# Petition for Writ of Certiorari — Morgan v. Automobile Manufacturers Ass'n > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1006%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1973 - **Citation:** 414 U.S. 1045 ## Text SRR eae Rh ERE REIT BESS OTS RELI RE es — ) rm ry LIBRARY FILED SUPREME COURT, U. S AUG 31 1973 MICHAEL RODAK, JR_ CLERK Supreme Court of tthe United States October Term, 1973. No. 73- 394 ROBERT MORGAN, Petitioner, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Respondents. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT. E Davin BERGER, H. Lappre MonracvugE, Jr., Davin Bercer, P. A., 1622 Locust Street, Philadelphia, Pa. 19103 (215) 732-8000 Counsel for Petitioner. Of Counsel: Davin Bercer, P. A., Attorneys-at-Law. International Printing Co., 711 So. 50th St., Phila., Pa. 19143 — Tel. (215) 727-8711 ed a Fs s > aeRO eI TANS OPINIONS BELOW ......-.-sceceeceereecerererseesenenes JURISDICTION .....-.2-eeeeeeceececescecesceesereseseess QUESTIONS PRESENTED .....---+--eeeeceeeerecessereseees STATUTE INVOLVED .......-0ceeeee cece ceeseeseeeenerees . STATEMENT OF THE CASE .....----+eeeeeeeereeee eee REASONS FOR GRANTING THE WRIT Introduction ............0.eceeeeereeeeceeeeeeeeeees I. The Circuits Are Hopelessly Divided on the Proper Criteria for Standing Under Section 4 of the Clayton TN ccke ene eeetersen ren keee eke seit 8 II. The Ninth Circuit Standard Should Not Be Applied to Dismiss Complaints Consolidated for Pretrial Pur- poses Under 28 U. S. C. § 1407 ......-.--++++++:- 10 III. The Artificial Tests of Standing Applied by the Court of Appeals and Other Lower Courts Run Contrary to This Court’s Construction of Section 4 of the Clayton ene. esis esdeviaeteeererenbees 13 A. This Court Does Not Recognize the Standing Re- quirement Imposed Below ........----+-+++++- 14 B. Dictum in Hawaii, Relied Upon by the Court of Appeals, Is No Bar to Petitioner’s Claim ........ 19 IV. The Court of Appeals Read the Complaint Narrowly in an Unwarranted Attempt to Defeat It .......... 20 V. The Decision Below Undermines Proper Adminis- " tration of the Antitrust Laws ..........------+---- 22 CONCLUSION 2.2.22. c cece cece cece cece ccccccccccccececes 28 APPENDIX : Court of Appeals Opinion ..........--+-+++e+eeeeeeee Al Court of Appeals Judgment .........------eeeeeeeeeee Al19 District Court Opinion ............--2eeeeee ee eeeeees A20 District Court Order .......-.------++-eeeee: Pea a at A3l TABLE OF CASES CITED. Page Bigelow v. R. K. O. Radio Pictures, 327 U. S. 251 (1946) ...- 20 Conley v. Gibson, 355 U. S. 41 (1957) ...ceeeeeeeeeeeceers 22 Hawaii v. Standard Oil Co. of California, 405 U. S. 251 (1972) 8, 9, 14, 16, 17, 18, 19 In Re Motor Vehicle Air Pollution Control Equipment, 311 F. Supp. 1349 (J. P. M. L. 1970) .-----eeeeeereereees 10 In Re Multidistrict Private Civil Treble Damages Antitrust Litigation Involving Motor Vehicle Air Pollution Control Equipment, MDL No. 31, 52 FRD 398 (C. D. Calif., 1970) 1970 T. C. 973,318 ...-...ee sere reer street 3 Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207 COE isin wnco ncn aes cacssennpeversexnanses sss ** 20 Lawlor v. National Screen Services Corp., 349 U.S. 322 (1955) 16 Mandeville Island Farms v. American Crystal Sugar Co., 334 U.'S. 219 (1948) ...cceeceeececceeeeeeneceer cess ees 15 Minnesota Mining and Manufacturing Co. v. New Jersey Wood Finishing, 381 U. S. 311 (1965) ...--+---+++0+0* 16 Perkins v. Standard Oil Co. of California, 395 U. S. 642 (1969) 17, 18 Perma Life Mufflers, Inc. v. International Parts Corp., 392 SE G10 CIID), ox sae snancascestsnenssesensece ter? 16 Poller v. Columbia Broadcasting System, 368 U. S. 464 (1962) . 20, 22 Radiant Burners v. Peoples Gas Light and Coke Co., 364 U. S. WE COTE) avon cn cssexcncsasetecssennceneesers ses" 14, 22 Radovich v. The National Football League, 352 U. S. 445 SOD) o iccavsavavensanccedseysecesnseneeses 14, 15, 20, 22 United States v. Borden Co., 334 U S. 219 (1948) ....----- 16 Van Dusen v. Barrack, 376 U. S. 612, 84 S. Ct. 805 (1964) 11, 12, 13 Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100 I eaccnnnccenxsanaiweosnsapenanenner state gaye 16, 20 MISCELLANEOUS. Section 1 of the Sherman Act, 15 U. S.C. §1 .....-----ee- 6, 18 Section 2(a) of the Robinson-Patman Act, 15 U. S. css... Section 4 of the Clayton Act, 15 U. S. C. § 15, 38 Stat. 731 | Pres 2, 3, 4, 7, 8, 10, 13, 14, 15, 17, 18, 19, 20, 27 Section 16 of the Clayton Act, 15 U. S. C. §26 ......-.-.--- 3 28 U. S. C. §1254(1) 20. e cece eee cere eee e rece eee eecers 1 28 U. S. C. §1292(b) ..... cece cence eect cece cn eereeeere 4 28 U. S.C. § 1404 (a) 22. cece e eee cere teen eee rete eens 11, 13 2B Uz. S. C. $1407 2... eee eee eee eee eee eee ee eeee 2,7, 10, 11, 13 Federal Rules of Civil Procedure, Rule 8(f) ......-..--++-- 22 IN THE Supreme Court of the United States OctrosEr TzEm, 1973. No. ROBERT MORGAN, Petitioner, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., ET AL., Respondents. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT. Petitioner, one of the plaintiffs in the proceedings be- low, respectfully prays that a writ of certiorari issue to review the judgment of the court of appeals entered on June 4, 1973. OPINIONS BELOW. The opinion of the court of appeals reversing the dis- trict court (reported in 1973 T-C {| 74,540) is reprinted in the Appendix, infra, pp. A2-A18. The opinion of the dis- trict court denying respondents’ Motion to Dismiss is re- ported at 52 F. R. D. 398 (C. D. Cal. 1970), 1970 T. C. | 73,318 and appears in the Appendix, infra, pp. A20-A30. JURISDICTION. The judgment of the court of appeals was entered on June 4, 1973 (Appendix, infra, p. A19). The jurisdiction of this Court is invoked pursuant to 28 U. S. C. § 1254(1). 2 Petition for Writ of Certiorart QUESTIONS PRESENTED. This case raises an important and persistently trouble- some issue in the administration and application of the Federal Antitrust Laws: 1. Was standing to sue for treble damages under Section 4 of the Clayton Act properly denied petitioner, a farmer who was concededly injured in his business and property as a direct result of an alleged conspiracy by automobile manufacturers to suppress the development of air pollution control technology? In addition, two significant subsidiary issues are raised: 2. To what extent can a consolidation under 28 U.S. C. § 1407 wreak a change in the rules of law applicable to the sufficiency of a complaint in an antitrust action? 3. Did the court of appeals err in construing the alle- gations of the complaint narrowly and thereby holding that petitioner was not within the ‘‘target area’’ of an alleged anti-competitive conspiracy? STATUTE INVOLVED. Section 4 of the Clayton Act, 15 U.S. C. § 15, 38 Stat. 731 (1914) provides: ‘‘Any person who shall be injured in his business or property by reason of anything forbidden in the anti- trust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, includ- ing a reasonable attorney’s fee.’ Petition for Writ of Certiorart ; 3 STATEMENT OF THE OASE. This petition presents a threshold question of law arising out of the celebrated In Re Multidistrict-Private Civil Treble Damage Antitrust Litigation Involving Motor Vehicle Air Pollution Control Equipment. The litigation consists of numerous private antitrust claims filed through- out the country against the domestic auto makers and consolidated for pretrial purposes in the Central District of California. Following the lead of the federal govern- ment, which charged the automobile industry with violation of the antitrust laws in the ‘‘development’’ of air pollution control technology,’ numerous private actions were filed against the big four auto makers and others under Sections 4 and 16 of the Clayton Act, 15 U. S. C. §§15, 26. The private suits alleged unlawful conspiracy under Section 1 of the Sherman Act. Damages for past harm and injunc- tive relief from future injury were sought. Various plain- tiffs brought individual and class actions including all persons or residents of the United States, persons within states and political subdivisions, all persons injured in their property or business, and governmental entities suing on behalf of their citizens and as representatives of govern- mental agencies. Petitioner, a crop farmer, brought suit on his own behalf and as a representative of all other crop farmers in the United States. On September 4, 1970, the district court denied the defendants’ motions to dismiss for lack of standing under Sections 4 and 16 of the Clayton Act and upheld certain parens patriae claims. The court also granted class action motions except those on behalf of all persons and residents of the United States and governmental entities suing on behalf of individual residents. 