

F.2d 198, 200 (6th Cir. 1980); Inland Oil & Transport Co. v.

United States, 600 F.2d 725, 728 (8th Cir. 1979); Spectrum

Financial Companies v. Marconsult, Inc., 608 F.2d 377, 380 (9th

Cir. 1979) ; Williams v. Borden, Inc., 637 F.2d 731, 738 (10th Cir.

1980); Weisberg v. United States Department of Justice, 627

2d 365, 368 (D.C. Cir. 1980).

A. The Decision Below Failed to Consider the Economic

Evidence Presented by Plaintiffs in Opposition to the

Summary Judgment Motions.

The majority decision in this case purportedly is pred-

icated on an independent review of the record, 641 F.2d

at 461, yet it is clear that the majority considered plain-

tiffs’ opposition evidence to consist solely of parallel in-

terest rates, “together with evidence that the opportunity

to conspire existed... 641 F.2d at 463 (App. A-12). Such

a view ignores the additional, and critical, economic evi-

dence presented by the plaintiffs which is analyzed at length

in the dissent.

For example, Chief Judge Fairchild concluded that:

“Another factor contributing to the evidence from

which an agreement to fix interest rates may rationally

be inferred is defendants’ express agreement to

standardize everything about their charge cards other

than marketing strategy and interest rates.” 641 F.2d

at 477 (App. A-45). (Emphasis supplied.)

As noted the dissent, plaintiffs’ expert witness testified

“that these uniform requirements were no more essential

to the compatability of the charge card system and the

interchange of sales slips than they are to the interchange

of checks.” Id. This artificial product standardization,

particularly in an oligopolistic market, is evidence highly

probative of a conspiracy. Reading Industries, Inc. v. Ken-

necott Copper Co., supra, at 1157; II Antitrust Law, Areeda

Turner, Section 404bl, p. 274 (1978).

The majority decision also failed to consider the evidence

introduced by plaintiffs of the defendants’ obvious economic

motive to conspire. The record is clear that the banks feared

the entry of any bank credit card at a lower rate than had

been planned because they would then have been forced to

market their cards at the lower rate as well. 641 F.2d at 471

(App. A-34).

This uncontradicted economic evidence—artificial product

standardization and clear motive to conspire—was not even

considered in the majority decision. Yet the economic evi-

dence is critical to plaintiffs’ claim and thoroughly con-

sistent with a finding of a price-fixing conspiracy. Evi-

dence of the economic context of the facts under analysis

is particularly crucial in an antitrust case. Judge

Fairchild concluded that the nature of the Chicago banking

community facilitated the exchange of pricing information

and that, “given the situation, defendants’ conduct should be

carefully scrutinized for evidence of conspiratorial be-

havior.” 641 F.2d at 471 (App. A-32). The majority opinion,

however, did not consider plaintiffs’ economic evidence, and

instead granted full and absolute credibility to defendants’

inherently suspect explanation of their business decisions

and their protestations of innocence. In fact, the economic

analysis of plaintiffs’ expert witness alone should have

served to deny the summary judgment motions. See, e.g.,

Bieghler v. Kleppe, 633 F.2d 531 (9th Cir. 1980); Contin-

ental Bank v. Wa-Ho Truck Brokerage, 122 Ariz. 414, 418,

595 P.2d 206, 210 (Ct. App. 1979).

The action of an appellate court in affirming the dismissal

of an antitrust case before trial, without consideration of

the economic evidence involved, should not be countenanced.

B. The Decision Below Failed to Draw Inferences from the

Evidence Most Favorably to Plaintiffs in Affirming the

Granting of Summary Judgment to Defendants.

As indicated above, the two complementary cases which

should have guided the Seventh Circuit in this case were

the 1962 decisions in Poller v. Columbia Broadcasting

System and United States v. Diebold, Inc., Page 23, supra.

In 1969 this Court again “cautioned” against the use of

summary judgment in complex antitrust litigation when it

reversed such a judgment in Norfolk Monument Co. v.

Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 704 (1969).

Yet the Court of Appeals in this case, like the District Court

before it, construed the evidence presented by plaintiffs

against them and in favor of the defendant banks. This

effort to turn Rule 56 upside down is a pernicious precedent

that must be reversed.

How far the majority below strayed from the proper

summary judgment standards is illustrated by its use of

the word “suggests.” For example, the court found that

the evidence suggested inferences for the defendants:

“While defendants were clearly concerned about a

chaotic credit card market, the record suggests their

concerns were not anti-competitive or conspiratorial.

Rather, they were legitimate business concerns.” 641

F.2d at 466 (App. A-21). (Emphasis supplied.)

The majority opinion below implicity concedes that far

different inferences can be drawn from the same evidence

in this case. The majority opinion tellingly comments as

follows on evidence relating to the defendant banks’ fear

of “chaos” in the Chicago credit card market:

“The dissent mistakenly construes defendants’ concern

about ‘chaos in the market’ as an admission of anti-

~— motive in forming the Midwest System.”

“The evidence suggests, however, that by chaos the

banks did not mean competition as to interest rates, but

a retail market in which a vast number of charge cards

emated.” 641 F.2d at 465 (App. A-20, 21). (Emphasis

supplied.)

It cannot be disputed that it is the role of the jury, and not

the judge, to decide which version of the evidence is more

credible and more persuasive. This fundamental concept

was ignored by the majority below. Their opinion fails

even to cite Diebold, this Court’s leading case on drawing

inferences in antitrust summary judgment cases, much less

rationalize their failure to follow its mandate.

The evaluation of the evidence in the court’s opinion is

heavily influenced by a candidly expressed goal of judicial

economy and relief of jurors. The following sentiments

clearly set the tone for the majority’s decision:

“A trial of this nature places a substantial burden on

jurors who are seldom prepared to analyze the com-

plexities of antitrust claims.” 641 F.2d at 464 (App.

A-17).

“(W]e ... conclude that further proceedings in this

case would result in a waste of judicial time and re-

sources.” 641 F. 2d at 461 (App. A-12).

“When a District Court . . has had an opportunity

to review the evidence and concludes that no reason-

able jury would return a verdict for plaintiffs, judicial

economy mandates that summary judgment be entered.”

641 F.2d at 464 (App. A-18). (Emphasis supplied.)

It is one thing to toss out truly frivolous lawsuits with

an eye to judicial economy and limited resources. It is

quite another, however, to allow such considerations

to overrule a jury determination of legitimate and well-

documented, albeit circumstantial, evidence of price-fixing.

That the plaintiffs had amassed sufficient circumstantial

evidence of a price-fixing conspiracy is reflected by the

decisions of two of the judges below in these proceedings.

Judge Fairchild analyzed the evidence and concluded that

plaintiffs should be given a chance to present their case

to a jury because they had “presented evidence from which

an agreement to fix prices may rationally be inferred .. .”

641 F.2d at 480 (App. A-52). Similarly, Judge McMillen of

the District Court, who twice found triable issues of fact,

clearly focused on the sharp disagreement between the

parties as to the inferences to be drawn from the evidence,

and ruled that. . . the issue of credibility implicit in the

plaintiffs’ evidence cannot be resolved on a motion for

summary judgment... (App. E-2).

The action taken by the trial court in this case, and con-

doned by the Circuit Court, was presaged in a comment

made by Justice Black in his dissent in Cities Service,

supra, at p. 304:

“The plain fact is that this case illustrates that the

summary judgment technique tempts judges to take

over the jury trial of cases, thus depriving parties of

their constitutional right to trial by jury.”

The decision below simply disregarded the controlling

decisions of this Court and other courts of appeals when

it affirmed the granting of summary judgment to the de-

fendants. If judges step into the jury box and decide factual

disputes themselves, particularly when part of the reason

for doing so is the potential burden on jurors, then the

Seventh Amendment guarantee of the right to trial by jury

is rendered meaningless. Such action cannot remain un-

checked for the sake of the more than 350,000 class members

in this case and for the sake of all litigants hereafter faced

with a summary judgment challenge.

CONCLUSION

The court below required plaintiffs to prove a logical

impossibility: that price-fixing is contrary to the economic

interest of the price-fixers. The Court of Appeals opinion

eliminates absolutely critical evidence of uniform pricing

through an inversion of the rule of Cities Service. Thus,

this Court’s ruling in Interstate Circuit, Inc. v. United

States goes unheeded, and the Seventh Circuit places itself

in direct conflict with the Second Circuit in Ambook Enter-

prises, Inc.

The opinion below sanctions the use of Federal Rule of

Evidence 403 to prevent jury trials in complex cases by

weighing the potential prejudicial effect of relevant evi-

dence on a non-existent jury.

The Seventh Circuit also resurrected Peveley Dairy Co.

v. United States in disregard of law established by this

Court and followed by other circuits.

Finally, the court below reversed the presumptions ap-

plicable to Rule 56 cases and drew every inference in favor

of the moving parties. The decision is in derogation of the

Seventh Amendment and circumvents United States v.

Diebold, Inc. and Poller v. Columbia Broadcasting System,

Inc. and is in clear conflict with settled precedent in every

other circuit.

In approving such a gross deviation from long-standing

procedural and substantive principles, the decision not only

threatens the effectiveness of civil and criminal antitrust

enforcement, but it also raises serious implications gen-

erally for the role of circumstantial evidence in the litiga-

tion of cases in all other areas of the law.

For all of the foregoing reasons, the petition for a writ

of certiorari should be granted with respect to each of the

four questions on which it is sought.

Respectfully submitted,

Frankun J. Lunpine, Jr. Dennis C. WaLpon

Biecam, Cowan, Marquarpr Wutuiam T. Huyck

& Luxx Wii R. Wax OCR

180 North LaSalle Street Roan & Grossman

Chicago, Illinois 60601 55 West Monroe Street

(Counsel of Record Chicago, IIlinois 60603

for Petitioners) James E. Beckuey

135 S. LaSalle Street

Chicago, Illinois 60603

July 10, 1981

APPENDIX

TABLE OF CONTENTS

PAGE

Appendix A—Opinion of the Court of Appeals for the

Seventh Circuit and Dissenting Opinion

—641 F. 2d 467 (7th Cir. 1981) ......... A-l

Order of the Court of Appeals for the

Seventh Circuit Denying Petition for

Rehearing with Suggestion for Rehear-

eee eee eee eee 4-54

Appendix B— Opinion of the District Court for the

Northern District of IIlinois—467 F.

Supp. 197 (N.D. Ill. 1978) ............ B-1

Appendix C—Opinion of the District Court for the

Northern District of Dlinois—478 F.

Supp. 285 (N.D. III. 1979) ............ C-1

Appendix D—Order of the District Court for the

Northern District of Illinois (June 14,

FFS D. 1

Appendix E— Order of the District Court for the

Northern District of Illinois (July 15,

eee eee E-1

Appendix F—Statutes and Rules Involved:

Sherman Act, §1, 15 U.S.C. 5111 F.1

Clayton Act, §4, 15 U.S.C. §15 .... F-l

Rule 403, Federal Rules of Evidence. F-1

Rule 56, Federal Rules of Civil Pro-

eee F-1

APPENDIX A

Jack WEIT et al., Plaintiffs-Appellants,

CONTINENTAL ILLINOIS NATIONAL BANK AND

TRUST COMPANY OF CHICAGO et al., Defendants-

Appellees.

Nos. 79-1077 & 79-2113.

United States Court of Appeals,

Seventh Circuit.

Class action was brought by bank charge card holders

alleging, inter alia, that five banks conspired to fix rate of

interest charged for extended payment privileges on credit

ecard purchases. Motions for summary judgment were

granted as to certain defendants, D.C., 467 F.Supp. 197.

