Supplemental Appendix — White Industries, Inc. v. Cessna Aircraft Co.
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oe . 5 FILED
ne Be? FP
AUG 4 1988
JOSEPH F. SPANIOL, ur,
In the Supreme Court of theUnited Stites!
OCTOBER TERM, 1988
WHITE INDUSTRIES, INC., CARTHAGE AIRWAYS,
INC. and EUGENE INGRAM,
Petitioners,
Vs.
THE CESSNA AIRCRAFT COMPANY and
CESSNA FINANCE CORPORATION,
Respondents.
SUPPLEMENTAL APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Epwarp A. McCoNnweELL
(Counsel of Record)
LAW FIRM OF
EpWarD A. McCoNWELL
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
E. L. MENDENHALL, INc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030
eet
_ Supreme Court, U3,
_s'
U\
TABLE OF CONTENTS
Appendix A—Opinion of the United States Court of
Appeals for the Eighth Circuit (Filed May 6, 1988) . Al
Appendix B—Order Granting in Part and Denying in
Part “Motion by Cessna Defendants for Determina-
tion of Certain Special Legal Issues” (Filed Novem-
SORE Fy Rar cigs censajtelenesueciatceserbanasigsaciises-seunpwiplvnnsciseiseks Al4
Appendix C—Walston As a Percent of Domestic Total
PESDCEOR TO TS oii i ii ckckcces A23
Appendix D—Order on Defendants’ Motions for In-
voluntary Dismissal and to Decertify Class (October
Be ID ashe sie nic nae caesar meamcomdane wtbensdeanatrecnenaamtepiactrees A27
Appendix E—Order of the United States District Court
for the Western District of Missouri, Western Di-
vision (Filed October 14, 1986) .............0.0..eeeeeeeeeee A96
Appendix F—Order of the United States District Court
for the Western District of Missouri, Western Di-
vision (Filed March 10, 1987) ............... eee er ee A100
Appendix G—Order on Defendants’ Motions for In-
voluntary Dismissal and to Decertify Class (As
Amended by the Court’s Orders of October 14, 1986
and March 10, 1987) (Filed March 13, 1987) ............ Al1l4
A27
APPENDIX D
(Filed October 2, 1986)
IN THE
UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
No. 20245-B
WHITE INDUSTRIES,
INC., et al.,
Plaintiffs,
v.
The CESSNA AIRCRAFT
COMPANY, et al.,
Defendants.
ORDER ON DEFENDANTS’ MOTIONS FOR
INVOLUNTARY DISMISSAL AND TO
DECERTIFY CLASS
White Industries, Inc. (“White Industries’)
Carthage Airways, Inc. (“Carthage Airways”)! seek, for
themselves and for the members of a nationwide class
1. Although one of Carthage Airways’ shareholders, Eugene
Ingram, is also named as a plaintiff, it is clear that any claims
he might assert would pre-date July, 1966, when Carthage Air-
ways wes incorporated. Those claims were barred by the ap-
plicable four year statute of limitations at the time this suit
was filed, see 15 U.S.C. §15b, and thus will not be considered
further.
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composed of all “zone dealers” of Cessna aircraft who
operated as such during the years between April 14, 1965
and June 5, 1974,? treble damages for alleged violations
of §2(a) of the Robinson-Patman Act, 15 U.S.C. §$13(a),
and §1 of the Sherman Act, 15 U.S.C. §1.° Still present as
defendants are The Cessna Aircraft Company (“‘Cessna’’),
and Cessna Finance Corporation (“CFC’’).
Foilowing assignment to this division, the case pro-
ceeded to trial before the court sitting without a jury.
During the course of trial, it was determined: (a) that
presentation of the individual claims asserted by White
Industries and Carthage Airways would be bifurcated be-
tween liability and damages; (b) that- upon completion
of the liability phase of those individual claims the court
would recess the case, issue its rulings on evidentiary
questions which had been reserved, and thereafter rule
defendants’ anticipated motion for involuntary dismissal
of those claims; and (c), that in tandem with its liability
rulings on the individual claims the court would rule de-
fendants’ motion - made during trial - to decertify the
class. The court’s evidentiary rulings having been made,
see White Industries v. Cessna Aircraft Co., 611 F. Supp.
1049 (W.D. Mo. 1985), I now turn to the substantive mat-
ters mentioned.
2. A class composed of all Cessna dealers - zone and con-
tracted (see definitions, infra) - was originally certified. In
August, 1983, my predecessor narrowed the class to its present
configuration.
3. Plaintiffs’ prayer also includes a request for injunctive
relief. At some unidentified point before this case proceeded
to trial, however, Cessna completed its elimination of the ‘Cessna
distributor” (see definitions, infra) portion of its distribution
network. Since the functioning of that “Cessna distributor”
system forms the whole basis for plaintiffs’ claims, the request
for injunctive relief is now moot.
Ti naoierrrteeeerniaeteiehiitatmaiaeieiemaeniiioniaiaal
A29
I.
DEFINITIONS
Given the scope and complexity of this litigation, I
commence with a definition of certain terms which recur
throughout: The exercise, however, is not purely ad-
visory; the definitions which follow also incorporate find-
ings of fact and conclusions of law.
(a) General Aviation: As described by Cessna it-
self, “general aviation” includes
all flying except for commercial airlines and military,
encomassing everything from the single-seat aerial
application aircraft to a planeload of commuters trav-
eling to major airports for airline connections. It
[includes] air taxi trips, busy executives visiting out-
lying plants, an injured child being airlifted to medical
facilities, pipeline patrol, aerial examination of forests
for fires, the shipment of high priority cargo, rushing
spare parts to equiprnent requiring immediate service,
aerobatics, reseeding strip-mined areas, restocking
lakes with fish [and] floatplane hunting and fishing
trips into the North Woods. It [includes] almost every
conceivable business and recreational use.
Plt. Ex. #2 (Cessna brochure, circa 1969).
(b) Fixed Base Operator (“FBO”): A generic term
signifying a business (individually owned, corporate, or
otherwise) which occupied physical space at an airport
and which carried on some or all of a variety of general
aviation related activities, including flight training, aircraft
rental, aircraft chartering, aircraft maintenance, servicing
and repair, aircraft hangaring or tiedown, and the sale of
aircraft, avionics, accessories and parts. As would be
a
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expected, some FBOs were larger and more aggressive in
their operations than others, and some did not engage in
all the activities mentioned above. It appears, however,
that many were at least occasionally involved in the resale
of both new and used aircraft to most kinds of “end con-
sumers” (see “end consumer,” infra), and a number were
active in that line of business. Both “contracted dealers”
of Cessna aircraft (see “Contracted Dealer,” infra) and
“zone dealers” of Cessna aircraft (see “Zone Dealer,” infra)
were ordinarily FBOs, although many other FBOs were
never formally associated with the Cessna distribution
system.*
(c) Cessna Distributor:® As used in this opinion, a
business operating under a franchise contract with Cessna,
performing - at least in theory - a more or less traditional
wholesale function in the distribution of Cessna aircraft,
accessories and parts: viz, the purchase and maintenance
of an inventory of Cessna aircraft, accessories and parts;
the development of “contracted dealers” (see “Contracted
Dealer,” infra) within the distributor’s assigned geographic
“area of responsibility;” and the sale of Cessna aircraft,
paris and accessories to those contracted dealers.
(d) Contracted Dealer: As used in this opinion, a
business - ordinarily if not without exception an FBO -
operating under a contract (ordinarily of a one year
4. As noted elsewhere, some FBOs from time to time be-
came “zone dealers” or “contracted dealers” by virtue of enter-
ing into the necessary contract with Cessna or a Cessna dis-
tributor, and from time to time lost that status by virtue of not
renewing the contract.
5. The witnesses and parties have referred to these entities
as “independent distributors.’ I have chosen to substitute the
present term in order to avoid any perception or suggestion
that there was a relationship between such entities and “inde-
pendent dealers,” infra.
A31
duration) with a Cessna distributor. A “contracted dealer”
was in theory to perform a more or less traditional retail
function in the distribution of Cessna aircraft, accessories
and parts: viz, purchase Cessna aircraft, accessories and
parts and resell the same to the buying public. In prac-
tice, a “contracted dealer” usually acquired its Cessna
aircraft from the Cessna distributor with whom it had a
contract, although nothing in any of the contracts shown
in evidence required the same or restricted either the dis-
tributor or its dealers in buying from or selling to any
person either might choose.
(e) Zone Dealer: A business - again, ordinarily if
not without exception an FBO - operating under a direct
contract (ordinarily of one year duration) with Cessna,
in theory performing a retail function in the distribution
of Cessna aircraft, accessories and parts; a function paral-
lel to that performed by a contracted dealer. As with
contracted dealers, nothing in any of the “zone dealer”
contracts shown in evidence restricted either Cessna or
its zone dealers in buying from or selling to any person
either might choose.
(f) Independent Dealer: As used in this opinion,
a business - usually an FBO - which was not under con-
tract with Cessna or a Cessna distributor, but which en-
gaged (even if occasionally) in the resale of new or used
Cessna aircraft.
(g) Used Aircraft: As used in this opinion, any
aircraft which at the time of the sale in question carried
100 hours or more of flight time. My present selection
of 100 hours of use is based upon the testimony of two of
plaintiffs’ witnesses (Love and Desciose), but of course
is made without prejudice to defendants’ ability to show
that some lesser number of hours would be appropriate.
eS
A32
(h) New Aircraft: As used in this opinion, any
aircraft which at the time of the sale in question carried
less than 100 hours of flight time, unless materially dam-
aged.
(i) Current and Non-Current Aircraft: Cessna mar-
keted each of its models of aircraft on a “model year”
basis. Although there were differences from model to
model, a “model year” generally commenced in the fall
or early winter of each year, and terminated upon the
introduction of the new model the following year. The
term “current aircraft’ refers to an aircraft which, at
the time in question, was still within its “model year.”
By the same token, a non-current aircraft would be any
aircraft, even if “new,” which at the time in question
had been succeeded by the next year’s model.
(j) End Consumer: One who acquired an aircraft
for the immediate principal purpose of using it (whether
for business or for pleasure), as opposed to reselling it.
Thus a commuter airline which purchased a plane for
use in that business was an end consumer; so too was
an individual who purchased a plane to fly for pleasure,
or a company which acquired a plane for executive use.
In theory at least, the definition would also include an
FBO - even a contracted dealer, zone d@aler or inde-
pendent dealer - which purchased an aircraft, as some
did, for the immediate principal purpose of using it in
a flight school, air charter service or similar activity.*
6. Defendants advance a suggestion that the use of an air-
craft in such activities would amount to a “resale by the hour”
(or on whatever other basis the owner’s charges were fixed).
I feel obliged to reject that idea as a matter of law. however
ingenious it may be and even though some of plaintiffs’ witnesses
agreed with it. So far as I can determine, when the Robinson-
(Continued on following page)
A33
II.
GENERAL BACKGROUND
Cessna was incorporated in 1927. It has been en-
gaged, since that time and insofar as pertinent here, in
the manufacture and distribution of aircraft for use in
general aviation.
During the period in question (April 14, 1968 to
June 5, 1974), Cessna manufactured a variety of models
of single and multi-engine aircraft for such use. Those
planes were assembled by Cessna at plants in or near
Wichita, Kansas - also the location of Cessna’s corporate
headquarters - and reached the “consuming” public
through one of two general distribution systems then
utilized by Cessna: (a) the Cessna distributor system;
and (b), the zone dealer system. It is the functioning
and interrelationship of these two systems which form
the core of plaintiffs’ claims.
Historically, in the period before and immediately
after World War II the Cessna distribution system - like
that of other general aviation aircraft manufacturers at
the time - was essentially single-tiered, made up of “dis-
tributors” who purchased aircraft and parts from Cessna
and resold to “operators.” The latter were at that time
the predominant end consumers of general aviation air-
craft, who used the planes they purchased for flight
school training, rentals, charter service and special use
Footnote continued—
Patman Act refers to “resale” it refers to a sale in the con-
ventional sense, as distinguished from “use” or ‘“‘consumption”’
(words it also employs) Compare General Motors Corp.. 3
Trade Reg. Rep. (CCH 22,165, at 23,021 to 23,023 (1984) (a
§2(d) decision, but still applicable here, see fn. 10 infra)
A34
work. The ‘distributors,’ although called such, gener-
ally performed little in the way of traditional “whole-
sale” functions, and in fact generally operated in a capac-
ity which would ordinarily be thought of as that of a
“dealer” or “retailer.”
In the 1950’s, Cessna undertook to broaden the mar-
ket for its aircraft to include more of the general public -
those who would purchase for what might be called
“personal use” (whether business or pleasure, individual
or corporate). To that end, it sought to expand the
number of airport based outlets which would bear its
name and provide a point of contact with the general
public. That effort led to the creation of a more formal,
two-tier distribution system composed of Cessna distrib-
utors operating under contracts with Cessna, and _con-
tracted dealers operating under contracts with those
Cessna distributors - the so-called Cessna distributor sys-
tem. Cessna sold its aircraft to Cessna distributors at
a “Mscount of 25% (during some periods, 26%) from
Cessna’s suggested list price; the suggested “dealer” price
was a discount of 20% from the suggested list price.
In general, the original Cessna distributors were the
larger and more stable of the earlier “distributors,” who
converted their operations and entered into appropriate
contracts with Cessna; the contracted dealers were either
earlier “distributors” who did not convert, or were drawn
from the ranks of FBO’s. In the event, however, Cessna
was unable to obtain and keep a sufficient number of
Cessna distributors to service all areas of the country.
Cessna sought to fill these voids, where they existed,
by the creation of its “zone” distribution system. Under
that arrangement Cessna established, for each geographic
area in need thereof, its own “zone” outlet, responsible
ee
A35
for performing in that geographic area the same func-
tions that a Cessna distributor would otherwise have
performed. These “zones” were wholly owned divisions
of Cessna, but each had its own, separate operating facil-
ity and staff and was in general dealt with as a separate
“profit center’ within the Cessna organization. It was
the responsibility of each “zone” to develop and enter
into contracts with local “zone dealers.” Over the years,
Cessna expanded this “zone” method of operation (by
buying out Cessna distributors or by implementing the
system in areas where Cessna distributors chose not to
renew their agreements), until by 1970 substantially over
60% of the company’s business was conducted through
the “zone” system. Zone dealers acquired their aircraft
from Cessna at a discount of 20% from the suggested
list price.
In summary, during the period in question the Cessna
distribution system was a “dual” system: in some parts
of the country planes were sold by Cessna to Cessna dis-
tributors, who in theory resold to their contracted dealers,
who in turn resold to the buying public; in other parts
of the country planes were sold by Cessna through its
“zone” outlets to zone dealers, with those dealers re-
selling to the buying public.
* * * * « *
CFC is, and was during the time in question, a wholly
owned Cessna subsidiary which provided wholesale and
retail financing to purchasers of Cessna aircraft. It is the
source of a good bit of the documentary evidence offered
in this case, but aside from whatever tactical advantage
may have accrued to plaintiffs in that connection its
presence as a defendant is largely unexplained.
Se gon See Pe To
A36
White Industries was incorporated in 1965. In excess
of 95% of its stock is and always has been held by Frank
Terry White, who is and always has been its President and
chief executive officer. Originally, the company was in-
volved principally in the foreign automobile salvage busi-
ness, although it also maintained an aircraft rental, air-
craft charter, flight instruction and aircraft sales business
at Fairfax Airport in Kansas City, Kansas. The assets of
the automobile salvage business were sold in 1968, and
thereafter the bulk of the company’s operations were rep-
resented by the above mentioned aircraft related activities,
eventually expanded to include the operation of an aircraft
commuter service as well.
On August 8, 1968, the company entered into a con-
tract with Cessna and became a Cessna zone dealer (under
the “Kansas City zone”) for all but one of the models
of Cessna single and twin-engine aircraft. The dealership
was “non-exclusive” (as were all Cessna dealerships,
whether established under a Cessna distributor or under
a zone), with an assigned ‘area of responsibility” consist-
ing of two Missouri counties (Jackson and Clay) and two
Kansas counties (Johnson and Wyandotte), all part of
the greater Kansas City metropolitan area. The arrange-
ment was continued until December 31, 1969, during which
time the company purchased 27 aircraft from Cessna, each
at a discount of approximately 20% from Cessna’s sug-
gested list price.
* + * ~ + +
Eugene Ingram is and was at all relevant times a
resident of Carthage, Missouri, a Southwestern Missouri
community located approximately 150 miles to the south
of Kansas City. In July of 1962, Ingram acquired a fixed
base operation at the Carthage Municipal Airport. That
A37
business had previously been, among other things, a con-
tracted dealer (single engine) under Hackett-Aire Dis-
tributors (“Hackett”), a Cessna distributor located in
Kansas City. Ingram, operating as a sole proprietorship
under the name “Carthage Airways,” continued the rela-
tionship until 1966, when the business was incorporated
under the name “Carthage Airways, Inc.”
In approximately 1967, the Hackett distributorship
was acquired by Cessna and became the Kansas City
“zone” operation. Carthage Airways thereupon entered
into a contract with Cessna and became a zone dealer
(single engine). In late 1968, the dealership was expanded
to include multi-engine aircraft.