1. In the Government suit, defendants consented to the entry of a decree proscribing future violation of the antitrust laws. 1970 T. C. | 73,070. RR APE RRS ESI Petition for Writ of Certiorart Defendants took a certified interlocutory appeal to the Ninth Circuit from the district court (under 28 U. S. C. § 1292(b)). This appeal resulted, on June 4, 1973, in re- versal of the district court’s denial of the motion to dismiss with respect to all claims for damages arising under Sec- tion 4 of the Clayton Act. In each case the justification for dismissal was lack of standing to sue. The court of appeals held that all individual plaintiffs except farmers and all governmental plaintiffs including governments’ individual claims, class claims and parens patriae claims failed to alleged injury to business or property. The court found that only petitioner alleged injury to business or property within the meaning of Section 4. Although petitioner was concededly injured in his business and property, the court also dismissed his cause of action for failure to allege any injury ‘‘by reason of’’ a violation of the antitrust laws. This result was reached because the court of ap- peals read the Complaint narrowly to allege only a com- bination or conspiracy to eliminate competition in the re- search, development and marketing of air pollution control equipment to the auto companies themselves. Having con- strued the Complaint in this light, the court then held that petitioner, as a farmer, was not within the ‘‘target’’ area of the conspiracy and hence lacked standing to sue for dam- ages under Section 4. Nevertheless, despite dismissal of petitioner’s and all other damage claims, the court of appeals simultaneously upheld another portion of the district court opinion and allowed all of the claims for injunctive relief to proceed. In his complaint, petitioner alleged a combination and conspiracy to eliminate competition and retard innovation in the development, marketing and installation of air pollution control equipment (Paragraph 22(a) of peti- tioner’s complaint?). This conspiracy was implemented 2. Hereinafter referenced as “Pet. Complaint.” Petition for Writ of Certiorari — 5 partially by restraining competition among the auto manu- facturers in the promotion, marketing and installation of such devices. Petitioner argued below that this was done to thrust the costs of pollution control onto others, including petitioner. Petitioner also alleged damage to his crops dur- ing the period of the conspiracy as a result of the pollution emitted by automobiles (Pet. Complaint {| 26). Under the cover of a joint research and development scheme promoted as achieving economies of scale and diversifying the costs and risks of development, the auto industry established an elaborate collusive arrangement through the industry trade association, the Automobile Manufacturers Association (Pet. Complaint 21, 22). This scheme was implemented to coordinate and police a secret agreement to suppress the development and installa- tion of automobile pollution control devices (Pet. Complaint 1 23(c)). The agreement was industry-wide and was par- tially embodied in a cross licensing agreement signed by the manufacturers. The purpose of this horizontal arrange- ment was to assure collusive suppression as opposed to independent development of air pollution technology (Pet. Complaint {If 21, 22, 23). Where outright suppression was not possible due to regulatory pressure and knowledge of the state of the art, delay of research and installation and hindrance of state or local legislation imposing mandatory controls became the goal. After the execution of the cross licensing agreement and the assumption of the role of directing the conspiracy by the Automobile Manufacturers Association, a serious retardation took place in applied and basic research and in the implementation of technology once it came into existence (Pet. Complaint { 24(a)). This case was prosecuted in the lower courts by peti- tioner and others as an antitrust, not an environmental, action. Petitioner alleged that his injuries arose because of ERIM) Sk APM aE PD TIME i ee MG yee. sin 6 Petition for Writ of Certiorart anticompetitive activity in violation of Section 1 of the Sherman Act. The decision for which review is sought is concerned solely with standing to sue for treble damages under the nation’s antitrust laws. It does not concern either the merits of petitioner’s claims or the propriety of any of the class actions. Lh FO A A EOE LIE ELE EFRON BET Petition for Writ of Certiorari 7 REASONS FOR GRANTING THE WRIT. Introduction. This case poses a question of crucial importance to the administration and application of the nation’s antitrust laws. As the court of appeals itself recognized, the issue of who has standing to sue for treble damages under Sec- tion 4 of the Clayton Act has beleaguered and divided the circuits. There are two major conflicting ‘‘tests’’ which the courts of appeal have devised to limit standing under Section 4. Despite the fact that every circuit uses one of these tests, or some combination thereof, both are shock- ingly deficient and both run contrary to the established decisions of this Court. Furthermore, petitioner’s complaint was filed in the Eastern District of Pennsylvania (in the Third Circuit) and consolidated for pretrial proceedings in the Central District of California. Petitioner’s case would have been remanded to the Third Circuit for trial. In dismissing his complaint, the Ninth Circuit panel flouted the purposes of 28 U.S. C. § 1407 by applying a test which it expressly conceded con- tradicted the test applied in the Third Circuit. Finally, it appears that the court of appeals purpose- fully construed petitioner’s complaint in the narrowest pos- sible fashion so as to conform to its ‘‘target area’’ test and still defeat the action for damages. Blatant contraven- tion of federal standards on the liberal construction of pleadings, particularly in the antitrust field, should not be tolerated in a case of this public importance. Petitioner respectfully urges that the writ issue to clarify a significant question of federal law and terminate the stark conflicts which prevail in the lower federal courts. 8 Petition for Writ of Certiorart L The Circuits Are Hopelessly Divided on the Proper Criteria for Standing Under Section 4 of the Clayton Act. The issue of who has standing to sue for treble dam- ages under Section 4 of the Clayton Act has perplexed and divided the lower federal courts. All of the circuits have spoken on the issue, and the only agreement has been on the point that “remote” or “incidentally” damaged parties cannot sue to redress antitrust violations. How- ever, no single set of criteria has dominated the colloquy between the circuits on this question. The Ninth Circuit candidly recognized this confusion in its decision. Commenting on a dictum in Hawaii v. Standard Oil Co. of California, 405 U. S. 251 (1972), the panel, while analyzing the prevailing positions as falling basically in two major ‘‘camps’’, carefully noted the division among the circuits: ‘‘ Although the Court [referring to this Court] cited cases in support from every circuit, it failed to dis- tinguish essentially two disparate analytical tech- niques—the ‘direct injury’ and the ‘target area’ ap- proaches *—employed by different circuits.” [Emphasis added. } 6. We have employed the terms “target area” and “direct injury” only as convenient, shorthand methods of identifying the two major approaches to the interpretation of “by reason of” [in Section 4 of the Clayton Act].. Use of either label in other cases, in contrast, has frequently suggested an approach opposite that so denominated here. E.g., Perkins v. Standard Oil Co., 396 F. 2d 809 (9th Cir. 1968) (Court labeled approach “target area” but employed the “direct injury” analysis), rev'd. 395 U. S. 642 (1969). Likewise, some courts have failed to perceive signifi- cant distinctions between the tests. E.g., Nationwide Auto Ap- praiser Serv., Inc. v. Ass'n. of Cas. & Sur. Cos., 382 F. 2d 925 (10th Cir. 1967). It is to be hoped that the resolution suggested in our present opinion will obviate the use of either label in the future. 