Subsequently, the United States District Court for the

Northern District of Illinois, George N. Leighton, J., ren-

dered summary judgment as to the remaining issues and

defendants, and plaintiffs appealed. The Court of Appeals,

William J. Campbell, Senior District Judge, sitting by

designation, held that although evidence established parallel

business behavior with regard to setting of interest rates

and discount fees in conjunction with issuance of bank

credit cards and established an opportunity to conspire,

plaintiffs, despite eight years of discovery, failed to produce

any significant probative evidence to support their claims

of antitrust violations by five Chicago banks; thus, district

A-2

court properly entered summary judgment in favor of banks

on claims of horizontal and vertical conspiracies.

Affirmed.

Fairchild. Chief Judge, filed dissenting opinion.

1. Federal Civil Procedure—2544

Monopolies—28 (7.5)

Parallel business behavior is the type of circumstantial

evidence which, absent more direct evidence, will be relied

on in inferring unlawful agreement; however, when defend-

ants come forward with denial sufficient to shift burden

under summary judgment rule, plaintiffs must come for-

ward with some significant probative evidence which sug-

gests that conscious parallelism is result of an unlawful

agreement. Fed. Rules Civ.Proc. Rule 56 (e), 28 U.S.C.A.

2. Monopolies—28(7.5)

Mere opportunity to conspire, even in context of parallel

business conduct, is not necessarily probative evidence of

an unlawful conspiracy. Sherman Anti-Trust Act, 56 1, 2,

15 U.S. C. A. 66 1, 2.

3. Federal Civil Procedure 2543

When piaintiff or prosecution relies on circumstantial

evidence alone, the inference of unlawful agreement rather

than individual business judgment must be compelling, if

not exclusive, rational inference in order to require a trial

on tle merits. Sherman Anti-Trust Act, 56 1, 2, 15 U.S.C.A.

56 1, 2; Fed. Rules Civ. Proc. Rule 56, 28 U.S. C. A.

4. Federal Civil Procedure 2546

If district court, on eve of trial, concludes that extensive

and complete discovery has produced no evidence to support

A-3

the complaint, summary judgment should be entered. Fed.

Rules Civ. Proc. Rule 56, 28 U.S.C.A.

5. Federal Civil Procedure 2546

Although evidence established parallel business behavior

with regard to setting of interest rates and discount fees in

conjunction with issuance of bank credit cards and estab-

lished an opportunity to conspire, plaintiffs, despite eight

years of discovery, failed to produce any significant proba-

tive evidence to support their claims of antitrust violations

by five Chicago banks; thus, district court properly entered

summary judgment in favor of banks on claims of horizon-

tal and vertical conspiracies. Sherman Anti-Trust Act, §§ 1,

2, 15 U.S.C.A. 56 1, 2; Fed. Rules Civ. Proc. Rule 56, 28

U.S. C. A.

6. Evidence 146

District court, in ruling on banks’ motion for summary

judgment on plaintiffs’ claims of antitrust violations with

regard to setting of interest rates and discount fees in

conjunction with issuance of bank credit cards, properly

refused to consider evidence of banks’ lobbying activities,

which resulted in legislation increasing interest rates for

reason that confusion of issues would have been the prob-

able result of admission of such evidence.

7. Monopolies—28(1.6)

In order to have standing to maintain private action for

treble damages in an antitrust case, a plaintiff must have

been injured in his business or property and also show that

he has sustained or is in immediate danger of sustaining

some direct injury from defendant's actions and a plaintiff

who does not have such a stake in the outcome lacks stand-

ing to maintain the action irrespective of merits of asserted

claim. Clayton Act, § 4, 15 U.S. C. A. 5 15.

8. Federal Civil Procedure—103

Monopolies—28(1.6)

Plaintiffs, cardholders of a bank’s charge cards, lacked

standing to complain of a vertical conspiracy between an-

other bank and its correspondents with regard to setting

of interest rate and discount fees in conjunction with is-

suance of bank charge cards and plaintiff would not be

permitted to satisfy requirement that they have requisite

stake in controversy by means of class action certification.

James E. Beckley, Chicago, III., for plaintiffs-appellants.

Keehan Landis, Bryson P. Burnham, Carl S. Lloyd,

Jerald P. Earick, Chicago, III., for defendants-appellees.

Before FAIRCHILD, Chief Judge, CUDAHY, Circuit

Judge, and CAMPBELL, Senior District Judge.*

CAMPBELL, Senior District Judge.

Plaintiffs appeal from the entry of summary judgment

on their claim of a price-fixing conspiracy in violation of

Sections 1 and 2 of the Sherman Act. The District Court

concluded that after eight years of discovery plaintiffs

had failed to produce any significant probative evidence to

support the complaint.' Based on our review of the record

* The Honorable William J. Campbell, Senior District Judge for

the Northern District of Illinois is sitting by designation.

1 Welt v. Continental Illinois National Bank and Trust Co., et al,

467 F.Supp. 197, 214 (N. D. III. 1978) ; and Weit v. Continental IUi-

nois National Bank d Trust Co., 478 F.Supp. 285, 298 (N. D. III.

1979).

A-5

we, too, conclude that plaintiffs are unable to point to any

significant probative evidence in support of the allegations

in the complaint. Accordingly, we affirm.

This class action was initiated in 1970 by three charge

cardholders in the Midwest Bank Card System, Inc. and its

successor the Interbank-Master Charge Card System, Inc.

(Mastercharge), against five Chicago banks. The plaintiffs

alleged that defendants, Continental Illinois National Bank

& Trust Company of Chicago (Continental), Harris Trust

and Savings Bank (Harris), Pullman Bank and Trust Com-

pany (Pullman), Central National Bank in Chicago (Cen-

tral), and American National Bank and Trust Company

(American), conspired to fix the interest rate paid by con-

sumer credit cardholders on extended payments at 1.5%

per month, or 18% per annum. Plaintiffs alleged that de-

fendants engaged in a horizontal conspiracy among them-

selves, and a vertical conspiracy among themselves and

their respective correspondent banks in Illinois. Plaintiffs

sought five hundred million dollars in damages before

trebling and injunctive relief requiring renegotiation of

cardholder rates on an individual basis.*

This controversy arises out of the formation of the Mid-

west Bank Card System by the defendant banks. As the

District Court noted, the circumstances surrounding the

formation of Midwest and its successor, Mastercharge, are

not in dispute. Those facts are set forth in detail in the

District Court’s opinion. See Weit v. Continental Illinois

National Bank d Trust Co., 467 F.Supp. 197, 200-205 (N. D.

2 First National Bank of Chicago (First) was named as a cocon-

spirator, but not as a defendant in this action.

3 “Pursuant to free market criteria and individual credit ratings.”

Plaintiff’s Third Amended Complaint, Count 1, Prayer for Relief.

*467 F.Supp. at 199.

A-6

Ill. 1978). However, a brief summary of the Midwest system

is appropriate.

In early 1966, First National Bank of Chicago held a

meeting attended by representatives of Continental Harris

and the Northern Trust to discuss the establishment of a

compatible credit card program. The idea of establishing a

credit card system was well received, and further meetings

ensued. A representative of American also * in

these meetings as an observer.

The banks sought to establish a compatible credit card

system. That is a system which permits a card issued by one

bank to be used for purchases from participating merchants

who deal with other banks. The card issuing bank provides

the consumer with a plastic charge card. The cardholder

agrees to pay his bank for monies advanced to cover pur-

chases by the cardholder with the charge card. The card-

holder can use the charge card to make purchases from any

merchant who accepts the Midwest Charge card. The mer-

chant simply forwards the signed charge ticket to his owu

bank, and is credited with the full amount of the charged

purchase, less a small “discount” or fee. The merchant’s

bank then receives a credit from the cardholder’s bank. At

the end of each month the cardholder is billed by his bank

for the total amount of purchases made during the period.

The merchant’s bank generates revenues by charging the

merchant a fee or “discount” for its services. If the card-

holder pays his bank the full amount due within a specified

period, he incurs no finance or interest charge. If he defers

payment however, his bank charges him interest on the

unpaid balance. That interest rate, and how it was arrived

at, is the subject of this controversy.

The Midwest Bank Card System, Inc. is a non-profit cor-

poration established by the defendant banks, except Amer-

A-7

ican® to administer the compatible charge card system. The

defendant banks established the Midwest System in 1966 to

facilitate the transfer or “interchange” of funds among par-

ticipating banks. The defendants maintain that compat-

ibility and a facilitated interchange of funds is essential to

a successful bank charge system. Midwest was established,

they argue, solely to assue an efficient compatible system.

The defendant banks also contend that an important as-

pect of a compatible charge card system is the integration of

correspondent banks into the system. A correspondent bank

maintains a deposit balance with a larger Metropolitan

bank. The Metropolitan banks, in turn, provide services to

their correspondents. Since Illinois is a “unit banking”

State which limits the use of branch banks,“ major Metro-

politan banks, such as the defendants, establish correspon-

dent relationships with smaller banks in lieu of opening

branches in other areas. Some banks would establish several

correspondent relationships with major Metropolitan

banks.’ Each defendant recruited its correspondent bank

to participate in the Midwest System. Plaintiffs claim that

in doing so the defendants also conspired with their cor-

respondent banks to fix the rate of interest charged at

18% per annum.

The initial meetings during the Spring and Summer of

1966, attended by representatives of defendants Continental

and Harris, and by representatives of First and the

Northern Trust, are outlined fully by the District Court and

5 American did not join the Midwest System until 1969.

See Ill. Rev. Stat., Ch. 1614, § 106.

For example, State National Bank of Evanston was a corre-

spondent of Harris, American, First, Continental and Northern. It

affiliated with Continental’s charge card system in September of

1966.

need not be restated here. See Weit v. Continental, supra, at

200-205. Continental and Harris were joined by Central Na-

tional Bank in the Fall. Northern Trust dropped out of the

program in August of 1966. Representatives of Pullman,

a correspondent of First, Harris and Continental, began

attending meetings in August. On October 24, 1966, First,

Continental, Harris, Central and Pullman executed an in-

terim agreement establishing the Midwest System. Mid-

west’s regulations permitted membership by any com-

mercial bank. On March 26, 1969, American petitioned for

membership and became a member on May 16, 1969.

From the outset the defendant banks were aware of the

potential anti-trust problems inherent in a joint venture

such as this. At an early meeting on May 26, 1966, lawyers

for First raised the anti-trust issue. The group agreed at

that time, on advice of counsel, to exclude from their dis-

cussion interest rates, fees, advertising, and market re-

search. On July 25, 1966, Miles Seeley, counsel for Con-

tinental, submitted a memorandum to the group warning

that discussions must be limited to planning a compatible

credit card system and prohibiting any discussion of “fees,

discounts, billing and extended credit terms.”* Thereafter,

a member of Seeley’s firm was present at all meetings to

assure that this policy was adhered to, and that interest

rates were not discussed, “even in jest“ Initial drafts of

the “Compatible Credit Card System for Chicago Area

Banks” also stated that card issuing banks “will be com-

pletely and solely responsible to determine . . credit pol-

icies and interest rates.

* Krazley deposition ex 8E; Prater deposition, ex. 50, excerpt

from Prater deposition, app. 224-225.

Id. at p. 225.

1° Wood deposition, exhibit 6.

A-9

Nevertheless, plaintiffs argue, each defendant bank ar-

rived at the same interest rate. The defendants had ample

opportunity to discuss interest rates at meetings of the

Midwest group, at annual bankers’ meetings, and even on

social occasions. Plaintiffs point to several instances in the

record where representatives of the defendant banks did

discuss interest rates, though in the context of Illinois

usury regulations. Plaintiffs further rely on an affidavit sub-

mitted by their expert, Bernard Shull, to the effect that

“conscious cooperation” on the part of the meiabers of the

Midwest System was the likely cause of the 18% interest

rate.