In February, 1969, Carthage Airways acquired a fixed
base operation at Miami, Oklahoma, approximately 60 miles
to the southwest of Carthage. That Miami operation,
carried on under the name “Miami Aircraft,” was actually
a separate dealership (multi-engine) conducted under a
contract with Skyliners Distributors, Inc. (“Skyliners’’),
a Cessna distributor located in Wichita, Kansas. Carthage
Airways continued the “Miami Aircraft” operation for ap-
proximately two years.
In 1970 or 1971, the Kansas City “zone” was acquired
by DAD Incorporated (“DAD”), a Cessna distributor lo-
cated in Omaha, Nebraska. Despite that fact, Carthage
Airways apparently continued as a single engine Cessna
dealer under a separate contract with Cessna until Feb-
ruary 4, 1972, although it actually purchased its aircraft
from DAD during that time frame. On the latter date,
it entered into a dealer (single engine) contract with DAD.
This last arrangement continued until Carthage Airways’
business ended in 1973.
A38
During the period at issue in this suit, Carthage Air-
ways purchased 23 Cessna aircraft. Those planes, as with
the planes purchased by White Industries, encompassed
a variety of models extending from the cheapest of Cessna’s
single engine craft (the Model 150) to sophisticated and
expensive twin-engine models (e.g., the model 421A).
Il.
STANDARD OF REVIEW
As noted, the individual plaintiffs’ claims have been
bifurcated between liability and damages. As also noted,
those claims have been bench-tried and are presently be-
fore me on defendants’ motion, pursuant to Rule 41(b),
for involuntary dismissal at the close of that individual
liability evidence.
Both the language of the Rule and the Advisory Com-
mittee comments demonstrate that the standard em-
ployed in dealing with such a motion is quite different
from that applied to counterpart motions made in jury-
tried cases under Rule 50(a). In the latter instance,
of course, the court determines only whether the evidence
presented is sufficient to create an issue of fact for the
jury; a process that requires viewing the evidence in the
light most favorable to the party opposing the motion
and prohibits a weighing of the evidence or any assessment
of witness credibility. See generally 9 Wright and Miller,
Federal Practice and Procedure §2524 (1971). With re-
gard to the present sort of motion, however, there are
no special inferences applied in favor of the party opposing
the motion, id. §2371, at 224-25, and the court may weigh
the evidence presented, resolve any conflicts therein and
A39
decide for itself where the preponderance lies. Id.; and
see Byrd v. Vitek, 689 F. 2d 770, 771 n.2 (8th Cir. 1982);
Shull v. Dain, Kalman & Quall, Inc., 561 F. 2d 152, 154-55
(8th Cir. 1977); Lang v. Cole, 542 F. 2d 751, 754 (8th Cir.
1976). In short, under a Rule 41(b) motion the court may
undertake a full-blown examination of the merits of the
claims to which the motion is directed, complete with fact
finding and credibility resolutions. If, having made that
examination, the court finds that the opposing party has
not supported those claims by a preponderance of the
credible evidence, the motion should be granted.
IV.
THE ROBINSON-PATMAN CLAIM
Reduced to its most prosaic terms, plaintiffs’ Robin-
son-Patman claim is that some or all Cessna distributors
sold Cessna aircraft on other than a ‘wholesale’ basis,
and in fact sold in direct competition with plaintiffs at the
retail level. Because of that, plaintiffs allege, and be-
cause of the price advantage Cessna distributors enjoyed
in their acquisition of Cessna aircraft - a 25% (or during
some periods 26%) discount as against the 20% discount
at which Cessna sold its planes to zone dealers (and at
which contracted dealers often acquired planes from
Cessna distributors) - plaintiffs have been, in Robinson-
Patman vernacular, the victims of discrimination by
Cessna in the price charged “different purchasers [Cessna
distributors vs. zone or contracted dealers] of commod-
ities of like grade and quality [the aircraft in question]...
where the effect of such discrimination may be substan-
tially to lessen competition . .. in any line of commerce,
or to injury ... competition with any person who...
ee EE Ee
A40
knowingly receives the benefit of such discrimination [the
Cessna distributors] ....” See 15 U.S.C. §13(a).’
As the Supreme Court has observed, “the Robinson-
Patman amendments by no means represent an exemplar
of legislative clarity.” FTC v. Fred Meyer, Inc., 390 USS.
341, 349 (1968). Nonetheless, the constitutent elements
of §2(a) are not difficult to identify, even if they are not
always easy to apply. According to the Federal Trade
Commission:
In order to bring the substantive portions of [§2(a)
of] the Act into play, there must be (1) two or more
consummated sales, (2) reasonably close in point of
time, (3) of commodities, (4) of like grade and qual-
ity, (5) with a difference in price, (6) by the same
seller, (7) to two or more different purchasers, (8)
for use, consumption, or resale within the United
States or any territory thereof, (9) which may result
in competitive injury. Furthermore, (10) the “com-
merce”? requirement must be satisfied. All ten of
these jurisdictional elements must be met in order
7. Section 2(a) of the Act, 15 U.S.C. §13(a), as immediately
pertinent, reads 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 commodi-
ties of like grade and quality, where either or any of the pur-
chases 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,
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.
eae
A4l
to invoke the power of the Federal Trade Commission
or the courts to consider the lawfulness of pricing
transactions.
International Telephone & Telegraph Corp., 3 Trade Reg.
Rep. (CCH) {22,188, at 23,090-91 (1984). Further (and
finally), in any claim for damages a plaintiff must also
meet the “actual injury” requirement of $4 of the Clayton
Act, 15 U.S.C. $15. J. Truett Payne Co. v. Chrysler Motors
Corp., 451 U.S. 557, 561-62 (1981).
Defendants suggest that plaintiffs’ case fails in con-
nection with several of these elements. Specifically, de-
fendants assert: (a) that plaintiffs have failed to meet
the “like grade and quality’’ requirement with respect
to aircraft purchased by them, as compared to aircraft
purchased within a “reasonably close” time frame by any
alleged competing Cessna distributor; (b) that plaintiffs
have failed to satisfy the “in commerce” requirement with
respect to any sales to them, or any sales to a Cessna dis-
tributor; (c) that plaintiffs have not shown themselves
to be in “competition” with any Cessna distributor; and
(d), that plaintiffs have failed to show any actual injury
within the meaning of §4 of the Clayton Act. In addi-
tion, defendants suggest that portions of Carthage Air-
ways’ claim are time-barred. To the extent necessary
to reach them, these and certain related issues will be
addressed below, seriatim.
A.
The Relevant “Commodities”
As concerns purchases by the plaintiffs and by Cessna
distributors, the relevant “commodities” would be either
A42
new or used (as sold by Cessna)® aircraft, purchased for
resale. Although dealers (and other FBOs) sometime pur-
chased aircraft (new or used) for use in their businesses
(flight school, air charter service, etc.), no one has as-
serted that pricing differentials by Cessna had any impact
upon competition in those endeavors, even if I make the
assumption that such “business use” competition falls
within the Act.* Nor can a purchase for use, albeit with
the idea of resale when sufficient use has been made, be
considered a purchase for resale. General Motors Corp.,
3 Trade Reg. Rep. at 23-023.1° Accordingly, while I do
not suggest that plaintiffs’ claims are adversely affected
8. While Cessna ordinarily sold new aircraft, it also oc-
casionally sold “factory demonstrator” or ‘zone demonstrator”
aircraft. Presumably those aircraft would often be “used,” as
that term has been defined in this opinion.
9. Some commentators have apparently viewed §2(a) as
limited to purchases made for the purpose of resale or distribu-
tion. See III Kinter and Bauer, Federal Antitrust Law 299
(1983); 5 Von Kalinowski, Antitrust Laws and Trade Regulation
30-44 (1986). The statute, however, uses the words “use, con-
sumption, or resale... .” I can certainly see that a purchase
of salt for “consumption” or “use’’ by a family does not impli-
cate “competition” at the purchaser’s level; but a business “use”
and perhaps even a business ‘‘consumption” might arguably be
something else again. The point, however, is academic as far
as this case is concerned, for the reasons stated_in the text.
10. General Motors Corp. is a decision under §2(d) of the
Act. That section is rather clearly limited to situations involv-
ing the resale of products, see General Motors Corp. at 23,021
and authorities cited; and of course the ruling in the case was
made in that context. It is, as noted in fn. 9, supra, less clear
that §2(a) is limited in that fashion. Whatever the theoretical
boundaries of §2(a) may be, however, I am, for the reasons
pointed out in the text, concerned only with aircraft which were
purchased for resale, and I thus believe Generai Motors is ap-
plicable - and persuasive - authority on the present point.
A43
by their use of planes purchased from Cessna if they pur-
chased those planes for the immediate principal purpose
of reselling them, and if their ability to resell them was
adversely impacted by Cessna’s differential pricing pol-
icies, in turn leading to use in order to mitigate loss,
the “commodities” in question here are in fact limited to
aircraft purchased for resale.
In that connection, Frank Terry White testified that
all of the aircraft purchased by White Industries in its
capacity as a zone dealer were purchased for the purpose
of resale. While more elaboration would have been help-
ful, and while the company did use some of those aircraft
in other facets of its business after they remained unsold
for a period of time, I find this testimony sufficient for
the present purpose. The same is true with respect to
Carthage Airways; in fact, the evidence there was in
some respects more explicit. And, of course, Cessna dis-
tributors ordinarily purchased only for the purpose of
resale. I thus find that all parties immediately involved
meet the requirement set forth above.
B.
“Like Grade and Quality”
“Airplanes,” as plaintiffs’ counsel once said (somewhat
unfortunately it might seem), “are not like hotdogs sold
at a ballgame.” And therein lies the nub of the parties’
argument over §2(a)’s “like grade and quality” require-
ment.
A44
Section 2(a) demands, generally speaking, not only
that there be contemporaneous": “actual sales”'* of the
relevant “commodities,” but also that the commodities
thus sold be of “like grade and quality.” Although a dif-
ferent test has been applied where the commodities are
sold to purchasers for use in a manufacturing process,
see, e.g., Bruce’s Juices, Inc. v. American Can Co., 87 F.
Supp. 985, 987 (S.D. Fla. 1949), aff'd, 187 F. 2d 919 (5th
Cir. 1951), modified on other grounds, 190 F. 2d 73 (5th
Cir. 1951), cert. dismissed, 342 U.S. 875 (1951) (applying
substitutability or functional interchangeability as a key
test), and where identical products are sold under a na-
tionally advertised label and a private label, see, e.g.,
FTC v. Borden Company, 383 U.S. 637, 640 (1966) (con-
sumer preference irrelevant), in the more ordinary case,
11. See generally UI Kintner and Bauer, supra, §21.17; 4
Von Kalinowski, supra §24.02[3]. In this case, where Cessna’s
pricing for aircraft generally remained the same throughout
the current model year for each model of aircraft; where no one
suggests that the price differential in question was related in
any fashion to the time of sale by Cessna; where planes often
were not sold for several months after their acquisition by a
dealer; and where there is no indication that customer preference
was affected by any time factor other than that of current model
year, I find as a general matter that all sales of the same model
aircraft, made within the current model year for such aircraft,
would meet the “contemporaneous sales” requirement. Ob-
viously, however, the timing of a given aircraft purchase might
directly impact a plaintiff's ability to show actual injury caused
by a Cessna distributor's alleged sale “in competition” with that
plaintiff, as where the distributor’s sale preceded the plaintiff's
purchase.
12. See, eg., Trm-State Broadcasting Co. v. United Press
Int'l, Inc., 369 F. 2d 268, 269-70 (5th Cir. 1966) (transfer under
an agency or consignment agreement not a “sale”); L & L Gil
Co., Inc. v. Murphy Oil Corp., 674 F. 2d 1113, 1120-21 (5th Cir.
1982) (refusal to deal not a “sale’’); Export Liquor Sales, Inc.
v. Animex Warehouse Co., 426 F. 2d 251, 252 (6th Cir. 1970),
cert. denied, 400 U.S. 1000 (1971) (lease not a “sale’): South
Enid Oil Co. v. Texaco, Inc., 2337 [sic] F. Supp. 650, 652 (N_D.
Ill. 1965) (offer to sell not a “sale’).
A45
where the commodities are destined for resale to the con-
suming public in an unchanged form and where the focus
of the dispute concerns whether those commodities are
sufficiently different (even if the seller’s cost is the same)
to warrant differential pricing, the test is said to be whether
there is any “genuine physical difference [between the
commodities], regardless of magnitude, that is not merely
decorative, artificial or fanciful and which affects consumer
use, preference or marketability.” 4 Von Kalinowski,
Supra §25.02[2], at 25.18, and authorities cited; and see
also III Kintner and Bauer, supra §§21.19, 21.20, 21.21.
The problem is that the instant case is not an ordinary
case. First, and in contrast to most reported §2(a) cases,
it involves highly complex products which are offered
(and sold) with a wide variety of “optional” equipment.
Second, the pricing differential at issue - the difference in
the functional discounts allowed to zone dealers on the
one hand and to Cessna distributors on the other - was
wholly unrelated to any physical differences between those
aircraft or their optional equipment. That is, while as an
abstract matter any two aircraft - unless new aircraft of
the same model and year, identically equipped - would ob-
viously be sold by Cessna at different prices, and legiti-
mately so, it is not that fact which generated the price
differential in question; any Cessna distributor would
always pay approximately'* 5 (or 6) “% less for a given
plane than a zone dealer, solely as a result of the different
functional discounts granted by Cessna.
13. The functional discounts granted on equipment, al-
though greater for distributors than for dealers, were different
in amount than the discount on the basic aircraft. Accordingly,
depending upon how a given aircraft was ultimately equipped
for resale, the total discount differential might vary slightly
from the five or six percent figure for the basic aircraft.
a
A46
In these circumstances, plaintiffs suggest, the op-
tional equipment features of the aircraft in question should
be ignored, with the result that all planes of a given model
(at least all new planes of the same model and year) would
be treated as being of “like grade and quality,” citing Moog
Industries v. Federal Trade Commission, 238 F. 2d 43 (8th
Cir. 1956), aff'd per curiam, 355 U.S. 411 (1958), reh’g
denied. 356 U.S. 905 (1958). Defendants dispute Moog’s
applicability and argue instead for an application of the
conventional test mentioned above, applied to each plane
as actually sold.
I am uncertain how Moog itself would dictate the
result plaintiffs seek, although I also confess to some un-
certainty over just how the case should be interpreted
and applied in the present sort of situation. The products
in Moog (automotive coils, piston rings and leaf springs,
each sold as a separate “line” with a number of different
items in each such “line”) did not involve “optional”
equipment, nor as defendants correctly point out were
Cessna aircraft sold as a “line,” with each purchaser buy-
ing the entire “line” (although, in fairness, apparently
not all of the purchasers in Moog bought all of an entire
“line” either ).* Nevertheless, Moog does s:1(7gest at least
two genera: concepts which bear upon the present issue:
(a) since the “like grade and quality” language of the
Act “ ‘was designed to serve as one of the necessary rough
14. Whether Moog stands for the proposition that when
the price differential is a discount that relates to the entire
“line,” rather than differences in the items themselves, it is
necessary only to find two (or more) competing buyers who
have purchased contemporaneously from the “line” (even if the
items purchased are different) (the idea that the “line” is itself
the “commodity”), or instead whether, even under Moog, it is
still necessary that there be at least two competing buyers who
have each contemporaneously purchased at least one identical
item from the “line,” I do not know.
A47
guides for separating out those commercial transactions
insufficiently comparable for price regulation by the
statute,” Myer 238 F. 2d at 50, quoting from the Report
of the Attor.«, weneral’s National Committee to Study
the Anti-Trust Laws 157 (1955), the phrase demands a
sensible approacii and permits a somewhat flexible appli-
cation; and (b), where the price differential in questior:
is in fact unrelated to physical differences in the items
sold, one should not - at least within certain limits which
remain consistent with the other features and general
purpose of the Act - allow those physical differences to
dictate the answer to the “like grade and quality” issue,
even though they otherwise ordinarily would. See Moog,
238 F. 2d at 49-50.
These two concepts have application here. Given
the highly sophisticated nature of the products in ques-
tion, the wide variety of options available (particularly
in multi-engine aircraft) and the relatively small number
of product sales, defendants’ argument would make it
virtually impossible to apply the Act to the general avia-
tion aircraft sales industry - or to any other industry in-
volving sophisticated products sold with options - despite
the fact that the discounting practice in question, if plain-
tiffs’ allegations concerning its effect are true, is something
the Act was clearly intended to reach and prevent. In
view of the Act’s general prophylactic nature, J. Truett
Payne Co., 451 U.S. at 561, and the fact that it was ob-
viously intended to apply (in a general sense) to the length
and breadth of domestic sellers and purchasers, I am un-
willing to concede such a gap in its practical reach. Fur-
ther, the evidence demonstrates that many optional items
could be readily removed or replaced or (conversely )
ordered and installed by the dealer or by someone in the
a eC
A48
dealer’s area, thus undercutting significantly the idea that
optional equipment must be inevitably considered an in-
tegral part of an aircraft for the present purpose. Finally,
to the extent that the presence or absence of optional
equipment actually did affect any given resale, it seems
to me a point better dealt with in connection with the
“actual injury” requirement imposed by §4 of the Clayton
Act.