7. We do not mean to imply that each circuit falls neatly into one of the two pigeonholes. Only the Eighth Circuit and ee EL SRE ie Aree ee Petition for Writ of Certiorari 7. (Cont’d.) ours, for example, have consistently followed the “target area” approach, e.g., Mulvey v. Samuel Goldwyn Productions, 433 F. 2d 1073 (9th Cir. 1970) ; yy. Milk Producers v. Bergjans Farm Dairy, Inc., 368 F. 2d 679, 688-89 (8th Cir. 1966) (Blackmun, J.), and even they have diverged occasionally. E.g., Perkins v. Standard Oil Co., supra note 6. The First, Third, Sixth and Tenth Circuits, on the other hand, generally apply the test we label “direct injury”. E.g., Reibert v. Atlantic Richfield Co., 471 F. 2d 727 (10th Cir. 1973); Kauffman v. Dreyfus Fund, 434 F. 2d 727, 732-34 (3d Cir. 1970), cert. denied, 401 U. S. 974 (1971) ; Volasco Products Co. v. Lloyd A. Fry Roof- ing Co., 308 F. 2d 383, 394-95 (6th Cir. 1962) ; Miley v. John Hancock Mut. Life Ins. Co., 148 F. Supp. 299 (D. Mass.), aff'd per curiam, 242 F. 2d 758 (1st Cir.), cert. denied, 355 U. S. 828 (1957). The Second, Fourth and Fifth Circuits have formu- lated their own particular mixtures of the two tests, e.g., Cal- derone Enterprises Corp. v. United Artists Theatre Circuit, Inc., 454 F. 2d 1292 (2d Cir. 1971) ; Dailey v. Quality School Plan, Inc., 380 F. 2d 484 (Sth Cir. 1967) ; South Carolina Council of Milk Producers, Inc. v. Newton, 360 F. 2d 414 (4th Cir. 1966), although the approach of the Second more closely resembles the “direct injury” test and that of the Fourth and Fifth the test of “target area”. The Seventh Circuit’s approach is uncertain, al- though it appears closer to “target area”. Compare Sandidge v. Rogers, 256 F. 2d 269 (7th Cir. 1958) with Congress Building Corp. v. Loews, Inc., 246 F. 2d 587 (7th Cir. 1957). In ascrib- ing positions to the various Circuits, we have ignored self- descriptions and have attempted to analyze their actual ap- proaches.” [The above footnotes are quoted verbatim from the court of appeals’ opinion in the instant case. ] Without elaboration upon any disputes with the Ninth Cireuit’s characterization of positions taken by the various circuits (and their correctness), petitioner adopts the court of appeals’ accurate portrayal of the state of anarchy which presently surrounds this question. Furthermore, in view of the crucial importance of private treble-damage actions as part of the regulatory scheme of the Sherman and Clayton Acts,* the issue of who has standing to sue 3. See, e.g., Hawaii v. Standard Oil Co. of California, 405 U. S. 251, 262 (1972). ssvoqiencencianenitinielap ee Lee a eee eT 10 Petition for Writ of Certiorart for damages under those provisions cannot be deprecated in importance. The Ninth Circuit went on to criticize the so-called ‘direct injury’’ test as arbitrary and unjustifiably tech- nical. Petitioner would contend that the panel then pro- ceeded to apply the ‘‘target area’’ test in precisely the same arbitrary manner which they criticized in the applica- tion of the ‘‘direct injury’’ test. However, irrespective of which test is preferable, it is plain that the lower federal courts are floundering about in considerable disarray. The law is different in almost every circuit. The necessity for enunciation and clarification of the correct standard is readily apparent. On this basis alone, the writ should issue to resolve an important question that has consist- ently proven to be a major stumbling block in the admin- istration of federal antitrust law. IL. The Ninth Circuit Standard Should Not Be Applied to Dismiss Complaints Consolidated for Pretrial Purposes Under 28 U. 8. C. § 1407. Upon defendants’ motion, these actions were consoli- dated in the Central District of California, under 28 U. S. C. § 1407, for pretrial purposes only. Jn re Motor Vehicle ; Air Pollution Control Equipment, 311 F. Supp. 1349 (J. P. M. L. 1970). They were filed in various sections of the country comprising different circuits. Petitioner’s 4 complaint was filed in the Eastern District of Pennsyl- vania. This district is in the Third Circuit, which, as the court of appeals expressly concedes (see page 9, supra), generally applies the opposing ‘‘direct injury’’ test to determine standing under Section 4 of the Clayton Act. Hence, the Ninth Circuit panel applied its contradictory test to dismiss a complaint which properly fit the standing requirements imposed by the Third Circuit. This, it is Petition for Writ of Certiorari 11 submitted, exceeds the proper bounds of the court of appeals’ discretion under 28 U. S. C. § 1407. A subsidiary question to the issue of petitioner’s standing is thus presented: To what extent can a consoli- dation under 28 U. S. C. § 1407 wreak a change in the rules of law applicable to an antitrust action? The issue of which law governs when there is a consolidation in another jurisdiction or circuit under § 1407 has never been expressly settled by this Court. However, the purposes of the statute indicate clearly that it is merely a procedural device designed to expedite the handling of complex litigation in the federal courts. This is evident from the fact that actions are consolidated for pretrial purposes only, and the consolidation district remands the actions for trial to the respective forums in which they were brought. Furthermore, the statute deals in terms with ‘‘civil actions involving one or more common questions of fact....’’ [Emphasis added.] 28 U.S. C. § 1407(a). Nowhere is the consolidation forum empowered to contravene the law applied in the original court and dismiss a complaint. Indeed, the only provision analogous to 28 U. S. C. § 1407 is the ‘‘permissive change of venue’’ statute—28 U.S. C. § 1404(a). Unlike § 1407, a change of venue under § 1404(a) is permanent, and the action proceeds to trial in the transferee forum. However, this Court has already held that where the law differs in the two districts, the law of the transferor forum governs. Van Dusen v. Bar- rack, 376 U. S. 612, 84 S. Ct. 805 (1964). In Van Dusen, the Court ensured that a defendant could not effect a change of law merely by seeking a change of venue for the ‘‘eonvenience of parties and witnesses’’: ‘‘Of course these cases allow plaintiffs to retain what- ever advantages may flow from the state laws of the Se I Se ee NWA RIT OL AE Mg 48S Dee I 5 12 Petition for Writ of Certiorart forum they have initially selected. There is nothing, however, in the language or policy of § 1404(a) to justify its use by defendants to defeat the advantages accruing to plaintiffs who have chosen a forum which, although it was inconvenient, was a proper venue. a The legislative history of § 1404(a) certainly does not justify the rather startling conclusion that one might ‘get a change of law as a bonus for a change of venue.’ Indeed, an interpretation accepting such a rule would go far to frustrate the remedial purposes of § 1404(a). If a change of law were in the offing, the parties might well regard the section primarily as a forum-shopping instrument. And, more importantly, courts would at least be reluctant to grant transfers, despite considera- tions of convenience, if to do so might conceivably prejudice the claim of a plaintiff who had initially selected a permissible forum. We believe, therefore, that both the history and purposes of § 1404(a) in- dicate that it should be regarded as a federal judicial housekeeping measure, dealing with the placement of litigation in the federal courts and generally intended, on the basis of convenience and fairness, simply to authorize a change of courtrooms.’’ 