Plaintiffs argue that in addition to these factors which

were considered by the District Judge, the lobbying efforts

by the defendant banks also suggest the existence of a price

fixing conspiracy. Those lobbying efforts were expressly

not considered by the District Court.”

When the Illinois General Assembly convened in 1967,

several bills were introduced regulating interest charged on

consumer credit cards. The general interest rate limit under

1! While each bank charged a rate of 1.5% per month, the banks

did not employ the identical method of calculating interest. For ex-

ample, Continental computes interest on an “Adjusted Balance

Method”, that is, by caiculating interest on the balance due during

the previous billing cycle to the date of a payment, and then com-

puting interest on the remaining balance, if any, up to the current

statement. Harris employs a “Closing Balance Method” whereby all

payments received during a billing cycle are deducted from the

previous balance. Central and American compute interest on the

basis of an average daily balance during a given billing cycle. Pull-

man calculates interest on the basis of the balance due at the begin-

ning of a billing cycle, without crediting for payments made. These

differing methods of computation result in a slightly different cost of

borrowing to the cardholder.

12 Weit v. Continental, 467 F.Supp. at 207-208, Nt. 22.

A-10

the Illinois Usury Statute was 7% per annum. The Chief

Counsel to the Illinois Comptroller’ had, however, issued

separate opinion letters to First and Continental indicating

that National Banks could, under the Consumer Finance

Act, charge 3% interest per month on balances up to $150,

2% on balances between $150 and $300, and 1% on the re-

maining balance above $300. There was no Illinois prece-

dent in accord with that conclusion. Several of the bills

pending in the Legislature would have limited charge card

interest to 1% per month. The defendant banks engaged a

lobbyist, William R. Dillon, to seek passage of a bill which

would permit monthly credit card interest of 1.5%. Dillon’s

efforts were successful, as the Legislature approved House

Bill 2071 which contained the 1.5% limit.

Plaintiffs contend that this ev.dence, provided by sworn

affidavit or deposition, should at least create a genuine issue

of material fact sufficient to defeat a defense motion for

summary judgment under Rule 56, F.R.C.P.

The District Court found that the defendant’s parallel

interest rate; the opportunity to conspire to fix those rates;

the specific references to interest rates in the record; and

the opinion of Professor Shull did not create a reasonable

inference of the conspiracy which plaintiff’s alleged. 467

F.Supp. at 210-211. In support of their motion for summary

judgment, defendants, as they must, came forward with

testimony under oath refuting plaintiffs’ allegations. This

evidence showed that each defendant had independently

projected the costs and early losses from the credit card

system, and independently arrived at 1.5% per month as the

minimum interest rate they could charge. The Court below

18 Defense counsel continually refer to this agency as the “Comp-

troller of the Currency”. We note that no such office exists, and

under Article I, Section 8 of the U.S. Constitution could not exist.

A-ll

noted that every employee of the defendant banks who

participated in the formation of Midwest denied, under

oath, that there had been any discussion relating to a fixed

or agreed interest rate. The Court found that the parallel

rates were not surprising since each defendant faced the

“identical problems of fraud, credit losses, and large initial

expense, to which reasonable businessmen would react in

the same fashion.” 467 F.Supp. at 210-211.

Also, the Court noted that 1.5% per month was the rate

then charged on other consumer credit cards and by retail

establishments offering their own credit.

The Court found that defendants had shifted the burden

to the plaintiffs to come forward with “significant probative

evidence to support the complaint,” citing First National

Bank of Arizona v. Cities Service, 391 U.S. 253, 88 S.Ct.

1575, 20 L.Ed.2d 569 (1968). The District Court concluded

that, after more than eight years of discovery,

. plaintiffs have confronted every person who

attended those meetings, examined the minutes of

and documents generated by each meeting, and found

no evidence which affirmatively supports their theory.

467 F.Supp. at 211.

SUMMARY JUDGMENT

Rule 56(c) provides that summary judgment “shall be

rendered forthwith if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to

material fact. Rule 56(e) provides that when a motion

for summary judgment is supported by sworn denials, as is

the case here, the burden shifts to the plaintiff to “set forth

specific facts showing that there is a genuine issue for trial.”

By entering summary judgment the Court is, in effect,

concluding that based on the evidence upon which the plain-

A-12

tiff intends to rely at trial, no reasonable jury could return

a verdict for the plaintiff.'*

In the instant case the District Judge reviewed the evi-

dence in the record at the conclusion of a lengthy period of

discovery and found no significant probative evidence of a

conspiracy to fix interest rates. Based on our independent

review of the record, we, too, are unable to uncover any such

evidence, and conclude that further proceedings in this case

would result in a waste of limited judicial time and re-

sources.“

THE ALICOCED HORIZONTAL CONSPIRACY

{1] Plaintiffs contend that circumstantial evidence in the

record—parallel rates and the opportunity to conspire—

are sufficient to meet their burden under Rule 56(e). Clearly,

circumstantial evidence can be sufficient to support a find-

1* In plaintiffs’ answers to interrogatories filed January 6, 1978,

plaintiffs identified the 964 documents and 53 witnesses on which

they intended to rely at trial.

15The dissent suggests that plaintiffs produced evidence that Con-

tinental, Harris and Pullman knew the interest rates being contem-

plated by each other. This evidence is that Harrris noted that

states other than Illinois permitted an interest rate of 114% per

month, and that Continental referred to a “regular 114% per month

interest charge” during the course of discussions with the President

of Bank Americard. This is hardly evidence that Pullman, Harris or

Continental knew what interest charge had been decided upon by

each bank. Yet even assuming that awareness of contemplated in-

terest rates is the logical inference to be drawn from those state-

ments, mutual awareness of similar conduct does not run afoul of the

Sherman Act. “This awareness must be an element entering into

each party’s decisional process, and the basis for inferring that it

did no must be something more substantial than a guess.” Brown v.

Western Massachusetts Theatres, Inc., 288 F.2d 302, 305 (1st Cir.

1961) (on petition for rehearing).

A-13

ing of a price-fixing conspiracy. Interstate Circuit v. United

States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939).

Parallel business behavior or “conscious parallelism” is the

type of circumstantial evidence which, absent more direct

evidence, will be relied on in inferring unlawful agreement.

Theatre Enterprises v. Paramount Film Distributing Corp.,

346 U.S. 537, 540, 74 S.Ct. 257, 259, 98 L.Ed. 273 (1954).

However, when defendants come forward with denials suffi-

cient to shift the burden under Rule 56(e), plaintiffs must

come forward with some significant probative evidence

which suggests that conscious parallelism is the result of an

unlawful agreement. First National Bank of Arizona v.

Cities Service Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-

1593, 20 L.Ed.2d 569 (1962); Modern Home Institute, Inc.

v. Hartford Accident and Indemnity Co., 513 F.2d 102 (2d

Cir. 1975). Parallel behavior and the hope that something

further can be developed at trial is not sufficient to warrant

a trial on the merits. Cities Service at 290, 88 S.Ct. at 1593;

Perma Research and Development Co. v. Singer Co., 410

F.2d 572, 578 (2d Cir. 1969}. Conscious parallelism in the

instant case could support a wide range of inferences. One

logical inference is that the 114% per month interest rate

reflected a business decision as to what rate the market for

consumer credit would bear, and eventually prove profitable

as well. An equally plausible inference, and one supported

in the record, is that the already established rate of con-

sumer credit was 1½ % per month, as reflected by Bank

Americard and retail outlets offering installment credit.'*

If plaintiffs are to proceed to trial, they must be able to

point to some probative evidence that parallel interest rates

16 The record indicates that the Wall Street Journal, on May 24,

1966 noted Bank Americard’s interest rate of 144% per month and

that the defendants were aware of this. Ex. A to Continental’s re-

sponse to Interrogatories, January 3, 1978, pp. 23-24.

A-14

resulted from unlawful agreement rather than lawful busi-

ness reasons.

[2] Plaintiffs rely heavily on the opportunity to conspire

as probative evidence of unlawful conspiracy. The dissent

also attaches significance to the close personal ties among

the members of the Chicago banking community. Yet, the

mere opportunity to conspire, ““ even in the context of

parallel business conduct, is not necessarily probative evi-

dence. See Venzie Corporation v. United States Mineral

Products Co., 521 F.2d 1309 (3rd Cir. 1975); Overseas

Motors, Inc. v. Import Motors Ltd., 375 F.Supp. 499, 535

(E.D.Mich. 1974), aff’d 519 F.2d 119 (6th Cir. 1975). This is

especially the case when the need to set up a compatible

card system requires a degree of cooperation. The only

rational inference here is that the need to set up a com-

patible system mandated that defendants work together.

Given the need for some degree of cooperation in a venture

of this nature, the opportunity to conspire evidence lacks

significant probative value. Of greater significance is the

sworn testimony compiled during eight years of depositions

which uniformly denies discussion of any agreement or

understanding as to the interest rate to be charged.

[3] It is suggested that while parallel pricing alone is

not sufficient to establish a price-fixing conspiracy, such evi-

dence together with an opportunity to conspire is sufficient

to rebut defendants’ denials and require a trial on the

merits. See C-O-Two Fire Equipment Co. v. United States,

197 F.2d 489 (9th Cir. 1952), cert. denied 344 U.S. 892,

17 The District Court characterized the bulk of this evidence as

falling into the “mere possibility range.” 467 F.Supp. at 211. We

agree. The fact that the Chairman of Harris and Continental both

served as trustees of Northwestern University is of little relevance,

much less probative value.

A-15

73 S.Ct. 211, 97 L.Ed. 690 (1952); Esco Corporation v.

United States, 340 F.2d 1000 (9th Cir. 1965). However,

when the plaintiff or prosecution relies on circumstantial

evidence alone, the inference of unlawful agreement rather

than individual business judgment must be the compelling,

if not exclusive, rational inference. Pevely Dairy Co. v.

United States, 178 F.2d 363 (8th Cir. 1949). Indeed, the

Court in Pevely stated:

Where circumstantial evidence is relied upon to estab-

lish the conspiracy or any other essential facts, it is not

only necessary that all the circumstances concur to

show the existence of such conspiracy and facts sought

to be proved, but such circumstantial evidence must be

inconsistent with any other rational conclusion.’*

Pevely, as well as C-O-Two and Esco were criminal cases

with differing standards of proof. Nevertheless, it is in-

teresting that the court in C-O-Two distinguished Pevely

on the basis of the product in question. The Court stated the

milk (the alleged price-fixed product) “approaches fungi-

bility.“ » The defendants did business in the same area,

paid a fixed regulated price for the product and incurred

virtually identical labor costs. Similarly, in civil antitrust

cases, Courts have noted that parallel pricing or conduct

lacks probative significance when the product in question is

standardized or fungible. Bendix Corporation v. Ballaz,

Inc., 471 F.2d 149, 160 (7th Cir. 1972); Independent Iron

18 We note that in both C-O-Two and Esco numerous co-defend-

ants entered pleas of nolo contendere prior to the trial of these

named co-defendants.

1 178 F. ad at 367. In Pevely the Court reversed the district

court’s denial of a motion for judgment of acquittal after the jury

returned a guilty verdict.

2” C-0-Two, 197 F.2d at 496.

A-16

Works, Inc. v. United States Steel Corp., 322 F.2d 6546 (9th

Cir. 1963).

In the instant case, the product in question is consumer

credit, or more fundamentally, the cost of horrowing money

for a given period. The underlying product—money—is not

only fungible, it is by definition an interchangeable medium

of exchange. The defendants’ own cost of money is highly

regulated and, on a given day and specified amount, the cost

is uniform. Thus, it is hardly surprising, or significant, that

the defendants charged a parallel interest rate“ given their

parallel costs. We agree with the District Court’s conclusion

as to the only rational inference to be drawn from parallel

pricing in this case:

The showing of parallel behavior under these cireum-

stances, where each bank faced identical problems of

fraud, credit losses, and large initial expense to which

reasonable businessmen would react in the same

fashion, does not provide a basis for the inference of

the conspiracy which plaintiffs allege.**

Thus, parallel interest rates, together with evidence that

the opportunity to conspire existed—when measured against

defendants’ denials, parallel economic cost factors, and the

need for a compatible charge card system—does not support

a rational inference of an unlawful conspiracy.

