# Motion — Crown Oil Corp. v. Lapidus Popcorn, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Motion
- **Published:** January 1, 1986
- **Citation:** 479 U.S. 879

## Text

Supreme Court, U.S,

FILED

ae SEP 19 1986

)} JOSEPH F. SPANIOL,
7 CLERK

No. 86-287

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1986

Crown O1L CORPORATION, GRANEX CORPORATION,
U.S.A. and PAN-PACIFIC COMMODITIES,
Appellants,,

Vv.

LapPipus Popcorn, INC.,
Appellee.

On Appeal from the Court of Appeal
of the State of California After Denial
of Review by the Supreme Court of California

MOTION TO DISMISS APPEAL

FRANCIS O. SCARPULLA
Counsel of Record

SCARPULLA & SCARPULLA
A Professional Corporation
423 Washington Street, 4th Floor
San Francisco, CA 94111
(415) 788-7210

[ Additional Counsel Appear
on Signature Page]

Counsel for Appellee
Lapidus Popcorn, Inc.

BOWNE OF GAN FRANCISCO. INC. + 130 NINTH ST. « S.F.. CA 94193 + (415) 864-2300

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QUESTION PRESENTED

This appeal was taken from a decision of the California Court
of Appeal affirming the trial court’s order overruling Defendants-
Appellants’ demurrer to this state antitrust action. Thus, the only
question presented here is:

Whether the Court of Appeal’s opinion in Crown Oil
Corporation v. Superior Court, 177 Cal. App. 3d 604, 223
Cal. Rptr. 164 (1986) deciding that Appellants’ //linois
Brick demurrer to an indirect-purchaser Cartwright Act case
presents a substantial Federal question, should be reviewed
by this Court?

ii
DESIGNATION OF CORPORATE RELATIONSHIPS

Lapidus Popcorn, Inc. has no parent company and does not
have an ownership interest in any subsidiary.

ili
TABLE OF CONTENTS

COUNTERSTATEMENT OF THE CASE............
REASONS FOR DISMISSING THE APPEAL........
A. The appeal should be dismissed for lack of finality

B. The California Court of Appeal did not decide the
due process issue

et ee ee ee ee a ee oe ee ee ee a a a eo ae

1. The Court of Appeal’s decision is not a final
judgment on the federal issue for purposes of
state court proceedings... .............0005.

2. Review of the Court of Appeal’s opinion would
not preclude further litigation

CONCLUSION

SS 2S 86) 4:6 & SA OO 8

a eh og ay oy ee ee Te le es ee ee ee ee a a ee oe ee |

iV

TABLE OF AUTHORITIES

Cases
Lh
Agency Rent-A-Car, Inc. v. Connolly, 686 F.2d 1029 (Ist

<n, Ee rere er rt gee CN Perry aera 7
Associated General Contractors of California, Inc. v. Cali-

fornia State Council of Carpenters, 459 U.S. 519 (1983) 6
Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982) 6
California v. Zook, 336 U.S. 725 (1949) ............... 4,7
Cities Service Co. v. McGrath, 342 U.S. 330 (1952) ..... 5
Clark v. Kansas City, 172 U.S. 334 (1899) ............. 3
Colorado Anti-discrimination Commission v. Continental

pa Se ye a oR. By SG . . * | acer area 7
Cox Broadcasting Corporation v. Cohn, 420 U.S. 469

LAD ies Fe BE ari er rere Tawny yr ee ee 4,5
Crown Oil Corporation v. Superior Court, 177 Cal. App.

56 G4, 725 Cal. Role. 166 CIES) ... 5 cc ccc ceas. 3,4
Flynt v. Ohio, 451 U.S. 619 (1981) ..............000-. 4
Hayfield Northern Railroad Co., Inc. v. Chicago & N.W.

Transportation Co., 467 U.S. 622 (1984) ............. a
Illinois Brick v. Illinois, 431 U.S. 720 (1977) ......... 2, 4, 6
In Re Beef Industry Antitrust Litigation, 600 F.2d 1148 (Sth

rE ac Siig Gt ie aes i GN sarees ae 4
McComb v. Commissioners, 91 U.S. 1 (1876) .......... 3
Meagher v. Minnesota Thresher Mfg. Co., 145 U.S. 608

(1 RAE Es GRE A Senn aE Ore ee teen Lae 3
Mid-West Paper Products Co. v. Continental Group, 596

VF Bp Be” Ca), | ee eerie ere tare 4
North Dakota State Board of Pharmacy v. Snyder’s Drug

a ae aS a ek | re rare 2
Radio Station WOW v. Johnson, 326 U.S. 120 (1945) ... 3
Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) .... 5,7
Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71 (1961) 5

Other
i ee, Te et CSD 6a vic koe nn cedsncceveveruks 6

No. 86-287

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1986

CROWN OIL CORPORATION, GRANEX CORPORATION,
U.S.A. and PAN-PACIFIC COMMODITIES,
Appellants,

ws

LAPIDUS PopcorN, INC.,
Appellee.