On balance, I conclude that plaintiffs’ ultimate premise
is correct: in determining the “like grade and quality”
issue in this case, the options sold with a particular aircraft
should be disregarded. I find, accordingly, that for pur-
poses of this case all new, current Cessna aircraft of a
given model were commodities of “like grade and quality,”
as were all new, non-current Cessna aircraft of a given
model and, as sold by Cessna, all used aircraft of a given
model and year (since Cessna applied the same functional
discounts to those aircraft, simply adding an additional
discount based on hours of use). I note, however, that
used aircraft, even as sold by Cessna, cannot be consid-
ered of “like giade and quality” when compared with
new aircraft (either current or non-current) - a point
that perhaps needs no explanation - and that the same
would often if not always be true as between current and
non-current aircraft.’®
15. The evidence makes clear that non-current aircraft
did not ordinarily compete with current aircraft at any level:
that is, the two were not viewed as equivalents by purchasers,
and different prices were charged for each both on sale and on
resale. In part, it appears, this was the result of actual physical
changes made in aircraft from one model year to the next, and
in part was simply the result of buyer perceptions and prefer-
ences. The same point has been noted with automobile sales,
although in connection with the Act’s ‘contemporaneous sales”
requirement. See Valley Plymouth v. Studebaker-Packard Cor-
(Continued on following page)
—-
Cc.
The “In Commerce” Requirement
Although there were exceptions, Cessna ordinarily
sold its aircraft to Cessna distributors and to zone dealers
on an “f.a.f.” (“fly away field’) basis from its facilities
in Wichita, Kansas. Under that arrangement, a purchaser
from Cessna would take possession of the aircraft at
the factory in Wichita and at that point assumed both
the risk of subsequent loss and the cost of transporting
the aircraft to the purchaser’s facility. Defendants urge
that any sale thus accomplished will fail to meet the “in
commerce” requirement of the Act.'®
It is true that §2(a)’s “in commerce” language is
considerably more restrictive than the broad “effect on
commerce” test adopted in Sherman Act cases. See Gulf
Oil Corp. v. Copp Paving Co., 419 U.S. 186, 194-95 (1974):
and see generally III Kintner and Bauer, supra 146; 4
Von Kalinowski, supra §26.01[2], at 26-6 to 26-14. Essen-
tially, the requirement under the present aspect of §2(a)
Footnote continued—
poration, 219 F. Supp. 608, 610-11 (S.D. Cal. 1963). In any
event, whether one considers that current and non-current air-
craft were commodities not of like grade and quality, or instead
simply that Cessna’s sales of current and non-current aircraft
cannot meet the Act’s contemporaneous sales requirement, the
end result is the same: such sales will not satisfy the “analogous
transactions” rationale that underlies both aspects of §2(a). Id.
16. There are, as a reading of the section demonstrates.
actually three (or four) “in commerce” clauses in §2(a). See
III Kintner and Bauer, supra 145; 4 Von Kalinowski, supra
§26.01. The present question technically relates only to the
third such clause, although at least in the present sort of case
a satisfaction of that third clause will ordinarily dictate a finding
that the other clauses are also satisfied. III Kintner and Baur,
supra 145-46; 4 Von Kalinowski, supra 26-16.
————e
A50
is that “‘at least one of the two [or more] transactions
which, when compared, generate a discrimination .
[have] crossed a state line,” Gulf Oil Corp., 419 USS.
at 200, although it is immaterial which of the relevant
transactions meets that test, see Moore v. Mead’s Fine
Bread Co., 348 U.S. 115, 119 (1954). Despite the super-
ficial plausability of defendants’ argument in this con-
nec‘ion, however, I believe it overlooks the “flow of
commerce” doctrine: a general doctrine of federal law
which considerably antedates the Robinson-Patman Act,
see, e.g., Swift & Co. v. United States, 196 U.S. 375, 398
(1905), which in fact forms part of the legislative his-
tory of the Act, see Representative Utterback’s remarks
at 80 Cong. Rec. 9416 (June 15, 1936), and which clearly
may be utilized in meeting the Act’s “in commerce”
requirements, see Gulf Oil Corp., 419 U.S. at 195; L & L
Oil Co., Inc. v. Murphy Oil Co., 674 F. 2d at 1116-17;
S & M Materials Co. v. Southern Stone Co., 612 F. 2d
198, 200 (5th Cir. 1980), cert. denied, 449 U.S. 832 (1980);
Roorda v. American Oil Co., 446 F. Supp. 939, 941-43
(W.D. N.Y. 1978). Under that doctrine, the “flow of
commerce” begins when goods are transported from their
place of origin, if the movement of those goods is in-
tended or expected to cross a state line (unless the
goods are raw materials which are to be physically altered
before they cross a state line), and continues until the
goods come to rest at their ultimate intended destination
17. Representative Utterback cautioned that the exemption
for purchases in intrastate commerce
[i]s not important for practical purposes [since the manu-
facturer] may not sell to a mass buyer at discriminatory
prices for delivery within the State and shipment then to
other States, since such sales are, by long-settled law, in-
terstate commerce.
Adl
in another state or states;'* all that occurs during that
flow is “in commerce” for Robinson-Patman purposes.
See generally 4 Von Kalinowski, supra at 26-38. It is
likewise clear that the existence of the flow depends
(with the limitations mentioned above) only upon the
general fact that the goods are intended or expected to
and do in fact cross a state line during the course of the
flow; technicalities regarding passage of title, or whether
the goods are shipped f.o.b. (or, as in this case, f.a.f.)
are essentially immaterial. S & M Materials Co. v. South-
ern Stone Co., 612 F. 2d at 200; and see also L & L Oil
Co., Inc. v. Murphy Oil Corp., 674 F. 2d at 1116-17;
Vanco Beverages, Inc. v. Falls Cities Industries, Inc., 654
F. 2d 1224, 1228 (7th Cir. 1981), vacated on other grounds,
460 U.S. 428 (1983).
Here, each of the Cessna distributors in question
was located outside the State of Kansas.’* It was obvi-
ously clear to all concerned that the aircraft they pur-
chased from Cessna, whether delivered f.a.f. in Wichita
or otherwise, would be transported from Wichita to their
respective places of business in those other states. No
18. Where goods are moved from out of state to an instate
wholesaler for redistribution in state, the flow stops when the
goods reach that wholesaler, unless the goods were purchased
by the wholesaler (a) to fill a specific order; (b) under a con-
tract or understanding by which the wholesaler has agreed to
fill the needs of a particular customer; or (c), to fill the an-
ticipated needs of a particular customer even though no contract
or understanding to do so exists. See Walling v. Jacksonville
Paper Co., 317 U.S. 564, 567-70 (1943); Burke v. Ford, 377 F. 2d
901, 904 (10th Cir. 1967), rev’d on other grounds, 389 U.S. 320
(1968) ; 4 Von Kalinowski, supra §26.02[3][b].
19. During the period in question, in fact, all Cessna dis-
tributors except for one (Skyliners) were located outside the
State of Kansas. Plaintiffs apparently make no claim that Sky-
liners sold in competition with them, or at least have adduced no
proof of that fact.
A52
more is necessary for the purpose of §2(a)’s “in com-
merce” requirement, and I accordingly reject defendants’
argument.
D.
Carthage Airways as a “Purchaser”
from Cessna
As noted, during the years 1971 and 1972 Carthage
Airways purchased its aircraft from DAD, a Cessna dis-
tributor in Omaha, Nebraska. In addition, Carthage Air-
ways’ “Miami Aircraft” operation purchased its aircraft
from Skyliners, a Cessna distributor in Wichita, Kansas.
Defendants suggest that all such purchases fall outside
the scope of §2(a), since they were not made directly from
Cessna.
By conventional analysis defendants’ position would
be correct, since the case law makes clear that one who
does not purchase directly from the alleged discriminatory
seller (here Cessna) cannot ordinarily be considered a
“purchaser” within the meaning of §2(a). See Barnosky
Oils, Inc. v. Union Oil Co., 665 F. 2d 74, 83 (6th Cir. 1981);
Hiram Walker, Inc. v. A & S Tropical, Inc., 407 F. 2d 4,
7 (5th Cir. 1969), cert. denied, 396 U.S. 901 (1969); Klein
v. Lionel Corp., 237 F. 2d 13, 14-15 (3d Cir. 1956); and
see generally Sanitary Milk Producers v. Bergjans Farm
Dairy, Inc., 368 F. 2d 679, 691 (8th Cir. 1966); III Kintner
and Bauer, supra at 192; 4 Von Kalinowski, supra at 24-40.
The only commonly recognized exception is found in the
so-called “indirect purchaser” doctrine: where one pur-
chases a manufacturer’s goods through a distributor, he
may be deemed to have purchased directly from the man-
ufacturer if the latter in fact deals directly with him in
A53
promoting the sale of the goods, or exercises control over
the terms on which he buys.”° See Barnosky Oils, Inc.
v. Union Oil Co., 665 F. 2d at 83-4; Hiram Walker, Inc. v.
A & S Tropical, Inc., 407 F. 2d at 7-8; and see generally
III Kintner and Bauer, supra at 202-08; 4 Von Kalinowski,
supra at 24-49 to 24-58. That exception is clearly inap-
plicable here, since there is no showing that Cessna dealt
directly with Carthage Airways in promoting the sale of
aircraft, or controlled the prices charged it by Cessna
distributors. In truth, the most to be said in this respect
is that Cessna’s “wholesale” price to those distributors
had the practical effect of establishing a “floor” on the
resale price imposed by them. That undistinguished fact
of life is not a sufficient basis for invoking the doctrine.
Barnosky Oils, Inc. v. Union Oil Co., 665 F. 2d at 84.
Carthage Airways concedes as much, and instead urges
the application of a new and different exception said to be
based upon the Supreme Court’s holding in Fred Meyer,
20. In contrast to the position take in H.A.B. Chemical
Co., Inc. v. Eastman Kodak Co., 1981-1 Trade Cas. (CCH)
§63,912 at 75,749 (C.D. Cal. 1980), I do not consider that “third
line” and “fourth line” claims, see generally Perkins v. Standard
Oil Co., 395 U.S. 642 (1969), are also an exception to the general
rule mentioned above. Those claims are allowed because of
§2(a)’s express reference to discriminatory effects which “may
. Substantially . . . lessen competition . . . with any person
who either grants or knowingly receives the benefit of such
discrimination, or with customers of either of them” (emphasis
added). Accordingly, claims by an injured “customer” of a
disfavored buyer are allowed without regard to the number of
sales “levels” that separate the ‘customer’ from the discrim-
inatorily priced sale (or, more precisely, the number of sales
levels that separate the claimant from the seller of the favored
buyer, III Kintner and Bauer, supra at 315 n. 289). See Perkins,
395 U.S. at 606-07. Nonetheless, unless the exception noted in
the text applies, or some new exception is recognized, the “dis-
favored” sale must have been made directly by the alleged dis-
criminating seller.
i i
A54
390 U.S. 341.21. I believe Fred Meyer does indeed sup-
port - in fact perhaps dictates - the result sought, and ac-
cordingly find the argument persuasive.
In that case, suppliers of canned corn and canned
peaches sold those products both to the Fred Meyer Com-
pany, which operated a chain of supermarkets, and to cer-
tain wholesalers who in turn sold to supermarkets which
competed with Meyer. Meyer’s supermarkets were the
beneficiaries of promotional allowances paid by those
suppliers; the same allowances were not made available
to the wholesalers or to the supermarkets which purchased
from them. The Federal Trade Commission found (among
other things) that this practice violated §2(d) of the
Act,2 and entered a cease and desist order barring Meyer
from inducing the suppliers to grant promotional allow-
ances which were not available to the wholesalers. Fred
Meyer, 390 U.S. at 344-47. The Court of Appeals reversed
that portion of the order, holding (a) that Meyer and the
21. Plaintiffs also seek to support their argument with a
citation to Perkins v. Standard Oil Co., 395 U.S. 642. Perkins
simply held, as applied to this case, that there is, in a causal
relationship sense, no artificial limit to the number of sales
levels which may separate an injured “customer” of a disfavored
buyer from a discriminating seller. See fn. 20 supra. For the
reasons stated in fn. 20, I do not believe Perkins has any direct
bearing upon the present question.
22. Section 2(d) reads as follows:
(d) It shall be unlawful for any person engaged in com-
merce to pay or contract for the payment of anything of value
to or for the benefit of a customer of such person in the course
of such commerce as compensation or in consideration for any
services or facilities furnished by or through such customer in
connection with the processing, handling, sale, or offering for
sale of any products or commodities manufactured, sold, or of-
fered for sale by such person, unless such payment or considera-
tion is available on proportionally equal terms to all other cus-
tomers competing in the distribution of such products or com-
modities.
A55
wholesalers did not themselves compete (since Meyer sold
only to the public while the wholesalers sold only to super-
markets), and (b), that the supermarkets which purchased
from those wholesalers, and did compete with Meyer,
were not “customers” of the suppliers within the mean-
ing of §2(d)’s use of that term. Fred Meyer, 390 U:S. at
348.
The Supreme Court in turn reversed. The essence
of the holding is captured in the following two quotations,
390 U.S. at 348-49, 352:
Respondents press upon us a view of §2(d) which
leaves retailers who buy from wholesalers for the
most part unprotected from discriminatory promo-
tional allowances granted their direct-buying com-
petitors. We are told that §2(d) in specific terms
requires this result. To benefit from the statute’s
requirement of proportional equality, it is urged, a
buyer must be a “competing customer” within the
narrowest sense of that phase. Thus, the wholesalers
in this case are not competing customers because they
do not compete with Meyer, and the retailers who do
compete with Meyer in the resale of the suppliers’
products are outside the protection of §2(d) because
they are not customers of the suppliers. For reasons
stated below, we agree with respondents that, on the
facts of this case, §2(d) reaches only discrimination
between customers competing for resales at the same
functional level and, therefore, does not mandate pro-
portional equality between Meyer and the two whole-
salers. But we cannot accept the second half of this
argument, for it rests on a narrow definition of “cus-
tomer” which becomes wholly untenable when viewed
in light of the central purpose of §2(d) and the eco-
A56
nomic realities with which its framers were con-
cerned.
* * * * * *
Of course, neither the Committee Report nor
other parts of the legislative history in so many words
define “customer” to include retailers who purchase
through wholesalers and compete with direct buyers
in resales. But a narrower reading of §2(d) would
lead to the following anomalous result. On the one
hand, direct-buying retailers like Meyer, who resell
large quantities of their suppliers’ products and there-
fore find it feasible to undertake the traditional whole-
saling functions for themselves, would be protected
by the provision from the granting of discriminatory
promotional allowances to their direct-buying com-
petitors. On the other hand, smaller retailers whose
only access to suppliers is through independent whole-
salers would not be entitled to this protection. Such
a result would be diametrically opposed to Congress’
clearly stated intent to improve the competition posi-
tion of small retailers by eliminating what was re-
garded as an abusive form of discrimination. If we
were to read “customer” as excluding retailers who
buy through wholesalers and compete with direct
buyers, we would frustrate the purpose of §2(d).
We effectuate it by holding that the section includes
such competing retailers within the protected class.
As did the courts in Julius Nasso Concrete Corp. v.
DIC Concrete Corp., 467 F. Supp. 1016, 1019 (S.D. N.Y.
1979), and Checker Motors Corp v. Chrysler Corp, 283 F.
Supp. 876, 887 (S.D. N.Y. 1968), aff'd on other grounds,
405 F. 2d 319 (2d Cir. 1969), cert. denied, 394 U.S. 999
(1969), I believe this language rather clearly leads - at
A57
least in the circumstances of this case - to the same result
with regard to the word “purchaser” as used in §2(a).
Granted, the holding in Fred Meyer involves §2(d) and
the word “customer” rather than §2(a) and the word
“purchaser,” but those terms, as they appear ir their re-
spective sections of the statute, have long been heid synon-
ymous, see American News Co. v. FTC, 300 F. 2d 104, 109
(2d Cir. 1962), cert. denied, 371 U.S. 824 (1962); Kennedy
Theater Ticket Service v. Tickertron, Inc., 342 F. Supp.
922, 925 (E.D. Pa. 1972); K.S. Corp. v. Chemstrand Corp.,
198 F. Supp. 310, 312 (S.D. N.Y. 1961), a holding which
certainly seems correct given the similar context in which
the two words are used Nor is the spirit of the two sec-
tions essentially different; both seek, within the limits
of the statutory language employed, to prevent “ ‘all de-
vices by which large buyers gained discriminatory prefer-
ences over smaller ones by virtue of their greater purchas-
ing power,’” see Fred Meyer, 390 U.S. at 349, quoting from
FTC v. Henry Brock & Co., 363 U.S. 166, 168 (1960). And
certainly an indirect purchaser in the present situation
would suffer precisely the same ultimate competitive dis-
advantage the Supreme Court noted in Fred Meyer in con-
nection with §2(d), unless a similar definition is given
the word “purchaser” in §2(a). In short, if it makes sense
to construe the word “customer” in §2(d) as including an
indirect purchaser - and the Supreme Court says it does -
it makes equal sense, at least in some situations, to con-
strue the word “purchaser” in §2(a) in that same way.
I agree that this sert of cross-pollination from Fred
Meyer should be allowed only with “great caution,” III
Kintner and Bauer, supra 208, so as to avoid consequences
unintended by Congress. In the limited circumstances
of this case, however, I do not believe an application of
A58
the principle in question will produce any such result.