376 U. S. at 634- 636. The only arguable distinction between Van Dusen and the instant case is that the differing laws in Van Dusen stemmed from the diversity jurisdiction (differing state laws governing scope of recovery in airline crashes), whereas here it is the circuits which are at odds. In view of the identical policy considerations, however, this must be deemed a distinction without a difference. Forum shop- ping between circuits is as counterproductive as forum shopping between jurisdictions. Furthermore, why should ARE GST ARTY Petition for Writ of Certiorari 13 plaintiff’s proper choice of forum be entitled to less weight where the law differs between circuits, as opposed to states? Most important, petitioner’s case would ultimately proceed to trial in the Eastern District of Pennsylvania. The result below indicates that defendants can impose the law of the Ninth Circuit upon the Third Circuit merely by seeking consolidation for pretrial purposes. Even more than § 1404(a), this is a fatuous conclusion with absolutely no support in the language or the purposes of § 1407. The district court recognized its limited role in the administra- tion of these actions. Appendix, infra, p. A23. Neverthe- less, the Ninth Circuit panel chose to discard the appropri- ately reserved opinion of the district judge and impose its view of the law on a case properly brought in the Third Circuit. This outcome points up the overreaching position of the court of appeals below. Furthermore, the decision runs contrary to the established rule in Van Dusen v. Barrack, supra. Finally, it highlights the express contradiction among the circuits which begs for resolution in this Court. III. The Artificial Tests of Standing Applied by the Court of Appeals and Other Lower Courts Run Contrary to This Court’s Construction of Section 4 of the Clayton Act. Both the ‘‘direct injury’’ and ‘‘target area’’ tests, as elucidated by the opinion below, attempt to read new stand- ing requirements into Section 4 and limit the number of potential litigants. Thus, the concept of both tests is sim- ilar. The ‘‘direct injury’’ test relates to outmoded notions of privity. By contrast, the so-called ‘‘target area’’ test narrows the field to litigants who were the purported ‘*targets’’ of the conspiracy and thus turns. upon the pro- fessed or inferred ‘‘intent’’ of the wrongdoers. Both tests LD ATT Mheebetersa WAT ON 14 Petition for Writ of Certiorart ignore the ‘‘injury in fact”’ standard repeatedly applied by this Court. Finally, both tests are wholly insufficient to deal with the very real problems posed by a modern market economy. [see Part V, infra] A. This Court Does Not Recognize the Standing Re- quirement Imposed Below. This Court has never read either the requirement of ‘direct’? injury or ‘‘target area’’ of the conspiracy into Section 4. When the Court has had occasion to comment or rule on the sufficiency of the complaint in the light of Section 4, injury in fact—as opposed to ‘‘direct’’ or ‘*in- tended’’ injury—has been adequate to establish standing where plaintiff met the other standing requirements set forth in the statute. In Radovich v. The National Football League, 352 U. S. 445 (1957), this Court upheld a litigant’s standing to sue where the plaintiff was a football player and the victim of a larger monopoly scheme directed at a competitor football league: ‘‘Petitioner’s claim need only be ‘treated under the Sherman Act’s general prohibition on unreasonable restraints of trade’, [citation omitted] and meet the requirement that petitioner has thereby suffered in- jury.’’ 352 U. S. 445, 453 Similarly, in Radiant Burners v. Peoples Gas Light and Coke Co., 364 U. S. 656 (1961), this Court declared : ‘Therefore, to state a claim upon which relief may be granted under that Section, allegations adequate to show a violation and, in a private treble damage action, that plaintiff was damaged thereby are all the law requires.’ 364 U. S. 656, 660 (1961) And in Hawaii v. Standard Oil Company of California, 405 U. S. 251 (1972), this Court stated that in Section 4: PANIED wild bad RL ORE Petition for Writ of Certiorari 15 ‘*‘Congress chose to permit all persons to sue to re- cover three times their actual damages every time they were injured in their business or property by an anti- trust violation’’. 405 U. S. 251, 262 (1972) Although the Court dismissed the State of Hawaii’s claim, it did so on the grounds that Hawaii had no standing to sue in a parens patriae capacity for its citizens or for damage to its ‘general economy’’. Injury in fact confers standing under Section 4 be- cause suit by a victim of an antitrust violation advances the fundamental purposes of the antitrust laws. A person in- jured in fact by conduct condemned by these laws is within the class of protected persons. This principle was expressly stated in Radovich v. The National Football League, supra, where the Court said: ‘‘These laws protect the victims of forbidden practices as well as the public’’. 352 U.S. 447, 454. Within the class of ‘‘victims’’ the Court has never limited protection to favored members. Rather, in Mande- ville Island Farms v. American Crystal Sugar Co., 334 U.S. 219 (1948), this Court declared : ‘‘The Act is comprehensive in its terms and coverage, protecting all those who are made victims of the for- bidden practices by whomever they may be perpe- trated.’’ 334 U.S. 219, 236 For remedial purposes, then, the Court has stated that victims of an antitrust violation as well as the public are entitled to protection and may invoke the rights to redress created by Section 4 of the Clayton Act. The victim of an antitrust violation is assured stand- ing under Section 4 for fundamental reasons other than protection and compensation. The victim sues as a Be Sadi 8 Oh Nay heed 1 WV 16 Petition for Writ of Certiorart ‘‘private attorney gener » to vindicate public antitrust policy and to deter future violations. Thus, in Radovich, supra, the Court stated: ‘‘Congress has by legislative fiat declared that such prohibited activities are injurious to the public and has provided sanctions allowing private enforcement of the antitrust laws by an aggrieved party.’’ 352 ou. 447, 453-454 And in Hawaii, supra, the Court declared : ‘‘By offering potential litigants the prospect of a re- covery in three times the amount of their damages, Congress encouraged these persons to serve as ‘private attorneys general’.’’ 405 U. S. 251, 262 Since every victim is a potential private attorney gen- eral, the entire class has a mandate under Section 4. This policy maximizes the enforcement potential of the statute, an objective intended by Congress and repeatedly endorsed by this Court.‘ Moreover, the special enforcement role accorded the private antitrust litigant by Congress man- dates that technical requirements not be employed to defeat lawsuits where serious harm has in fact ensued. In short, the Court has already resolved this issue by conferring standing on parties injured in fact by a violation of the antitrust laws. Their identity is determined by focusing on the harm of the violation and the victims of the harm, not on the proximity of the victim to the violator or the directness of the victim’s injury. Rather than opening the federal courts to a ‘‘flood’”’ of litigation, this standard 4. See United States v. Borden Co., 308 U. S. 188 (1939) ; Lawlor v. National Screen Service Corp., 349 U. S. 322 (1955) ; Hawaii v. Standard Oil Co. of California, supra; Zenith Radio Corp. v. Haseltine Research, Inc., 395 U. S. 100 (1969); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134 (1968) ; Minnesota Mining and Manu acturing Co. v. New Jersey W ood Finishing, 381 U. S. 311 (1965). Petition for Writ of Certiorari 17 merely ensures that the proper plaintiff is brought before the court. The two most recent decisions by this Court, Perkins v. Standard Oil Co. of California, 395 U. S. 642 (1969), and Hawaii v. Standard Oil Co. of California, supra, reaffirm this requirement of injury in fact. Perkins involved an action brought under Seetion 2(a) of the Robinson-Patman Act, 15 U. 8. C. § 13 and Section 4 of the Clayton Act. In Perkins, the Ninth Circuit had held that plaintiff was only incidentally injured by a price dis- crimination where he was sold gasoline on the retail level and where the price discriminator was a manufacturer who sold bulk to two intermediaries before the gasoline reached the retail level. This Court found that analysis to be ‘‘artificial and completely unwarranted by the language and the purpose of the Act’’, 395 U. S. 642, and reversed the court of appeals. The Court also permitted Perkins to re- cover in his capacity as a landiord and creditor, two classes of plaintiffs traditionally excluded by the arbitrary standing requirement of ‘‘target’’ or ‘‘direct’’ injury. Noting that Perkins was the principal victim of the violation, he was entitled to submit all his damages to the jury. 395 U.S. 642, 650. The impact of Pericins is apparent in light of the im- portant function of the private antitrust action. The Court focused primarily upon implementing the purposes and policies underlying the Act. In overruling the court of appeals’ dismissal on the basis of a conceptual determina- tion of incidental injury, the Court stressed that the ruling below immunized the violator from liability and under- mined the purpose of the statute. 