Petition for Writ of Certiorari — White Industries, Inc. v. Cessna Aircraft Co.

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, yy ¢ Supreme Court, Us.

deal FILED

AUG 4 1988

No. SS8- . WOSEPH £, SPANIOL, UR,

In the Supreme Court of the United States

OCTOBER TERM, 1988

WHITE INDUSTRIES, INC., CARTHAGE AIRWAYS,

INC. and EUGENE INGRAM,

Petitioners,

VS.

THE CESSNA AIRCRAFT COMPANY and

CESSNA FINANCE CORPORATION,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Epwarp A. McCoNnwELi

(Counsel of Record)

LAW FIRM OF

Epwarp A. McCoNnweELL

Cloverleaf V Building

Suite 210

6701 West 64th Street

Overland Park, Kansas 66202

(913) 262-0605

JOHN A. COCHRANE

STEWART C. LOPER

CoOcHRANE AND BRESNAHAN, P.A.

24 East 4th Street

Saint Paul, Minnesota 55101

(612) 298-1950

Attorneys for Petitioners

E. L. MENDENHALL, INc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030

QUESTIONS PRESENTED

1. UNDER THE ROBINSON PATMAN ACT, ARE DIS-

TRIBUTOR SALES TO PERSONS WHO ARE UNAUTHO-

RIZED DEALERS NOT IN COMPETITION AS A MATTER

OF LAW EVEN THOUGH AUTHORIZED DEALERS ARE

IN FACT IN COMPETITION WITH DISTRIBUTORS FOR

SUCH SALES?

2. UNDER THE ROBINSON PATMAN ACT, WHAT IS

THE PROPER STANDARD FOR DETERMINING IF AF-

FILIATED COMPANIES SHOULD BE TREATED AS

ONE ENTITY FOR THE PURPOSE OF IMPOSING LI-

ABILITY?

3. UNDER SECTION 1 OF THE SHERMAN ACT, 15

U.S.C. 1, DO SPECIAL DISCOUNTS, REBATES, FINANC-

ING AND TERMS AND CONDITIONS OF SALE AGREED

UPCN AND GRANTED TO ONLY ONE OF ITS TEN

DISTRIBUTORS AND TO NONE OF ITS DIRECT DEAL-

ERS BY A COMPANY WHICH IS BOTH A MANUFAC-

TURER AND DISTRIBUTOR OF AIRCRAFT, CONSTI-

TUTE A HORIZONTAL COMBINATION, CONTRACT OR

CONSPIRACY IN RESTRAINT OF TRADE?

a. Is application of the law concerning vertical con-

spiracy applicable to this case?

b. Is specific intent required to prove a horizontal

conspiracy in violation of the Sherman Act?

c. Is the Rule of Reason applicabie to a horizontal

conspiracy in restraint of trade?

TABLE OF CONTENTS

COUTTS FIR inc iccsctine che accnennsenernrenermsnee

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS EIGHTH

CI. Sock pecetensrncnsncinrsciesnkerantinhshinsiversasaiaaue eal enn

CENT IAN oninsecencsccsinstess cen eaeanaes

RMI BES oo vseice nines snnsnadnednorendnienasénssasegaccainia eau

STATUTE TIVO GD a cissiccvsnscncsiesscsosdesorsteienvanseneoannains

EAT CO ACE iste ssicissncsenicccccieentonenabaseemammenaret

REASONS FOR GRANTING WRIT—

§ No Appellate Court Has Dealt Squarely With

The Issue Of Whether An Unauthorized

Dealer Or Broker Who Is A Customer And

Competitor Of Authorized Dealers May Pur-

chase Products From A Favored Buyer (Dis-

tributor) Without Violating The Robinson

gE | - SR Steyn ate) od

II. The Holding Of The Eighth Circuit Is In Con-

flict With The Recognized Standards Of

Treatment Of Distributors’ Affiliated Com-

panies In The Determination Of Robinson Pat-

UNG DAE wiccen iin conasncxanvianncetieeeee mana

III. The Holding Of The Eighth Circuit Court Of

Appeals Js In Conflict With The Recognized

Standards For Determining Liability For

Horizontal Conspiracies In Violation Of The

Shrermae AGF :acinieniscnccssriencioaset cee oneenades

A. The Law Concerning Vertical Conspir-

acies Is Inapplicable In This Case Since

The Case Involves A Horizontal Conspir-

III

B. Specific Evidence On Intent Is Not Re-

quired To Prove A Horizontal Conspiracy

In Violation Of The Sherman Act

C. The Rule Of Reason Is Inapplicable To

Plaintiffs’ Claims In This Action

CONCLUSION .....

TABLE OF AUTHORITIES

Cases

Alhambra Motor Parts, 57 F.T.C. {007 1960), aff'd

in part, set aside in part, and remanded, 309 F.2d 213

(9th Cir. 1962), on remand, 68 F.T.C. 1039 (1965) .

Baker v. Raymond International, 656 F.2d 173 (1981)

Bogosian v. Gulf Oil Corp., 561 F.2d 434 (3rd Cir. 1977),

cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d

Neen Tain vert nacsccnsanennannbieeteceoseannesens

Catalano, Inc. v. Target Sales, Inc., 466 U.S. 643, 100

S.Ct. 1925, 64 L.Ed.2d 580 (1980) —...............

Century Hardware Corporation v. Acme United Cor-

poration, 467 Fed. Supp. 350 (E.D. Wisconsin, 1979)

F.T.C. v. Monroe Auto Equipment Corp., 66 F.T.C.

276 (1964), aff'd, 347 F.2d 401 (7th Cir. 1965), cert.

SI EE MR, TO © OE oc cinncncnsmescncecescocenannnnnsconsee

F.T.C. v. Rubberoid Co., 343 U.S. 470, 72 S.Ct. 800,

i eee

F.T.C. v. Simplicity Pattern Co., 360 U.S. 55, 79 S.Ct.

i 6) Ec NEE

In the Matter of E. Edelmann & Company, 51 F.T.C.

978 (1958), affd, 239 F.2d 152 (7th Cir. 1956),

cert. denied, 355 U.S. 941, rehearing denied, 356 U.S.

905 (1958) ......... iislesalliclemiopunsasioionees Io es Et NEE,

J. Truett Payne Company v. Chrysler Motors Cor-

poration, 451 U.S. 557, 101 S.Ct. 1923, 68 L.Ed.2d

BS CED sccuiinea ice iccectsidatietiioimentaenstinnnions 8

Kirby v. Mallory, 480 F.2d 904 (1973) —...........-......... 12, 13

Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S.

207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959) ........................ 20

National Dairy Products Corporation v. United States

of America, 350 F.2d 321 (8th Cir. 1965) —................ 14

Radiant Burners v. People’s Gas, Light and Coke Co.,

364 U.S. 656, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961) -....... 20

Rea v. An-Son Corporation, 79 F.R.D. 25 (W.D. Okla,

IPT | eicssentthancnentinsdeneencnsaesnccnlteiianentedcunesstalibanasesetnteiiieiéoddbaneid 14

Reines Distributors v. Admiral Corporation, 256 Fed.

Um, Te Ce ea in CN cian cccctcsntciiciettecerneienes 14

Silver v. New York Stock Exchange, 373 U.S. 341, 83

S.Ct. 1246, 10 L.Ed.2d 389 (1963) ~..............2..2..2......... 20

Tennessee Valley Authority v. Exxon Nuclear Com-

pany, Inc., 753 F.2d 493 (6th Cir. 1985) —....00...... 14

United States v. American Smelting and Refining Co.,

182 Fed. Supp. 834 (S.D.N.Y. 1960) —.......0200.... 18

United States v. General Motors Corp., 384 U.S. 127,

86 S.Ct. 1321, 16 L.Ed.2d 415 (1966) -..........00.0000002..... 19, 20

United States v. McKesson and Robins, 351 U.S. 305,

76 S.Ct. 937, 100 L.Ed. 1209 (1956) ............................ 16

United States v. Paramount Pictures, Inc., 334 U.S.

131, 68 S.Ct. 915, 92 L.Ed. 1260 (1948)

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

60 S.Ct. 811, 84 L.Ed. 1129 (1940) __.... Sea ote see NA 19

United States v. Wahl Shoe Co., 369 Fed. Supp. 386

NING III aerhchaciglaschaa nis cinecneasintics cn thechnamencs tab saniiccines 18

Zoslaw v. MCA Distributing Corp., 693 F.2d 870 (9th

a eR ee Ore eae Scere ern, eed 17

Statutes

a ee NE aiccesrdetthtientidechs tate 2

Robinson Patman Act, 15 U.S.C. sec. 13a... 2

Sherman Act, 15 U.S.C. see. 1 ..........................