Where (as here) a retailer who purchases indirectly claims
to be in competition with someone who purchases directly,
where (as here) that direct purchaser receives a func-
tional discount predicated upon its claimed status as a
wholesaler - a discount not available to the indirect pur-
chaser - and where (as here) the seller in question has
notice that its direct purchaser may in fact be competing
at the retail level,” the seller’s options - and duties - are
(or should be) no more or less than where both purchasers
buy directly. The suggested answer to the latter problem
is one as old as the Act itself: the seller must take reason-
able steps to keep advised of the resale activities of those
who receive its functional discounts, and where retail
selling by one who receives a wholesaler’s discount occurs,
post-resale price adjustments should be made.* See
Sherwin-Williams, 36 F.T.C. 25, 73-4 (1943); E. Edelman
& Co., 51 F.T.C. 978, 988 (1955); Schniderman, “The Tyr-
anny of Labels” - A Study of Functional Discounts Under
the Robinson-Patman Act, 60 Harv. L. Rev. 571, 601-02
(1947); and compare Abbott Labs v. Portland Retail Drug-
gists, 425 U.S. 1, 19-20 (1976). This is admittedly a burden .
upon the seller, but it represents the price paid under
the Act for maintaining a dual distribution system. The
burden would be no greater in the present instance.
:
The problem is by no means easy. All things con- |
oe ee _
sidered, however, I believe Carthage Airways’ suggested
23. The evidence, in the form of various complaints to
Cessna, makes clear that Cessna had such notice, at least as a
general matter. :
24. Cessna, of course, had no legal way of controlling the
aw f--- £ a b---- It could, on the other
obviously control the prices which it charged those dis-
tributors. The requirement noted in the text amounts to no
more than requiring it to exercise that ability.
EE
A59
application of Fred Meyer is appropriate, and I accordingly
hold that, as to the aircraft it purchased from DAD and
Skyliners, Carthage Airways was in fact a “purchaser”
from Cessna within the meaning of §2(a).
E.
“Competition”
With exceptions not pertinent here, it is axiomatic
that a seller's differential pricing as between purchasers
of a commodity can be a violation of the Robinson-Pat-
man Act only when those purchasers actually compete
in the resale or distribution - or perhaps business use -
of that commodity, see National Distillers and Chemical
Corp. v. Brad’s Mach. Products, Inc., 666 F. 2d 492, 496
(11th Cir. 1982), reh’g denied, 673 F. 2d 1342: M.C. Manu-
facturing Co., Inc. v. Texas Foundaries, Inz., 517 F. 2d
1059, 1066 (Sth Cir. 1975); Ag-Chem Equipment Co.,
Inc. v. Hahn, Inc., 480 F. 2d 482, 490 (8th Cir. 1973):
III Kintner and Bauer, supra 295; 5 Von Kalinowski.
supra 30-41, 30-50, or would, but for that differential
pricing, see Patman, Complete Guide to the Robinson-
Patman Act 60 (1963). Such purchasers must thus com-
pete both in the geographic sense - that is, in the same
relevant geographic market area, see III Kintner and
Bauer, supra 295-98; 5 Von Kalinowski, supra 30-41, 30-72
- and in the functional sense - that is, at the same func-
tional level in the distribution system for the commodity,
see III Kintner and Bauer, supra 298-99: 5 Von Kalinow-
ski, supra 30-48 to 30-64. Accordingly, a determination
as to whether two purchasers are “in competition” within
the meaning of §2(a) will involve two separate points
of inquiry: (a) an identification of the kinds of cus-
A60
tomers for which each competes in connection with the
commodity in question; and (b), an identification of the
geographic area in which each thus competes.
1.
Functional Competition
The parties have argued at length over whether a
Cessna distributor's sales to FBOs should be treated as
sales made “in competition” with plaintiffs. Since the
term “FBO” does not even necessarily identify a dealer
in aircraft, much less what an FBO’s immediate principal
purpose in perchasing an aircraft might have been, I
believe both a?guments miss the mark to some extent.
As will be seen, however, it is the plaintiffs who ulti-
mately suffer from that fact.
I do reject plaintiffs’ theory that an aircraft sold
by a Cessna distributor to any purchaser other than an
“authorized Cessna dealer” (defined by plaintiffs as a
dealer under current contract with a Cessna distributor
or with a Cessna zone) would be (assuming the neces-
sary geographic market factors) a sale made “in com-
petition” with plaintiffs, no matter what the purchaser's
reselling function might be. In particular, plaintiffs urge,
a sale by a Cessna distributor to an independent dealer,
who purchased in order to resell. would be a sale “in
competition” with plaintiffs even though that dealer in
turn actually competed with plaintiffs in the resale of
the aircraft to an end consumer. Plaintiffs take this
position despite the fact that their contracts with Cessna
(as with all Cessna contracts shown in evidence, both
zone dealer and Cessna distributor) clearly specify that
the sales rights thereunder are “non-exclusive” (see, e.g.,
nf
A61
White Industries 1969 contract, Plt. Ex. +40, page 2
para. 1), and despite the fact, clearly shown by the
evidence, that any given independent dealer may have
been, in its business operations, indistinguishable from
one of the plaintiffs except for the fact that the latter
was a party to a Cessna contract for that particular year
and the former was not. Indeed, as the evidence shows,
that independent dealer may in fact have been an “au-
thorized” Cessna dealer the previous year, or may have
become one the next, or both, all with no observable
change in its business functioning or functions.
Plaintiffs’ theory results, apparently, from an attempt
to apply an oft-repeated statement regarding the legality
of functional discounts under the Robinson-Patman Act,
viz:
Section 2(a) does not exempt functional differen-
tials from its general prohibitions. Such differentials
are neither prohibited nor expressly permitted. They
must therefore be subjected to the same tests as any
other price differences in determining whether they
amount to unlawful discrimination in price. The
only need for a separate discussion of functional dif-
ferentials, therefore, is with respect to certain situa-
tions in which the granting of such differentials may
result in injury to competition. Manufacturers do
not ordinarily compete with wholesalers, nor whole-
salers with retailers; but it cannot be assumed that
differentials as between those classes of customers.
granted solely on a functional basis and not justifi-
able by difference in costs, may not result in injury
to competition and be unlawful. If injury to com-
petition results, the fact that the differential was
A62
made in good faith on functional grounds is no de-
fense.
Austin, Price Discrimination and Related Problems Under
the Robinson-Patman Act 50 (rev. ed. 1953); and see also
I ABA Antitrust Section, Monograph No. 4, The Robinson-
Patman Act: Policy and Law 54, 59 (1980); Rowe, Price
Discrimination Under the Robinson-Patman Act 176
(1962); Shniderman, supra at 579-88. Such statements
in turn suggest that determining the presence or absence
of functional competition between purchasers of a com-
modity is not so much a process of identifying or labeling
their respective functions or functional levels, or the func-
tions or functional levels of their customers, as it is simply
a factual process of determining whether they normally
compete for the same business of the same customers - a
rather straightforward approach I generally accept. But
see 5 Von Kalinowski, supra, at 30-16 n.35. If that is plain-
tiffs’ theory, however, it encounters an immediate im-
passe, at least as concerns new aircraft (either current or
non-current), since the available evidence fails to show
that either White Industries or Carthage Airways ever
competed, in any meaningful way, in selling such aircraft
to other dealers for resale. Carthage Airways, for example,
never sold any plane to a dealer (or an FBO) for any
purpose, so far as the evidence shows. Neither did White
Industries, insofar as new planes are concerned. Nor does
the evidence show that dealers elsewhere customarily
sold new aircraft to other dealers (independent or other-
wise) for resale,*® other than perhaps on an accomodation
25. Plaintiffs’ offer of some 387 aircraft sales files and
sales tickets maintained by Walston Aviation, Inc. (a contracted
dealer located in East Alton, Illinois), for the purpose of showing
(Continued on following page)
A63
basis - something which is the antithesis of a competitive
sale.**° Indeed, if Cessna distributors supplied new air-
craft to independent dealers at dealer cost prices as com-
monly as plaintiffs claim, practical market economics alone
would tend to dictate the absence of any real dealer-to-
dealer market involving new planes for resale.
The alternative argument, of course, is that plaintiffs
were “frozen out” of that market by virtue of Cessna’s
differential pricing as between Cessna distributors and zone
Footnote continued—
dealer sales to other dealers, falls far short of the mark. In the
first place, the available evidence does not in many instances
even allow me to find that the purchasers were in fact dealers,
and I cannot of course simply accept counsel’s representation
on the point. Second, many if not most of the aircraft involved
in these 387 sales were non-current when purchased from Cessna
by the various Walston distirbutors, who in turn made them
available to Walston Aviation, Inc. Even if these sales by the
latter were to other dealers for purposes of resale the situation
appears to have been atypical, resulting from the fact that when
Cessna attempted to dispose of its remaining inventory of air-
craft following the end of a model year, the Walston distribu-
tors customarily purchased the bulk of them. The evidence
does not reflect that dealers other than Walston Aviation, Inc.
ordinarily dealt to any extent in reselling non-current new air-
craft to other dealers for resale, nor, as mentioned, that either
White Industries or Carthage Airways did so.
26. A customer sometimes had very particular require-
ments regarding the plane he wished to purchase. If the dealer
he approached did not have a plane meeting those requirements,
the dealer would call his distributor (or, if a zone dealer, pre-
sumably his Cessna zone). If the distributor (or zone) did not
have the plane in stock, an effort would be made by the dis-
tributor (or zone) to find the plane elsewhere in the system
and to acquire it by purchase or trade. Whether this same sort
of thing also occurred with any consistency at the dealer level,
as is common in the automobile sales business, see Cartrade, Inc.
v. Ford Dealers, Etc., 446 F. 2d 289, 290-93 (9th Cir. 1971), is
unknown. In any event, an ‘‘accommodation sale” of this nature
(involving a search for and acquisition of the only aircraft of
a particular sort which can be located with reasonable ease),
even if made between dealers, would not be the kind of transac-
tion which demonstrates the existence of a general dealer-to-
dealer for resale market.
A64
dealers; that plaintiffs wished to compete in that market,
and would have done so but for the differential pricing -
an approach which might be theoretically acceptable, see
Patman, supra; Schniderman, supra 596, but which also
poses certain dangers, since the viewer may be led to
substitute his own concepts of what “ought to be” for the
actual realities of the marketplace. In any event, this
approach does require an examination of the parties’ func-
tions and functional levels in the distribution of general
aviation aircraft, as well as an inquiry into some of the
more theoretical aspects of Robinson-Patman policy. When
that analysis is performed, the argument flounders.
Plaintiffs urge, in this connection, that it is the in-
dependent dealers’ status as purchasers which controls,
not whether they resell. That suggestion is directly con-
trary to the law on the subject (much of which plaintiffs
freely acknowledge elsewhere in their brief): that one’s
functional level is determined not by “the character of his
buying, but [by] the character of his selling” (emphasis
added). Kintner, A Robinson-Patman Primer 154 (1979),
quoting from Mennen Co. v. F.T.C., 288 Fed. 774, 782 (2d
Cir. 1923); and see Attorney General’s National Committee
to Study the Antitrust Laws, 1955 Report 204-05 (1955).
And, of course, the argument also ignores the fact that
independent dealers and “authorized” Cessna dealers oc-
cupied precisely the same functional level in the resale
of new Cessna aircraft. In fact, if the two were located
at the same airport (as in fact was sometimes the case),
the ordinary independent dealer would be the direct, pri-
mary competitor of the ordinary “authorized” Cessna
dealer in all aspects of their respective businesses: flight
training, aircraft rental, aircraft charter, aircraft servic-
ing, maintenance and repair, aircraft hangaring and tie-
down, new aircraft sales and used aircraft sales.
A65
It has been said that the purpose of the Robinson-
Patman Act is to protect competition, not competitors.?’
See Hampton v. Graff Vending Company, 478 F. 2d 527,
533 (5th Cir. 1973), cert. denied, 414 U.S. 859 (1973),
reh’g denied, 414 U.S. 1087 (1973); Anheuser-Busch v.
F.T.C., 289 F. 2d 835, 840 (7th Cir. 1961); Kintner, supra,
at 117-20; Rowe, supra, at 126-32. Perhaps more to the
point, it has also been said that
[iJn short, Congress intended to assure, to the extent
reasonably practicable, that businessmen at the same
functional level would start on equal competitive
footing as far as price is concerned.
Federal Trade Comm'n v. Sun Oil Co., 371 U.S. 505, 520
(1963); and see also Abbott Labs v. Portland Retail
Druggists, 425 U.S. 1, 12 (1976). Given these principles,
to accept plaintiffs’ alternative theory would be to stand
the Act on its head. Since independent dealers were
plaintiffs’ direct competitors in the only new plane resale
market in which either actually competed (the end con-
sumer market), to find illegal a Cessna pricing policy
which allowed a Cessna distributor to sell new aircraft
for resale to both at the same price could only curtail
competition, not enhance it. I refuse to apply the Act
in that fashion.
27. The statement is ordinarily made in addressing a
slightly different problem, but I think it has application here,
at least in spirit.
28. A much better point for the argument could be made
in connection with distributor sales to an independent dealer -
or for that matter to any dealer, contracted, zone or indepen-
dent - for use, although the result might not be very practical.
The point is largely academic, however, since even in those
instances where I am able to identify a distributor’s purchaser
as a dealer of some sort, or even simply as an FBO, the evidence
usually does not provide so much as a hint concerning the prin-
cipal reason for purchase. See text infra.
A66
The situation with respect to used aircraft, sold as
such by Cessna (factory or zone demonstrator aircraft),
is more troublesome. There is no question that dealers
sold used aircraft to FBOs, including other dealers. White
Industries, for example, did so with regard to several
planes. It is, however, considerably less clear how fre-
quently such sales were made for the immediate prin-
cipal purpose of resale, and how frequently factory or
zone demonstrator aircraft - which were considered the
“cream puffs’ of the trade, because of the care given
them by Cessna - were involved, at least without a
substantial number of added use hours by the selling
dealer. And, of course, the same theoretical principles
regarding competition, noted above, would apply here as
well. I conclude, in these circumstances, that the answer
must be the same as for new Cessna aircraft.
All this leaves plaintiffs in a rather awkward posi-
tion, given their method of proof. As suggested by the
preceding passages, for the purpose of ascertaining com-
petition between plaintiffs and any Cessna distributor I
will consider only distributor sales to end consumers -
i.e., sales to those who purchased for the immediate prin-
cipal purpose of using an aircraft. Unfortunately, plain-
tiffs’ technique of lumping together all of a distributor’s
sales to any purchaser other than a contracted dealer
of that distributor, usually without further elaboration,
does not ordinarily allow me to make that determina-
tion.*® Simply being advised, for example, that Florida
29. The mere fact that a given sale was a ‘“‘pass-thru”’ or
“conduit” sale by a distributor - i.e., a sale actually negotiated
and consummated by the distributor, but with the chain of
title reflecting a sale to a dealer and a resale by that dealer -
does nothing to prove the point; the evidence reflects a number
of such sales which were made to dealers (independent or
otherwise), thus leaving the inquiry where it started.
A67
Air Distributors (“FAD”) (a Cessna distributor in Ft.
Lauderdale, Florida) made a sale to “Cam Aircraft” dur-
ing the relevant time period does not teli me that the
sale was to an end consumer (a purchase for use); “Cam
Aircraft” may, for all I know, have been a dealer pur-
chasing to resell.*° Accordingly, unless a given Cessna
distributor sale is affirmatively shown to have been an
end consumer sale - as where the buyer is shown, di-
rectly or by fair inference, to have purchased for use
(e.g., a commuter airline’s purchase of aircraft suitable
for use in that business), or where the buyer is at least
shown to have had no connection with the business of
reselling aircraft - the sale cannot be used in deciding
plaintiffs’ claims. The end result is the rather meager
collection of sales tabulated in Appendix A.
9
«.
“Captive” Dealerships
According to plaintiffs, where a contracted dealer
was a wholly owned (or perhaps even partially owned)
subsidiary of a Cessna distributor, or where both were
owned by a third party, the distributor and the dealer
should be classed as a single entity for present purposes,
with sales by the dealer treated as sales in fact made by
30. Trying to identify the nature of a purchase by virtue
of the purchaser’s name alone is generally a futile exercise, even
though there was testimony that the presence of the word “ser-
vice” in the name usually signified an FBO. And, of course,
merely knowing that a purchaser was an FBO is of no help;
not all dealers were FBOs, and not all FBOs bought all their
planes for the immediate principal purpose of resale. An ex-
ception has been made in a very limited number of instances,
however, where the name and the accompanying evidence allow
a reasonable inference that the purchaser was not involved in
any aspect of aircraft sales.
A68
the distributor - “in competition,” of course, with plain-
tiffs. Under the proof here, I am obliged to reject the
argument.
The result plaintiffs seek - a disregard of separate
corporate entity status - can certainly be accomplished in
Robinson-Patman litigation, see, e.g., National Dairy Prod-
ucts Corporation v. United States, 350 F. 2d 321, 326-27
(8th Cir. 1965) (subsidiary and parent treated as same
entity for Robinson-Patman criminal liability); Reines Dis-
tributors, Inc. v. Admiral Corp., 256 F. Supp. 581, 585-86
(S.D. N.Y. 1966) (parent and subsidiary treated as same
seller for Robinson-Patman purposes); and see generally
III Kintner and Bauer, supra §§21.15, 21.16; 4 Von Kalinow-
ski, supra §24.04[2]; the doctrine is, after all, one of gen-
eral application. The difficulty here is simply that plain-
tiffs have generally shown, in this regard, no more with
respect to any Cessna distributor and its alleged “captive”
dealer(s) than the fact of ownership (i.e., a parent sub-
sidiary relationship, or ownership of both by some third
party), varying degrees of director or officer interlock,
and in one instance (FAD, a Cessna distributor, and
Sunny South, a dealer, both wholly owned by a third cor-
poration) a sharing of the common parent’s accounting
services. None of these things - or even all of them to-
gether - are sufficient to support the end plaintiffs propose.