395 U. S. at 647-48. Perkins thus illustrates that no artificial limitation should be placed on victims injured in their business and property and willing to sue to vindicate public policy. In a refer- Pe ORG OP OIA EE a ew een dnenemngenere oe ee a oe Oe ee 18 Petition for Writ of Certiorari ence to the direct-incidental injury conundrum created by the court below in Perkins, this Court held standing de- pendent upon the harm to the victim, not his relationship or proximity to the defendant. Applying the principles of Perkins and earlier cases to the facts of this case, the Ninth Circuit is plainly in error. Unquestionably, petitioner is a victim of a violation giving rise to a unique harm to petitioner; he has been injured in fact by reason of defendants’ alleged anticompetitive activities. He sues to condemn a new variation of an old forbidden practice : conspiracy among manufacturers in the market to rig their conduct and performance, in this case innovations in automobile pollution control technology. Unquestionably he advances the public policies underlying Section 4 of the Clayton Act and the substantive policies underlying Section 1 of the Sherman Act: he sues to enforce the Sherman Act prohibition, to deter further and future violations by the auto makers and other large firms in tight knit markets characterized by few competitors, and to re- dress his own injuries. Finally, dismissal wrongly im- munizes the violators from liability. The decision in Hawaii v. Standard Oil Co. of Calt- fornia, supra, in no way vitiates the significance of Perkins. Nor can Hawaii be construed to foreclose petitioner in this case. In Hawaii, the Court found that the State of Hawaii had suffered no “‘injury to business or property’’ within the meaning of Section 4 by alleging injury to the ‘‘general economy”’ of the State. 405 U. S. 251, 263. To make this determination, the Court looked to the purpose of Section 4, not to an arbitrary test of injury or directness of injury. The Court found that all persons were entitled to sue every time they were injured in their business or property by a violation of the antitrust laws. Violators, however, were not required to reimburse state and federal governments for duplicative damage to their respective economies. With Petition for Writ of Certiorari 19 respect to the issue of injury in the instant case, the Ninth Circuit panel below expressly conceded that petitioner was injured in his business and property within the meaning of Section 4. Appendix, infra, p. A6. For this reason alone, Hawaii cannot stand as a bar to petitioner’s antitrust claims. B. Dictum in Hawaii, Relied Upon by the Court of Appeals, Is No Bar to Petitioner’s Claim. In Hawaii, the Court intimated in a footnote that under certain circumstances it might be willing to limit the ambit of Section 4.5 Although the footnote leaves the contours of such a limitation entirely unresolved, in the body of the opinion the Court expressed concern for the situation which might give rise to additional standing requirements: selec- tion of the proper party litigant so as to avoid double or treble recoveries (by multiple parties) for the same injury. 405 U. S. 251, 263-64. The possibility of such a recovery is frequently present in the antitrust context, where several persons are in a position to sue for the same injury and where a plaintiff, suing under Section 4, derived his injury from another victim of the violation. In this setting, a policy reason might exist for curtailing liability—assuming the most logical plaintiff could be induced to sue. However, the problem of double recovery for the same injury has no application to this case. Unlike Hawaii, where the injury to the general economy consisted in part of damages to individual consumers and businesses, peti- tioner here sues as a victim in his own right. The purpose of automobile pollvtion control is to protect petitioner from 5. Footnote 14 of Hawaii reads, in pertinent part: “The lower courts have been virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation [citations omitted]. IRIE ed as 20 Petition for Writ of Certiorart harm to his business and property resulting from air pol- lution. Therefore, he is a principal and immediate victim of the auto makers’ industry-wide agreement to suppress pollution controls. He suffers a unique harm, underived from any third party. The proof of this proposition is the absence of any other person in a position to recover for his damages. Thus, there is no threat of double recovery in the instant case, and the court of appeals’ reliance on Hawaii was misplaced. Finally, circumspect use of standing requirements also follows implicitly from this Court’s oft-expressed view that private plaintiffs should not be required to overcome arti- ficial barriers to assert rights under the antitrust laws, particularly requirements not specifically adumbrated in Section 4.° IV. The Court of Appeals Read the Complaint Narrowly in an Unwarranted Attempt to Defeat It. The alleged violation is a variation of restrictive hori- zontal trade practices which have been uniformly con- demned since the enactment of the antitrust laws. Unlike collusion to fix prices or allocate market shares, this con- spiracy to rig performance in the market was aimed at an- other competitive variable: innovation. The injury to com- petition lies in the stifling of competitive performance in 6. For example, the Court has eliminated the requirement of alleging and showing public injury as well as private injury to the plaintiff. See Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207 (1959); Radovich, supra; and Radiant-Burners, supra. Simi- larly, concerning the issue of a causal connection between the injury and the illegal acts of the violator, the Court has eliminated the re- quirement that the violation be the “only” factor or that it produce the effect with “certainty”. See Poller v. Columbia Broadcasting Sys- tem, 368 U. S. 462 (1962) and Bigelow v. R. K. O. Radio Pictures, 327 U. S. 251 (1946). Also see Zenith Radio Corp., supra, and Bigelow, supra, on the liberal requirements of proof of damage. po Set ae a 4 eB Bat BEL TT wm ae DG GOT i RE Oe Petition for Writ of Certiorart 21 the development of new technology and systems controlling automobile emissions. The facts alleged in the complaint (which must be taken as valid for purposes of the motion to dismiss) indicate that market forces unrestrained by collusion would have produced controls far sooner than the industry’s self-proclaimed ‘‘joint development”’ effort. This horizontal agreement within the automobile in- dustry to retard a solution to air pollution is a classic illus- tration of the anti-competitive behavior of tight knit oligo- polies in areas other than price. The motives underlying this conspiracy were two-fold: First, independent and un- restrained development posed a threat to market stability, particularly market share; second, the industry regarded the development of pollution controls as a ‘‘pure cost’’ incapable of transformation into new sales and higher profits and to be avoided entirely or limited as much as possible—lest the research, development and implementa- tion costs adversely affect profitability. In short, under the oligopolistic conditions prevailing in the auto industry at the time of the cross-licensing agree- ment, the development of air pollution control systems by a single firm would have conferred a temporary competitive advantage upon that firm, and would have compelled the rest of the industry to offset that edge by innovation of their own. The complaint alleges that certain jurisdictions were prepared to require pollution-control devices if the technology were available (Pet. Complaint { 23(¢c)(2) & (3)). Taking the complaint as a whole, petitioner adequately alleged the foregoing violation to restrain competition in the automobile industry. However, the court of appeals construed the complaint narrowly as alleging only a viola- tion to restrain competition in the market for air pollution control equipment through an exclusion of potential com- petitors into that market. The court assumed this unwar- ranted and narrow position despite repeated efforts in both a — Fes GBs sae EE he 22 Petition for Writ of Certiorare written and oral argument and allegations in the complaint which suggested a wider—and more obvious—purpose to the conspiracy. Thus, the complaint alleges that the in- dustry entered into an agreement to develop air pollution technology on & ‘‘non-competitive basis’’, implying that the automobile makers were limiting innovations which might upset the stability of the market and lead to increased rivalry (Pet. Complaint { 23(a)). The complaint further alleges a concerted effort to delay implementation of air pollution controls once the systems came into existence. (Pet. Complaint { 23(c)). This suggests an attempt to limit and/or avoid the cost of developing