Other

No. 88-

In the Supreme Court of the United States

OCTOBER TERM, 1988

WHITE INDUSTRIES, INC., CARTHAGE AIRWAYS.

INC. and EUGENE INGRAM,

Petitioners,

VS.

THE CESSNA AIRCRAFT COMPANY and

CESSNA FINANCE CORPORATION,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioners respectfully pray that a Writ of Certiorari

issue to review the final order of the United States Court

of Appeals, Eighth Circuit, 845 F.2d 1497 (May 6, 1988),

which affirmed the judgment of the District Court for the

Western District of Missouri, 657 Fed. Supp. 687 (1987),

dismissing the claims of White Industries, Inc., Carthage

Airways, Inc., and Eugene Ingram against the defendants;

and decertifying a plaintiff class of Cessna dealers that had

been initially certified in October, 1973.

OPINION BELOW

The Opinion of the United States Court of Appeals,

Eighth Circuit is reported as White Industries, Inc., et al.

v. The Cessna Aircraft Company, et al. 845 F.2d 1497

(May 1988). That opinion is reproduced in the appendix

which is included with this petition. (See Appendix A).

Also included in the appendix is an opinion of the trial

court entered on November 19, 1975. The trial court’s

opinions giving rise to the appeal can be found in 657 Fed.

Supp. 687. The trial court’s opinion will be supplied in

a supplemental! appendix.

JURISDICTION

The opinion of the United States Court of Appeals,

Eighth Circuit, affirming the trial court’s judgment in this

case was entered on May 6, 1988. The jurisdiction of this

Court is invoked under 28 U.S.C. sec. 1254(1). This peti-

tion was filed within ninety days of the Eighth Circuit's

order of judgment.

STATUTES INVOLVED

The pertinent provisions of the Robinson Patman Act,

15 U.S.C. sec. 13a, are as follows:

“.. . It shall be unlawful for any person engaged in

commerce, in the course of such commerce, either

directly or indirectly, to discriminate in price between

different purchasers of commodities of like grade and

quality, where either or any of the purchases involved

in such discrimination are in commerce, where such

commodities are sold for use, consumption, or resale

within the United States or any Territory thereof or

the District of Columbia or any insular possession or

other place under the jurisdiction of the United States,

and where the effect of such discrimination may be

substantially to lessen competition or tend to create

a monopoly in any line of commerce, or to injure, de-

stroy, or prevent competition with any person who

either grants or knowingly receives the benefit of

such discrimination, or with customers of either of

them... .”

In addition, 15 U.S.C. sec. 1 states as follows:

“Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or com-

merce among the several States, or with foreign na-

tions, is hereby declared to be illegal: .. .”

STATEMENT OF FACTS

The Cessna Aircraft Company (Cessna) maintained

a two-tier distribution system. It sold approximately

50% of its aircraft to ten “independent distributors” at

a discount of 25% or 26% off suggested retail price.

Independent distributors were supposed to sell] aircraft

to authorized Cessna dealers appointed by them. Cessna

sold the-remaining 50% of its output direct to dealers

(called “zone dealers”) appointed directly by Cessna, at

a discount of 20% off suggested retail price. Cessna was

thus both a manufacturer and a distributor in competi-

tion with independent distributors. The terms of the

written dealer contracts for zone dealers and independent

dealers was prepared by Cessna and contained essentially

the same terms and conditions. The contracts required

authorized dealers to make certain purchases and perform

a number of duties including such things as performance

of warranty work, maintenance of a stock of spare parts,

provision of service facilities, maintenance of a certain

number and quality of employees, and maintenance of a

fleet of demonstrator aircraft.

During the relevant period of time, there were also

in the aircraft industry persons referred to as “fixed

based operators” (F.B.O.’s). The operation of F.B.O.’s

range from little or no facilities to full service facilities

which provided gas, repair, tie-down, aircraft rental and

aircraft sales. These F.B.O.’s commonly purchased air-

craft for their own use and for resale from Cessna dealers

and Cessna distributors, without meeting the require-

ments of the Cessna franchise agreement. Some F.B.Q.’s

like Ray Horridge operated as a broker without airport

facilities. As such he acquired aircraft from distributor

Walston at the same time he purchased services and

attempted to purchase aircraft from White Industries.

White Industries, Inc., an authorized (zone) dealer

during 1968 and 1969 and Eugene Ingram, an authorized

independent dealer and authorized zone dealer at various

times in the period 1968 to 1974, alleged that indepen-

dent distributors sold Cessna aircraft to persons who were

not authorized Cessna dealers at prices at or below dealer

net price and thereby caused Defendants to violate Sec-

tion 2(a) and 2(f) of the Robinson-Patman Act.

One of the issues for trial as framed by the trial court

in its Order of November 19, 1975 (Docket No. 130) was

“. . wnether the Cessna franchise dealers and inde-

pendent wholesale distributors competed for the same

customers and thus on the same functional level.”

There was actual competition between independent

distributors and dealers for sales. That competition was

observed by the highest managers of the Cessna Aircraft

Company, but Cessna took no action to prevent it. Studies

by Cessna’s own dealer Pennant Aviation, attribute low

gross profit on sales to distributed competition. Former

distributor, principal, Vincent DeScoise, testified at length

about “retail sales” made by his distributor D.A.D. Mr.

DeScoise testified that all dealers of Cessna Aircraft in

the United States competed with each other and with

Walston.

The record clearly shows direct competition between

White Industries and Walston for sales to Roy Hor-

ridge. Horridge and the companies with which he was

affiliated, Kaw Investment and Mid-Continent Aviation,

purchased aircraft from Walston (Southaire). Horridge

bought from Walston not from White because he could

purchase less expensively from Walston and could then

resell at a lower price than could White.

The largest of the independent distributors was a

group of distributors owned by Walston Aviation, Inc.

and referred to as “Walston” or the Walston group.

Walston accounted for nearly 25% of the total sales of

Cessna aircraft. (Appendix C).

Undisputed evidence from the former Senior Vice

President of the Cessna Aircraft Company shows that

there was overproduction by Cessna in most of the rel-

evant time period; that the overproduction overloaded the

entire distribution system; that planes had to be gotten

rid of to make way for next years models and that Cessna

agreed with Walston to give Walston special discounts,

rebates and financing not made available to other dis-

tributors. New model introduction was facilitated by

getting rid of the previous years models. Once new

models were introduced, dealers were required to pur-

chase new model demonstrators pursuant to the terms

of their franchise contracts. New model introduction

dates were changed from year to year in the sole dis-

cretion of Cessna. The effect of these special discounts

and financing arrangements with Walston was to allow

the introduction of new models at an artificially higher

__ price and would have prevailed had there been an over-

supply of aircraft on the market. Petitioners’ economic

expert testified that the agreements between Cessna and

Walston allowing Walston to purchase aircraft at a price

below that which Cessna zone dealers could sell similar

Cessna aircraft, resulted in economic damage to the

Petitioners.

REASONS FOR GRANTING WRIT

No Appellate Court Has Dealt Squarely With The

Issue Of Whether An Unauthorized Dealer Or Broker

Who Is A Customer And Competitor Of Authorized

Dealers May Purchase Products From A Favored

Buyer (Distributor) Without Violating The Robinson

Patman Act

Petitioner has consistently maintained throughout this

litigation that sales of aircraft by Cessna distributors to

unauthorized dealers or brokers are violations of the

Robinson Patman Act if it could be shown that unautho-

rized dealers or brokers were actual or potential customers

of authorized dealers. The Cessna defendants raised this

issue (called the FBO theory) on numerous occasions

throughout the pendency of the litigation. One significant

occasion resulted in the following order from the Honor-

able William H. Becker on November 19, 1975:

“...IL. The F.B.O. Theory.

In Cessna Aircraft Corporation’s system of dis-

tribution, Cessna sold both directly to Cessna fran-

chised retail dealers and to independent wholesale

distributors. Cessna did not sell directly to non-fran-

chised fixed base operators. The independent whole-

sale distributors are alleged to have sold both to Cessna

franchised retail dealers and to non-franchised fixed

base operators (hereinafter “F.B.O.’s’”). Cessna con-

tends that because the Cessna franchised dealers and

the F.B.O.’s both sell retail, the independent wholesale

distributors must be on a different functional level than

the Cessna franchised dealer and thus may be charged

a lower price than that charged franchised dealers

without violation of 2(a). Cessna cites cases which

recognize the legality of price differentials which re-

flect functional differences in the chain of distribution.