On Appeal from the Court ef Appeal
of the State of California After Denial
of Review by the Supreme Court of California

MOTION TO DISMISS APPEAL

COUNTERSTATEMENT OF THE CASE

In September 1984, Plaintiff-Appellee, Lapidus Popcorn, Inc.
(“Lapidus”) filed suit against Defendants-Appellants, Crown Oil
Corporation, Granex Corporation, U.S.A. and Pan-Pacific Com-
modities, alleging a price-fixing conspiracy in violation of both
California’s antitrust laws (Business and Professions Code, Sec-
tion 16700, et seg.), and its unfair business practices statutes
(Business and Professions Code, Section 17200, et seq.).

As Lapidus did not purchase coconut oil directly from any
defendant, Appellants demurred to the complaint, claiming that
the California Superior Court lacked jurisdiction to hear the suit
and that the complaint failed to state a cause of action. According
to Appellants, to the extent that California’s antitrust act permits

2

indirect-purchaser suits, it conflicts with, and is preempted by,
this Court’s decision in J//inois Brick v. Illinois, 431 U.S. 720
(1977). Moreover, Appellants claim that these California code
sections unduly burden interstate commerce.

On May 9, 1985, the trial court entered an order overruling
Appellants’ demurrer. Appellants’ Appendix, p. !2.

The California Court of Appeal initially denied Appellants’
petition for mandate. Appellants’ Appendix, p. 15. The California
Supreme Court instituted the Court of Appeal to hear that
petition. Appellants’ Appendix p. 16. The Court of Appeal then
heard argument and filed the opinion under consideration here.
The California Supreme Court subsequently denied Appeliants’
petition for review after the judgment of the Court of Appeai had
been entered. Appellants’ Appendix p. 18-19.

Appellants’ now seek review of the Court of Appeai’s decision
in this Court, incorrectly claiming that a substantial federal
question is presented.

REASONS FOR DISMISSING THE APPEAL
A. The Appeal Should Be Dismissed for Lack of Finality

Both Title 28 U.S.C. sections, 1257 and 2103, require that the
judgment or decree of the highest state court respecting the
federal question be final before this Court can entertain an appeal
from such an order. As noted in North Dakota State Board of
Pharmacy v. Snyder's Drug Stores, Inc., 414 U.S. 156, 159
(1973), this finality requirement serves ends relating to judicial
economy, comity, and federalism because:

(1) it avoids piecemeal review of state court decisions; (2)
it avoids giving advisory opinions in cases where there may
be no real “case” or “controversy” in the sense of Art. IIT;
(3) it limits review of state court determinations of federal
constitutional issues to leave at a minimum federal intrusion
in state affairs.

The Court of Appeal’s February 14, 1986 decision affirming the
Superior Court’s order overruling Appellants’ demurrer is not a
final order. Finality is lacking where the court overrules a demur-

3

rer and orders that an answer be filed. Clark v. Kansas City, 172
U.S. 334 (1899); Meagher v. Minnesota Thresher Mfg. Co., 145
U.S. 608, 610-611 (1892); McComb v. Commissioners, 91 U.S. |
(1876); For this reason alone, Lapidus respectfully suggests that
this Court should dismiss this appeal.

B. The California Court of Appeal Did Not Decide the Due
Process Issue

The Court of Appeai held that Appellants had not demon-
strated that California’s remedy for antitrust violations was pre-
empted by the federal remedy articulated in J/linois Brick, and,
therefore, left undecided the subsidiary and related due process
challenges raised by Appellants in their demurrer. The potential
for multiple liability claimed by Appellants could not be litigated
at the pleading stage of this case. Any such ruling would consti-
tute “sheer speculation” by the courts and would constitute an
impermissible “advisory opinion.” Crown Oil Corporation v. Su-
perior Court, 177 Cal. App. 3d 604, 223 Cal. Rptr. 164, 169
(1986). Consequently, without a record, the Court of Appeal
stated it was premature to consider the due process component of
Appellants’ preemption claim. /d. at 169-170.