Plaintiff’s suggest that summary judgment should rarely

be entered in anti-trust cases due tothe central role of motive

and intent issues. See Poller v. Columbia Broadcasting

21 In Bendiz this Court overturned the trial court’s finding of

improper price influencing for lack of evidence. In Independent

Iron Works the Court affirmed the trial court's directed verdict on

a concerted boycott claim.

22 As indicated at footnote 11 infra, the cost of borrowing to the

cardholder is not identical at each bank due to the individual bank's

method of calculating interest.

3 467 F.Supp. at 210-11.

A-17

System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d

458 (1962). However, no greater caution or concern for

litigants’ rights is required in the anti-trust context than in

other substantive areas of Federal Court litigation. Lupia v.

Stella D’Oro Biscuit Company Inc., 586 F.2d 1163, 1167 (7th

Cir. 1978), cert. denied 440 U.S. 982, 99 S.Ct. 1791, 60

L.Ed.2d 242 (1979).

This Cireuit has recognized that “the very nature of anti-

trust litigation would encourage summary disposition .. .

when permissible.” Lupia v. Stella D’Oro, 586 F.2d at 1167.

The statutory remedy of treble damages creates a “special

temptation for the institution of vexatious litigation.” Id.,

citing Poller, 368 U.S. at 478, 82 S.Ct. at 493 (Harlan, J.,

dissenting). Also, anti-trust actions have proven to be

especially protracted, and difficult for jury consideration.

See United States v. United Gypsum Co., 438 U.S. 422, 465—

469, 98 S.Ct. 2864, 2887—2889, 57 L.Ed.2d 854 (1978); ILC

Peripherals Leasing Corporation v. International Business

Machines Corporation, 458 F. Supp. 423, 445—448 (N.D.

Cal.1978). Indeed, in the JLC case the District Judge, after

a five month trial which ended in a deadlocked jury and a

mistrial, concluded that the case was “beyond the ability

and competency of any jury to understand and decide

rationally.” 458 F.Supp. at 448.

We simply turn our heads and ignore the practical

realities of complex anti-trust litigation. A trial of this

nature places a substantial burden on jurors who are seldom

prepared to analyze the complexities of anti-trust claims.**

24 When the Court in ILC asked the foreman of the jury whether

this type of case should be tried to a jury, the foreman responded :

“If you can find a jury that's both a computer technician, a lawyer,

an economist, knows all about that stuff, yes, I think you could have

a qualified jury, but we don’t know anything about that”. (Tr.

19,548). 458 F.Supr., at 447.

A-18

As Chief Justice Burger has so appropriately noted: . . it

borders on cruelty to draft people to sit for long periods to

cope with issues “largely beyond their grasp.““

[4] When a District Court has afforded the parties eight

years of unlimited discovery, the parties have designated

the evidence on which they will rely at trial, and the Court

has had an opportunity to review the evidence and concludes

that no reasonable jury could return a verdict for plaintiffs,

judicial economy mandates that summary judgment be en-

tered. See e.g. Modern Home Institute, Inc. v. Hartford

Accident d Indemnity Co., 513 F.2d 102 (2d Cir. 1975). A

trial on such claims would serve only as a forum for im-

peachment and argument by counsel; not for the presenta-

tion of evidence. If the District Court, on the eve of trial,

concludes that extensive and complete discovery has pro-

duced no evidence to support the complaint, summary judg-

ment should be entered. As the Court noted in Cities

Service:

While we recognize the importance of preserving liti-

gants’ rights to a trial on their claims, we are not pre-

pared to extend those rights to the point of requiring

that anyone who files an anti-trust complaint setting

forth a valid cause of action be entitled to a full-dress

trial notwithstanding the absence of any significant

probative evidence tending to support the complaint.

391 U.S. at 290, 88 S.Ct. at 1593.

[5] We believe the instant case is precisely the kind con-

templated by the Court in Cities Service. The allegations

have been met with consistent sworn denials and there has

been a more than adequate period of discovery. Yet, plain-

tiffs can point to only two instances where interest rates

25 Remarks of the Chief Justice of the United States, Meeting of

Conference of Federal Chief District Judges, Little America Hotel,

Flagstaff, Arizona, Aug. 7, 1979.

A-19

were even discussed, and then only in the context of state

usury laws, or the rate that Bank Americard was charging.“

These two statements relating to interest rates during the

several years of planning and implementation of the Mid-

west System, even when coupled with rate parallelism and

an opportunity to conspire, do not rise to the level of “sig-

nificant probative evidence” within the meaning of Cities

Service.

Plaintiffs suggest that Cities Service is inapposite be-

cause that case involved a claim of refusal to deal rather

than price fixing.“ When price fixing is alleged, they sug-

gest, circumstantial evidence should receive greater weight

on a motion for summary judgment. Yet, a conspiracy to

fix prices and a group boycott are both proscribed by Sec-

tion 1 of the Sherman Act. Both are per se violations of the

Act.“ Neither case lends itself to proof by direct evidence.

There is no basis for altering the standard for summary

judgment to conform to a lesser quantum of evidence in

either case. If plaintiffs’ circumstantial evidence of con-

spiratorial conduct is so insignificant that a rational jury

could not find for plaintiffs, summary judgment is appropr'-

ate irrespective of the substantive natu~e of the complain

26 The dissent attaches considerable significance to the use of th

term “regular interest” rate in the discussion with Bank America.

Yet that was the “regular” rate charged Bank Americard holders.

27 Plaintiffs attempt to classify Cities Service as an “individual

refusal to deal“ case. It is not. The complaint alleged concerted

conduct. Indeed, since Section 1 of the Sherman Act proscribes

“every contract, combination . . or conspiracy in restraint of trade

.. individual conduct does not run afoul of Section 1, by defini-

tion.

28 See Klors Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct.

705, 3 L.Ed.2d 741 (1959) ; U.S. v. Socony Vacuum Oil Co., 310 U.S.

150, 60 S. Ct. 811, 84 L.Ed. 1129 (1940).

A-20

The disser t suggests that in the instant case, unlike in

Cities Service, plaintiff has produced evidence of motive.

It is suggested that this motive evidence distinguishes Cities

Service from this case. In Cities Service the plaintiff**

alleged that Cities Service Co. and six other large oil com-

panies refused to purchase oil from him because plaintiff

was selling Iranian oil. The alleged motive for the group

boycott was retaliation against nationalization of property

owned by one of the defendants, and an effort to force return

of the property by a boycott of all oil produced in that

country. The Court found that given no contrary evidence

a jury “might well be presented as to Cities’ motives in not

dealing with Waldron.“ However, the Court affirmed the

entry of summary judgment because “the record . . . con-

tains an overwhelming amount of such contrary evidence

of Cities’ motives. 1 Similarly, a motive is suggested for

conspiratorial conduct in the present case, but the evidence

in the record does not suport that motive. The dissent mis-

takenly construes defendants’ concern about “chaos in the

market” as an admission of anti-competitive motive in

forming the Midwest System.** Clearly, the defendant

banks were concerned with the possibility that either an

out-of-state bank or one Chicago bank would initiate its

2° The original plaintiff was Gerald Waldron. Upon his death the

First National Bank of Arizona, his executor, was substituted as

plaintiff. See Cities Service, 391 U.S. 253, 259 n. 1, 88 S.Ct. at 1578

n. 1.

3° 391 U.S. at 277, 88 S.Ct. at 1586.

21 Id.

32 A Continental internal memo of August 11, 1966 noted, if any-

one goes in Chicago, others will and this may result in chaos in the

market. Could be disasterous [sic] .. .”

A-21

own credit card system.“ If each bank in Chicago plus

several large out-of-state banks initiated their own system,

the likely result would be chaotic. The evidence suggests,

however, that by chaos the banks did not mean competition

as to interest rates, but a retail market in which a vast

number of charge cards existed. Merchants would have to

accept many if not all of these cards and then would

have to look to each individual bank for payment. A com-

patible system permits the merchant to look to his own

bank for the entire payment irrespective of which bank

may have issued the card to the customer. While defend-

ants were clearly concerned about a chaotic credit card

market, the record sugests their concerns were not anti-

competitive or conspiratorial. Rather, they were legitimate

business concerns. We therefore, do not agree with the

dissent’s finding of an anti-competitive motive in this case.

Plaintiffs rely, as does the dissent, on Poller v. Columbia

Broadcasting, 368 U.S. 446, 82 S.Ct. 486, 7 L.Ed.2d 458

(1962) in support of the contention that issues of anti-

competitive intent are particularly appropriate for jury

consideration. The Court in Cities Service noted several

factual distinctions between that case and Poller which

could be applied in the instant case as well.** Ultimately,

however, these other cases are distinguished on the basis

33 A Harris internal memorandum of December, 1966 noted, “it

would be very difficult for any one bank in Chicago to successfully

operate a broad credit plan in our area because of our unit banking

system. And, even if tried, others would soon initiate similar and

competitive plans resulting in a chaotic state of affairs as far as the

public and the merchants were concerned.”

34 For example, the Court in Cities Service noted that in Poller a

competitive relationship existing between the plaintiff and defend-

ant. In both Cities Service and the instant case there is no com-

petitive business relationship. 391 U.S. at 285, 88 S.Ct. at 1590.

A-22

of the inferences which may reasonably be drawn from the

evidence in the record. Our review of the record leads us

to the conclusion that the circumstantial evidence in support

of the complaint is so insubstantial when measured against

the evidence in support of defendants’ denials, as to pre-

clude a verdict for plaintiffs. Summary judgment on the

claims of horizontal conspiracy is therefore appropriate.

EVIDENCE OF LOBBYING ACTIVITIES

[6] Plaintiffs also contend that the District Court erro-

neously declined to consider the evidence of defendants’

lobbying activities, and that had that evidence been con-

sidered, summary judgment should have been denied. The

dissent concurs in that view.

The argument for admissibility of this evidence is that

it is relevant to the question of whether defendants con-

spired to fix interest rates. As the dissent points out, an

inference can be drawn that the banks would not have

worked together in lobbying for passage of a bill in the

legislature unless they had implicitly agreed on an interest

rate as well. We agree that such an inference could be

drawn. Our problem with this evidence is that it more

directly suggests an agreement to influence legislation on

behalf of a particular bill under consideration. In Eastern

Railroads Presidents Conference v. Noerr Motor Freight,

Inc., 365 U.S. 127, 81 S. Ct. 523, 5 L.Ed.2d 464 (1961), the

Court held that such conduct does not violate the Sherman

Act, even though there may be an anti-competitive motive

behind such conduct.“ In United Mine Workers of America

v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626

(1965), the Court reaffirmed that principle. The Court in

Pennington noted:

$5 365 U.S. at 140, 81 S.Ct. at 531.

A-23

Joint efforts to influence public officials do not violate

the antitrust laws even though intended to eliminate

competition. Such conduct is not illegal, either standing

alone or as part of a broader scheme itself, violative of

the Sherman Act.**

The District Court noted that such conduct is immunized

from anti-trust liability under the Noerr-Pennington doc-

trine, but stopped short of excluding it on that basis.*’

Rather, the District Judge concluded that the prejudicial

quality of this evidence outweighed its probative value.

Since he would exclude such evidence at trial, he declined

to consider it on summary judgment. The basis for the

Court declining to consider this evidence was its “minimal

probative value” as compared to its “inevitable prejudicial

effect.”