Plaintiffs contend that because Cessna did not sell

to F.B.O.’s, in fact the Cessna franchised retailers and

the independent wholesale distributors were in com-

petition for sales to the F.B.O.’s and therefore com-

peted on the same functional level. Plaintiffs do not

take issue with the proposition that price differentials

can be justified by functional differences.

The real issue is thus a factual one - whether the

Cessna franchised dealers and the independent whole-

sale distributors competed for the same customers and

thus on the same functional level. When the issue is

so framed, it is apparent that there is no legal issue

ripe for an early determination. Plaintiffs should be

given an opportunity to utilize discovery to develop

the facts concerning competition for sales to F.B.O.’s.”

Subsequent to this order, the Cessna defendants moved

for an order allowing an Amicus Curiae in J. Truett Payne

Company v. Chrysler Motors Corporation, 451 U.S. 557, 101

S.Ct. 1923, 68 L.Ed.2d 442 (1981). In that motion, the

Cessna defendants made the following statements at page

vV:

“|. The principal allegation is this litigation relates

to Cessna’s ‘dual’ distribution system during the rel-

evant period. In certain areas of the country, Cessna

sold aircraft through its own zone officed to contracted

retail dealers (‘zone dealers’). In other areas of the

country, Cessna sold aircraft to independent wholesale

distributors who, in turn sold to dealers. ... In so

far as Cessna can presently determine, plaintiffs allege

approximately 3,100 such ‘favored’ aircraft sales to

some 15 distributors and seek damages based on ap-

proximately 20,000 sales to approximately 1,500 class

member dealers. These allegations involve aircraft of

widely differing types ranging in price from $7,000 to

$250,000...”

Both Judge Becker’s opinion and Cessna’s position become

significant when compared to the ultimate conclusions of

law of the Honorable Ross T. Roberts, deceased and the

opinion of the Eighth Circuit about which this writ is

sought. Judge Roberts eliminated all but 29 of the favored

sales primarily of the basis that most of the remaining sales

were potentially to non-authorized dealers and were ex-

cluded as a matter of law. This conclusion was made in

the face of undisputed evidence that one non-authorized

dealer, Roy Horridge, was in fact a customer of petitioner

White Industries, Inc. and of distributor Walston.

The Eighth Circuit at pages five and six of its opinion

succinctly crystalizes the competition issue:

“A review of the evidence of distributor-dealer

competition that White proffers on appeal confirms

that White and the District Court are proceeding on

very different legal approaches to the concept of

functional competition under 2a. White argues that

any distributor sale to an entity ‘which is not an

authorized Cessna dealer’ constitutes a sale in com-

petition with zone dealers like White. Under the

District Court’s analysis, distributor sales to inde-

pendent unauthorized dealers occurred at the distrib-

utor’s proper functional level, and so such sales were

not treated as competitive with dealers, whose func-

tion was to sell to end-users.

We agree with the District Court’s analysis.

Nothing in the Robinson-Patman Act compels a manu-

facturer like Cessna to impose a vertical restraint on

its wholesalers’ sales to limit them to ‘authorized’ or

contracted dealers. See 5 Von Kalinowski, Anti trust

Laws and Trade Regulations, art. 30.02(2)(a) (1988).

Dealers like White who desire to compete in selling

to other dealers will of course suffer a cost disad-

vantage compared with distributors, but to hold that

the larger distributors’ discount violates art. 2(a)

in this circumstance would effectively abolish two-

channel distribution systems in all industries. foot-

note 4. White cites no authority for this extraor-

dinary interpretation of the Act, nor can we find

any.

Footnote 4. White places a great deal of em-

phasis on its loss of the business of independent

dealer Roy Horridge to distributor Walston. If Hor-

ridge had been an end-customer, this diversion would

clearly have violated the Act. As a dealer, however,

Horridge appears to be precisely the kind of pur-

chaser that distributors legitimately cater to.

White objects that Horridge buys planes at the

same price as White, while Horridge bears none of

the costly burdens imposed on authorized Cessna

dealers, like maintenance of a showroom, purchase

of demonstrator aircraft, etc. Whatever the merits

of White’s complaint about the unfairness of inde-

pendent dealers with lower overhead buying the same

commodities for the same price as authorized dealers,

it is clear that §2(a) does not prohibit this result.

The Robinson-Patman Act proscribes discriminatory

pricing, not pricing which fails to discriminate be-

tween dealers with unequal costs at the same level

of distribution. Moreover, the burdens that Cessna’s

dealership agreement imposed on White presumably

were matched by commensurate economic benefits.

One may reasonably expect that authorized dealers

with showrooms and other customary trappings of

authorized status will be able to attract more cus-

tomers interested in a stable, long-term relationship.

Finally, White makes much of the fact that Hor-

ridge had once been a customer of White’s. This

fact does not establish functional competition between

White and the distributor who ultimately undersold

White. In general terms, a retailer who manages

for a time to sell to another retailer does not thereby

establish competitive injury from the wholesaler to

whom his retailer-customer ultimately takes his busi-

ness.”’

The Eighth Circuit observation that “If Horridge had

been an end-user, this diversion would clearly have vio-

lated the Act” emphasizes the importance of the finding

to petitioners and to class member dealers. Petiticners’

interpretation of the Act was based upon the law of the

case as ordered by Judge Becker on November 19, 1975

and upon a reading of the Act itself.

The words “retail” and “end user” simply are not

found in the Act. In addition the cases uniformly con-

clude that the issue is whether the favored and non-

favored purchasers are in competition. Since Cessna does

not treat non-authorized dealers or brokers as _ being

within the distribution no risk is imposed on two tiered

distribution systems if this court reverses the Eighth Cir-

cuit.

An analysis of 5 Von Kalinowski art. 30.02(2) (a)

reveals that the article supports the position of petitioner

rather than the holding of the Eighth Circuit. Example

2 on page 30-37 and 30-38 sets forth circumstances where

there is a violation of the Act when a distributor sells

to both jobbers and dealers who also buy from jobbers.

Authority for the example is In the Matter of E. Edel-

mann & Company, 51 F.T.C. 978 (1958), aff'd 239 F.2d

152 (7th Circuit 1956), cert. denied, 355 U.S. 941, re-

hearing denied, 356 U.S. 905 (1958). The 7th Circuit

in Kirby v. Mallory, 480 F.2d 904, 909 (1973) emphasized

that “a functional analysis is necessary to determine

whether customers are in fact competing on the same

distribution level . . . and that traders whatever their

designations, who compete at the same level must be

granted the same discount... .” See F.T.C. v. Simplicity

Pattern Co., 360 U.S. 55, 62-63, 79 S.Ct. 1005, 3 L.Ed.2d

1079 (1959) and F.T.C. v. Rubberoid Co., 343 U.S. 470,

72 S.Ct. 800, 96 L.Ed. 1081. A reading of the introduc-

tion to the Von Kalinowski section relied upon by the

Circuit Court demonstrates how the Court must give

deference to those within the distribution system.

“.. . The purpose of the graduated discount sys-

tem was to compensate various marketing interme-

diaries for performing different distributive services

or marketing functions. In deference to that tra-

ditional distribution schi@mne, the courts and the

Commission generally have: allowed sellers to charge

different prices among customers at different levels

of distribution. Those differentials, however, must

correspond to the particular customer’s position on

the distribution ladder, so that a wholesaler or jobber

must receive a higher discount (and therefore a lower

price) than a dealer or retailer.”

30.02(2)(a). In this case, F.B.O.’s and brokers are not

even within the Cessna distribution system.

Further support of petitioner’s position can be found

in Century Hardware Corporation v. Acme United Cor-

poration, 467 Fed. Supp. 350, 356 (E.D. Wisconsin, 1979)

where the district court followed the criteria established

in Kirby, supra, and found “. . . With respect to sales to

schools, the plaintiff operates at the same level of distribu-

tion as do the distributors of school supplies. The char-

acter of the plaintiff’s selling is no different from the char-

acter of the distributor’s selling—indeed, they bid for the

same sales contracts to schools... The plaintiff has es-

tablished that it competes with the favored purchasers.”

Clearly the holding of the Eighth Circuit is in conflict

with the Seventh Circuit on the general proposition of

criteria to be examined. The instant case is egregious

when it is evaluated in the light of the circumstances of

Cessna dealers. Cessna dealers’ entire product line was

at risk. It would be pointless to become a dealer if anyone

who designated themselves as being in the aircraft busi-

ness could purchase aircraft, parts, avionics and accessories

at dealer net prices from any Cessna distributor regardless

of the marketing or distributive service that he performed.

II.