controls, thus in- voluntarily thrusting these costs upon petitioner and others. This unjustifiable constriction of the scope of peti- tioner’s complaint, undertaken to conform to the require- ments of the Ninth Circuit’s so-called ‘‘target area’’ test, runs squarely contrary to the mandate of this Court. Com- plaints are to be construed liberally in the interests of justice. Federal Rules of Civil Procedure, Rule 8(f); Conley v. Gibson, 355 U.S. 41 (1957). Liberal construction of pleadings is deemed doubly important in antitrust cases. Radiant Burners v. Peoples Gas Light & Coke Co., supra; Radovich v. The National Football League, supra. See also Poller v. Columbia Broadcasting System, 368 U. S. 464 (1962), where the Court rejected summary judgment as a viable procedural device in antitrust cases. By contrast, the court of appeals here has purposefully taken the narrowest possible view of the conspiracy alleged by petitioner. In essence, the court wore blinders to fa- cilitate the application of a disputed rule of law. V. The Decision Below Undermines Proper Administration of the Antitrust Laws. As previously noted, the court of appeals permitted all injunctive claims to proceed even as the damage claims Petition for Writ of Certiorari 23 were dismissed. Apparently, this was attributable both to the likelihood of continued harm, and the egregiousness of the alleged violations. It could also be construed as a concession to the high public visibility of this case. In this context, judicial abrogation of the right to private relief under the antitrust laws, in a highly visible litigation, foreshadows a considerable diminution of the publie’s protection from concerted anti-competitive action. Businessmen, perceiving that courts will not impose liabil- ity for the full consequences of their actions, are less likely to be deterred from unlawful conspiracies undertaken with a complete disregard of public welfare. Certainly the pros- pect of substantial damages stands as a far greater deter- rent than an injunction or judicial censure—the very reason for enactment of the treble-damage provision. Further- more, other courts, observing the Ninth Circuit’s action in a salient case, are likely to embellish their own already chaotic standing requirements. This can only represent a further departure from the concept of ‘‘private at- torneys general’’ which the antitrust laws were designed to implement. In the instant case, the complaint alleges that business- men in some of the nation’s largest corporations conspired to retard the development of automobile pollution control devices, thus thrusting the hidden costs of their product upon the unwilling public. Farmers, as cropgrowers, were forced to absorb a larger proportion of these unallocated costs than any other group. A denial of their ‘‘standing”’ to challenge an unlawful conspiracy of this magnitude can only operate as an invitation to exploitation and an abroga- tion of the private damage provisions of the antitrust laws. An extensive review of the conflicting case law in the various circuits (see Part I supra) reveals four primary ‘‘publie policies’? or variations thereof underlying the PFE AAR Ee RS, NN BSE 24 Petition for Writ of Certiorart judicially created limitation on standing under Section 4: ruinous liability ; the desire to eliminate groundless claims brought for the purpose of extorting a settlement; flood of litigation; and multiplicity of suits. The latter three rationales may be dismissed out of hand. A case of this public importance cannot be dismissed merely to diminish the ‘flood of litigation’”’—indeed, the injunctive claims are proceeding in the district court. If the allegations of the complaint are credited, as they must be on a motion to dis- miss, spuriousness certainly does not warrant the result below. ‘‘Ruinous”’ liability probably constitutes the principal policy rationale underlying the various standing limitations imposed by the lower federal courts. Whether described as the “‘target area”’ or ‘‘direct injury’’ test, these limita- tions have aimed towards circumscribing the so-called ‘‘rip- ple” effect of an antitrust violation in the commercial context. This ‘‘ripple effect’’ may be described as follows: A single injury to one person is compounded through the general interdependency of prices and outputs in a mar- ket economy. In this situation, reasons may exist to cut off liability after the original victim since the three public policies underlying Section 4—enforcement, deterrence, and compensation—can generally be vindicated. Thus, in the ease of derivative injury, the original victim sues to vindi- cate public antitrust policy, to deter further violation, and to recoup his damages. Moreover, derivative victims can recover their damages through the same mechanism which transmitted the injury from the violation in the first place if the original victim recovers his damages. Where a litigant’s claim does not raise the threat of double recovery, it is improper to cut off liability. To do so gives a windfall to the violator and frustrates all the a es Petition for Writ of Certiorari 25 policies underlying the antitrust laws and the right of pri- vate action.’ Petitioner’s claim poses no such threat of double re- covery. Petitioner’s injury is a ‘‘primary”’ injury. It is not derived from another victim of the violation situated between petitioner and the violator. It is not a by-product of the conspiratorial scheme. As alleged in the complaint, a basic purpose of the conspiracy was to avoid the price of developing controls by forcing farmers and others to absorb the entire cost of air pollution emitted by autos. In this setting, the possibility of ‘‘ruinous liability’’ (which petitioner contends is unlikely) stems not from the ‘ripple effect’’ or interdependency of the nation’s economy. Rather, if it looms at all, its source is the immense mag- nitude of the defendants’ violations. Defendants cannot be excused from liability because of the outrageous scope of their own misconduct. The novel context of petitioner’s antitrust injury ap- pears to have created the controversy in this case. Peti- tioner is not a competitor, a buyer, or a supplier of the auto makers, yet he suffered injury as the result of an antitrust violation. This is unusual in the antitrust setting. The court of appeals alluded to the potential com- pelled use of air pollution devices as an ‘‘externality’’. (Appendix, infra, p. A3). Petitioner has no objection to such a description (a technical term of economists, not 7. The rejoinder that producers of pollution-control devices can sue to vindicate public policy is unpersuasive in the confines of this case. Unlike farmers and other parties injured by the resulting air pollution, producers of such devices are subject to several strong de- fenses by the manufacturers—notably that cost and other product ramifications would have required internal development and produc- tion of the devices. Furthermore, the propriety and extent of patents and the nature and quality of various parties’ research are also at issue. These problems are completely irrelevant to petitioner’s cause of action—which derives from the existence of the conspiracy and the readily foreseeable resultant harm. The “business justification” de- fense is totally inapplicable to petitioner’s case. Ea eae eee 26 Petition for Writ of Certiorart lawyers), and assumes that the court was contemplating the so-called ‘hidden cost’’ effects of the automobile. These reflect the fact that air pollution is largely created by the automobile and causes injury accounting for serious costs | to farmers and others. Such costs are not included in the market price of the automobile. That is to say, as the cost of air pollution increases due to increased automobile use, the cost of the car in the market place remains fixed. Un- aware of the true cost to society of the automobile, buyers continue to purchase and use it based upon a faulty determi- nation of its utility. The hidden cost effect is a blind spot in the market and makes it difficult for market economics to force automakers responsible for the noxious effects of their product to assume the burden of developing technology to eliminate them. Petitioner would argue that, externality or not, peti- tioner’s serious injury was the immediate result of an anti- competitive conspiracy, and he discerns no reason why public policy should treat ‘‘externalities”’ created by anti- trust violations any differently than other injuries occa- sioned by unlawful horizontal collusion. In this regard, petitioner stresses that the court of appeals cannot prop- erly dismiss petitioner’s claim by labeling it an externality or analogizing it to some kind of incidental injury. Peti- tioner’s injury is unrelated to the condition of general and moderate interdependency between prices and outputs in a market economy that gives rise to the so-called ripple effect of an antitrust violation. Petitioner’s injury is unique but palpable, underived q from any third party. Externality or no, the auto industry has created a burdensome cost for him. He has no indirect or direct market relationship with the industry but has suf- ; fered injury as a primary result of an unlawful horizontal : conspiracy. 