Rule 403 of the Federal Rules of Evidence permits the

Court to exclude relevant evidence “if its probative value

is substantially outweighed by the danger of unfair preju-

dice, confusion of the issues, or misleading the jury.

The evidence of defendants’ lobbying activity poses a

serious problem of confusion of issues.“ The likely con-

fusion is that the jury will consider this evidence as pro-

bative of an agreement to influence public officials to enact

a favorable interest rate. While an inference of a separate

36 381 U.S. at 670, 85 S.Ct. at 1593.

57 467 F. Supp., at 207-208 N. 22.

38 Generally, the Rules of Evidence apply to pre-trial proceedings

including summary judgment considerations. See F.R.E. 101;

American Security Co. v. Hamilton Glass Co., 254 F.2d 889, 893

(7th Cir. 1958).

3® The dissent suggests that 403 is designed to exclude only that

evidence which tends to horify, or evoke sympathy or anger. While

the tendency to suggest an emotional decision is one basis for exclu-

sion of evidence under Rule 403, it is clearly not the only one.

Advisory Committee Notes quoted in Weinstein’s Evidence 40303].

A-24

agreement to fix consumer credit rates could be drawn

from this evidence, the more direct link is to the defendants’

legislative efforts which Noerr-Pennington immunizes from

anti-trust liability. An appropriate cautionary instruction

could be fashioned so as to draw the jury away from con-

sideration of the immunized conduct as the antitrust tort

and toward other possible inferences. Yet, the more likely

result is that the jury, unskilled in the constitutional con-

siderations of Noerr-Pennington, would conclude that the

passage of a favorable consumer credit limit was the prod-

uct of an unlawful conspiracy. We believe that confusion

of issues is the probable result of admission of this evi-

dence. Given the lack of any substantial evidence of an

antitrust conspiracy in the instant case, the threat of preju-

dice from admission of this evidence is considerable. The

lack of other probative evidence of conspiracy would serve

to focus the jury’s attention on the lobbying evidence. This

could easily result in a finding of antitrust liability for

engaging in the First Amendment right to petition which

Noerr-Pennington protects. We believe the District Court

correctly excluded this evidence from consideration on the

motion for summary judgment.

THE ALLEGED VERTICAL

CONSPIRACY

Plaintiffs also claim that Continental, Harris, Central

and Pullman conspired between themselves and their cor-

respondent banks to fix interest rates charged to consumers

and discount rates charged to merchants, in violation of

Section 1 of the Sherman Act. The District Court entered

summary judgment on the claim of vertical price-fixing by

Continental in its Order of December 22, 1978. 467 F.Supp.

214-216. The rationale for entry of summary judgment was

that the plaintiffs, in the face of sworn denials by Conti-

nental, had failed “to produce any significant probative

A-25

evidence . . that a conspiracy existed.” Id. at 216, citing

Lamb’s Patio Theatre v. Universal Film Exchanges, 582

F.2d 1068, at 1070. The District Court entered summary

judgment for defendants Harris and Central in its order

of September 6, 1979.“ The District Court noted at the

outset the plaintiffs were cardholders of Continental and

not within the “target area” of any conspiracy between

defendants. The Court concluded that since plaintiffs could

not have suffered any damage as a result of such conspiracy

they cannot represent any class of persons holding cards

issued by Harris, Central or Pullman. The Court went on

to find that even assuming standing plaintiffs had failed to

point to any evidence suggesting that interest rates were

the result of anything other than independent business

decisions. The Court also noted that the vertical conspiracy

allegations “must fail because the basis for their existence—

the allegation of a conspiracy among the named defendants

—can no longer be maintained in light of this Court’s ruling

of December 22, 1978.” 478 F.Supp. at 298.

With regard to plaintiffs’ claims against Pwilman, the

Court found that there were sufficiemt “plus factors” to

withstand summary judgment. However, plaintiffs had no

standing to raise a claim against Pullman since they were

not cardholders of the charge cards issued by Pullman or

its correspondent banks.

The District Court has given a comprehensive summary

of the role played by correspondent banks and their rela-

tionship to the named defendant banks which need not

be recapitulated here.“ We agree with the District Court’s

% 478 F.Supp. 285 (N. D. III. 1979).

1 For a discussion of Continental’s relationship with its corre-

spondents, see the District Court opinion, 467 F.Supp. at 202-204,

215-216. Harris’ and Central’s correspondent relationships are de-

tailed at 478 F.Supp. 290-294, 297-298. Pullman’s correspondent

relationships are set out at 478 F.Supp. 290-291 and 297-299.

A-26

conclusion that once judgment is entered as to the horizontal

conspiracy claim there is little viability remaining to the

vertical conspiracy claim. Nevertheless, the issue of stand-

ing aside, a genuine issue of fact as to a violation of the

Sherman Act, Section 1, would exist had plaintiffs presented

evidence of an agreement between the defendants and their

respective correspondents to fix interest rates or dis-

count fees.

Defendant Continental supported its motion for summary

judgment by affiidavits of its Vice President in charge of

correspondent banking to the effect that no agreement to

set rates existed between Continental and its correspondents

because Continental alone set the interest rate charged on

all charge cards issued through its correspondents. The

standard contracts between Continental and its correspon-

dents support that position. The only fact which could pro-

vide any support for any anti-trust theory was that Con-

tinental and its correspondents did not compete for charge

card customers. That alone does not create an inference

of conspiracy. o the contrary, in light of the evidence

demonstrating the high costs of the Midwest System, the

more reasonable inference is that the correspondents did

not compete because they were not in a financial position to

do so. The evidence before the District Court shows that

Continental set the terms and conditions of its credit card—

including the interest rate it would charge cardholders—

and conveyed that decision to its correspondents.“ The cor-

respondents were free to accept Continental’s terms, affili-

ate with another system,“ or start their own credit card

network. We believe the District Court correctly concluded

#2 See e. g. deposition of Alfred Lindgren, pp. 60-61 and depo.,

ex. No. 9.

Such as the Bank Americard System which the First had be-

come affiliated with.

A-27

that there was no evidence on which a jury could find a

conspiracy between Continental and its correspundents.

With regard to Harris, the District Court found that

Harris simply purchased receivables generated by its cor-

respondent banks until January of 1968. At that point

Harris offered its correspondents an opportunity to share

in the risk and profits or losses on receivables generated by

the correspondents. From that point until late 1974, Harris,

unlike Continental, let its correspondents decide on the

interest rate charged to their customers. Harris required a

1.5% return on its share of those receivables at first, but

changed to a set fee paid by the correspondents. At no point

during this period did Harris require its correspondents

to charge any prearranged interest rate. In 1974 Harris

switched to a system similar to Continental’s whereby

Harris issued cards to those cardhulders referred by its cor-

respondent banks, and Harris alone set interest rates.

With respect to Central, the District Court found that it

did not begin soliciting correspondent banks until 1970.“

At that time Central issued bank charge cards to some

customers referred by correspondents and also permitted

correspondents to issue their own cards. Central did not

make any provision for interest rates in any contracts with

its correspondents.

In the face of what the Court below found to be legiti-

mate business relationships, plaintiffs are unable to point

to any evidence of agreement or conspiracy. Here, as in the

alleged horizontal conspiracy, plaintiffs can point only to

the opportunity to conspire; the ability to conspire; but

no evidence of actual conspiracy. The District Court cor-

rectly concluded that this is not sufficient to create a genu-

44 Central was itself a correspondent of both Continental and

Harris.

A-28

ine issue of material fact as to the existence of a conspiracy.

First National Bank of Arizona v. Cities Service, 391 U.S.

at 286-288, 88 S.Ct. at 1591-1592. See also Lupia v. Stella

D’Oro Biscuit Co., Inc., 586 F.2d 1163 (7th Cir. 1978) cert.

denied 440 U.S. 982, 99 S.Ct. 1791, 60 L.Ed.2d 242 (1979).

STANDING TO MAINTAIN THE VERTICAL

CONSPIRACY CLAIMS

The District Court noted that plaintiffs lack standing to

complain of any injury resulting from Harris’ and Central’s

relationship with their correspondent banks. Yet, the Court

went on to find that even assuming standing to challenge

the alleged vertical conspiracy plaintiffs had failed to point

to any significant evidence of an agreement to fix interest

rates between Harris and Central and their correspondent

banks. Because we affirm the entry of summary judgment

on that basis we need not address the standing question as

it relates to Harris and Central. With regard to Pullman,

however, the District Court dismissed the vertical con-

spiracy claim solely on the basis of standing. We, therefore,

address the question of whether plaintiffs have standing

to assert a vertical conspiracy claim against Pullman.

[7] Section 4 of the Clayton Act, 15 U.S.C. § 15, permits

anyone who has been “injured in his business or property”

to maintain a private action for treble damages. As the

Supreme Court’s opinion in Illinois Brick Co. v. Illinois,

431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) indicates,

the injury must be a direct one. In addition to this require-

ment of “antitrust injury,” a plaintiff in any lawsuit must

show that he has sustained or is in immediate danger of

sustaining some direct injury from the defendant’s actions.

O’Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 675, 88

L.Ed.2d 674 (1974); Sierra Club v. Morton, 405 U.S. 727,

92 S.Ct. 1361, 31 L.Ed 2d 636 (1972). A plaintiff who does

A-29

not have such a stake in the outcome lacks standing to

maintain the action irrespective of the merits of the as-

serted claim.

The Court below noted, as has this Court, that the dis-

tinction between the “antitrust injury” requirement of Sec-

tion 4 and the more general standing requirement is often

blurred. 478 F.Supp. at 297. See also Lupia v. Stella D’Oro

Biscuit Co., Inc., 586 F.2d at 1168-69. This is not surprising

in antitrust actions as the two requirements overlap con-

siderably. The labels are not important, however. The fun-

damental requirement is that plaintiffs establish a sufficient

nexus between the defendant’s alleged actions and an injury

to plaintiffs.

8] Here the plaintiffs are unable to establish that nexus.

The named plaintiffs are cardholders of only Continental’s

Midwest chargecards. The fact that they purport to repre-

sent Pullman cardholders who would have standing to com-

plain of a vertical conspiracy between Pullman and its

correspondents cannot create standing to bring an action.

If plaintiffs lack the requisite stake in a controversy at the

time the complaint is filed, they may not bootstrap that ele-

ment into their claim by means of class action certification.

Kauffman v. Dreyfus Fund, Inc., 44 F. 2d 727, 734 (3d Cir.

1970). Similarly, plaintiffs who have not suffered antitrust

injury from an alleged conspiracy cannot bring themselves

within the “target area” simply by purporting to represent

those who are. See Lupia v. Stella D’Oro, 586 F.2d at 1168-

69. The District Court correctly concluded “the named

defendants could not have been injured by any conspiracy

between Pullman and its correspondents and lack standing

to raise any claim against Pullman.” 478 F.Supp. at 299.

For the reasons set forth herein, the judgment of the

District Court is AFFIRMED.

A-30

FAIRCHILD, Chief Judge, dissenting.

Plaintiffs alleged that defendants, five Chicago banks,

violated sections 1 and 2 of the Sherman Act, 15 U.S.C.

5 1, 2, by conspiring between themselves and with their

correspondent banks to fix the interest rates they charged

as member banks of the Midwest Bank Card System, Inc.,

and its successor, the Interbank-Master Charge System,

Inc. (“Mastercharge”). The district court entered summary

judgments for all defendants on all counts.' I would affirm

the summary judgments for defendants Continental, Harris

and Central as to the charges of a vertical conspiracy with

their respective correspondents. I would reverse the sum-

mary judgment granted to defendants Continental, Harris,

Central and Pullman on the horizontal conspiracy.