The Holding Of The Eighth Circuit Is In Conflict

With The Recognized Standards Of Treatment Of Dis-

tributors’ Affiliated Companies In The Determination

Of Robinson Patman Liability

The Eighth Circuit summarily rejected petitioners’ po-

sition concerning distributors’ affiliated companies. In so

doing it applied the following test:

“. .. The key question for Robinson-Patman pur-

poses is whether the relationship between distrib-

utors and ‘captive dealers’ was so integrated that

the subsidiary dealerships - which competed on the

same functional level as the plaintiff - could be taken

to have purchased the planes at the higher distribu-

tors’ discount. White gives us no reason to reverse

the District Court’s findings of fact on this issue.”

Opinion, Appendix A pages A8-A9.

The proper test under which the evidence should have

been evaluated would have to have been to have deter-

mined the degree of control that the parent had over the

policies, objectives, and practices of the affiliated compa-

nies. See National Dairy Products Corporation v. United

States of America, 350 F.2d 321 (8th Cir. 1965); Reines

Distributors v. Admiral Corporation, 256 Fed. Supp. 581

(S.D. N.Y. 1966); F.T.C. v. Monroe Auto Equipment Corp.,

66 F.T.C. 276 (1964), aff'd, 347 F.2d 401 (7th Cir. 1965),

cert. denied, 382 U.S. 1009 (1966); and Alhambra Motor

Parts, 57 F.T.C. 1007 (1960), aff'd in part, set aside in part,

and remanded, 309 F.2d 213 (9th Cir. 1962), on remand,

68 F.T.C. 1039 (1965).

In its findings on the “single unit” issue the district

court referred to three non-Robinson Patman cases at a

key point in its evaluation process. The cases cited were:

Tennesss? Valley Authority v. Exxon Nuclear Company,

Inc., 753 F.2d 493 (6th Cir. 1985)—a contract case; Rea v.

An-Son Corporation, 79 F.R.D. 25 (W.D. Okla, 1978)—a

maritime case; and Baker v. Raymond International, 656

F.2d 173 (1981)—a maritime case. None of these three

cases should have been even considered by the court.

The Eighth Circuit apparently failed to examine the

overwhelming evidence of interinvolvement and control

under the test set out in its opinion and absolutely did not

evaluate the evidence under the proper test. Even a cur-

sory examination of the evidence would have disclosed

total interinvolvement and contro! by most Cessna distribu-

tors over their affiliated dealer. In one case the evidence

was undisputed that the dealer Walston controlled four

distributorships. Petitioners’ evidence included many of

the distributor principals who totally verified petitioners’

position concerning control. An example of the impact

that one particular distributor (Walston) had on the

Cessna distribution system is demonstrated by Appendix

C. Walston was the name used by persons throughout

Cessna and the industry to describe two dealerships and

four distributorships. The record is replete with evidence

common management, control, and guarantees of debt. At

least two of the Horridge transactions were run through a

Walston dealership at prices equal to or less than dealer

net price paid by White Industries, Inc. The undisputed

testimony of distributor D.A.D.’s principal was that he

owned and totally controlled both the dealership and the

distributorship. They had common financing, common

employees, one common aircraft file, and common facilities.

Petitioner submits that had the Eighth Circuit evalu-

ated the evidence in the proper light, it would have dis-

covered the error of the trial court in its application of the

law to the facts of this case.

Ill.

The Holding Of The Eighth Circuit Court of Ap-

peals Is In Conflict With The Recognized Standards

For Determining Liability For Horizontal Conspir-

acies In Violation Of The Sherman Act

A. The Law Concerning Vertical Conspir-

acies Is Inapplicable In This Case Since The Case

Involves A Horizontal Conspiracy

The Court clearly misapplied the law concerning ver-

tical conspiracies to the facts established in this case.

There is no question about the fact that the Cessna

Aircraft Company acted both as manufacturer and a dis-

tributor, performing the same functions as its indepen-

dent distributors performed in the distribution chain.

White Industries, for example, purchased iis aircraft di-

rect from Cessna at 20°. off suggested retail price, while

Cessna sold approximately 50° of its production to dis-

tributors at 25% or 26% off suggested retail.

Where a corporation is both a manufacturer and a

wholesaler, and where there is evidence of an agreement

between the manufacturer and its independent whole-

salers with respect to price, a horizontal price-fixing con-

spiracy will be found to exist. United States v. McKesson

and Robins, 351 U.S. 305, 76 S.Ct. 937, 100 L.Ed. 1209

(1956). In that case, a manufacturer who was also a

wholesaler argued that the Miller-Tydings provision to

the Sherman Act (15 U.S.C. § 1) and the McGuire Act

(15 U.S.C. § 45) exempted the manufacturer-wholesaler

from liability under the Sherman Act. The Supreme

Court held that where a manufacturer competes at the

“same functional level” it is not exempt from liability

under the Sherman Act. Z/d. at 312, 313.

The rationale expressed by the Ninth Circuit in the

case of Zoslaw v. MCA Distributing Corp., 693 F.2d 870

(9th Cir. 1982) relied upon by the Trial Court is in-

apposite since the record clearly discloses that Cessna

performed both manufacturing and distribution roles. In

Zoslaw, there were no dual functions. The distributor

defendants were mereiy distributors, and therefore did

not compete at the “same functional level” as the re-

tailers with whom they were alleged to have conspired.

B. Specific Evidence Of Intent Is Not Re-

quired to Prove A Horizontal Conspiracy In Vio-

lation Of The Sherman Act

Contrary to the holding of the Trial Court, teachings

of the Supreme Court make it clear that horizontal price-

fixing conspiracies may exist in circumstances where the

relationship of the defendants is as a supplier to others

who engage in the price-fixing activity. In such circum-

stances, it is not necessary to find an express agreement

in order to find a conspiracy. “It is enough that a

concert of action is contemplated and defendants con-

form to the arrangement.” United States v. Paramount

Pictures, Inc., 334 U.S. 131, 142, 68 S.Ct. 915, 922, 92

L.Ed. 1260, 1285 (1948).

In Paramount, some of the defendants were motion

picture producers as well as distributors. The Court

held what was important to finding of a Section 1 vio-

lation was that the effect of the arrangements between

distributors and motion picture licensees was to establish

a “price structure” which regulates licensee's business.

Id. at p. 144. In the present case, the effect of the agree-

ment between Cessna and Walston was to stabilize the

market, by reducing Cessna’s inventory, clear the way

for new model introduction and allow Cessna to require

the purchase of new demonstrator aircraft by each au-

thorized dealer. The fact that Walston did not “intend”

to assist Cessna in stabilizing prices in a market flooded

by overproduction, or to help affect the price increases

or required purchase of new model aircraft by Cessna,

does not negate the existence of a horizontal combina-

tion in violation of the Sherman Act.

it is not important that price-fixing is achieved with-

out the active or direct participation by one of the con-

spirators. United States v. American Smelting and Refin-

ing Co., 182 Fed. Supp. 834 (S.D.N.Y. 1960). See also

United States v. Wahl Shoe Co., 369 Fed. Supp. 386 (D.

N.M. 1974).

C. The Rule Of Reason Is Inapplicable To

Plaintiffs’ Claim In This Action

Evidence in this case shows that there was a con-

tract, combination, or conspiracy between Cessna and

its largest distributor, Walston, the object of which was

to clean out the distribution system of year-end model

aircraft. Although Cessna from time to time offered

other distributors the right to purchase year-end aircraft

at discounts, dealers were not given similar opportunities.

Furthermore, Walston got ‘‘special’”’ discounts, rebates and

financing not made available, and in fact, kept secret

from, other distributors and dealers. The purpose of

these arrangements was to allow Cessna, which varied

its model introduction year from time to time depending

on market conditions, to introduce new model aircraft,

at higher prices. New model introductions also triggered

the requirement under dealer contracts for each dealer

to purchase the required number of demonstrator aircraft

for the new model year.

The effect of the agreement was to keep Walston,

Cessna’s largest distributor, in business, and to stabilize

the market and fix the price for the new models there-

after introduced. This resulted in a “squeeze” on Plain-

tiffs who were then forced to buy new model aircraft

for demonstration purposes, and to compete with sub-

stantially lower prices for late model aircraft available

in the Cessna distribution system through Walston. Under

the Sherman Act, a combination formed for the purpose,

or which has the effect of raising, depressing, fixing or

stabilizing the price of a commodity in interstate or for-

eign commerce is illegal per se. United States v. Socony

Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129

(1940). (Emphasis added.) An explicit agreement is not

necessary as a part of a horizontal combination or con-

spiracy under the Sherman Act. It is of no consequence

that one or more of the parties acted in its own self-interest.

United States v. General Motors Corp., 384 U.S. 127, 129,

86 S.Ct. 1321, 16 L.Ed.2d 415 (1966). See also, Bogosian

v. Gulf Oil Corp., 561 F.2d 434 (3rd Cir. 1977), cert.

denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978).