Notwithstanding the special concerns of federalism and comity,
review of the preemption decision when the related federai due
process issue has been left unresolved makes appellate review by
this Court at this juncture inappropriate. Justice Frankfurter
cautioned against such piecemeal appeals in Radio Station WOW
v. Johnson, 326 U.S. 120, 127 (1945) stating:

Of course, where the remaining litigation may raise other
federal questions that may later come here...to allow
review of an intermediate adjudication would offend the
decisive objection to fragmentary reviews.

Despite this apparent facial lack of finality, Appellants suggest
that review by this Court is appropriate as the Crown Oil decision
“involves a direct assault upon the important federal policies
recognized in this Court’s decision in J/linois Brick. ...” Appel-
lants’ Jurisdictional Statement p. 7 fn. 3.

4

Of course, that is not the issue. The only issue here is whether
the Crown Oil decision has -the requisite finality and, if so,
whether a substantial federal question is presented, both of which
are lacking here.

1. The Court of Appeal’s Decision Is Not a Final Judg-
ment on the Federal Issue for Purposes of State Court
Proceedings

The first category invoked by Appellants permits federal appel-
late review of a state court judgment which is a “final judgment
on the federal issue for purposes of state court proceedings,” and
there is “no probability of piecemeal review with respect to
federal issues.” Flynt v. Ohio, 451 U.S. 619, 621 (1981); see also,
Cox Broadcasting Corporation v. Cohn, 420 U.S. 469 (1975).

Only one aspect of the preemption challenge to the complaint
was resolved by the California Court of Appeal. Following this
Court’s precedent, the Court of Appeal first found that it was not
the intention of Congress to preempt the field of antitrust enforce-
ment. Crown Oil, supra, 223 Cal. Rptr. at 167-68. Furthermore,
the Court of Appeal found no conflict between the federal and
State statutes concerning conduct condemned under the Sherman
Act and the Cartwright Act. Jd. 167-68 (citing Alton Box Board
Co. v. Esprit de Corp., 682 F.2d 1267, 1274 fn.11 (9th Cir.
1982)).

Certain indirect-purciiaser remedies survived this Court’s deci-
sion in //linois Brick. ““Cost-plus” pricing to customers, as well as
indirect purchasers who buy products from producer-owned or
controlled direct purchasers, may still institute federal Sherman
Act suits. I/liniois Brick, supra, 431 U.S. at 135-36 and fn.16.
Indirect purchasers may also maintain actions for injunctive
relief. In Re Beef Industry Antitrust Litigation. 600 F.2d 1148,
1167 (Sth Cir. 1979); Mid-West Paper Products Co. v. Continen-
tal Group, 596 F.2d 573, 589-594 (3rd Cir. 1979). Thus, in
indirect-purchaser actions, a potential conflict arises only when
comparing federal and state remedies with respect to damages.

That an offense against both state and federal statutes might
draw separate prosecutions and differing penalties from each is
not evidence of federal preemption, as Appellants urge. California

5

v. Zook, 336 U.S. 725, 730-31 (1949). Using the more recent,
and far more complex statutory schemes in Silkwood v. Kerr-
McGee Corp., 464 U.S. 238 (1984) and Hayfield Northern
Railroad Co., Inc. v. Chicago & N.W. Transportation Co., 467
U.S. 622 (1984), the California Court of Appeal concluded that
the Cartwright Act’s remedy for antitrust violations did not
conflict with the federal remedy.

Left unresolved was the related due process challenge raised by
Appellants under the so-called “common fund” theory.’ This
issue, derivative of the preemption claim, was not decided by the
Court of Appeal. A ruling on this due process claim could not and
should not be made in a hypothetical vacuum. To date, no
California court has had the opportunity to fashion a method for
assessing damages for indirect-purchaser Cartwright Act suits.

Therefore, as the Court of Appeal’s pinion did not finally
resolve the due process issue, no final, substantial federal question
is presented here and this appeal should be dismissed.

2. Review of the Court of Appeal’s Opinion Would Not
Preclude Further Litigation

The second category into which Appellants attempt to place
this appeal permits interlocutory review by this Court when
“reversal of the state court on the federal issue would be preclu-
sive of any further litigation on the relevant cause of action,” Cox
Broadcasting, supra, 420 U.S. at 482-83. Appellants claim that
the case involves “identifiable federal statutory or constitutional

' Appellants’ reliance on Western Union Tel. Co. v. Pennsylvania, 368
U.S. 71 (1961) and Cities Service Co. v. McGrath, 342 U.S. 330 (1952)
distorts the holdings in these cases. Neither involves any wrongdoing by
defendants. Both involve competing interests to possession uf the same
property. Underlying Appellants’ use of these “due process” decisions is
the unsubstantiated assumption that each tortious wrongdoing should
produce only one fund from which injured parties can claim. That
assumption ignores the fact that antitrust law is derived from intentional
tort law. Consequently, the wrongdoer is responsible for payment to
anyone foreseeably injured, noi merely for creation of some single fund
created by the overcharge.