See generally Tennessee Valley Authority v. Exxon Nu-
clear Co., 753 F. 2d 493, 497 (6th Cir. 1985); Baker v.
Raymond Intern., Inc., 656 F. 2d 173, 179-81 (5th Cir.
1981); REA v. An-Son Corp., 79 F.R.D. 25, 29 (W.D. Okl.
1978); 1 Fletcher, Cyclopedia Corporations 472 (Perm. ed.
1983) (all standing for the proposition that “[o]wnership
of all the stock of a corporation coupled with common
management and direction does not .. . operate as a merger
A69
of the two corporations into a single entity,” or otherwise
permit a disregard of the separate corporate entities, 1
Fletcher, supra). To the contrary, the general rule is
that separate corporate entity status can be disregarded
only “where [the corporation in question] is so organized
and controlled, and its affairs are so conducted, that it
is merely an instrumentality, agency, conduit or adjunct
of another corporation,” 1 Fletcher, supra; that is, where
there is “such domination of finances, policies and prac-
tices that the controlled corporation has, so to speak, no
separate mind, will or existence of its own and is but a
business conduit for its principal,” id.; and see also Ten-
nessee Valley Authority v. Exxon Nuclear Co., 753 F. 2d
at 497; Baker v. Raymond Intern. Inc., 656 F. 2d at 179-81;
REA v. An-Son Corp., 79 F.R.D. at 29.
With one exception, there is no proof that any Cessna
distributor “passed on” the benefit of its discount to any
“captive” dealer. To the contrary, the testimony was gen-
erally that dealings between all distributors and “captive”’
dealers were carried on at arms length, with no favoritism
shown. Except in that single instance, accordingly, there
is no reason to depart from the general rule noted above.
Since plaintiffs’ evidence entirely fails to address the
“domination” test posed by that rule, their general argu-
ment is without merit.*? Compare National Dairy Prod-
31. The evidence does reflect that “Aircraft Finance Com-
pany,” a separately incorporated Walston company which func-
tioned, on occasion, as a dealer, in fact had no operating facil-
ities or employees of its own. However, even if it is treated
as a single entity with its parent on that basis, the ruling does
not aid plaintiffs: the parent was Walston Aviation, Inc.,
another dealer, not a distributor. Nor do I believe the discus-
sion in the text is altered by the fact that Walston Aviation, Inc.
(the dealer) was actually the parent of the various Walston
distributors. In applying the “domination” test, it should make
no difference what the respective functional levels of the parent
and subsidiary may be.
A70
ucts Cooperative v. United States, 350 F. 2d at 326-27;
Carl Zeiss Stiftung v. E.B. Carl Zeiss Jena, 298 F. Supp.
1309, 1317-18 (S.D. N.Y. 1969), aff'd, 433 F. 2d 686 (2d
Cir. 1970).*
The single exception noted relates to Walston Aviation,
Inc. (the dealer) and the various Walston distributors in
the year 1970. In that year, Walston distributors pur-
chased the bulk of Cessna’s remaining 1969 model year
aircraft (after the end of their model year) at a discount.
See text infra p. 66. The discount, however, was paid in
the form of a cash rebate from Cessna and was promptly
disbursed in kind among the Walston companies, includ-
ing the dealership. I am willing to find, on that basis,
that sales by the dealership of those aircraft should be
treated as sales by the Walston distributors. In view of
the isolated nature of this occurrence and the other facts
mentioned in the preceding paragraphs, however, there
is no reason to expand this to a ruling that all other sales
by Walston Aviation, Inc. represent or should be treated
as sales by the Walston distributors. Nor does the find-
ing assist plaintiffs’ case, even as to those 1970 non-current
aircraft sales: neither White Industries nor Carthage Air-
ways ever purchased any new, non-current 1969 aircraft
and, as previously noted, their purchase of new, current
1969 aircraft would not have represented “analogous trans-
actions” for purposes of the Robinson-Patman Act.
42. I have not overlooked plaintiffs’ citations to Alhambra
Motsr 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), and similar “group buying” cases. I
do not consider those cases in point: they involve situations
where the putative wholesaler was found to be, in substantial
part, nothing more than a passive “front” for the group buyers,
and in addition usually reflect a consistent partial pass-thru of
the wholesaler’s discount to those group buyers. Those are
not the facts of this case.
dnnidtaaiiak. tly uablion
2A Ee 0d Pe
A7l
3.
Geographic Competition
I also reject, to a large extent, plaintiffs’ apparent
theory of the geographics of competition in the general
aviation aircraft sales industry. According to that theory,
at least as advanced at trial (although, oddly, unbriefed
here) the relevant geographic market area for any dealer
(or Cessna distributor) with respect to any model of air-
craft was at least nationwide; that is, every dealer, no
matter where located in the continental United States,
actually and in fact competed with every other dealer in
the continental United States, in the sale of every sort
of Cessna aircraft. The evidence, however, clearly fails
to support such a sweeping generalization.
Plaintiffs did not present, for example, the sort of
price and price movement relationship analysis which
might have been helpful in ascertaining the existence of
a single, unitary national market for general aviation air-
craft, see generally II Areeda & Turner, Antitrust Law
351, 355-57 (1978); perhaps because, as their own econ-
omist seems to have accepted, an analysis of that type
would have tended to show the non-existence of such a
market. Instead, plaintiffs rely principally upon the ex-
istence of a trade publication of nationwide distribution
(“Trade-A-Plane’’) in which various dealers (Cessna and
otherwise) and individuals advertised planes for sale
(usually without price quotations, and more often than
not in connection with used or non-current aircraft), and
upon the opinions of their economist. As to the former,
while I can certainly accept that the location and scope
of certain types of advertising may furnish some insight
into where a given seller actually competes, I cannot ac-
A72
cept that advertising of the sort involved in “Trade-A-
Plane” in fact demonsirates the existence of a nationwide
market for all general aviation aircraft sellers, or even
for all of those who advertise therein: such advertising
may often be - as plaintiffs’ economist admitted - intended
to reach or effectual in attracting only those in the adver-
tiser’s immediate general location. As to the latter, I
note that the economist’s opinions on the subject were
based upon the fact of “Trade-A-Plane” advertising (de-
spite his above-mentioned admission), coupled with an
assumption that ads therein by certain sellers, even though
ordinarily unaccompanied by price quotations, would in
some unexplained fashion generate nationwide price stan-
dards;” upon the location of sales by certain contracted
dealers and Cessna distributors without distinguishing
between the two; and upon reading “the testimony [of
others who] treat the market as being a single market
for a particular model plane,” although no more factual
support is shown in the record for the opinions of those
others than is shown for the opinions of the economist him-
self, and even though the testimony of plaintiffs and other
witnesses suggests just the opposite. I am thoroughly
unpersuaded.
Unfortunately, plaintiffs’ reliance upon their theory,
and upon their expert in support of it, has left them with
very little real proof on this subject. The evidence which
— ee ee cece ae lt.
33. , 2 ee ee ee oon, eS eee
amount of price advertising could generate such standards; the
evidence simply does not convince me that this occurred on
the sort of continuing, generalized basis plaintiffs suggest. In
fact, plaintiffs’ own computer generated summaries reflect a
wide variation in resale prices for the same model of aircraft.
sn cutee tal ak fetes tenant ts ee
were eq but that further variable hardly helps prove
plaintiffs’ point.
A73
does exist suggests that a number of factors impact the
matter, including the population density of the area in
which the seller is located (the more sparsely populated
that area, the greater the likely radius of the actual mar-
keting area), the model and cost of the aircraft (e.g., the
more expensive aircraft generally involve buyers who are
willing, because of economies of scale in connection with
cost, to travel greater distances to shop), the flying range
of the aircraft (a factor that affects, among other things,
the distances the seller is willing to take the aircraft for
demonstration purposes), the particular seller’s advertis-
ing and other merchandising efforts, and matters of buyer
convenience (some rather peculiar to the general aviation
industry). In short, it is not possible, at least on the evi-
dence before me, to generalize fairly with respect to all
sellers and all aircraft - except to reiterate that plaintiffs’
“nationwide” theory is clearly unacceptable.
Insofar as White Industries is concerned, I find that
the Company’s actual, effective geographic market area
with respect to single engine aircraft, at least as a sort
of composite for all models thereof, extended a distance
of approximately 150 miles from the company’s location
at Fairfax Airport, Kansas City, Kansas - somewhat less,
perhaps, for Model 150 aircraft, slightly more, perhaps,
for Model 182 aircraft. This is admittedly an approxima-
tion, but appears reasonable given the area in which White
Industries actually sold single engine aircraft (a maximum
distance of 100 miles), the maximum distance covered by
the company’s mailings (150 to 250 miles) and demon-
stration flights (ordinarily within 200 miles on single
engine aircraft), and the testimony of other witnesses
(Hoster, Cox, Hunt; but see DeScoise) who offered gen-
eralized estimates of geographic trade or market areas.
A74
For the time being at least, I will also use the same figure
to designate the single engine aircraft trade area enjoyed
by Carthage Airways (calculated separately for aircraft at
its Carthage, Missouri and Miami, Oklahoma locations),
although I do so with less confidence since the record
contains little information about that company’s actual
sales locations and marketing efforts.
Determining the plaintiffs’ respective geographic trade
areas for multi-engine aircraft is another matter. As
regards White Industries and Model 402A aircraft, I find
that its relevant area area of competition was in fact nation-
wide, given the extraordinary marketing effort the com-
pany undertook with respect to those planes (direct mail
advertising to all air taxi and commuter airline companies
in the country, together with installation of a WATS line
and direct telephone calling of every person who had
received a direct mailing, as well as most of the FBOs
and a great many individual aircraft owners across the
country). I cannot make the same finding with respect
to White’s other multi-engine aircraft, however, or with
respect to any of Carthage Airways’ multi-engine air-
craft. As to the latter categories, while it is clear the
relevant trade area would have been materially in excess
of that for single engine aircraft of any model, the evi-
dence does not permit me to determine how much so:
I am simply left with a market area extending to some
undefined point more than 150 miles from the point of
operation. How this lack of more precise information
will affect matters remains to be seen.
The other half of the equation, of course, involves
determining the geographic area in which Cessna dis-
:
.
A75
tributors made end consumer sales.“ If the geographic
area in which a Cessna distributor was thus marketing
overlapped in any more than a marginal fashion the
geographic trade area of either plaintiff, I will treat the
requisite fact of competition as shown.
Unfortunately, once again plaintiffs’ theory of a na-
tionwide market, coupled with their reliance upon “Trade-
A-Plane” advertising and their expert's opinions in that
connection, leave me little more than bare bones with
which to work. In fact, I have nothing at all except
the location of such sales, and those with respect to only
three of the Cessna distributors” - certainly relevant in-
formation, but hardly all that might be useful.
The information which does exist is shown in Appen-
dix A to this opinion. Capsulized briefly, it reflects,
with respect to end consumer sales of single engine air-
craft by Aviation Activities, Inc. - the only Cessna dis-
tributor for whom such information exists, see Appendix
A - that 11 of 15 such sales (73%) occurred within
approximately 100 miles of that company’s offices in
Valparaiso, Indiana, one at approximately 200 miles, one
at approximately 275 miles, one at approximately 300
miles, one at approximately 600 miles, and one at approx-
34. One might argue that the area in which a distributor
made aircraft sales of any kind should be the relevant stan-
dard. There is, however, an obvious potential difference be-
tween the geographic area in which a distributor, dealing with
its own or with other dealers, might expect to market aircraft
for resale, and the area involved when that distributor deals
with at least some kinds of end consumers. Lacking any testi-
mony on the subject, I am unwilling simply to assume that the
two areas are co-extensive.
35. Aviation Activities, Inc., of Valparaiso, Indiana; South-
aire, Inc., of Memphis, Tennessee; and Florida Aircraft Dis-
tributors, Inc., of Ft. Lauderdale, Florida.
A76
imately 950 miles. If one excludes the last two such
sales as representing the sort of abberant items referred
to by Professors Arieda and Turner, see II Areeda &
Turner, supra at 357-58, it is obvious, given no more
than this sparse information, that the geographic area
in which Aviation Activities was effectively marketing
single engine aircraft to end consumers extended no more
than a radius of approximately 300 miles from Valparaiso,
Indiana. This is wholly insufficient to show the fact of
geographic market competition with Carthage Airways
regarding single engine aircraft; and while that radius
does overlap marginally (in one sparsely populated sector
of north central Missouri) the 150 mile radius of White
Industries’ single engine aircraft marketing area, I con-
clude - particularly since the closest end consumer sale
by Aviation Activities was actually approximately 150 miles
distant from the furthest reach of White Industries’ 150
mile radius - that this area of theoretical market prox-
imity is in fact too marginal to support a showing of
actual geographic market competition. See 5 Von Kalin-
owski, supra at 30-74 (“mere fringe or marginal com-
petition is usually not sufficient to satisfy the competitive
effects requirement of Section 2(a)”).
The situation with respect to multi-engine aircraft -
excluding for the moment 400 series aircraft - is even
more problematical, given the paucity of end consumer
sales with which to work. Again, Aviation Activities
is the only Cessna distributor shown to have made such
sales: two in number, one at a distance of approxi-
mately 260 miles, and one at a distance of approximately
950 Miles (see Appendix A). This information is ac-
tually too sparse to be particularly meaningful. When,
however, I consider the fact that the multi-engine air-
AT77
craft geographic market areas for both Carthage Airways
and White Industries (other than White’s 402A aircraft)
\. re postulated as being materially in excess of a 150
mue radius, and the additional fact that the respective
trade areas of all three parties would, if extended only
a distance of 150 miles over their respective marketing
areas for single engine aircraft, overlap significant popula-
tion centers (including the St. Louis metropolitan area), I
conclude that the fact of geographic market competition
as between both Carthage Airways and White Industries
on the one hand, and Aviation Activities on the other,
regarding multi-engine aircraft other than 400 series air-
craft, is sufficiently shown.
As to 400 series aircraft, the answer comes more easily.
With White Industries’ 402A aircraft, the relevant com-
petitive market area has in fact been found to be nation-
wide; hence any sales by Cessna distributors to end con-
sumers within a reasonably approximate time frame will
be sufficient to show the fact of geographic market com-
petition. Nine such sales are shown (see Appendix A):
four by Aviation Activities (three to a customer in Wash-
ington, D.C., and one in Odessa, Texas), three by FAD
(all to the same customer, located in Fort Lauderdale,
Florida), and two by Southaire to a customer in Memphis,
Tennessee. Further, with respect to other 400 series air-
craft, the end consumer sales by Aviation Activities - again
the only Cessna distributor shown to have made such sales
(two in Cincinnati, Ohio, one in Los Angeles, California,
and one in Atlanta, Georgia) - clearly suggest (as one
would expect given the increased cost, flight range and
relative sophistication of such aircraft) a competitive
geographic market area considerably in excess of that for
other multi-engine aircraft. Whether Aviation Activities’
A78
market area for these planes was actually nationwide is
questionable, but it seems clear that it would have en-
compassed the area in which Carthage Airways and White
Industries might reasonably have expected to sell them.
The net result of the foregoing, obviously, is a finding
that Carthag> Airways and White Industries have shown
that they were, more likely than not, “in geographic com-
petition” with Aviation Activities in connection with end
consumer sales of contemporaneously purchased models
of multi-engine aircraft during the relevant time period
(for White Industries, 1969 Model 402As; for Carthage Air-
ways, 1969 Model 337s and 421As), and that White In-
dustries was, in connection with such sales of 1969 402A
aircraft, more likely than not competing geographically
with FAD and Southaire as well.
F.
“Competitive Injury” under §2(a)
The final element required for a §2(a) violation is
that there be a “reasonable possibility that [the] price
difference [in question] may harm competition.” See Falls
Cities Industries, Inc. v. Vanco Beverage, Inc., 460 U.S.
428, 435 (1983). Given the relative magnitude of the price
advantage which Cessna distributors enjoyed in their ac-
quisition of Cessna aircraft, it would appear that this
element is also shown.
True, as discussed in Section G. infra, I am unable
to find any actual diverted sale with regard to either plain-
tiff. Nor is there any real evidence that a reduction in
either plaintiff’s profits occurred as a result of that pricing
differential, whether from a loss of sales to distributors
or from a lowering of resale prices to meet competition
from distributors. ‘Actual injury,” however, as separately
A79
required for any antitrust damages claim by §4 of the
Clayton Act, 15 U.S.C. §15, is not the issue at this point.
Falls Cities Industries, 460 U.S. at 434-35; and cf. J. Truett
Payne Co., 457 U.S. at 561-62. The immediate question,
instead, is simply whether Carthage Airways and White
Industries have established a prima facie case of $2(a)
“injury to competition” so as to require - at least for pur-
poses of that statute, if analyzed alone - that defendants
assume their burden of defense. See Falls Cities Industries,
460 U.S. at 434-35. In view of the Supreme Court’s recent
reaffirmation of the Morton Salt doctrine, see Falls Cities
Industries, 460 U.S. at 435 (for §2(a) purposes, “injury to
competition is established prima facie by proof of a sub-
stantial price discrimination between competing purchasers
over time’’), that much seems clear. Here, the 5 (or 6)
% purchase price differential in question must be taken
as “substantial,” given the general and the low profit
margins experienced in the general aviation aircraft sales
industry, see generally Von Kalinowski, supra $31.01, at
31-44 to 31-50, 31-61 to 31-66, and cases cited, or as al-
ternatively measured, in the sense that it was sufficient
in amount to “influence” the competing parties’ resale
prices, see FTC v. Morton Salt Co., 334 U.S. 37, 47 (1948).