Price fixing is not the only conduct in restraint of

trade which is prohibited by Section 1 of the Sherman

Act. Where wholesalers agree to eliminate the extension

of credit terms, for example, the United States Supreme

Court has held that credit fixing agreements should be

characterized as forms of price-fixing and come within

the ambit of the per se rule. Catalano, Inc. v. Target

Sales, Inc., 466 U.S. 643, 100 S.Ct. 1925, 64 L.Ed.2d 580

(1980). A combination which imposes “unfavorable”

terms on others is actionable under the Act. The com-

bination of Walston and Cessna brought about the “price

squeeze” noted by Plaintiffs economist which put Plain-

tiffs at a competitive disadvantage.

Unfavorable terms are frequently discussed in terms

of an actual or attempted boycott. The facts elicited at

trial show that special financing discount: and rebates

provided to Walston were not available to dealers. A

boycott need not be total to be actionable under the

Sherman Act. An agreement to sell at substantially un-

favorable terms will suffice. Klor’s, Inc. v. Broadway-

Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d

741 (1959). The mere fact that plaintiff is just one small

business whose sales make little difference to the economy

as a whole, do not justify tolerance of concerted or re-

fusals to deal. Certain classes of restraints on trade are

unduly restrictive and with respect to these classes, it is

not necessary for the court to determine whether the

restraint was reasonable or unreasonable. Klor’s, id. at

213. Subsequent rulings have determined that a con-

certed boycott is unlawful per se no matter what the

purpose. Radiant Burners v. People’s Gas, Light and

Coke, Co., 364 U.S. 656, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961);

Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct.

1246, 10 L.Ed.2d 389 (1963); United States v. General

Motors Corp., id. at 145.

Not only did the Cessna Walston agreements stabilize

the market, but they also acted as a boycott of Plaintiffs.

Plaintiffs were not offered aircraft on terms even pro-

portionally comparative to those given to Walston. When

Walston got interest free financing, Plaintiffs got no con-

sideration, and when Walston got more than $300,000 in

rebates in 1969, Plaintiffs merely received demands to

purchase new demonstrator aircraft. Thus Plaintiffs

found themselves in the “squeeze” resulting from the

horizontal agreements between Cessna and its largest

distributor, the glut of late model aircraft on the market

and the request to comply with the Cessna franchise

agreement and purchase more higher priced planes.

CONCLUSION

For the reasons stated herein, petitioners respectfully

request that the Court grant a Writ of Certiorari and re-

verse and remand this action with instructions to the

Eighth Circuit to order the district court to vacate its order

of dismissal and to make further findings after application

of the appropriate standards of law.

Respectfully submitted,

Epwarp A. McConwE Lu

(Counsel of Record)

LAW FIRM OF

Epwarp A. McCoNnweELi

Cloverleaf V Building

Suite 210

6701 West 64th Street

Overland Park, Kansas 66202

(913) 262-0605

JOHN A. COCHRANE

STEWART C. LOPER

COCHRANE AND BRESNAHAN, P.A.

24 East 4th Street

Saint Paul, Minnesota 55101

(612) 298-1950

Attorneys for Petitioners

APPENDIX

APPENDIX A

(Filed May 6, 1988)

UNITED STATES COURT OF APPEALS,

FOR THE EIGHTH CIRCUIT

No. 87-1672

White Industries, Inc.; Eugene C. Ingram, d/b/a Carthage

Airways; and Carthage Airways, Inc.,

Appellants,

Vv.

The Cessna Aircraft Co.; Mil Walston; Waiston Aviation

Sales, Inc.; Southaire, Inc.; Dad, Inc.; Skyliners Dist. Inc.;

Harold Gorrell; Aviation Activities, Inc.; and Cessna

Finance Corp.,

Appellees.

On APPEAL FROM THE UNITED STATES DISTRICT COURT FOR

THE WESTERN DISTRICT OF MISSOURI.

Submitted: January 13, 1988

Filed: May 6, 1988

Before LAY, Chief Judge, McMILLIAN and ARNOLD,

Circuit Judges.

ARNOLD, Circuit Judge.

White Industries, an authorized dealer of Cessna air-

craft, brings this lawsuit against the Cessna Aircraft Com-

pany for price discrimination under §§2(a) and 2(f) of

the Robinson-Patman Act, 15 U.S.C. §§13(a) and 13(f).

White’s suit also alleges a combination and conspiracy to

violate $1 of the Sherman Act, 15 U.S.C. §1, but, as we

discuss below, the Sherman Act claim is really only a varia-

tion on White’s central price-discrimination theory.

This case started seventeen years ago, in 1971, when

the Cessna Finance Corporation sued the White dealership

over some notes it claimed were due on two aircraft White

had purchased.' White responded with a class action

brought on behalf of Cessna dealers operating from 1968

to 1974, pressing the Robinson-Patman claim now before

us. After a decade of discovery and pretrial litigation, the

case was tried to the District Court” without a jury in 1984.

After the close of the evidence on the issue of liability, the

Court granted Cessna’s motion for involuntary dismissal

of White’s suit and decertified the plaintiff class. White

Industries, Inc. v. Cessna Aircraft Co., 657 F. Supp. 687

(W.D. Mo. 1986). White now brings this appeal from the

judgment,* and we affirm.

From 1968 to 1974, Cessna distributed the airplanes it

manufactures through two different channels. It sold

about half its output to Cessna distributors, who per-

1. This collection suit was consolidated with the present

Robinson-Patman countersuit by the Judicial Panel on Multi-

District Litigation, In re Cessna Aircraft Distributorship Anti-

trust Litigation, 359 F. Supp. 543 (J.P.M.L. 1973).

2. The Hon. Ross T. Roberts, late a United States District

Judge for the Western District of Missouri.

3. White’s appeal focuses on its own claim of competitive

injury. No other class members join White on its appeal.

formed a wholesaler’s function by selling to contracted

dealer-buyers who would in turn sell to the final consum-

ers. Cessna sold its planes to its distributors at a 25-26%

discount. Cessna also developed a second channel of dis-

tribution by organizing a number of “zone dealers,” like

White, to whom Cessna sold planes directly. The function

of these zone dealers was parallel to that of the retail deal-

ers who bought their planes through Cessna distributors,

in that zone dealers sold their planes to end-users. Cessna

sold planes to zone dealers like White at a discount of 20%.

Reduced to its simplest terms, the central theory of

this lawsuit is that some or all Cessna distributors abused

their wholesalers’ discount by competing directly with

dealers like White. According to White, these distributors

sold aircraft directly to end-users, and the cost advantage

the distributors enjoyed enabled them to injure competi-

tion by squeezing the zone dealers out of the market. If

true, this allegation would establish that Cessna violated

§2(a) of the Robinson-Patman Act by discriminating in

price between distributors and dealers, where the pur-

chasers both sold the commodities in the same geographic

market and on the same functional level.

After hearing from twenty witnesses at trial plus four-

teen others by deposition, and after working through over

a thousand plaintiffs’ exhibits, the District Court found

that White had failed to demonstrate any actual injury

which would justify a damage remedy under the Act. In

capsule form, the Court’s analysis proceeded as follows.

1. Distributors competed with dealers only when they

sold directly to end-users, and White presented only

twenty-nine instances of such sales during the period in

question. 657 F. Supp. at 703-07, 717-18.

2. White generally failed to present evidence of col-

lusion between commonly owned distributors and “captive”

dealerships sufficient to justify attributing sales made by

distributor-owned dealerships to the distributors them-

selves. 657 F. Supp. at 707-08.

3. An analysis of White’s sales of aircraft estab-

lishes a geographic market area of 150 miles for White’s

sale of single-engine Cessnas, and a nationwide market

for the multi-engine 402A models. After comparing

White’s market overlap with offending distributors, the

court concluded that none of the distributors sales of

single-engine planes occurred in geographic competition

with White. 657 F. Supp. at 708-11.

4. White failed to prove by a preponderance of the

evidence that any sales were actually diverted from White

as a result of the remaining 14 proven distributor sales

to end users. 657 F. Supp. at 712-15. As a result, the

District Court entered judgment for Cessna.

On appeal, White claims that the trial court’s order

fails to state factual conclusions and legal findings and

conclusions in enough detail to meet the standards of

Fed. R Civ. P. 52(a). At first blush, this ground of

appeal seems astonishing when urged against an opinion

filling 31 pages in the Federal Supplement. On closer

examination, it appears that White’s objections to the

formal sufficiency of the trial court’s findings are really

arguments that the trial court misapplied the law and

committed clear error in finding fact.

II.