I. THE STANDARD OF REVIEW

The issue before this court is whether this court is satis-

fied that a properly instructed jury, giving full weight to

plaintiffs’ evidence, drawing every reasonable inference in

its favor, and subjecting defendants’ evidence to a critical

eye, could not rationally find that plaintiffs were entitled

to any relief. Ambook Enterprises v. Time, Inc., 612 F.2d

604, 611 (2d Cir. 1979), cert. dismissed, ff oe

S.Ct. 35, 65 L.Ed.2d 1179 (1980). See Continental Co. v.

Union Carbide d Carbon Corp., 370 U.S. 690, 696, 82 St. Ct.

1 The district court’s opinion granting summary judgment for

defendants Continental, Harris and American as to the charges of

horizontal conspiracy and for Continental as to the charge of verti-

eal conspiracy is reported in Weit v. Continental Ill. Nat'l Bank &

Trust Co., 467 F.Supp. 197 (N.D.I11.1978) (hereinafter “Weit J“).

The decision granted summary judgment for defendants Central

and Pullman on both the horizontal and vertical conspiracy claims

and for defendant Harris on the vertical conspiracy claim is re-

ported at Weit v. Continental Ill. Vat I Bank & Trust, 478 F.Supp.

285 (N. D. III. 1979) (hereinafter “Weit II“).

A-31

1404, 1409, 8 L.Ed.2d 777 (1962). That the issues may be

particularly difficult for jury consideration is immaterial

to the merits of plaintiffs’ claim. The court should only

consider whether, after examining all the evidence, plain-

tiffs’ case remains devoid “of any significant probative

evidence tending to support the complaint.” Ambook

Enterprises v. Time, Inc., supra, 612 F.2d at 611, citing

First National Bank of Arizona v. Cities Service Co., 391

U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968).

II. THE HORIZONTAL CONSPIRACY

As the majority and the district court noted, the eireum-

stances surrounding the formation of Midwest in 1966 and

its successor, Mastercharge, are not in dispute. Weit I,

467 F.Supp. at 199. The significance of plaintiffs’ evidence

introduced in support of their allegations of a horizontal

conspiracy is more readily apparent, however, when viewed

in light of certain salient facts about the Chicago banking

community and the credit card industry at the time of

Midwest’s formation. Plaintiffs produced evidence to show

the following.

In 1966, the Chicago banking market was an oligopoly

dominated by First National Bank and Continental.“ Illi-

2 On appeal from a grant of summary judgment, the appellate

court is to review the record and determine for itself whether there

are any genuine issues of material fact. 6 Pt. 2 Moore’s Federal

Practice 56.27 [1], at 56-1555 (2d Ed. 1980).

First was named as a non-defendant co-conspirator in Counts I

and III of plaintiffs’ third amended complaint. Although First was

a founding member of Midwest, it left Midwest and joined the Bank

Americard System in 1970. Weit I, 467 F.Supp. at 200 n. 3.

* Shull Aff. at 2.

Defendants Harris and Pullman are state chartered banks, and

defendants Continental and Central are nationally chartered banks,

as is First National Bank.

A-32

nois prohibitions against branch banking® contributed to

this high level of concentration.’ Defendants’ officers knew

each other personally, attended many of the same functions,

and were members of the same clubs. Weit I, 467 F.Supp.

at 206-07. Kenneth Zweiner, chairman of Harris, and Tilden

Cummings, of Continental, worked together for 20 years

as trustees of Northwestern University.’ David Kennedy,

chairman of Continental, and Frank Bauder, president f

Central, knew each other “very well” because Bauder had

worked with Kennedy at Continental.“ James R. Kennedy,

who ran the Town and Country Charge Card Program at

Continental,“ became American’s second vice-president in

charge of the bank’s charge card operations, which he de-

signed, instituted and managed.'® Thus, the very nature of

the Chicago banking community facilitated the exchange

of pricing information. Gainesville Utilities Dep’t v. Florida

Power & Light Co., 573 F.2d 292, 303 (5th Cir.), cert. denied,

439 U.S. 966, 99 S.Ct. 454, 58 L.Ed.2d 424 (1978). Given this

situation, defendants’ conduct should be carefully scruti-

nized for evidence of conspiratorial behavior. Id.

Illinois had no credit card interest law in 1966. The Illi-

nois usury statute in effect at that time, however, prohibited

interest rates in excess of a 7% add-on per annum, (which

Harris counsel said would proximate 14% annually),

Il Ann. Stat. ch. 74, § 4 (Smith-Hurd 1966), and defendant

Harris, a state bank, assumed that it would be bound by this

statute. See Plaintiffs’ Ex. 1, quoted in Weit I, 467 F.Supp.

5 Tl. Ann. Stat. ch. 1614, § 106 (Smith-Hurd Supp.1980).

* Shull Aff. at 3.

Deposition of Kenneth V. Zweiner at 17.

Deposition of David M. Kennedy at 64-65.

® Deposition of James R. Kennedy at 357.

1° Deposition of Arthur Stump at 40, 76-77.

A-33

at 200. The federal statute governing the nationally char-

tered banks (defendants Continental and Central, and

First) provided that they could charge interest at the rate

allowed by the laws of the state in which the bank is located.

12 U.S.C. § 85 (1976). In determining what state law it was

bound by, defendant Continental looked to the Illinois Con-

sumer Finance Act, Ill.Ann.Stat. ch. 74, § 19 et seg. (Smith-

Hurd 1966), which applied to small consumer loans and

allowed an interest rate of 3% per month on loans up to

$150.00, or 36% per annum, 2% per month or 24% per

annum on the balance of the loans exceeding $150 and not

exceeding $300, and 1% per month, or 12% per annum, on

any part of the unpaid balance exceeding $300. Id. at 5 31.

Continental interpreted this Act as allowing a 14%2% per

month, or 18% per annum maximum overall effective rate.

Weit I, 467 F.Supp. at 201. Without attempting to resolve

these seemingly conflicting positions, I assume throughout

this opinion that the limitations on the two types of banks

differed as the parties thought.

Defendant banks began discussing the idea of a joint

charge card in 1966 so as to prevent competition from

outsiders and to prevent any one Chicago bank from taking

the lead in the new charge card market. Continental was

afraid that outsiders would enter the market, resulting in

chaos." Continental believed that First’s motive in pro-

posing a joint system was to prevent Continental from

getting a head start.! At the same time, Continental didn’t

11 A memorandum by Thomas G. Patterson to John B. Tingleff,

both Continental officers, stated Valley National Bank, Phoenix

believes that if anyone goes in Chicago others will and this may

result in chaos in the market. Could be [disastrous]. Weit J, 467

F.Supp. at 200.

12 Plaintiffs’ Ex. 6: Feasibility Study—Continental Illinois Nat’!

Bank & Trust Co., dated July 1966, at 45-46.

A-34

want First, Harris and Central to start a charge card

system “while we were sitting over there without a charge

card.“ '* High start-up costs and large initial losses were

projected, Weit I, 467 F.Supp. at 201, so defendants were

anxious to avoid an outbreak of competition. Gaylord Free-

man, president and later chairman of First testified “. . .

since nobody had a viable credit card [in 1966] and it was

all new and if one of the others had aggressively merchan-

dised the card at a lower cardholder interest rate, I think

[First] would have to go too, at the lower rate, too.” Id.

at 207.

In the spring of 1966, then, when the subject of bank

credit cards was. .. in the air,“! First hosted a meeting

attended by representatives of Continental, Harris and

Northern Trust!“ to discuss the feasibility of a credit card

program. The notes of this meeting, held on May 22, 1966,

summarize a discussion about the maximum legal interest

rate:

Lewis {of Harris, a state bank] commented that the

maximum must be no more than the equivalent of 7%

add-on per annum, or less than 14%. Foote [of Harris],

who said he had looked into credit cards on his own for

Harris some months ago, found specific revolving credit

enabling legislation in other states where 142% per

month is in effect. Wood [of First] commented that

this is troubling First’s lawyers, too.

Plaintiffs’ Ex. 1, quoted in Weit I, 467 F.Supp. at 200.

Representatives of the four banks met again on May 26,

18 Deposition of Sheldon Swope, Vice-President of Continental,

at 45.

14 Deposition of Allen Stults, president of American, at 24-25.

15 Northern participated in the original planning sessions, but

dropped out of the program in August, 1966. Weit I, supra at 200,

n. 4.

A-35

1966. The minutes of this meeting state that “Wood [of

First] said the First’s lawyers had two legal questions—

rate and anti-trust—and the anti-trust seemed to be the

easier of the two.” Id. The group began meeting regularly

after this. American was not a formal participant, but

sent a representative. Central, a correspondent bank of

both Harris and Continental, did not participate in these

early meetings, but received status reports on the formation

of a compatible system.“ Pullman, a correspondent of First,

Continental and Harris, did not attend the group meetings

either, as it was planning to issue its own bank credit card.

Pullman received mailings about the compatible system,

however, and in June, a Continental officer called a Pullman

officer to tell him about a pending Continental press release

on the joint system. Weit II, 478 F.Supp. at 289.

During these early meetings, the group determined that

card design, imprints and forms would be uniform, and that

a participating merchant directory, a list of cancelled or

stolen cards, and a merchant instruction booklet would be

jointly issued. Weit I, supra at 200. They also agreed that

their correspondent banks could retain their relationship

with local merchants in return for soliciting card holders.

Id. at 203. Without this latter agreement, the four banks

would have solicited correspondents customers directly,

provoking the correspondents into forming their own bank

credit card systems, thereby diluting the markct. Id.

In late June, 1966, officers of First, Continental, Harris

and Northern flew to San Francisco to consult with the

Wells Fargo Bank about the Western States Bank Card

Association.“ The next day, these officers met with the

16 Deposition of Frank Bauder at 37; Defendants’ Ex. D9 and

Dili.

17 Plaintiffs’ Ex. 93 and 140.

A-36

president of Bank Americard Service Corporation to dis-

euss Bank Americard’s revenues and expenses, including

the “regular 142% per month” interest charge.“

In July, 1966, the four banks retained Information

Sciences Associates, a consulting firm with experience in

the formation of charge card systems. /d. at 200. Later that

month, Continental personnel received a memorandum

dated July 25, 1966 from Miles G. Seeley, senior partner

of Mayer, Brown & Platt, counsel for Continental, limiting

discussions with other banks to the subject of planning a

compatible card system and oe forbidding any

“discussion (even in jest)” of “. . . [f]ees, discounts, billing

and extended credit terms or ow other economic terms of

the relationship between any bank and its own credit card-

holders.“ The four banks employed Mayer, Brown & Platt

to advise them on antitrust matters, and the Seeley

memorandum was distributed to other defendant banks.

From this point on, counsel monitored the meetings of

defendants’ “study group” to ensure anti-trust compliance.”

During this time, defendant Pullman was going ahead

with plans to issue its own charge card. Pullman intended

to announce its card, which was to have an interest rate of

18% per annum, on August 12, 1966, and the program was

to begin on November 7, 1966. Weit II. 478 F.Supp. at

288-90. The other banks knew about Pullman’s plans. A de-

scription of the Pullman credit card program, including the

cardholder interest rate, appeared in the feasibility study

18 Memorandum of Robert K. Miller to John Tingleff, dated July

14, 1966, Ex. A to Defendant Continental's Answers to Plaintiffs’

Interrogatories, filed November 11, 1977 at pp. 23-24.

1 Prater Deposition, Ex. 50; Kranzley Deposition, Ex. 8E.

Deposition of John Mattmiller (Northern), at 39-42.