So too must the duration of that pricing differential be
taken as meeting the requirements of Morton Salt - it ex-
isted for at least fifteen years, and encompassed all of
the time that Carthage Airways and White Industries
were Cessna dealers.
G.
ACTUAL INJURY
As indicated by the preceding passages, White In-
dustries and Carthage Airways have - with occasional
A80
faltering, to be sure - managed to satisfy the elements
of §2(a) of the Robinson-Patman Act itself. Since their
only remaining claim is for damages, however, that show-
ing is not enough; they must also establish, as a part
of their liability case, “actual injury” resulting from that
violation. 15 U.S.C. §15; J. Truett Payne Co., 451 USS.
at 462, 568; Chrysler Credit Corp. v. J. Truett Payne
Co., 670 F. 2d 575, 581-82 (5th Cir. 1982) (on remand),
cert. denied, 459 U.S. 908 (1982). On that issue, the
claim dissolves.
Actual injury cannot simply be inferred from the
fact of price discrimination, even if the discrimination
is substantial. J. Truett Payne Co., 451 U.S. at 561-62.
Instead, it will ordinarily be necessary to show a loss
of profits or diverted sales which can be causally linked
to the violation. See World of Sleep, Inc. v. La-Z-Boy
Chair Co., 756 F. 2d 1467, 1480 (10th Cir. 1985); Olympia
Co., Inc. v. Celotex Corp., 597 F. Supp. 285, 291-92 (E.D.
La. 1984); Double H Plastics, Inc. v. Sonoco Products
Co., 575 F. Supp. 389, 400-01 (E.D. Pa. 1983); III Kintner
and Bauer, supra at 657. Here, unfortunately, plaintiffs
have made no real effort to show either, and instead
rely again for the most part upon general economic the-
ories advanced by their economist.
I find those opinions unpersuasive. First, even the
general theory behind the opinions is fatally flawed, at
least as far as the law and the facts of this case are
concerned. The theory begins with a premise that there
was in fact a single, nationwide market for the sale of
Cessna aircraft (something I have found to be unsup-
ported by the evidence); proceeds with a further premise
that a sale by a Cessna distributor to any person or
entity other than a contracted dealer of that distributor
A81
represents a sale made “in competition” with every zone
or contracted dealer in the United States, even if the
sale is to another zone dealer, a contracted dealer of
another distributor or an independent dealer (something
contrary to both the law and the evidence); adds yet
another premise to the effect that any sale by a so-called
“captive dealer” of a Cessna distributor constitutes a
sale by the distributor in competition with all zone and
other contracted dealers (again, something unsupported
by either the law or the evidence); and concludes with
the general proposition that the result of all such sales,
given the purchase price differential available to dis-
tributors, was to depress, nationwide, the profits of the
“average” zone or contracted dealer by at least the amount
of the “average” distributor mark-up on such sales - a
proposition which simply cannot be accepted, given the
failure of so many of its bases. Second, as may be ob-
vious, even if the general theory was accevtable it tells
me only what may have happened to the hypothetical
“average” Cessna dealer; as the economist himself finally
admitted, it does not tell me that a particular dealer
in fact suffered injury. In short, whatever role general
economic theories might play in proving the fact of in-
jury in Robinson-Patman cases, the effort fails here.
Nor does the proof in this case satisfactorily demon-
strate a loss of profits by White Industries or Carthage
Airways, caused by violations of the Act. I do have
generalized, conclusory testimony that both operated un-
profitably in selling aircraft throughout their respective
periods as zone dealers (and in the case of Carthage
Airways, while it was a contracted dealer as well), and
data reflecting that many planes ultimately sold by them
were sold at a loss. Whether that general unprofitability
A82
of business was caused in any part by violations of the
Act, however, or instead was caused by other factors,
the evidence does not tell me. Plaintiffs made, for ex-
ample, no effort at establishing profit comparisons with
others who operated both during and before or after
the period of the business practices in question. Com-
pare Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251,
257-60 (1946). Furthermore, the evidence reflects that
both plaintiffs suffered losses on their sales of single
engine aircraft; yet, so far as the evidence shows, those
were not sales affected by competition from any Cessna
distributor. And, on the other hand, I do know that
the mid-1969 to 1971 time frame (which encompasses
much of White Industries’ time of operation as a zone
dealer and much of Carthage Airways’ time of “active”
operation as a dealer) was a period of serious economic
recession in the general aviation aircraft industry. In
addition, the evidence reflects that neither White Indus-
tries nor Carthage Airways was experienced in the type
of dealer operation it attempted to maintain during this
period, and that in fact both made rather serious errors
of business judgment with respect to their inventory
practices during that period. White Industries, for in-
stance, attempted to “corner the market” on 402A series
aircraft by purchasing six of the highly expensive, newly
introduced planes, and in doing so both saddled itself
with a significant debt service problem and with an
inventory of aircraft it had no experience selling - prob-
lems which were exacerbated when Cessna _ ultimately
produced more of the aircraft than anticipated.”
36. Carthage Airways apparently made a similar, although
more diversified mistake, purchasing and carrying a larger in-
ventory of expensive aircraft than would make good business
sense for a dealer of its size and location, see Love testimony;
a point which Ingram himself appears to have accepted.
A83
Admittedly, a plaintiff attempting to prove the fact
of actual injury in an antitrust case is not required to
exhaust all possible alternative sources of injury in order
to fulfill his burden. Zenith Radio Corp. v. Hazeltine
Research, Inc., 395 U.S. 100, 114 n9 (1969). In fact,
once a violation of the operative statute (here, §2(a))
is shown, a plaintiff need only prove that the violation
is a material cause of his injury. Bohack Corp. v. Iowa
Beef Processors, Inc., 715 F. 2d 703, 710-11 (7th Cir.
1983). Nonetheless, the finder of fact must be able to
determine that the alleged injury is, more likely than
not, causally linked to that violation. Here, given the
other factors mentioned above, all of which are in evi-
dence and cannot be ignored, I am unable to reach that
conclusion with regard to a loss of profits, as such, by
either plaintiff. Compare Richard Short Oil Co., Inc. v.
Texaco, Inc., No. 85-1665, slip op. at 10 (8th Cir. Aug. 25,
1986).
Finally, the evidence fails to reflect any sale which I
can find was actually diverted from either plaintiff as a
result of any violation of the Act. In fact, the evidence
does not reflect any sale by a distributor to a customer
with whom Carthage Airways had ever had dealings or
communications, and only three with whom White In-
dustries had dealings or communications.”
Of those three purchasers who acquired aircraft from
a distributor, with whom White Industries also had com-
37. I do not suggest that a seller must always have had
actual communications with a buyer in order to show diverted
sales. Presumably, in some circumstances a simple downturn
in sales might suffice. However, that sort of evidence is lack-
ing here. Without one sort of proof or the other, or some
comparable approach, it is difficult to see how such diversions
could be shown.
A84
munications, two may be dealt with rather quickly. As
to Florida Airlines, the evidence tells me only that Terry
White had a “contact” at some unspecified time in 1969,
without evidence even that a price was quoted. As to
Priority Air Dispatch, I know only that at some unstated
time (even the year is unidentified, although presumably
it was 1969) White “quoted prices.” What those prices
were is unknown, although the testimony does reveal
that in “early 1969” White Industries - apparently in the
belief that it had cornered the market on 402A aircraft -
was generally seeking a 12% mark-up on those planes, as
opposed to the 6% mark-up it ordinarily sought on new
aircraft. I note that this was not an especially competi-
tive pricing structure, particularly since White’s effort at
mini-monopolization had failed, and might in and of itself
have been discouraging to a prospective buyer. In ad-
dition, the actual sales to Priority Air Dispatch were made
through a third party - apparently a broker - with whom
White had no communications at all. Further, all the
aircraft ultimately purchased by Florida Airlines and Pri-
ority Air Dispatch were equipped a good bit differently
than any 402A aircraft White Industries had for sale; a
matter of no small significance, since the evidence sug-
gests that buyers of this sort of aircraft often had highly
specific equipment requirements.** Given these points,
together with the fact that White Industries had no prior
dealings with either of the two companies, and the fact
38. Florida Airlines, for example, did not want their
planes equipped with Cessna avionics or autopilot, and did not
want dual instruments, twin doors, de-ice propellors, an auxil-
iary fuel system or an oxygen system. Each of White Industries’
402A aircraft had Cessna avionics, de-ice propellors, auxiliary
fuel system, oxygen system and twin doors. Some of these
items on White Industries’ planes could have been modified,
but it would have been prohibitively expensive to remove others,
and totally impracticable to change twin doors to single doors.
A85
that I have not the least idea what actually motivated
either company to purchase when and where it did, I must
and do conclude that neither has been shown to be a pur-
chaser diverted from White Industries by virtue of any-
thing causally linked to a violation of the Robinson-Patman
Act. It is possible, of course, that such was the case, but
that bare possibility hardly makes the point more likely
that not.
The evidence regarding Sun Airlines is only slightly
more developed. Frank Terry White’s testimony was that
he had conversations with Sun personnel over a two month
period in the late winter or early spring of 1969 (the first
conversation occurred at some point prior to March 17,
1969), and quoted prices on five different 402A aircraft.
Apparently discussions ended at that point. In late May
of 1969, Sun purchased two 402A aircraft from Southaire
at dealer cost.
It is clear, of course, that dealer cost prices were prices
White Industries could not profitably have matched. It
is considerably less than clear, however, that the above
facis reflect a sale diverted from White Industries by virtue
of those prices. There is, for example, no indication that
White Industries had ever had any prior relationship with
Sun, or even any prior dealings. Neither is there any
indication that Southaire’s discussions with Sun overlapped
those between Sun and White. Indeed, I do not even know
what the general substance or tenor of the discussions be-
tween White and Sun may have been, much less what
White’s “quoted prices” were or whether actual price ne-
gotiations took place - all gaps of some significance given
the potential discouraging effect of the 12% mark-up price
White was generally quoting at that time. Furthermore,
Sun had very particular equipment specifications for the
A86
aircraft it wished to purchase - specifications that none of
White Industries’ 402A aircraft could meet or, except in
two instances, even be modified to meet.” Whether discus-
sions on the subject of modification took place, or instead
whether Sun simply determined that it had no interest
in planes that did not meet its equipment requirements,
is again unknown.
To summarize, I am unable to say with any degree of
assurance that Southaire’s pricing had any causal relation-
ship to Sun’s decision not to purchase from White In-
dustries. Certainly, of course, it is possible that it did,
but the lack of any evidence on the subject, coupled with
the presence of equally likely contrary possibilities, leaves
the matter no further advanced than the realm of specula-
tion.
I conclude that both White Industries and Carthage
Airways have failed to show, by a preponderance of the
credible evidence, any actual injury caused by a viola-
tion of the Robinson-Patman Act. Their claims under
that statute must accordingly be dismissed.
IV.
THE SHERMAN ACT CLAIM
Given the result reached with plaintiffs’ Robinson-
Patman claim, there is probably a short answer to at least
portions of their partially parallel Sherman Act §1 claim:
even if that claim might otherwise be viable, there has
39. Sun's specifications called for aircraft without Cessna
avionics and with de-ice equipment sold separately rather
than installed. All but two of White Industries’ 402A aircraft
had complete, installed de-ice systems. The testimony was that
it would be impractical to attempt to remove those de-ice sys-
tems.
ee ee ee.
A87
been a failure to prove actual injury in connection with it.
There are, however, more fundamental difficulties as well.
The claim is apparently premised upon a theory that
there was a vertical conspiracy between Cessna and the
Walston distributors (Aviation Activities, Inc. and South-
aire, Inc.), the object of which was to extend discrimina-
tory discounts and allowances to those distributors. As
the Ninth Circuit pointed out in Zoslav v. MCA Distribut-
ing Corp., 693 F. 2d 870, 886-87 (9th Cir. 1982), however,
such an agreement cannot form the basis for a Sherman
Act claim - at least in a situation of alleged secondary
line discrimination such as this one - unless the intent of
the arrangement was to exclude others from the buyer's
market. Further, even if there is proof of such an intent
there is no per se violation; the situation must be tested
by the rule of reason (a balancing of the competitive evils
of the restraint against the anti-competitive benefits as-
serted on its behalf). Id.
Here, as in Zoslav, there is no credible evidence -
direct or circumstantial - of any arrangement which con-
templated plaintiffs’ exclusion from a distributor's market
for the resale of new, current aircraft, even if that market
is assumed to include end consumer sales. To the con-
trary, the evidence reveals no more than the fact that
Cessna and the distributors in question entered into the
same Cessna distributorship contract that all Cessna dis-
tributors signed - a contract, it may be noted, that did not
restrict either party with regard to where or with whom
sales could be made. It may be, of course. that the dis-
tributors in question undertook to sell in the end con-
sumer market, and in doing so realized a competitive ad-
vantage over dealers, but in view of Cessna’s efforts at
establishing its zone dealer system it approaches the ri-
A88 )
diculous to suggest that it sought, at the same time, to
“exclude” those dealers from the very market they were
to serve. In short, while the evidence in this case may
reflect a distribution system which gave Cessna distribu-
tors a price advantage if they in fact sold in the end con-
sumer market, that evidence falls far short of supporting
a Sherman Act claim.
Neither does the evidence reflect any sort of an agree-
ment or understanding to exclude plaintiffs from the gen-
eral market for resales to other dealers. Cessna simply
granted a larger functional discount to those who were
willing to undertake the additional cost and effort of mer-
chandising its products in a wholesale capacity - some-
thing that plaintiffs never sought and probably lacked
the resources to accomplish in any event. In fact, there
is nothing even in the effect of this which is anti-competi-
tive, at least in the sense that it violates the rule of reason.
Nor does the evidence - and this is apparently plain-
tiffs’ real theory - satisfactorily support a finding that
there was any agreement or understanding to exclude plain-
tiffs from the resale market in new, non-current aircraft.
The testimony, instead, reveals no more than that at the
end of each current model year, Cessna offered its remain-
ing inventory of that year’s aircraft to distributors on a
close-out basis, and if all such aircraft were not disposed
of in that way then on a “best-bid” basis. True, there is
no showing that the same offers were made to zone dealers,
but neither is there any showing that zone dealers in gen-
eral, or plaintiffs in particular, were ever precluded from
buying such aircraft. Indeed, White Industries bought
several, albeit at dealer prices. And, more importantly
perhaps, even if one might find some evidence of an ex-
clusionary effect in all this, I am unable to conclude that
L
A89
the same represents an unreasonable restraint on trade
as measured by the rule of reason. At worst, Cessna
simply offered and sold most such aircraft to the class of
buyer best able to purchase them in quantity - something
inoffensive in and of itself, which in turn allowed Cessna
to compete effectively with other manufacturers by clear-
ing out old inventory after it introduced new aircraft, and
(according to the testimony) stimulated aircraft sales
of all sorts at all levels. I find no violation of the Sherman
Act in this.
V.
DECERTICATION OF THE CLASS
The fact that the designated class representatives
have lost their own claims does not, itself, necessarily
require a decertification of the class. East Texas Motor
Freight System, Inc. v. Rodriguez, 431 U.S. 395, 406 n.12
(1977); Scott v. City of Anniston, Ala., 682 F. 2d 1353,
1356-57 (11th Cir. 1982); Sirota v. Solitron Devices, Inc.,
673 F. 2d 466, 472 (2d Cir. 1982), cert. denied, 459 U.S. 838
(1982). Where, however, the class certification is found
to have been improvident because the basic requirements
of Rule 23 cannot be met, the court may - indeed must,
to my thinking - enter a decertification order. Valentino
v. U.S. Postal Service, 674 F. 2d 46, 66 n.12 (DC. Cir.
1982); Eggleston v. Chicago Journeyman Plumbers, Etc.,
657 F. 2d 890, 896 (7th Cir. 1981), cert. denied, 455 US.
10i7 (1982); Stastny v. Southern Bell Tel. and Tel. Co.,
628 F. 2d 267, 275-76 (4th Cir. 1980). This is so even if
the finding is not made until during or at the conclusion
of the trial on the merits, Stastny v. Southern Bell Tel. and
Tel. Co., 628 F. 2d at 275-76; and of course should be equally
true where, as here, the proceedings have been bifurcated.
ee
A90
From what has been said in the preceding sections of
this opinion, it should now be clear that the class certifica-
tion order in this case was improvident or at least, with
the disappearance of the claim for injunctive relief, is
now. Rule 23(a), of course, requires (among other things)
that there be “questions of law or fact common to the
class.” Rule 23(b)(3) in turn requires that “the ques-
tions of law or fact common to the members of the class
predominate over any questions affecting only individual
members, ...” Here, by contrast, the individual ques-
tions overwhelm any common ones. For example, each
class member, in order to prevail on a Robinson-Patman
claim, would find it necessary to show, on an individual
basis, (a) the immediate principal purpose for which it
purchased its aircraft; (b) the geographic market area in
which it actually competed for aircraft sales to end con-
sumers during the time in question; (c) whether any
Cessna distributor actually competed for aircraft sales to
end consumers in that same geographic the time in ques-
tion; and (d), the fact of actual injury (no small task, as
the present case illustrates). In fact, of the issues which
have been contested in this case, there are none which
could even be profitably be treated on an “issues only”
class basis under Rule 23(c)(4). I conclude, accordingly,
that defendants’ motion to decertify the class must be
granted.