We discuss the appellant’s objections following the

structure of the trial court’s analysis.

A. Functional Competition

White argues that the District Court’s order ignores

many specific examples of distributor-dealer competition

presented in its narrative statement of fact, examples

which White proceeds to list. White therefore concludes

that the Court’s order is insufficient under the standards

of Rule 52(a).

Trial courts must indeed state legal and factual con-

clusions sufficient to give an appellate court a clear under-

standing of the grounds of its decision. See Allied Van

Lines, Inc. v. Small Business Administration, 667 F.2d

751, 753 (8th Cir. 1982). This the trial court did with

a remarkable degree of clarity. What Rule 52(a) does

not require is a particularized finding on each piece of

evidence presented by the parties. If it did, it would

be impossible to adjudicate cases as complex as this one.

According to White, the plaintiff's narrative statement

of fact included over 8,000 separate statements occupying

over 900 written pages; no rational system of civil pro-

cedure would compel a trial judge to issue 900-page

opinions making 8,000 findings of fact. It is sufficient

that the District Court state its decision so that the parties

and reviewing court understand what it has decided and

why.

A review of the evidence of distributor-dealer com-

petition that White proffers on appeal confirms that White

and the District Court are proceeding on very different

legal approaches to the concept of functional competition

under §2(a). White argues that any distributor sale to

an entity “which is not an authorized Cessna dealer”

constitutes a sale in competition with zone dealers like

White. Under the District Court’s analysis, distributor

sales to independent unauthorized dealers occurred at the

distributor’s proper functional level, and so such sales

were not treated as competitive with dealers, whose func-

tion was to sell to end-users.

We agree with the District Court's analysis. Nothing

in the Robinson-Patman Act compels a manufacturer like

Cessna to impose a vertical restraint on its wholesalers’

sales to limit them to “authorized” or contracted dealers.

See 5 Von Kalinowski, Antitrust Laws and Trade Reg-

ulations, §30.02{[2}{a}] (1988). Dealers like White who

desire to compete in selling to other dealers will of

course suffer a cost disadvantage compared with distrib-

utors, but to hold that the larger distributors’ discount

violates §2(a) in this circumstance would effectively

abolish two-channel distribution systems in all industries.

4. White places a great deal of emphasis on its loss of

the business of independent dealer Roy Horridge to distributor

Walston. If Horridge had been an end-customer, this diversion

would clearly have violated the Act. As a dealer, however,

Horridge appears to be precisely the kind of purchaser that

distributors legitimately cater to.

White objects that Horridge buys planes at the same price

as White, while Horridge bears none of the costly burdens

imposed on authorized Cessna dealers, like maintenance of a

showroom, purchase of demonstrator aircraft, etc. Whatever

the merits of White’s complaint about the unfairness of inde-

pendent dealers with lower overhead buying the same commod-

ities for the same price as authorized dealers, it is clear that

§2(a) does not prohibit this result. The Robinson-Patman Act

proscribes discriminatory pricing, not pricing which fails to

discriminate between dealers with unequal costs at the same

level of distribution. Moreover, the burdens that Cessna’s dealer-

ship agreement imposed on White presumably were matched

by commensurate economic benefits. One may reasonably ex-

pect that authorized dealers with showrooms and other customary

trappings of authorized status will be able to attract more cus-

tomers interested in a stable, long-term relationship.

Finally, White makes much of the fact that Horridge had

once been a customer of White's. This fact does not establish

(Continued on following page)

ieee eel”

White cites no authority for this extraordinary inter-

pretation of the Act, nor can we find any.

White also presses a miscellany of other evidence

which tends to show distributor-dealer competition, in-

cluding Cessna’s use of the word “retail” to describe

certain kinds of distributor sales, as well as instances

of sales “passed through” subsidiary dealerships by dis-

tributors. On review, we presume that the District Court

weighed the evidence before it; our review of the Court's

factual findings is limited to the question of whether

the trial court committed clear error. We cannot say

that appellant White has presented evidence sufficient

to reverse the trial judge’s findings. We affirm the

Court’s finding that the plaintiff's proof of distributor

sales to end-users extends only to the twenty-nine sales

listed in the appendix to the Court’s order. 657 F. Supp.

at 717-18.

B. “Captive” Dealerships

The second ground of White’s claim of insufficient

findings involves the Court’s rejection of White's theory

that commonly owned dealerships and distributors func-

tioned as the same economic entity.

We have little trouble settling this ground of appeal

in the terms that White presents it. There is no ques-

tion that the District Court clearly laid out its finding -

Footnote continued—

functional competition between White and the distributor who

ultimately undersold White. In general terms, a retailer who

manages for a time to sell to another retailer does not thereby

establish competitive injury from the wholesaler to whom his

retailer-customer ultimately takes his business.

that, with one exception,’ there was no proof that any

Cessna distributor passed on the benefit of its higher

discount to its subsidiary dealers. 657 F. Supp. at 707.

Furthermore, the District Court left no ambiguities in

its legal approach to White's arguments for disregarding

the dealerships’ separate corporate status or its factual

findings on White’s evidence. Accordingly, we see no

merit in White’s claim on appeal that the trial court's

order violated Rule 52(a).

Again, it seems that White's appeal on this issue is

really a disguised challenge to the District Court’s find-

ings of fact. A review of the evidence which White claims

the Court overlooked fails to convince us that the Court’s

findings were clearly erroneous. White refers to several

items of proof which it claims demonstrate interlocking

management and centralized accounting among commonly

owned distributors and dealers. We entirely agree with

the District Court that none of these elements is sufficient

to justify disregarding the separate corporate status of the

subsidiary. 657 F. Supp. at 707. The key question for

Robinson-Patman purposes is whether the relationship be-

tween distributors and “captive” dealers was so integrated

that the subsidiary dealerships - which competed on the

same functional level as the plaintiffs - could be taken to

have purchased the planes at the higher distributors’ dis-

5. The exception involved Walston Aviation, Inc., a dealer-

ship which also controlled several distributors. The District

Court found that in one instance in 1969, the Cessna discount

on a “close-out” sale of planes to Walston distributors was

allocated in part directly to the Walston dealership. However,

the District Court found that the plaintiff dealerships had not

purchased any new non-current 1969 Cessnas, and so found

that the Walston dealership’s constructive purchase of the bulk

of Cessna’s 1969 production at the distributor’s discount did

not represent an analogous transaction for Robinson-Patman

purposes.

count. White gives us no reason to reverse the District

Court's findings of fact on this issue.

C. Geographic Competition

White argues that the District Court’s findings on the

limited scope of White’s geographic market ignore evidence

in the record. Once again, this ground of appeal is mis-

labeled as a challenge to the sufficiency of the trial court's

findings. As stated, we have no trouble affirming the

District Court, since its findings on the scope of the com-

peting entities’ geographic market are unambiguously

stated, and the reasons for the result are clearly developed.

657 F. Supp. at 708-11.

White’s appeal on this issue really asks us to find that

the evidence that White alleges has been overlooked ren-

ders the Court’s findings clearly erroneous. In particular,

White urges that the distributors’ use of national advertis-

ing establishes every sale by distributors within White's

geographic market area as a sale “in competition” with

White. The problem with White’s evidence is that White

continues to apply its proof to its theory - which we re-

ject - that distributors may sell only to authorized Cessna

dealers. White’s burden is to show distributor sales to

end-users within White’s geographic market, and its presen-

tation of evidence showing distributor sales to independent

dealers in White’s area does nothing to carry this burden

As a result, we find no error in the District Court’s

summary of distributor sales to end-users found in the

appendix to its order. 657 F. Supp. at 717-18. Nor do we

find error in its finding that none of the distributor sales

of single-engine planes occurred in geographic competition

with White. 657 F. Supp. at 708-10.

Al0

D. Actual Injury

White challenges the District Court’s conclusion that

it suffered no actual injury from Cessna’s violations of

$2(a).

White argues, first, that proof of price discrimination

creates an inference of injury to competition, citing F.T.C.

v. Morton Salt Co., 334 U.S. 37 (1948). White’s claim is

well-taken, but it does not seem to challenge the District

Court’s opinion in any way. The District Court found that

White had established a prima facie case that Cessna in-

jured competition by selling at a discount to distributors

who at times resold to end-users. As a result, the Court

held, following Morton Salt, that White had proved that

Cessna violated §2(a). 657 F. Supp. at 711-12. We cannot

understand why White raises the issue of injury to com-

petition under §2(a) on appeal, since the District Court

upheld the plaintiff's position on this issue.

The fact that the plaintiff has established that Cessna’s

pricing practices may injure competition® in violation of

$2(a) does not mean that White has proved that it has

suffered such actual injury as a result of this violation to

entitle it to treble damages under §4 of the Clayton Act.