A-37

prepared by Continental in July, 1966,“ and on August 5,

1966, at a meeting of the Continental Advisory Committee,

Alfred Lindgren of Continental reported “that the Pullman

Bank has changed their package, and are now offering

basically what we are proposing.“ The night before Pull-

man’s scheduled announcement, three Continental officers

had dinner with Donald O’Toole, president of Pullman, and

tried to talk him into delaying Pullman’s start-up date. Id.

at 289. O’Toole refused Continental, Harris and First then

decided to advance their start-up dates to early November.“

On September 8, 1966, Continental announced its plans

for an all purpose charge card.** Harris announced its entry

into the charge card business the next day“ and First made

its announcement the following week.““ All three banks

stated that they would be part of a compatible charge card

system, and that they would issue their cards in November.

None of the announcements mentioned interest rates to be

charged future cardholders. At the same time, Northern

announced it was dropping out of the program.“

Continental, Harris and First continued to inform Pull-

man of their plans. Finally, in the fall of 1966, Pullman

joined the group. 7d. at 289-90. Mr. Murphy, a Pullman

officer who became president of Midwest in 1967, testified

that Pullman joined Midwest “[{bJecause we were con-

cerned ... that we were going to have competing bank card

systems .... And also, that we were a failure.” Id.

21 Plaintiffs’ Ex. 6 at 43.

22 Lindgren Deposition, Ex. 2.

28 Defendants’ Ex. A6, Prater Deposition, Ex. 55 and 56.

24 Defendants’ Ex. A6.

25 Prater Deposition, Ex. 55.

26 Prater Deposition, Ex. 56.

* Prater Deposition, Ex. 55.

A-38

Central decided to join the group at this time as well.

Although it had not participated in or sent a representative

to the formal study group meetings, a Central vice-president

had attended a presentation on interbank charge card

transfers held in late August. Jd. at 288. Central also knew

of Pullman’s plans. Id. Central officers assumed they would

charge the maximum legal interest rate, which their counsel

had advised was 18% per annum, or 144% per month. /d.

On October 24, 1966, First, Continental, Harris, Central

and Pullman signed the “interim agreement” establishing

the Midwest charge card system. Weit I, 467 F.Supp. at 202.

The agreement mandated certain requirements for all mem-

bership banks: uniform floor limits; uniform cash advance

limits; uniform merchandising return procedures; uniform

advertising limitations; uniform transaction reporting pro-

cedures ; and uniform card format and design. Id. It did not

mention charge card holder interest rates. By this time,

however, each defendant, with the exception of Americans“

was planning on charging its cardholders an interest rate

of 18% per annum, or 144% per month. Continental, which

thought it was bound by the Illinois Consumer Finance Act,

could have charged an interest rate of 36% per annum for

the first $150, 24% on the next $150, and 12% on the re-

maining balance above 8300,“ but settled on an interest rate

of 18% per annum, as did Central, which decided 18% was

the maximum allowed by law. Weit II, 478 F.Supp. at 288.

Harris, which assumed it was limited by the Illinois usury

law*® to charging a 7% add-on, or less than 14% annually,

Weit J, 467 F.Supp. at 200, arrived at the 18% interest rate

28 American did not join Midwest until 1969, although a repre-

sentative of American attended the group meetings. Weit I, 467

F.Supp. at 202.

29 III. Ann. Stat. ch. 74, § 31 (Smith-Hurd) 1966).

0 III Ann. Stat. ch. 74, § 4 (Smith-Hurd, 1966).

A-39

by charging 1% interest and ½%% “service charge” per

month.“ Pullman was also charging an interest rate of 18%.

When the Illinois General Assembly convened in 1967, the

Midwest group hired William Dillion, a lawyer and pro-

fessional lobbyist, to lobby for a credit card interest bill

and represent the banks before the Illinois legislature."

An early draft of the Midwest bill set the maximum card-

holder interest rate at 24%, % but later drafts settled on

18%.** Midwest paid Dillion for his efforts, even though

Dillion thought the bill was unnecessary for the national

banks.“ The legislature passed the Midwest bill which went

into effect on July 24, 1967,** eight months after the banks

first issued their cards at the uniform rate of 18% per

annum.

Although American had attended the Midwest organiza-

tional meetings in 1966, it did not get into the charge card

business until 1968. It then hired James Kennedy, who ran

the charge card program at Continental, to establish the

program for American. Weit I, 467 F.Supp. at 204. Ameri-

can joined Midwest in the spring of 1969, charging the (by

now) standard cardholder interest rate of 18% per annum.

Id. Midwest joined the Interbank Card Association, Inc.

(Ma ercharge) that year as well. Id. at 205. In 1970, First

left the Midwest system, joined Bank Americard, and began

soliciting the defendants’ correspondent banks for the first

time. Id.

31 Appellants’ brief at 65, citing Plaintiffs’ Ex. 105 and 733.

82 Deposition of William Dillon at 13.

33 Dillon Deposition, Ex. 19 and 15A.

Dillon Deposition, Ex. 16A.

35 Dillon Deposition at 210-11; Ex. 6 and 9.

36 III Ann Stat. ch. 74, § 4.2 (Smith-Hurd Supp. 1980).

A-40

When plaintiffs first filed suit in 1970, defendants were

still charging an interest rate of 18%, the same rate being

charged today.

Defendants, in their motion for summary judgment, in-

troduced affidavits by and depositions of their officers

denying the existence of an agreement and giving business

reasons for arriving at the 18% per annum charge card

holder interest rates David M. Kennedy, chairman of the

Board of Directors, for Continental, stated that during

the summer of 1966, he determined that Continental’s

charge card should carry the highest interest rate legally

permissible so as to make the system, for which Continental

projected early high losses, profitable as soon as possible.

Weit I, 467 F.Supp. at 201. Harris Bank’s senior vice-

president, Carroll E. Prater, also testified that Harris

decided to charge the maximum legal rate because “it was

an expensive business to get into. .. losses were very high.”

Id.

Pullman officers stated that they arrived at an interest

rate of 1½ % per month based on their prior experience

in the charge card business. Weit II, 478 F.Supp. at 289.

Even at that rate, they did not expect the charge card pro-

gram to be profitable for several years. Id. Frank Bauder,

chairman of Central, testified that by the time Central

decided to join Midwest in September of 1966, the 114%

per month interest rate was taken for granted as necessary

to cover costs. Id. at 288. James Kennedy, American’s

second vice-president in charge of the bank's charge card

operations, gave similar reasons for American’s decision to

charge 114% per month. Weit I, 467 F.Supp. at 204.

Defendants also argued that it was public knowledge

that Bank Americard and other retail and oil credit cards

were charging an interest rate of 144% per month or 18%

A-41

per annum. Finally, they relied on written memorandum

from their lawyers forbidding the discussion of interest

rates as evidence that they did not agree on the uniform

interest rate.

Under Rule 56(e) defendants’ denials were sufficient to

shift the burden to plaintiffs to produce some significant

probative evidence tending to support their complaint. First

National Bank of Arizona v. Cities Service, 391 U.S. 253,

289-90, 88 S.Ct. 1575, 1592-1593, 20 L.Ed.2d 569 (1968). The

critical question then becomes whether plaintiffs presented

enough evidence so that a rational trier of facts could find

that this uniform interest rate resulted from an agreement

among and between defendants rather than from inde-

pendent identical decisions by individual bankers. See

Ambook Enterprises v. Time, Inc., 612 F.2d 604, 613 (2d

Cir. 1979), cert. dismissed, —— U.S. ——, 101 S.Ct. 35, 65

L.Ed.2d 1179 (1980). In order to infer such an agreement,

there must be more than merely parallel business conduct.

See Theatre Enterprises, Inc. v. Paramount Film Dis-

tributing Corp., 346 U.S. 537, 541, 74 S.Ct. 257, 259, 98 L.Ed.

273 (1954). I think that plaintiffs did present evidence of

more than merely parallel conduct, from which a jury could

rationally conclude that defendants Continental, Harris,

Pullman and Central agreed on uniform interest rates.

First of all, plaintiffs produced evidence showing that

defendants Continental, Harris and Pullman knew the in-

terest rates being contemplated by each. At the very first

formal meeting of the group, which representatives of

Continental and Harris attended, Harris officers stated they

were afraid they may be bound by the Illinois usury limits,

but that other states had enabling legislation allowing an

interest rate of 144% per month. From this statement it

A-42

can be inferred that Harris hoped to charge 1½ % per

month. Then, in late June, 1966, officers of defendants

Continental and Harris, along with representatives of First

and Northern, met with the president of Bank Americard

and discussed what Continenta! officers termed the “regular

144% per month interest char,..” (Emphasis added.) From

this statement it can be inferreo that Continental was plan-

ning on charging 142% per month interest.“ Because Con-

tinental knew in July, 1966, that Pullman was going to

charge its cardholders an interest rate of 144% ,» r month

or 18% per annum, it can be inferred that Pullman told

Continental as much.

This exchange of information regarding the “regular”

interest rate and the interest rate being charged by Pull-

man is analogous to [a] knowing wink [which] can mean

more than words” in determining whether defendants

agreed to fix prices. Esco Corp. v. United States, 340 F.2d

1000, 1007 (9th Cir. 1965). In Esco, the court held that an

exchange of price information at a meeting called by Esco

Corporation’s largest competitor was sufficient evidence,

when combined with price uniformity, for inferring a price

fixing conspiracy :

[Sluppose five competitors meet on several occasions,

discuss their problems, and one finally states I won't

fix prices with any of you, but here is what I am going

to do—put the price of my gidget at X dollars; now

you all do what you want.” He then leaves the meeting.

Competitor number two says—“I don’t care whether

number one does what he says he’s going to do or not,

37 It can also be inferred from this statement that Continental was

saying “this is the only rate a bank should charge.” It is interesting

to note that Continental referred to 18% as the “regular” interest

rate several months before it consulted with Robert Bloom, Chief

Counsel to the Illinois Comptroller of the Currency. The United

States Treasury, regarding its interpretation of the Illinois Con-

sumer Finance Act, Weit I, 467 F.Supp. at 201.

A-43

nor do I care what the rest of you do, but I am going

to price by gidget at X dollars.” Number three makes

a similar statement— “My price is X dollars.” Number

four says not a word. All leave and fix “their” prices

at “X” dollars.

We do not say the foregoing illustration compels an

inference in this case that the competitors’ conduct con-

stituted a price-fixing conspiracy, including an agree-

ment to so conspire, but neither can we say, as a matter

of law, that an inference of no agreement is compelled

....+ [I]t remains a question for the trier of fact... .

Id.

Here, defendants Continental and Harris said they

wouldn't fix prices,“ yet in discussions between the two

banks, representatives of Harris spoke of 142% enabling

legislation and Continental officers referred to “regular

1%%” interest rates. In the same way, Pullman told Con-

tinental what it was going to charge. The Supreme Court

has held that an exchange of price information, in an in-

dustry dominated by relatively few sellers, is itself a vio-

lation of section 1 of the Sherman Act because [plrice is

too critical, too sensitive a control to allow it to be used

even in an informal manner to restrain competition.” ited

States v. Container Corp. of America, 393 U.S. 333, 338, 89

S.Ct. 510, 513, 21 L.Ed.2d 526 (1969). If the Supreme Court

could find that the exchange of price information was suffi-

cient for inferring a price-fixing agreement, surely we

should consider it as some evidence, when combined with

subsequent parallel pricing, joint action, product uniformity

and motive from which an agreement could be inferred.““

Continental circulated the Seeley memorandum forbidding the

discussion of interest rates to other Midwest banks, including Harris.

See nn. 19 and 20, and aceon panying text, supra.

3® Defendants argue that it was common knowledge that 114% per

month was the “regular” interest rate. This does not prevent them

from agreeing to c arge that rate, however.

A-44

Plaintiffs introduced no evidence indicating that defend-

ant Central exchanged any interest rate information with

defendants Continental, Harris and Pullman. Yet when

Central joined Midwest in the fall of 1966, it charged the

same interest rate as discussed by the other defendants,

even though it could have charged the higher rate allowed

to National banks. It is not necessary for each defendant to

have participated in every act of the conspiracy in order to

be charged with such, as long as they had a common purpose

connecting their acts. See Esco Corp. v. United States,

supra, 340 F.2d at 1006. Here, Central participated in other

activities from which its participation in the conspiracy

can be inferred.