Elementary principles of fairness suggest that notice
of the court’s ruling should be given to the absent class
members so that they may determine what further in-
dividual courses of action they wish to pursue. Class
counsel will be ordered to prepare a suggested form of
notice; defendants of course will be given the opportunity
to comment.
A91
VI.
ORDERS
For the foregoing reasons, it is hereby
ORDERED that judgment shall be entered in favor
of defendants The Cessna Corporation and Cessna Finance
Corporation on all the claims of plaintiffs Whice Industries,
Carthage Airways and Eugene Ingram as asserted in this
case; and it is further.
ORDERED that the original class certification order
entered in this case on October 9, 1973, as modified by the
court’s orders of June 5, 1974, November 24, 1978 and
Aug'st 22, 1983, is herewith vacated, and such class is
herevy decertified; and it is further
ORDERED that class counsel shall, within thirty (30)
days of the date of this Order, prepare, file and serve
a suggested form of notice to absent class members, ad-
vising of the court’s action in decertifying the class and
further advising said absent class members of their right
to proceed individually if they wish; and it is further
ORDERED that defendants shall have fifteen (15)
days from and after the filing of the suggested form of
notice called for by the preceding paragraph, within which
to comment on the same; and it is further
ORDERED that each party shall bear its own taxable
costs herein incurred and expended.
/s/ Ross T. Roberts
Ross T. Roberts, District Judge
DATED: OCTOBER 2, 1986.
A92
APPENDIX A
End Consumer Sales by Cessna Distributors
Aviation Activities, Inc. (a Cessna Distributor located
in Valparaiso, Indiana); single engine aircraft:
Date of Sale Purchaser
Aircraft Model
1. 150
2. 150
3. 150
4. 171
5. 172
6. 172
40.
All of the alleged com
Southaire and FAD have been e
2/28/70
7/15/70
11/30/70
3/31/70
3/31/70
9/4/69
Emninated
Swanke Aviation,
Rochelle, Illinois
(flight school)
Flight Tech, Inc.,
Chicago, Illinois
(for lease to
flight school)
B & W Aviation,
Chicago, Illinois
(flying club)
B & W Aviation,
Chicago, Illinois
(flying club)
Ralph Sherrill,
Parkridge, Illinois
(for lease to
flight school)
Magnolia Airport,
Magnolia, Ohio
(for use in
flight school)
e single engine aircraft sales b
, as well as most of the multy-
engine sales by Southaire, FAD and Aviation Activities, either because
the sale has not been shown to have been made to the ultimate purchaser
or (as in most instances) because that ultimate purchaser has not been
shown to have purchased for the immediate principal purpose of use.
4
10.
11.
12.
13.
14.
15.
Aircraft Model
A93
Date of Sale Purchaser
172
172
172
172
172
172
172
177
6/13/72
5/13/68
5/18/68
7/31/68
8/29/68
7/26/68
11/12/68
12/13/71
Max C. Emory,
Bay City, Michigan
(individual, for use)
Aviation Training
Enterprises,
Chicago, Illinois
(flight school)
Aviation Training
Enterprises,
Chicago, Illinois
(flight school)
Aviation Training
Enterprises,
Chicago, Illinois
(flight school)
Aviation Training
Enterprises,
Chicago, Illinois
(flight school)
Chicago Area Pilots
Association, Chicago,
Illinois (flying club)
Dan Chislom,
Philadelphia, PA.
(individual, for use)
Robert G. Zimmer,
Carbondale, Illinois
(individual, for use)
Aviation Activities, Inc.; multi-engine aircraft:
210
8/31/70
John & Ann Huttig,
Orlando, Florida
(individuals,
apparently for use)
16.
-,
18.
19.
20.
21.
22.
23.
Aircraft Model
A94
Date of Sale Purchaser
337
401
402A
402A
402A
402A
414
421A
7/24/69
11/27/68
4/22/69
6/26/69
7/22/69
3/27/70
7/18/70
8/30/69
Centurion Corporation,
Cincinnati, Ohio (con-
struction company)
Centurion Corporation,
Cincinnati, Ohio (con-
struction company)
Priority Air Dispatch,
Washington, D.C.
(contract air carrier)
Priority Air Dispatch,
Washington, D.C.
(contract air carrier)
Priority Air Dispatch,
Washington, D.C.
(contract air carrier)
Wooly Tool and
Manufacturing, Inc.,
Odessa, Texas
(apparently a manu-
facturing company)
Hassen Motors, Inc.,
Cincinnati, Ohio
(apparently a business
unrelated to aircraft
sales)
Teledyne, Inc., Los
Angeles, California
(an engine manu-
facturing company)
24.
25.
26.
27.
28.
29.
A95
Aircraft Model Date of Sale Purchaser
421B 1/26/71 Big Creek Farms,
Atlanta, Georgia
(apparently a business
unrelated to aircraft
sales)
Southaire, Inc. (a Cessna Distributor located in Mem-
phis, Tennessee); multi-engine aircraft:
402A 5/23/69 Sun Airlines,
Memphis, Tennessee
(commuter airline)
402A 5/23/69 Sun Airlines,
Memphis, Tennessee
(commuter airline)
Florida Aircraft Distributors (a Cessna distributor
located in Ft. Lauderdale, Florida); multi-engine air-
craft:
402A 8/20/69 Florida Airlines (Hill
Leasing Corporation),
Ft. Lauderdale,
Florida (commuter
airline)
402A 9/15/69 Florida Airlines (Hill
Leasing Corporation),
Ft. Lauderdale,
Florida (commuter
airline)
402A 10/31/69 Florida Airlines (Hill
Leasing Corporation),
Ft. Lauderdale,
“orida (commuter
aline)
A96
APPENDIX E
(Filed October 14, 1986)
IN THE
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT
OF MISSOURI
WESTERN DIVISION
No. 20245-B
WHITE INDUSTRIES,
INC., et al.,
Plaintiffs,
Vv.
The CESSNA AIRCRAFT
COMPANY, et ai.,
Defendants.
ORDER
The court herewith makes the following technical
changes to its October 2, 1986 order in the above-styled
cause:
1. P.1, fn.3, 1.6: change “forms” to “formed.”
2. P.8, 1.23, strike the apostrophe between “FBO”
and “s.”
3. P.23, 1.25, insert the words “and model year,”
between the word “model” and the word “and.”
A97
4. P.29, fn.20, revised to read as follows:
“20. In contrast to the position taken in H.A.B.
Chemical Co., Inc. v. Eastman Kodak Co., 1981-1 Trade
Cas. (CCH) §63,912 at 75,749 (C.D. Cal. 1980), I
do not consider that “third line” and “fourth line”
claims, see generally Perkins v. Standard Oil Co.,
395 U.S. 642 (1969), are also an exception to the
general rule mentioned above. Those claims are al-
lowed because of $2(a)’s express reference to dis-
criminatory effects which ‘may .. . injure, destroy
or prevent competition with any person who either
grants or receives the benefit of such discrimination,
or [competition] with customers of either of them’
(emphasis added). Under this language, and under
the construction given it in Perkins, 395 U.S. at
606-07, claims which involve injury to a ‘customer’
of a disfavored buyer are allowed without regard
to the number of sales ‘levels’ that separate the
‘customer’ from the discriminatorily priced sale (or,
more precisely, the number of sales levels that sep-
arate the favored ‘customer’ from the discriminating
seller, III Kintner and Bauer, supra at 315 n. 289).
Nonetheless, unless the exception noted in the text
applies, or some new exception is recognized, both
the ‘favored’ sale and the ‘disfavored’ sale must have
been made directly by the alleged discriminating
seller.”
5. P.38, 18, strike the words “identifying or.”
6. P.38, 1.12, insert the words “kinds of” between
the word “some” and the word “customer.”
7. P.43, £n.30, 1.5, strike the words “not all dealers
were FBOs, and”; 1.7, change “resale” to use.”
A98
8. P.48, 1.2, change “dealer” to “seller.”
9. P.48, 14, change “dealer” to “seller.”
10. P.51, 1.11, strike the word “area” as it first
appears in that line.
11. P.52, 1.19, change figure “11° to “10,” and figure
— to at
12. P.52, 1.20, change figure “73” to “71.”
13. P.53, 13, insert the word “and” at the beginning
of the line, a period after the word “miles,’ and strike
all following words.
14. P.53, 1.4, strike the word “miles,” the word
“two,” and change “sales” to “sale.”
15. P.53, 1.5, change “items” to “item,” and “Arieda’”’
to “Areeda.”’
16. P.56, last line, add the words “keenness of com-
petition” at the end of the line.
17. P.57, 1.1, strike the word “the” between the word
“and” and the word “law.”
18. P.57, 1.11, change the words “preceding passages”
to “above comments.”
19. P.57, 1.12, insert the word “managed” after the
word “have.”
20. P.57, 1.13, strike the word “managed.”
21. P.58, 1.8, reverse the words “rely” and “again.”
22. P.60, 1.3, change the word “much” to “part.”
23. P.63, 1.8, strike the word “late.”
A99
24. P.68, last line, add the words “area during” at
the end of the line.
25. P.69, 1.4, strike the word “be” between the word
“even” and the word “profitably.”
IT IS SO ORDERED.
/s/ Ross T. Roberts
Ross T. Roberts, District Judge
DATED: OCTOBER 14, 1986.
A100
APPENDIX F
(Filed March 10, 1987)
IN THE
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT .- -
OF MISSOURI
WESTERN DIVISION
No. 20245-B
WHITE INDUSTRIES,
INC., et al.,
Plaintiffs,
v.
The CESSNA AIRCRAFT
COMPANY, et al.,
Defendants.
ORDER
Pending before the court are two post-judgment mo-
tions (and supplements thereto) filed by plaintiffs. The
first is a motion for new trial or other relief; the second.
a motion to make amended or further findings of fact.
For the reasons which follow, the former motion will be
denied; the latter will be granted in part and denied in
part.
o ree
Al0l
I.
MOTION FOR NEW TRIAL OR OTHER RELIEF
1. Passage of Time in Rendering Judgment. Plain-
tiffs have argued at least one point not otherwise identi-
fied in the motion itself: that because of the time it took
the court to hand down its opinion on the merits, the judg-
ment should be set aside and the case retried to a jury.
For rather obvious reasons, I reject the point. I have
previously indicated to counsel my embarrassment over
the length of time it took the court to render judgment
in this case. That passage of time, however, hardly con-
stitutes any basis for the truly astonishing demand that I
now simply set the judgment aside, and retry the case to
a new fact finder.
2. The Functional Competition Issue. Plaintiffs sug-
gest that the court’s opinion on the merits “confuses com-
petition with function ....” Given the language of the
original opinion, see original opinion on the merits, p. 38.
I can perhaps see why plaintiffs make that suggestion,
although a careful reading of the entire section of the
opinion dealing with functional competition, and a read-
ing of the amendment made on October 14 (see item 6.
therein) should have helped clarify the matter. To in-
sure that no confusion as to my view remains, however,
I will further amend the sentence in question (first full
sentence on page 38), and the following sentence, so that
the two will now read as follows:
Such statements in turn suggest that determining the
presence or absence of functional competition between
purchasers of a commodity is, with reference to any
particular kind (in a functional sense) of customer.
not so much a process of labeling as simply a factual
A102
process of determining whether they both sell the
commodity to that kind of customer - a rather straight-
forward approach I generally accept. But see 5 Von
Kalinowski, supra, at 30-16 n.35. If that is plaintiffs’
theory, however, it encounters an immediate impasse,
at least as concerns new aircraft (either current or
non current), since the available evidence fails to
show that either White Industries or Carthage Air-
ways ever competed, in any meaningful way, in sell-
ing such aircraft to other dealers for resale, and since
a dealer (independent or otherwise) who purchases
to resell is obviously not the same kind of customer
(in a functional sense) as an end consumer.
Plaintiffs also point out - correctly - that both zone
dealer and contracted dealer contracts required things of
those dealers that were not required of independent deal-
ers (who of course were not under contract). However,
none of the 26 points listed by plaintiffs in this regard -
to the extent they bear upon the issue at all (points 1.
through 5. and 21. through 23. arguably do; points 6. through
20. and 24. through 26., in my judgment, do not) - demon-
strate a difference in the reselling functions of plaintiffs
and independent dealers. That is the function which is
critical to the analysis.
Finally, the fact Cessna or CFC chose to label in-
dependent dealer sales as “retail” sales is not controlling.
The respective reselling functions of independent dealers
and zone or contracted dealers are what they are; labels
are not the touchstone.
3. The Identity of Dealers. Plaintiffs suggest, in con-
nection with the independent dealer/functional competi-
tion issue and the comments made in footnote 23. of the
A103
opinion on the merits, that Plaintiffs’ Exhibits 545-568
allow an identification of all authorized Cessna dealers
(zone or contracted) during the relevant time period.
The point remans, however, that I am, as I was at the time
the opinion was written, “in many instances” unable to
find that the purchasers in question were “dealers,” since
they are not shown on those lists.
4. Erroneous Conclusion of Law on (a) National
Market; (b) Standards for Measuring Competition Be-
tween Distributors and Dealers; (c) Standards for Measur-
ing “Injury to Competition,” and (d) Standards for Measur-
ing “Actual Injury.” Although plaintiffs assert errors
of law in the court’s treatment of these issues, their brief-
ing deals only with disputed factual matters. I will
address those items in Part hereof. I am not aware of
any erroneous legal standards applied in dealing with those
issues, and sO pass on.
5. Captive Dealers. Again, the primary thrust of
plaintiffs’ argument deals with factual] matters. As con-
cerns legal issues, I will simply reiterate what I attempted
to say in the original opinion on the merits: as I view
the matter, the general rule for disregarding separate
corporate entity status (and the general case law, Rob-
inson-Patman or otherwise, which supports that rule)
is fully applicable here, unless there is some specific
reason peculiar to antitrust litigation for departing from
it. I have identified, in the original merits opinion, the
single instance in which I found such a reason.
6. Function of the Manual for Complex Litigation.
Plaintiffs complain, apparently, that the court erred, or
that they were otherwise disadvantaged, because the
court did not attempt to force defendants into admissions
ae
A104
of plaintiffs’ narrative fact statements, or did not take
judicial notice of the propositions submitted or otherwise
deem them admitted. There is no authority whatsoever
for a court to take those kind of steps, and plaintiffs had
no good reason to suppose otherwise. When defendants
denied the narrative fact statements they chose to deny,
plaintiffs were put on notice (in some instances, several
years before the trial) that they would be obliged to prove
those points at trial if they thought them important. The
matter is no different in this respect than with requests
for admissions under Rule 36, a point made clear by the
court to plaintiffs early in the triai.
7. Sam Vires and “Conduit Sales.” During trial,
plaintiffs offered a number of aircraft files to show that
the transactions reflected therein were so-called “conduit
sales” by Southaire, a Cessna distributor (for a definition
of “conduit” sale, see fn. 29 to the court’s opinion on the
merits). The files in question were offered to prove that
point solely on the basis of the fact that they had been,
prior to trial, gathered and segregated as such by a South-
aire secretary (who did not testify). Defendants’ hearsay
objection was ultimately sustained. See White Industries
v. Cessna Aircraft Co., 611 F. Supp. 1049, 1075-76 (W.D.
Mo. 1985). Plaintiffs now complain that they would have
been able to introduce the files, or at least pertinent in-
formation from them, had they been able to secure one Sam
Vires at a witness, but that Mr. Vires, after having been
contacted by defendants, refused to appear and testify.
Plaintiffs made no mention of any problem with Mr.
Vires until the time of their present motion. That is an
omission which is inexplicable in view of the fact that
the court, when confronted with similar complaints about
other witnesses during trial, went to considerable lengths
itil
A105
to assure that nothing untoward had occurred and to assist,
within the limits of judicial propriety, in obtaining the
presence of witnesses or in offering to recess to permit
their deposition testimony to be taken.’ The omission is
all the more inexplicable in light of the fact that no men-
tion of a problem was made even at the time of the court’s
evidentiary ruling mentioned above. In the circumstances,
I consider the point to be totally without merit.
8. FAA Records and “Dealer Witnesses.” Plaintiffs
apparently desire to reopen their case to offer records from
the FAA registry in Oklahoma City, Oklahoma, and to call
persons they denominate as ‘dealer witnesses” in order to
prove the existence of a “national market.” The trial
record makes clear that neither of these things constitutes
newly discovered evidence. The request is without merit.
9. Inadequate Briefing or Argument Time. Perhaps
one of the strangest of plaintiffs’ complaints is that, in
view of the court’s delay in rendering an opinion, they
should have been given an opportunity “to comment on the
evidence and provide assistance to the court in clarifying
matters in the record or offering to provide additional evi-
dence.” First, while the court certainly would have ap-
preciated more assistance from plaintiffs in marshalling
the evidence from the voluminous documents they pre-
sented, such marshalling could have been accomplished far
more easily by way of written suggestions. Plaintiffs
had more than a sufficient opportunity to accomplish that,
and did not request any time beyond the briefing contin-
uances the court permitted. Never did they request cral
argument. Finally, plaintiffs overlook the fact that the
1. The charge that witnesses had been “scared off’ bv
defendants eventually proved baseless.