15 U.S.C. $15. See J. Truett Payne Co. v. Chrysler Motors

Corp., 451 U.S. 557, 561-63 (1981).

White’s proof of actual injury depended on (1) evi-

dence from its expert economist on the tendency of lower-

cost distributor sales to consumers to depress profits for

zone dealers nationwide; (2) evidence of the general un-

6. We note that Cessna may well have had affirmative

defenses which could have been presented in the event that

White’s §2(a) claim had not been dismissed at the close of

plaintiffs’ case.

All

profitability of White’s operations during the subject pe-

riod; and (3) evidence of three end customers with whom

White had communications who ultimately purchased from

distributors. The District Court was unpersuaded by

White’s expert economist both because the witness pro-

ceeded on the assumption of nationwide market competi-

tion among dealers for all aircraft and because the econo-

mist’s projections of adverse effect on the average Cessna

dealer failed to prove any particular injury for the White

dealership. 657 F. Supp. at 712-13. The general unprofit-

ability of White’s operation, similarly, did not suffice to

prove to the trial court that Cessna’s violation of the Act

had caused any profit loss, especially in light of a recession

in the aircraft industry d»ring the period in question. 657

F. Supp. at 713. Finally. -he District Court found that the

three instances of distributor sales to customers with whom

White had communicated did not prove that sales had been

diverted from White, since the consumers’ equipment needs

did not match the specifications of White’s aircraft, and

since White had no prior dealings with any of the cus-

tomers. Id. at 713-15. As a result, the Court held that

White had failed to prove that it had suffered any actual

injury from Cessna’s violation of the Act, and so dismissed

White’s Robinson-Patman claim.

Once again, White’s appeal rests on the stated ground

that the Court’s findings were inadequate under Rule

52(a). In light of the clarity and detail of the Court's

findings, we reject this argument out of hand.

White’s real objection seems to be, not that it€can-

not determine what the Court’s findings or reasoning

is, but that it disagrees with the Court’s factual conclu-

sion. Again, we review only for clear error. We do

not know whether White’s evidence of its business dif-

Al2

ficulties from 1968 onward would convince us of a causal

connection to Cessna’s violations of the Act, were we

sitting as the finders of fact. We cannot say, though,

that the trial court committed clear error in finding that

White had failed to prove it had suffered actual injury

from Cessna’s violations, and we therefore affirm the

court’s judgment against White on its Robinson-Patman

claim.

Iil.

The Court also rejected White’s parallel claim of

anticompetitive conspiracy under §1 of the Sherman Act.

The Court found no evidence sufficient to prove that

Cessna had combined with its distributors to exclude

zone dealers from the end-consumer market for its new,

current aircraft. Further, the Court held that Cessna’s

close-out bulk sales of non-current planes to distributors,

even if it had an exclusionary effect, fell well within

the rule of reason for purposes of determining antitrust

liability. 657 F. Supp. at 715-16.

On appeal, White briefly recapitulates its argument

below, and again labels its disagreement with the Court’s

factual conclusions as an appeal from insufficient find-

ings. We cannot find any ambiguity or lack of clarity

in the Court’s factual findings, and White presents no

reason to reject the substance of the Court’s finding that

no conspiracy existed between Cessna and its distrib-

utors. Accordingly, we affirm the Court’s dismissal of

White’s Sherman Act conspiracy claim.’

7. We need not reach White’s appeal from the District

Court’s judgment dismissing White’s conspiracy claims against

the Cessna Finance Corporation (CFC). Even if, as White

claims, CFC is only a sales tool of Cessna, White’s failure to

prove a right of recovery against Cessna necessarily extends

to CFC as well.

Al3

IV.

White appeals the District Court’s decertification of

the plaintiff class, re-arguing its earlier contention that

each zone dealer was commonly affected by nationwide

distributor competition. Because we reject White’s theory

of nationwide markets for most Cessna aircraft, we affirm

the District Court’s findings that individual questions of

fact (in this case, the extent of distributor competition

with individual dealerships) predominate over common

questions. Other zone dealers may well be able to dem-

onstrate actual injury from distributor competition inside

their geographic markets. This proof of liability would

depend on particular facts which would vary for each

dealer, and so the District Court appropriately decerti-

fied the plaintiff class, with notice to class members to

permit the individual litigation of these potential claims.

The judgment of the District Court dismissing the

claims of plaintiff White Industries is accordingly

Affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS,

EIGHTH CIRCUIT.

Al4

APPENDIX B

(Filed November 19, 1975)

IN THE UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF MISSOURI

WESTERN DIVISION

Docket No. 123

IN RE

CESSNA AIRCRAFT DISTRIBUTORSHIP

ANTITRUST LITIGATION

ORDER GRANTING IN PART AND DENYING IN

PART “MOTION BY CESSNA DEFENDANTS FOR

DETERMINATION OF CERTAIN SPECIAL

LEGAL ISSUES’’

The Cessna defendants have moved for an early de-

termination of three special legal issues under Section

1.80 of the Manual for Complex Litigation.! Plaintiffs

have filed suggestions in opposition to defendants’ mo-

tion.

The three legal issues presented for determination

are, as framed by defendants:

“1. Whether a Cessna dealer who purchases

Cessna aircraft solely through an independent whole-

1. Whether an early determination of special legal issues

is appropriate depends on whether such determination “. . . wil]

expedite disposition of the cause” and whether “. . . the nature

and scope of discovery and further pretrial proceedings would

be substantially affected by the determination of the prelim-

inary legal question.” Section 1.80, Manual For Complex Lit-

igation (1973).

noi

ee oe

Al5

sale distributor and makes no direct purchases from

Cessna has standing to sue Cessna for alleged viola-

tions of Section 2(a) of the Robinson-Patmen Act,

assuming Cessna exercises no control over the inde-

pendent wholesaler’s resales.

“2. Whether an independent wholesale distrib-

utor’s sale of a new Cessna aircraft to a fixed base

operator, lacking a Cessna franchise agreement, at

dealer net prices (20% off suggested retail price)

is prima facie discriminatory, under the Robinson-

Patman Act, assuming such distributor also makes

contemporaneous sales at the same dealer net prices

of new Cessna aircraft of like grade and quality

to franchised Cessna dealers.

“3. Whether concealment by an independent

distributor of Cessna aircraft sales made to other

than franchised Cessna dealers will toll the running

of the applicable statute of limitations in respect to

claims against Cessna.”

For the reasons hereinafter stated, a ruling is deemed in-

appropriate at this juncture on the first issue tendered.

Whether Cessna Dealers Purchasing Through Inde-

dependent Wholesale Distributors Have a Cause of

Action Against Cessna For Alleged Violation of Section

2(a) of the Clayton Act.’

Cessna contends that in order to sue under Section

2(a) of the Clayton Act as amended by the Robinson-

2. The Cessna defendants have framed the first issue in

terms of the “standing” of the Cessna retailers who purchased

(Continued on following page)

Al6

Patman Act, Section 13(a), Title 15, United States Code,

a party must have been a direct purchaser from the dis-

criminating seller. Plaintiffs contend that the “direct pur-

chaser” doctrine relied upon by Cessna was overruled by

the Supreme Court in F.T.C. v. Meyer, 390 U.S. 341, 19 L.

Ed.2d 1222, 88 S.Ct. 404 (1968), and Perkins v. Standard

Oil Co., 395 U.S. 642, 23 L.Ed.2d 599, 89 S.Ct. 1871 (1969).

Section 2(a) of the Clayton Act as amended by the

Robinson-Patman Act provides in pertinent part:

“It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, either directly

or indirectly, to discriminate in price between different

purchasers of commodities of like grade and quality,

where either or any of the purchases involved are in

commerce ... and where the effect of such discrim-

ination may be substantially to lessen competition or

tend to create a monopoly in any line of commerce, or

to injure, destroy, or prevent competition with any

person who either grants or knowingly receives the

benefit of such discrimination, or with customers of

either of them... .”

Footnote continued—

through independent distributors to sue Cessna. Standing to

sue under the Clayton Act is governed by Section 4 of the

Clayton Act, Secion 15, Title 15, United States Code, which

provides in pertinent part:

“Any person who shall be injured in his business or prop-

erty by reason of anything forbidden in the antitrust laws

may sue therefore... .”’

See, e.g., In re Multidistrict Vehicle Air Pollution M.D.L. No.