6

policies which would [be] undermined by the continuation of the
litigation in the state courts.”

No federal statutory or constitutional policies are being under-
mined by the prosecution of this indirect-purchaser suit.

Neither the Sherman Act nor the Clayton Act precludes
indirect-purchaser suits. As a rule of judicial economy, this
Court’s J/linois Brick opinion concluded that “the legislative
purpose in creating a group of ‘private attorneys general’ to
enforce the antitrust laws under Section 4 is better served by
holding direct purchasers to be injured to the full extent of the
overcharge. ...” J/linois Brick, supra, 431 U.S. at 746.

This Court’s decision was neither a rule of standing, nor a
decision of constitutional proportions. /d. at 728 fn.7; see also
Associated General Contractors of California, Inc. v. California
State Council of Carpenters, 459 U.S. 519, 535 fn.31 (1983).
Illoinis Brick was a decision concerning statutory construction
only. /d. at 736. This Court apparently determined that ordinarily
the indirect purchaser theory of damages should not be imposed
on the federal judiciary. Blue Shield of Virginia v. McCready, 457
U.S. 465, 475 fn.11 (1982); Associated General Contractors of
California, supra, 459 U.S. at 544 fn.51.

Illinois Brick did not vitiate a states’ authority to permit their
courts the opportunity to fashion damage remedies for indirect-
purchaser actions brought under state statutes.

The legislative history of the Sherman Act, 15 U.S.C., Section
1, reveais that the Act’s sponsor, Senator Sherman, did not intend
it to preempt state antitrust laws:

This bill... has for its... object to invoke the aid of the
courts of the United States to deal with the combinations . . .
when they affect injuriously our foreign and interstate com-
merce... and in this way to supplement the enforcement of
the established rules of the common and statute laws by the
several states in dealing with combinations that affect injuri-
ously the industrial liberty of the citizens of those states. It is
to arm the federal courts within the limit of their constitu-
tional power, that they may cooperate with the state couris in

7

checking, curbing and controlling the most dangerous com-
binations that now threaten the business, property, and trade
of the people of the United States....21 CONG. REC.
2457 (1890) (Statement of Senator Sherman) (emphasis
added).

Where the federal and state governments have concurrent
power to regulate the same conduct, state laws providing a
cumulative, different or harsher remedy are not preempted unless
the states’ power to fashion a remedy has been specifically
withdrawn by Congress. Agency Rent-A-Car, Inc. v. Connolly,
686 F.2d 1029, 1036-40 (Ist Cir. 1982).

This is especially true where the state is acting pursuant to its
traditional police powers and both regulatory schemes provide for
identical standards of conduct, differing solely as to remedies.
Colorado Anti-discrimination Commission v. Continental Air-
lines, 372 U.S. 714 (1962); California v. 2 00k, supra.

In Silkwood this Court reaffirmed this principle when it re-
jected the argument that the Nuclear Regulatory Commission’s
exclusive authority to reguiate nuclear safety preempted state
punitive damage recovery under tort law:

The United States, as amicus curiae, contends that the
award of punitive damages in this case is preempted because
it conflicts with the federal remedial scheme, noting that the
NRC is authorized to impose civil penalties on licensees
when federal standards have been violated. 42 U.S.C. Sec-
tion 2282 (1976 ed. and Supp. V). However, the award of
punitive damages in the present case does not conflict with
that scheme. Paying both federal fines and state-imposed
punitive damages for the same incident would not appear to
be physically impossible. Nor does exposure to punitive
damages frustrate any purpose of the federal remedial
scheme.

Silkwood, supra, 464 U.S. at 257; see also, Hayfield Northern
Railroad Co., inc. v. Chicago & N.W. Transportation Co., 467
U.S. 622 (1984).

8

For these reasons Appellee respectfully suggests that this court
should dismiss this appeal.

CONCLUSION

For each of the reasons stated above, Appellee respectfully
Suggests that this appeal should be dismissed.

Dated: September 18, 1986

FRANCIS O. SCARPULLA
Counsel of Record

SCARPULLA & SCARPULLA

A PROFESSIONAL CORPORATION
423 Washington Street, 4th Floor
San Francisco, CA 94111

Mario N. ALIOTO
JosepH M. PATANE
LAW OFFICES OF
Mario N. ALIOoTO
2280 Union Street
San Francisco, CA 94123
Counsel for Appellee
Lapidus Popcorn, Inc.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_0422%3A2. Public record. Not legal advice.