_———-iis i
A106
court had a complete transcript, as well as its own trial
notes, from which to work. Again, I find the point en-
tirely devoid of merit.
10. Consideration of Fraud and Breach of Contract
Theories. As a final matter in this category, plaintiffs re-
quest that the court reopen its judgment to consider the
fraud and breach of contract theories they now wish to
assert. The request comes far too late. At no time during
any phase of the case in which the undersigned has been
involved have either of those theories been argued, briefed
or even mentioned as a theory of recovery for this case.
Indeed, even now plaintiffs do not specify what fraud
or breach of contract they refer to. Nor, for that matter,
would such a consideration be consistent with the Final
Pretrial Order entered by my predecessor on July 25,
1980, or with elementary principles of fairness.
II.
SUFFICIENCY OF THE FINDINGS
I have no thought of granting plaintiffs’ extraordinary
request that I “make specific findings of fact concerning
the testimony of each witness and the content of each
document” (numbering in the many thousands, when in-
dividual documents are counted) on some eleven diffuse
and broadly worded topics that plaintiffs list. To the con-
trary, I am of the opinion that the court’s memorandum
opinion of October 2, 1986, fully complies with all the
requirements of Rule 52. Nonetheless, because I may
have characterized some of plaintiffs’ efforts at proof too
abruptly, even though I fully considered the evidence
relating to them, or because plaintiffs seem to have mis-
apprehended the import of some of the court’s findings,
I will provide the following brief additional comments.
.
A107
1. Competition Between Cessna Distributors and
Dealers. I have no doubt that some actual competition
occurred between some Cessna distributors and some zone
or contracted dealers. The issues presented on defen-
dants’ motion for involuntary dismissal, however, were
necessarily limited to the cases of the two individual plain-
tiffs. I had neither the proof nor the need to make find-
ings as to other specific dealers; indeed, the practical im-
possibility of doing so was the predicate for decertifying
the class. I am unaware of any instances (and plaintiffs
cite to none) involving Cessna distributor sales to end
consumers for whose business either individual plaintiff
was even potentially competing, other than the multi-
engine aircraft sales identified at items 16., 18. through
21., 23. and 25. through 29. in Appendix A to the merits
opinion.”
Much of the material plaintiffs now cite deals with
Cessna distributor sales to independent dealers,* and their
point in reality becomes a quarrel with the court’s treat-
2. I have not overlooked White’s testimony that ‘they all’
(referring to Cessna personnel at the Kansas City zone office)
acknowledged the “problem” of independent distribution com-
petition with White Industries, or the comments made by Mr.
Rausch to Mr. Crawford. See White Industries, 611 F. Supp.
at 1074. As mentioned in the evidentiary rulings, the gen-
erality of those statements renders them less than useful. It
may well be, for example, that the speakers were referring
to distributor sales to independent dealers; sales which, as I
interpret the Robinson-Patman Act, were not sales “in com-
petition” with White Industries in the legal sense.
3. Although it leads to the same result, for the sake of
consistency I believe the definition of “independent dealer,”
as given in the original opinion on the merits, should be amended
to read as follows: “As used in this opinion, a business -
usually an FBO - which was not under contract with Cessna
or a Cessna distributor, but which engaged (even if occasion-
ally) in purchasing new or used Cessna aircraft for the imme-
diate principal purpose of resale.”
A108
ment of the functional competition issue as a legal matter.
This is particularly evident in their claim that the court
has overlooked distributor sales to Zoller, Horridge and
their affiliated companies. That evidence was not over-
looked; the point is simply that the record makes clear
that Zoller, Horridge and their companies were function-
ing as independent dealers (purchasing planes for the
purpose of resale), and were in fact competing with White
Industries in reselling those aircraft.* As I held in the
original merits opinion, Cessna distributor sales to such
persons were not sales made “in competition” with White
within my interpretation of the Robinson-Patman Act.
2. Captive Dealers. Plaintiffs refer the court to cer-
tain historical evidence concerning Cessna distributors
and dealerships owned by them. In the final analysis,
however, I am concerned only with the state of affairs
which existed during the period at issue in this suit.
Whatever may have been the situation ten years before
then, I am satisfied, from the evidence at hand, that
for the period in question the findings on this subject
made in the original merits opinion were correct. The
fact that “captive” dealerships sometimes allowed them-
selves to be utilized for “conduit” sales does not alter
the situation; non-“captive’’ dealers were also used for
such purposes, and in either event, where a “conduit”
__ 4. Zoller was an aircraft dealer who functioned as Hor-
ridge’s partner or employee (Tr. 2835-36, 2838-39). Horridge
was involved in several general aviation related companies,
and either individually (with or without Zoller) or through
those companies purchased a number of new or used Cessna
aircraft. While some of these aircraft were used in various
ways by the companies while being held for resale (as was
the case with both White Industries and Carthage Airways),
the record makes reasonably clear that all were purchased for
the immediate principal purpose of resale (Tr. 4406, 4407, 4410,
4412, 4437, 4441, 4462, and see particularly 4465).
A109
sale has in fact been shown, I have treated it as a sale
by the distributor. Nor does the fact that a distributor
was interested in or kept track of the profitability of
its wholly or partially owned dealer affiliates change
the situation: if it did, all but the most blithe parent
corporations would be treated as one with their subsid-
iaries, no matter how little actuai domination was exer-
cised. Given the affirmative testimony that dealings be-
tween Southaire (distributor) and Sunny South (“cap-
tive” dealer) were at arms length (Tr. 2529, 2632), that
the two had separate sales managers and sales staffs
(Tr. 2632-34), and that the operating philosophy of the
third party parent was that each was to operate as an
independent company and as a separate profit center
(Tr. 2632-33); that dealings between Skyliners (distrib-
utor) and Yingling ‘Aircraft (‘“‘captive” dealer) were ac-
complished with no (or “very little”) favoritism shown
to the dealer (Tr. 3085), and that the two were operated
separately (Tr. 3085); that Capitol Aviation (distributor)
and Ragsdale Aviation (“captive” dealer) dealt with each
other at arms length (Tr. 3708); that dealings between
the various “Walston” distributorships and Walston Avia-
tion, Inc. (dealer), were carried out at arms length (Tr.
5223), with each having separate profit center respon-
sibility (Tr. 4901, 5272); and the lack of any real evi-
dence showing a “domination” of these or any other
“captive” dealerships by a distributor or other parent,
the only conclusion I can reach is the one previously
made in the opinion on the merits.
3. National Market. In the opinion on the merits,
I was perhaps unduly short in stating that plaintiffs
“rely principally upon the existence of a trade publication
of nationwide distribution . . ., and upon the opinions
A110
of their economist.” As plaintiffs point out, they also
offered testimony from several witnesses (Robinson,
Desoise, Love, Walker), to the effect that nationwide
advertising could or did tend to have a nationwide effect.
I was, and am, unpersuaded by that testimony, at least
in the sense that it demonstrates a nationwide market
for any or all Cessna aircraft. First, the vast bulk of
the advertising in evidence is by individuals selling used
aircraft. Second, where the advertising was by a Cessna
dealer (there was none by a distributor, except in two
instances regarding float planes), actual asking prices
were ordinarily given only for used or non-current air-
craft. For example, Walston Aviation, Inc., the dealer
which plaintiffs claim “set the price,” never (so far as
I can determine) advertised a price for new, current
aircraft, other than the “list price” (which was of course
established by Cessna) (see Tumbleson testimony, and
see Trade-A-Plane ads). I simply do not understand
how, in these circumstances, a nationwide price market
is shown; a point which led, in turn, to the comment
made in footnote 33. to the merits opinion.
There was also testimony that a dealer would sell
to anyone who happened by the dealer’s place of busi-
ness, even if the individual was from the cpposite end
of the country (what witness Robinson referred to as
a “fleeting sale’). I have no doubt that was so, but
it does not demonstrate the existence of a unitary, nation-
wide market anymore than does the fact that a vaca-
tioner from California buys a soft drink in Maine.
I was, and am, convinced that the evidence does
not fairly reflect a single, nationwide market for the
sale of all Cessna aircraft, either at the dealer level
or as concerns distributors selling to end consumers. I
Alll
rely, in that regard, upon the evidence cited in the merits
opinion (see Robinson, Desoise, Hoster, Hunt, Cox and
the testimony of White and Ingram themselves) as well
as upon the actual sales patterns referred to therein.
4. Actual Injury. Again, perhaps my statement that
plaintiffs “rely for the most part upon general economic
theories advanced by their economist,’ in connection with
the necessary showing of actual injury, was too abbre-
viated. Frank Terry White, for example, opined gen-
erally that Cessna distributors were competing with him,
that he could not compete with them, and that such
competition came close to destroying White Industries.
Eugene Ingram also offered his thought that Cessna dis-
tributors were competing with him, creating an unprof-
itable situation. However, neither White’s comments,
nor Ingram’s, were related to any specific, creditable
facts, and in the circumstances (particularly the matters
noted in the original merits opinion) I gave (and give)
them no more weight than did the Fifth Circuit in
Chrysler Credit Corp. v. J. Truett Payne Co., 670 F.2d
575, 581 (5th Cir. 1982) (on remand), cert. denied, 459
U.S. 908 (1982), with respect to similar conclusory ob-
servations.
It is also clear that both White Industries and Carthage
Airways had unprofitable operations, at least with respect
to aircraft sales. For the reasons pointed out in the orig-
inal merits opinion, however, I am unable to conclude
that such unprofitability was causally related to any viola-
tion of the Robinson-Patman Act.
5. Plaintiffs’ “Price Fixing” Claim. I am, frankly,
at somewhat a loss as concerns the predicate for plain-
tiffs’ claim of price fixing in violation of Section 1 of the
A112
Sherman Act, 15 U.S.C. §1. As nearly as I can understand,
the assertion is that when Cessna sold the balance of its
aircraft at the end of their model year, or at least where
such sales were to the Walston distributors, there was
an accompanying agreement or understanding to fix the
resale price of those aircraft. That, at least, is the only
sort of claim I can envision which would meet the con-
ventional definition of vertical “price fixing.” See Bender
v. Southland Corp., 749 F.2d 1205, 1212 (6th Cir. 1984);
General Cinema Corp. v. Buena Vista Distribution Co.,
681 F.2d 594, 497 [sic] (9th Cir. 1982); and see generally II
Kintner, Federal Antitrust Law §§10.15, 10.17 (1980). lf
that is the theory, there is not one shred of evidence to
support it, either in terms of an express agreement or an
implied understanding. As pointed out in the original
opinion on the merits, when Cessna undertook to dispose
of its remaining inventory of aircraft at the end of their
model year, it offered the aircraft to distributors on a
close-out basis, and if all such aircraft were not disposed
of in that way, then on a “best-bid” basis. The Walston
distributors ordinarily were the purchasers in such “best-
bid’”’ sales, with the terms thereof often involving special
discount or financing terms. There is absolutely no in-
dication, however, of any agreement or understanding
between Cessna and those distributors with respect to
resale prices, or even any indication of some unilateral
effort by Cessna to compel adherence to a particular
resale price.
Plaintiffs also urge that the “effect’’ of the above
(presumably referring to a “rule of reason” standard)
was to allow “Cessna to establish artificially higher prices
for new Cessna aircraft at a time when a glut of aircraft
on the market had forced other manufacturers to shut
A113
down.” Ido not find any such “effect,” but even if it did
exist, I do not find any violation of the rule of reason
therein. The practice in question simply allowed Cessna
tu dispose of its old inventory when introducing new models
- a common business practice in which I can find nothing
anticompetitive at all.
Ill.
ORDERS
Based upon the foregoing, it is
ORDERED that plaintiffs’ motion for new trial or other
relief is hereby denied; and it is further
ORDERED that plaintiffs’ motion for amended or
further findings of fact is hereby granted to the extent
of the additional findings and comments set forth in Part
II hereof, and in all other respects is hereby denied, the
judgment previously entered being unaffected thereby; and
it is further
ORDERED that class counsel shall, within thirty (30)
days from the date hereof, prepare, serve and file the sug-
gested form of notice to absent class members referred
to in the third “ORDERED” paragraph of the original
merits opinion; and that defendants shall have fifteen (15)
days from the filing of such suggested form of notice
within which to comment on the same.
/s/ Ross T. Roberts
Ross T. Roberts, District Judge
DATED: MARCH 10, 1987.
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APPENDIX G
(Filed March 13, 1987)
IN THE
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT
OF MISSOURI
WESTERN DIVISION
No. 20245-B
WHITE INDUSTRIES,
INC., et al.,
Plaintiffs,
v.
The CESSNA AIRCRAFT
COMPANY, et al..
Defendants.
ORDER ON DEFENDANTS’ MOTIONS FOR
INVOLUNTARY DISMISSAL AND TO DE-
CERTIFY CLASS (AS AMENDED BY THE
COURT’S ORDERS OF OCTOBER 14, 1986
AND MARCH 10, 1987
White Industries, Inc. (“White Industries”) and
Carthage Airways, Inc. (“Carthage Airways”)' seek, for
1. Although one of Carthage Airways’ shareholders, Eugene
Ingram, is also named as a plaintiff, it is clear that any claims
he might assert would pre-date July, 1966, when Carthage
Airways was incorporated. Those claims were barred by the
applicable four year statute of limitations at the time this suit
was filed, see 15 U.S.C. §15b. and thus will not be considered
further.
All5
themselves and for the members of a nationwide class
composed of all “zone dealers” of Cessna aircraft who
operated as such during the years between April 14, 1968
and June 5, 1974,* treble damages for alleged violations
of §2(a) of the Robinson-Patman Act, 15 U.S.C. §13(a),
and §1 of the Sherman Act, 15 U.S.C. §1.° Still present as
defendants are The Cessna Aircraft Company (“Cessna”),
and Cessna Finance Corporation (“CFC”).
Following assignment to this division, the case pro-
ceeded to trial before the court sitting without a jury.
During the course of trial, it was determined: (a) that
presentation of the individual claims asserted by White
Industries and Carthage Airways would be bifurcated
between liability and damages; (b) that upon completion
of the liability phase of those individual claims the court
would recess the case, issue its rulings on evidentiary
questions which had been reserved, and thereafter rule
defendants’ anticipated motion for involuntary dismissal
of those claims; and (c) that in tandem with its liability
rulings on the individual claims the court would rule
defendants’ motion - made during trial - to decertify the
class. The court's evidentiary rulings having been made,
see White Industries v. Cessna Aircraft Co., 611 F. Supp.
1049 (W.D. Mo. 1985), I now turn to the substantive
matters mentioned.
2. A class composed of all Cessna dealers - zone and
contracted (see definitions, infra) - was originally certified.
In August, 1983, my predecessor narrowed the class to its
present configuration.
3. Plaintiffs’ prayer also includes a request for pe meere oe
relief. At some unidentified point before this case
to trial, however, Cessna completed its elimination of the * “Cessna
distributor” (see definitions, twnfra) portion of its distribution
network. Since the functioning of that “Cessna distributor”
system formed the whole basis for plaintiffs’ claims, the request
for injunctive relief is now moot.
All6
I.
DEFINITIONS
Given the scope and complexity of this litigation, I
commence with a definition of certain terms which recur
throughout. The exercise, however, is not purely ad-
visory; the definitions which follow also incorporate find-
ings of fact and conclusions of law.
(a) General Aviation: As described by Cessna it-
self, “general aviation” includes
all flying except for commercial airlines and military,
encompassing everything from the single-seat aerial
application aircraft to a planeload of commuters
traveling to major airports for airline connections.
It [includes] air taxi trips, busy executives visiting
outlying plants, an injured child being airlifted to
medical facilities, pipeline patrol, aerial examination
of forests for fires, the shipment of high priority
cargo, rushing spare parts to equipment requiring
immediate service, aerobatics, reseeding strip-mined
areas, restocking lakes with fish [and] floatplane
hunting and fishing trips into the North Woods. It
fincludes} almost every conceivable business and
recreational use.
Plt. Ex. +2 (Cessna brochure, circa 1969).
(b) Fixed Base Operator (“FBO”): A generic term
signifying a business (individually owned, corporate, or
otherwise) which occupied physical space at an airport
and which carried on some or all of a variety of general
aviation related activities, including flight training, air-
craft rental, aircraft chartering, aircraft maintenance,
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servicing and repair, aircraft hangaring or tie-down, and
the sale of aircraft, avionics, accessories and parts. As
would be expected, some FBOs were larger and more
aggressive in their operations than others, and some did
not engage in all the activities mentioned above. It ap-
pears, however, that many were at least occasionally
involved in the resale of both new and used aircraft
to most kinds of “end consumers” (see “end consumer,”
infra), and a number were active in that line of busi-
ness. Both “contracted dealers” of Cessna aircraft (see
“Contracted Dealer,” infra) and “zone dealers” of Cessna
aircraft (see “Zone Dealer,” infra) were ordinarily FBOs,
although many other FBOs were never formally asso-
ciated with the Cessna distribution system.‘
(c) Cessna Distributor:* As used in this opinion,
a business operating under a franchise contract with
Cessna, performing - at least in theory - a more or less
traditional wholesale function in the distribution of Cessna
aircraft, accessories and parts: viz, the purchase and
maintenance of an inventory of Cessna aircraft, acces-
sories and parts; the development of “contracted dealers”
(see “Contracted Dealer,” infra) within the distributor's
assigned geographic “area of responsibility;” and the sale
of Cessna aircraft, parts and accessories to
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