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

The issue actually presented by the first issue is whether

Congress intended parties in the position of the Cessna retailers

who purchased through independent distributors to have a cause

of action against the one-removed manufacturer.

a Re Be Ae

Al7

There is some authority supporting Cessna’s contention

that a party can have no cause of action under Section 2(a)

unless it was an actual purchaser from the party charged

with the price discrimination. However, an exception to

this general rule has been recognized where the buyer

purchased through an intermediary whose sales policy was

controlled by the seller charged with the discrimination.*

The Supreme Court decisions in F.T.C. v. Meyer, supra,

and Perkins v. Standard Oil Co., supra, have at least cast

doubt on the continuing vitality of the authority cited by

Cessna. In F.T.C. v. Meyer the Court held that the term

“customer” in Section 2(d) of the Clayton Act includes

retailers who purchase through wholesalers and compete

with direct buyers in resales. In Perkins v. Standard Oil

Co., the Court extended this flexible definition of “cus-

tomers” in Section 2(d) to Section 2(a) by ruling that the

term ‘“‘customers” used therein was not intended to impose

an arbitrary bar against recovery for “fourth level” in-

juries. The Court in Perkins emphasized that the “level”

of injury was not important so long as the injured party

proved a causal connection between the price discrimina-

tion in violation of the Act and the injury suffered. 395

U.S. at 648, 23 L.Ed.2d at 607.

3. Klein v. Lionel Corporation, 237 F.2d 13 (3rd Cir. 1956);

Tri-Valley Packing Association v. F.T.C., 329 F.2d 694 (9th

Cir. 1964); Baim & Blank, Inc. v. Philco Corporation, 148 F.

Supp. 541 (E.D.N.Y. 1957). See also dictum in: Sanitary

Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679

(8th Cir. 1966); National Auto Brokers Corp. v. General Motors

Corp., 376 F.Supp. 620 (S.D.N.Y. 1974).

4. This “indirect purchaser” doctrine finds support in Puro-

lator Products, Inc. v. F.T.C., 352 F.2d 874 (7th Cir. 1965); .

American News Company v. F.T.C., 300 F.2d 104 (2nd Cir.

1962); Hiram Walker, Incorporated v. A & S Tropical, Inc.,

407 F.2d 4 (5th Cir. 1969); Skinner v. United States Steel

Corporation, 233 F.2d 762 (5th Cir. 1956).

Als

Because the legal principles involved in determination

of this first issue are in an area of rapidly developing law

in which there is a substantial prospect that the legal con-

tentions of plaintiffs may ultimately be sustained,® and

because facts may be developed showing control of the

wholesale distributors by the Cessna defendants, it is

deemed inappropriate to rule on this issue at this time.

Therefore, defendants’ motion for an early determination

of this issue will be denied without prejudice to the legal

and factual contentions made therein.

Il. The “F.B.O.” Theory.

In Cessna Aircraft Corporation’s system of distribu-

tion, Cessna sold both directly to Cessna franchised retail

dealers and to independent wholesale distributors. Cessna

did not sell directly to non-franchised fixed base operators.

The independent wholesale distributors are alleged to have

sold both to Cessna franchised retail dealers and to non-

franchised fixed base operators (hereinafter “F.B.O.’s’).

Cessna contends that because the Cessna franchised deal-

ers and the F.B.O.’s both sell retail, the independent whole-

sale distributors must be on a different functional level

than the Cessna franchised dealer and thus may be charged

a lower price than that charged Cessna franchised dealers

without violation of Section 2(a). Cessna cites cases which

recognize the legality of price differentials which reflect

functional differences in the chain of distribution.*

5. Cf.: National Dairy Products Corp. v. F.T.C., 395 F.2d

517 (7th Cir. 1968); Checker Motors Corporation v. Chrysler

Corporation, 283 F.Supp. 876 (S.D.N.Y. 1968), affirmed 405

F.2d 319 (2nd Cir. 1969), cert. denied 394 U.S. 999, 22 L.Ed.2d

777, 89 S.Ct. 1595 (1969).

6. F.T.C. v. Ruberoid Co., 343 U.S. 470, 96 L.Ed. 1081,

72 S.Ct. 800 (1952); General Foods Corp., 52 F.T.C. 798 (1956) ;

(Continued on following page)

Alg

Plaintiffs contend that because Cessna did not sell

to F.B.O.’s, in fact the Cessna franchised retailers and the

independent wholesale distributors were in competition

for sales to the F.B.O.’s and therefore competed on the

same functional level. Plaintiffs do not take issue with

the proposition that price differentials can be justified by

functional differences.

The real issue is thus a factual one - whether the

Cessna franchised dealers and the independent wholesale

distributors competed for the same customers and thus

on the same functional level. When the issue is so framed,

it is apparent that there is no legal issue ripe for an

early determination. Plaintiffs should be given an oppor-

tunity to utilize discovery to develop the facts concerning

competition for sales to F.B.O.’s.'

III. Statute of Limitations - Fraudulent Concealment.

As framed by the Cessna defendants, the third legal

issue is whether fraudulent concealment by the inde-

pendent wholesale distributors of the illegal conduct

charged in this action from the Cessna franchised re-

tailers will toll the statute of limitations with respect

to Cessna. Defendants assert that the “undisputed facts”

show that the illegal conduct was also actively concealed

from Cessna as well as from the Cessna franchised re-

tailers; and that as a matter of law, fraudulent conceal-

Footnote continued—

Hruby Distributing Co., 61 F.T.C. 1437 (1962); Kirby v. P. R.

Mallory & Co., 489 F.2d 904 (7th Cir. 1973), cert. denied 417

U.S. 911, 41 L.Ed.2d 215, S.Ct. (1974).

7. Although defendants have set forth a single transaction

with respect to which it contends discovery has been com-

pleted, plaintiffs vigorously dispute that discovery has been

completed.

A20

ment does not toll the statute of limitations with respect

to a defendant which was not a party thereto. Plain-

tiffs do not dispute defendants’ legal contention; but

assert that proof of defendants’ involvement in the fraud-

ulent concealment must be developed through discovery.

That fraudulent concealment will toll the statute of

limitations with respect to the concealing defendant is

well established. Kansas City, Missouri v. Federal Pacific

Electric Co., 310 F.2d 271 (8th Cir. 1962), cert. denied,

371 U.S. 912, 9 L.Ed.2d 171, 83 S.Ct. 256 (1962); Public

Service Cu. of New Mexico v. General Electric Co., 315

F.2d 306 (10th Cir. 1963), cert. denied, 374 U.S. 809, 10

L.Ed.2d 1033, 83 S.Ct. 1695 (1963); Atlantic City Electric

Co. v. General Electric Co., 312 F.2d 236 (2nd Cir. 1962),

cert. denied, 373 U.S. 909, 10 L.Ed.2d 411, 83 S.Ct. 1298

(1963); City of Burlington, Vt. v. Westinghouse Electric

Corp., 326 F.2d 691 (D.C.Cir. 1964). In order to estab-

lish fraudulent concealment which tolls the statute of

limitations, a claimant must show:

“(1) that defendants concealed the basic facts that

would reveal the existence of their [illegal] behav-

ior, and (2) that plaintiffs were ignorant of those

facts through no fault of their own.” (Emphasis

added. )

City of Detroit v. Grinnell Corporation, 495 F.2d 448, 460

(2nd Cir. 1974); Baker v. F. & F. Investment Company,

420 F.2d 1191 (7th Cir. 1970), cert. denied, 400 U.S. 821,

91 S.Ct. 42, 27 L.Ed.2d 49 (1970). See also: Wilmar

Poultry Co. v. Morton-Norwich Products, 520 F.2d 289

(8th Cir. 1975). Fraudulent concealment by some de-

fendants does not toll the statute with respect to non-

concealing defendants. Because of the nature of the

me te

A2l

issue, plaintiffs should be given an opportunity to de-

velop the facts concerning defendants’ involvement

through discovery and thereafter to file an amended or

supplemental pleading of the facts before being concluded

summarily on the issue of fraudulent concealment. Poller

v. Columbia Broadcasting System, 368 U.S. 464, 82 S.Ct.

486, 7 L.Ed.2d 458 (1962).

Defendants have made various challenges to the suf-

ficiency of plaintiffs’ allegations of fraudulent conceal-

ment in the complaint. Those challenges are considered

inappropriate in the context of this motion and untimely,

and will not be considered herein.”

For the foregoing reasons, it is therefore

ORDERED that the Cessna Defendants’ Motion For

Determination of Special Legal Issues be, and it is hereby,

granted in part and denied in part as more fully stated

above.

/s William H. Becker

William H. Becker

Chief Judge

Kansas City, Missouri

Date: 11-19-75

8 Defendants were denied leave to file motion to dismiss

which challenged the sufficiency of the allegations of fraud-

ulent concealment on the grounds of untimeliness by order

dated November 7, 1975.

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