The district court judge did not consider the joint lobby-

ing activities by defendants Continental, Harris, Central

and Pullman,“ stating that the pr dice of this evidence

outweighed its probative value. Weit J, 467 F.Supp. at 207-

08 n. 22. The majority adopts this holding, but I respect-

fully disagree. Federai Rule of Evidence 403 is meant to

exclude evidence which tends to horrify, evoke sympathy or

increase a desire to punish due to prior bad acts, and whose

probative value is slight. 10 Moore’s Federal Practice

§ 403.10[1], at IV-75 (2d Ed. 1979). Defendants’ lobbying

activities do not fall into any of these categories.

While defendants’ united support of the 18% per annum

interest rate is not in itself illegal under Eastern Railroads

Presidents Conference v. Noerr Motor Freight, Inc., 365

U.S. 127, 81 S.Ct. 523, 5 L. Ed. 2d 464 (1961), “ it is certainly

% These four defendants were Midwest members when Midwest

hired William Dillon.

*! Plaintiffs did not allege that this activity in and of itself con-

stituted an illegal conspiracy. Rather, they introduced it as evidence

of the alleged agreement between defendant banks to fix the interest

rate of 18%. This evidence thus falls within an exception to the

A-45

probative of an existing agreement to fix interest rates at

that level. The inference is very readily drawn that de-

fendants could not have worked together on the same bill,

at a time when a number of different interest rates could

have been agreed to, and when defendants had differing

understandings regarding the legal restrictions on their in-

terest rates, without implicitly agreeing that 18% was the

rate they thought best and would therefore charge. Indeed,

this is the rate they were each charging when they agreed

to support a credit card interest bill. The Supreme Court

has held that such a concerted effort, when defendants con-

formed to the arrangement, is probative of a price fixing

conspiracy. See United States v. Paramount Pictures, 334

U.S. 131, 142, 68 S.Ct. 915, 921, 92 L.Ed. 1260 (1948). Thus,

defendants’ joint lobbying activities should be considered

as further evidence of an implicit agreement to charge 18%

interest rate per year.

Another factor contributing to the evidence from which

an agreement to fix interest rates may rationally be in-

ferred is defendants’ express agreement to standardize

everything about their charge cards other than marketing

strategy and interest rates. Defendants admitted that

“(h]omogeneity was legislated into the product by edict. In

fact, this identity is the philosophic heart and soul of the

compatible agreement each bank must sign to gain admis-

sion into the system.“ Plaintiffs’ expert witness testified

Noerr rule being the “established rule of evidence that testimony of

prior or subsequent transactions, which for some reason are barred

from forming the basis for a suit, may nevertheless be introduced if

it tends reasonably to show the purpose and eharacter of the par-

ticular transactions under scrutiny.” United Mine Workers of

America v. Pennington, 381 U.S. 657, 670 n.3, 85 S.Ct. 1585, 1593,

n.3, 14 L.Ed.2d 626 (1965).

Egan Deposition, Ex. 16 at 99.

A-46

that these uniform requirements were no more essential to

the compatibility of the charge card system and the inter-

change of sales slips than they are to the interchange of

checks.“

In a competitive industry, such standardization could

perhaps enhance price competition. L. Sullivan, Antitrust

§ 98 at 276 (1977). But in an oligopoly, and plaintiffs have

shown that the Chicago banking industry may be fairly

characterized as such, non-price competition is valuable,

and anything tending to standardize non-price terms harms

competition. Id., § 99 at 279. The Ninth Circuit recognized

this harm in C-O-Two Fire Equipment Co. v. United States,

197 F.2d 489 (9th Cir. 1952), when it statcd that product

standardization of a product that is not naturally standard-

ized facilitates the maintenance of price uniformity. Id. at

493. Thus, product standardization was another factor, in

addition to parallel conduct, from which a conspiracy to fix

could be inferred. Id

Here, under competitive conditions, credit card character-

istics would have changed as independent banks experi-

mented with one or another promotional features and card-

holders and merchants gave their business to the banks

offering the most attractive combination.“ Instead, de-

fendants Continental, Harris, Central and Pullman each

signed an agreement, on the same day, which artificially

homogenized their product and eliminated an area of po-

tential competition. Their defense that such standardization

was needed to eliminate chaos among the merchants and

public, see Weit I, 467 F.Supp. at 211, should not be de-

finitive of the issue, as industry self-regulation should be

viewed with suspicion. See United States v. Socony- Vacuum

#8 Shull Aff. at 5.

** Shull Aff. at 6.

A-47

Oil Co., 310 U.S. 150, 220-22, 60 S.Ct. 811, 842-843, 84 L. Ed.

1129 (1940).

Plaintiffs also introduced evidence of defendants’ op-

portunity to conspire. Aside from the formal study group

meetings, which representatives of Continental, Harris

and American attended, and of which Central and Pullman

were kept informed, defendants’ officers met informally

on numerous occasions. Oppertunity to conspire, standing

alone, is insufficient for inferring a conspiracy. It may be

considered, however, in determining whether all of the

evidence, in addition to parallel behavior, warrants an in-

ference of common, rather than individual conduct. L. Sul-

livan, Antitrust, § 110 at 317 (1977). Evidence of meetings

between defendants, presenting an opportunity to conspire,

were plus factors in finding a price-fixing agreement in C-O-

Two Fire Equipment Co. v. United States, even though

there was no evidence of what was discussed. C-O-Two Fire

Equipment Co. supra, 197 F. 2d at 493.*° And in Esco Corp.

v. United States, 340 F.2d 1000 (9th Cir. 1965), the court

affirmed a jury finding of price-fixing based on evidence that

defendants were at two méetings during which the elements

necessary to price fixing were discussed, although there was

45 The district court distniguished C-O-Two from the present case

by saying that a finding of conspiracy was warranted in light of

other factors: identical bids, unnecessary product standardization,

illegal licensing contracts, dealer policing, and identical price in-

creases at times of surplus, coupled with the fact that the defendants

offered no rebuttal evidence. Weit I, 467 F.Supp. at 214. Admit-

tedly, plaintiffs in this case have not made as strong a showing of

conspiracy as did the government in C-O-Two. But this case is not

a challenge to the ley | sufficiency of the evidence for a criminal

conviction. All that is necessary to withstand a motion for summary

judgment, which is the only issue at this point, is a showing of at

least one other factor, in addition to parallel pricing, from which a

jury could infer an agreement. L. Sullivan, Antitrust § 110, at 317

(1977). Plaintiffs have shown at least three such factors, and their

opportunity evidence merely contributes to the overall picture.

A-48

no evidence of an agreement other than parallel behavior.

The court stated:

As in so many other instances, it remains a question

for the trier of fact to consider and determine what

inference appeals to it (the jury) as most logical and

persuasive, after it has heard all the evidence as to

what these competitors had done before such meeting,

and what actions they took thereafter, or what actions

they did not take.

Id. at 1007.

Defendants denied any discussion of interest rates at

these formal and informal meetings. But the fact of their

meetings, combined with their knowledge of the interest

rates to be charged by fellow defendants, their decision

to lobby together in the legislature for an 18% rate and

their express agreement on non-interest aspects of their

parallel conduct, provide sufficient evidence from which a

jury could infer that interest rates were in fact discussed.

The jury should have the opportunity to decide for itself

that defendants’ denials are more credible than plaintiffs’

circumstantial evidence of an agreement.

Finally, plaintiffs introduced evidence of defendants’

motive to conspire. It was plaintiffs’ inability to show a

motive to agree and benefits obtained through the agree-

ment which led the Supreme Court to affirm a summary

judgment for defendants in First National Bank of Arizona

v. Cities Service Co., 391 U.S. 253, 287, 88 S.Ct. 1575, 1591,

20 L.Ed.2d 569 (1968). In the present case, defendants ad-

mitted the motive for doing exactly what they are accused

of: defendant officers testified that they were afraid of

aggressive competition in the new market for credit cards,

which they thought would result in chaos. If someone en-

tered the market at a lower rate, which Harris thought it

may have been forced to do, given the state usury laws,

A-49

the other defendants may have marketed their cards at a

lower rate as well. None of the banks wanted to face this

possibility as they were afraid of large losses in starting

the new program.“

Defendants introduced independent business reasons to

explain their decisions to charge an 18% per annum interest

rate. it is up to the jury, however, and not the trial judge,

to decide which explanation for defendants’ action is more

reasonable. See Continental Baking Co. v. United States,

281 F.2d 137, 143-46 (6th Cir. 1960).“ Furthermore, the

legitimate business reasons which defendants suggest moti-

vated their actions do not defeat the possibility that

defendants acted collusively. Reading Industries, Inc. v.

Kennecott Copper Co., 1979-2 Trade Cases { 62,906 at

79,215 (S.D. N.Y. 1979). The Supreme Court has stated:

“(t)his evidence [of business judgment], together with

other testimony of any explanatory nature, raised fact

% At the same time, defendant Continental, which thought it

was bound by the Illinois Consumer Finance Act, gave up the oppor-

tunity to charge a higher interest rate—36% per annum on balances

up to $150—which would have enabled it to recoup its projected

losses much more quickly. Such an apparent contradiction in self

interest “strengthens considerably the inference of conspiracy.”

Milgram v. Loews, Inc., 192 F.2d 579, 583 (3rd Cir. 1951).

* In Continental, the government charged Continental with par-

ticipating in a price fixing conspiracy and introduced evidence

showing that defendants met prior to each price increase. As in

Weit I, the government did not introduce any evidence of a specific

agreement. The trial judge decided for himself that there was an

agreement, and consequently refused defendants the opportunity to

present evidence of economic factors leading to these price increases.

The Sixth Cireuit reversed, stating that it was up to the jury to

determine whether an agreement existed, based on all the evidence.

Id. at 143. Weit I is analogous, in that here, the trial judge decided

for himself that defendants explanations were more reasonable than

1 tiffs and that there was no agreement.

A-50

issues requiring the trial judge to submit the issue of

conspiracy to the jury.” Theatre Enterprises, Inc. v. Para-

mount Film Distributing Corp., 346 U.S. 537, 542, 74 S.Ct.

257, 260, 98 L.Ed. 273 (1954). In Theatre Enterprises, as in

Weit I, defendants had denied any agreement and had in-

troduced evidence of local conditions, attributing their uni-

form action to individual business judgment. The Supreme

Court went on to affirm the jury verdict for defendants,

over plaintiff’s argument that the district court should

have directed a verdict, but it was the jury, and not the

court making the ultimate decision. When defendants’

credibility is at issue, as it was in Theatre Enterprises and

is in Weit I, directed verdicts and summary judgments

“should be used sparingly,” because “[i]t is only when the

witnesses are present and subject to cross examination that

their credibility and the weight to be given their testimony

can be appraised.” Poller v. Columbia Broadcasting System,

Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458

(1962).** In the present case, the district judge overstepped

his proper role by determining for himself that defendants’

explanations were more credible than plaintiffs’ explanation

It is true tnat defendants’ credibility in the present case is not

at issue in the same way in which it was at issue in Poller. There,

the issue was defendants’ intent, as their actions in cancelling

plaintiffs affiliation contract and then buying its equipment would

have been legal unless done with an intent to monopolize. CBS, in its

motion for summary judgment, presented “substantial evidence

tending to show the nonexistence of conspiratorial behavior.” (ities

Service, supra, 391 U.S. 253, 285, 88 S.Ct. 1575, 1590, 20 L.Ed.2d

569 (discussing the difference between Poller and Cities Service).

Nonetheless, the Court held that the deni

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