9 Saint OF oh Gt Petition for Writ of Certiorart 27 In summation, the issue of petitioner’s standing under Section 4 of the Clayton Act arises out of a claim which involves the interaction of two sets of operative facts. The nature of the antitrust violation is a conspiracy among the domestic auto makers to retard the development and in- stallation of automobile air pollution control devices. The nature of petitioner’s injury is damage to his business and property as a‘result of air pollution during the period of the retardation. The interaction between these two opera- tive facts creates a cause of action unlike most traditional antitrust claims where the parties are typically located in the same industry. However novel the context in which the claim arises, the injury upon which it is based is a traditional antitrust claim created by a violation of the antitrust laws and is no less concrete, immediate, or serious than a cause of action arising in a more typical antitrust setting. A consequence of environmental pollution condemned in large part for its effects on crops, petitioner’s injury results from concerted, unlawful action. Just as purchasers pay higher prices due to price fixing conspiracies, or competitors are forced out of business as a result of schemes to dominate or control markets, petitioner has suffered injury from this conspiracy to suppress needed technological innovation. It is pre- cisely the type of injury the antitrust laws are designed to prevent and redress. nee eames soma et in et Prone * — NGPA SER LIES at COE i LEED BANTER 28 Petition for Writ of Certiorart CONCLUSION. In conclusion, petitioner respectfully urges that the writ issue to resolve serious and persistent conflicts among the circuits, clarify a crucial issue of federal antitrust law, and correct a conspicuous decision which patently flouts the applicable precedents in this Court. Respectfully submitted, Davin BERGER, H. Lappe Montasve, JR., Davip Bercer, P. A., 1622 Locust Street, Philadelphia, Pa. 19103 (215) 732-8000 Counsel for Petitioner. Of Counsel: Davi Bercer, P. A., Attorneys-at-Law. Dated: August 31, 1973. BN SUR, Sach NERD EY SEP sp PLEIN ELE SDD ONE IRE Appendix. UNITED STATES COURT OF APPEALS For tHe Nintx Circuit. No. 71-1241. In ne MULTIDISTRICT VEHICLE AIR POLLUTION M. D. L. No. 31 STATE OF CALIFORNIA, er At., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., er At., Appellants. ROBERT MORGAN, Appellee, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., Er au., Appellants. CITY OF PHILADELPHIA, er 4 t., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., Er At., Appellants. (Al) Court of Appeals Opinion STATE OF NEW YORK, Appellee, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., eT AL., | Appellants. CITY OF NEW YORK, er At, Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., Er AL., Appellants. —— CITY AND COUNTY OF DENVER, Appellees, v. AMERICAN MOTORS CORPORATION, ET AL., Appellants. L From THE UNITED Srates District CourT FoR THE CenTRAL DisTRICT OF CALIFORNIA. APPEA ————— Before: Hamuin, BrowniNe, and Exy, Circuit Judges. oe OPINION. el Exy, Circuit Judge: This certified interlocutory appeal under 28 U. S. C. § 1292(b) arises from pretrial proceedings in Multidistrict cniiniens - SRG OM POD AE NRE Court of Appeals Opinion A3 Air Pollution Control Litigation (C. D. Cal. M. D. L. 31), which is a consolidation of numerous actions’ under 28 U. 8S. C. § 1407. In re Motor Vehicle Air Pollution Control Equipment, 311 F. Supp. 1349 (Jud. Panel on Multidist. Lit. 1970). Since this appeal is from denial of motions to dismiss, factual allegations are cast most favorably to the appellees. See Conley v. Gibson, 355 U. S. 41 (1957). As early as 1953, the nation’s automobile manufac- turers and their trade association allegedly conspired to eliminate competition among themselves in the research, development, manufacture, installation and patenting of automotive air pollution control devices. Appellees urge that this horizontal antitrust conspiracy was motivated: (1) by appellants’ conviction that antipollution devices are externalities, whose development would increase price with- out a concomitant spur to consumer interest; (2) by the apprehension that the first competitor to perfect such a device would garner exclusive contracts with governmental purchasers; and (3) by the fear that technological realiza- tion of the devices would prompt laws compelling their use.’ 1. These are the progeny of a civil antitrust action filed by the federal government against the largest domestic automobile manu- facturers and the Automobile Manufacturers’ Association. In Oc- tober of 1969, the Government accepted a consent decree, United States v. Automobile Mfgrs. Ass’n, 307 F. Supp. 617 (C. D. 1969) aff'd per curiam sub nom. New York v. United States, 397 U. S. 248 (1970), the text of which is reported in 1969 Trade Cas. {| 72,907. Similar factual claims were presented to the original jurisdiction of the Supreme Court in Washington v. General Motors Corp., 406 U. S. 109 (1972). After the Court declined to assume jurisdiction in that case, and after this court accepted certification of the present ap- peal, an additional spate of actions was filed in the District Court under the multidistrict tag-along procedures. 2. Such compulsion would be unattractive to manufacturers insofar as required use of an externality would likely increase price while not necessarily increasing demand, thus diminishing overall product marketability and profit. . a a theta shite tei as ts ee A4 Court of Appeals Opinion Appellees argue that this conspiracy inflicted financial losses that would not have occurred but for the conspiracy- induced absence of antipollution equipment. Governmental entity appellees claim losses resulting from diminution in value of, and expenditures in connection with, government property and interests. Crop farmer appellees assert direct damage to crop yields. Variously proceeding in their individual capacities, as parens patriae and as class representatives all appellees seek treble damages and equitable relief under sections 4 and 16 of the Clayton Act, 15 U. S. C. §§ 15, 26. On appeal, appellants challenge the district court ’s rulings that appellees have standing to sue under sections 4 and 16 of the Clayton Act, that certain appellees may pro- ceed as parens patriae, and that others may proceed as class representatives under Fed. R. Civ. P. 23. L. Sranpinc Unver Section 4. Appellees ground their claims for treble damages on section 4 of the Clayton Act, 15 U. 8. C. § 15, which reads: ‘‘ Any person who shall be injured in his business or property by reason of anything forbidden in the anti-trust laws may sue therefor in any district court of the United States in the district in which the de- fendant resides or is found or has an agent, without respect to ameunt in controversy, and shall recover threefold ine dama, -¢ by him sustained, and the cost of suit, including a reasonable attorney’s fee.’’ Read literally, this statute could afford relief to all persons whose injuries are causally related to an antitrust viola- tion. Recognizing the nearly limitless possibilities of such an interpretation, however, the judiciary quickly brushed Court of Appeals Opinion’ aside this construction. Instead, a measured approach has prevailed; courts have impressed a standing doctrine so as to confine the availability of section 4 relief only to those individuals whose protection is the fundamental purpose of the antitrust laws. Cf. Barlow v. Collins, 397 U. S. 159 (1970) ; Association of Data Processing v. Camp, 397 U. S. 150 (1970); Mount Clemens Industries, Inc. v. Bell, 464 F. 2d 339, 341-44 (9th Cir. 1972). Unfortunately, no ‘‘bright line’’ has yet emerged to divine this group, and courts have formulated varied definitions. In this case, however, the District Court declined to apply any of the extant definitions, choosing instead to expand‘ the coverage of section 4: ‘*We are now concerned with the phrase ‘injured in his business or property by reason of anything for- bidden in the antitrust laws’ in the light of the alle- gations of these complaints, rather than the traditional legalistic approach defined by the cases cited by de- fendants in their motion to dismiss. Each of the plaintiffs allege injury to their respective business or property by reason of anti-trust violations of the defendants. ‘*Plaintiffs may fail in their proof, but until then, they should be given the benefit of employing ‘any 3. See, e.g., Loeb v. Eastman Kodak Co., 183 F. 704 (3d Cir. 1910) (limiting standing under section 7 of the Sherman Act, predecessor of section 4 of the Clayton Act). Cf. Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U. S. 531, 534 (1918) (Holmes, J.) (“the endlessness and futility of the effort to follow every transaction to its ultimate result”). See also L. Green, The Rationale of Proximate Cause 122-23, 195-97 (1927); Pollock, The “Injury” and “Causation” Elements of a Treble-Damage Antitrust Action, 57 Nw. U. L. Rev. 691, 697-700 (1963). 4. Even some commentators who have lauded the ingenuity of the district court’s decision ize its clear rture from prior law. See, e.g., 12 B. C. Ind. & Com. L. Rev. ese (1971) Note, ; 24 Vand. L. Rev. 126 (1970). gt TN A6 Court of Appeals Opimion available remedy to make good the wrong done.’ ’” [footnote citing J.1. Case Co. v. Borak, 377 U. 8. 426, 433 (1964); Bell v. Hood, 327 U. S. 678, 684 (1946) }. 52 F. R. D. 398, 401 (C. D. Cal. 1970). In the aftermath of the Supreme Court’s recent decision in H awau v. Standard Oil Co., 405 U. S. 251 (1972), however, we cannot so easily disregard the so-called ‘‘traditional legalistic approach of the cases . . - — Judicial constructions of standing under section 4 have keyed on the phrases ‘‘business or property”’ and ‘‘by reason of” as indicating twin requisites for standing. First, a plaintiff must allege injury to his ‘*business or property’, a term definitively limited to interests in com- mercial ventures or enterprises: ‘‘the words ‘business or property’. - - refer to commercial interests or enter- prises.”’ Hawaii, supra at 264. See Control Data Corp. ». IBM, 306 F. Supp. 839, 845 (D. Minn. 1969) (corporate plaintiff not in legal existence at time of antitrust viola- tion is without commercial injury). Secondly, a plaintiff must allege that the injury suffered was occasioned ‘‘by reason of’’ an antitrust violation. Hawaii, supra at 263- 64 n. 14. Applying the first predicate, since neither the govern- ments’ individual claims, nor their class claims, nor their parens patriae claims allege any injury to commercial ventures or enterprises, the governmental entities cannot seek recovery under section 4 of the Clayton Act. In contrast, the farmers satisfy the first requisite, since a diminished crop yield, for example, would constitute injury to commercial interests. Application of the second prong of the standing for- mulation is more difficult since ‘‘by reason of’’ has con- sistently eluded efforts at uniform definition or applica- de ta eS Reng 0 DC heel BLE wie iE en nae EE” Rraes Wine iS POM Ie Cet , See MeN Laritiedtn ts) nee Ve er Oe ean Ie Leh See ©. Court of Appeals Opinion’ AT tion. Compare, e.g., Mulvey v. Samuel Goldwyn Produc- tions, 433 F. 2d 1073 (9th Cir. 1970) with Fields Produc- tions, Inc. v. United Artists Corp., 432 F. 2d 1010 (2d Cir. 1970), aff’g per curiam 318 F. Supp. 87 (S. D. N. Y. 1969), cert. denied, 401 U. S. 923 (1971); and compare Stemer v. 20th Century-Fox Film Corp., 232 F. 2d 190 (9th Cir. 1956) and Congress Building Corp. v. Loew’s, Inc., 246 F. 2d 587 (7th Cir. 1957) with Melrose Realty Co. v. Loew’s, Inc., 234 F. 2d 518 (3d Cir.), cert. denied, 352 U. S. 890 (1956) and Harrison v. Paramount Pictures, Inc., 115 F. Supp. 312 (E. D. Pa. 1953), aff’d, 211 F. 2d 405 (3d Cir.), cert. denied, 348 U. S. 828 (1954); and compare Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F. 2d 383 (6th Cir. 1962), cert. denied, 372 U. S. 907 (1963) with South Carolina Council of Milk Producers, Inc. v. Newton, 360 F. 2d 414 (9th Cir.), cert. denied, 385 U. S. 934 (1966). The resulting confusion prompted specu- lation that the Supreme Court would disapprove judicial application of ‘‘by reason of’’ to limit potential antitrust claimants.’ In Hawaii, however, the Court appeared to approve the standing doctrine to require more from a would-be plaintiff than some remote connection in the causal chain. ‘*The lower courts have been virtually unanimous in concluding that Congress did not intend the anti- trust laws to provide a remedy in damages for all injuries that might conceivably be traced to an anti- trust violation.’’ 405 U. S. at 263 n. 14. Although the Court cited cases in support from every circuit, it failed to distinguish essentially two disparate analytical techniques—the ‘‘direct 5. See, e.g., Kiingsberg, Bull’s Eyes & Carom Shots, XVI Anti- trust Bull. 381, 368-09 (1971). ; A8 Court of Appeals Opinion injury’’ and the ‘‘target area”’ approaches ¢__employed by different circuits.” Courts adhering to the ‘direct injury’ test focus principally on the relationship between the alleged anti- 6. We have employed the terms “target area” and “direct injury” only as convenient, shorthand methods of identifying the two major approaches to the interpretation of “by reason of”. Use of either label in other cases, in contrast, has frequently suggested an approach ge that so denominated here. E.g., Perkins v. Standard Oil 0., 396 F. 2d 809 (9th Cir. 1968) (court labeled approach “target area” but employed the “direct injury” analysis), rev'd, 395 U. S. 642 (1969). Likewise, some courts have failed to perceive significant distinctinc, v. Ass'n of Cas. & Sur. Cos, 382 F- 2d 925 (10th Cir. 1967). It is to be hoped that the resolution suggested in our present opinion will obviate the use of either label in the future. example, have consistently followed the “target area” a roach, ¢.g., Mulvey v. Samuel Goldwyn Productions, 433 F. 2d 1073 (9th Cir. 1970) ; ee Milk Producers v. Bergjans Farm Dairy, Inc., cert. denied, 401 U. S. 974 (1971) ; Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F. 2d 383, 394-95 (6th Cir. 1962) ; Miley y. John Hancock Mut. Life Ins. Co., 148 F. Supp. 299 (D. Mass.), aff'd per curiam, 242 F. 2d 758 (ist Cir.), cert. denied, 355 U. S. 828 (1957). The Second, Fourth and Fifth Circuits have formulated their own particular mixtures of the two tests, e.g., Calderone Enter- prises Corp. v- United Artists Theatre Circuit, Inc., 454 F. 2d 1292 (2d Cir. 1971) ; Dailey v. Quality. School Plan, Inc., 380 F. 2d 484 (Sth Cir. 1967) ; South Carolina Council of Milk Producers, Inc. v. Newton, 360 F. 2d 414 (4th Cir. 1966), although the approach of the Second more closely resembles the “direct injury” test and that of the Fourth and Fifth, the test of “target area”. The Seventh Cir- cuit’s approach is uncertain, although it appears closer to “target area”. Compare Sandidge v. Rogers, 256 F. 2d 269 (7th Cir. 1958) with Congress Building Corp. v- Loews, Inc., 246 F. 2d 587 (7th Cir. 1957). In ascribing positions to the various Circuits, we have ignored self-descriptions and have attempted to analyze their actual approaches. aie de? FRO TEY RFRETREREREE PNE Court of Appeals Opinion . AS trust violator and the claimant. Generally, if the claimant is separated from the violator by an intermediate antitrust victim, standing is denied by attaching conclusory labels such as ‘‘remote’’, ‘‘indirect’’, and ‘‘consequential’’. Resurrecting notions of privity, this test thus arbitrarily forecloses otherwise meritorious claims simply because another antitrust victim interfaces the relationship be- tween the claimant and the alleged violator. Moreover, the ‘‘direct injury’’ requirement has engendered among some adherents a regrettable tendency to deny standing to any plaintiff who happens to fall within certain talis- manic rubries: ‘‘creditor’’, ‘‘landlord’’, ‘‘lessor’’, ‘‘fran- chisor’’, ‘‘supplier’’.® This disposition is, we think, un- satisfactory insofar as it transforms judicial inquiry into a mere search for labels. In contrast, courts employing the ‘‘target area’’ ap- proach focus on claimant’s relationship to the area of the economy allegedly injured by the defendant. ‘fT ]o state a cause of action under the anti-trust laws a plaintiff must show more than that one purpose of the conspiracy was a restraint of trade and that an act has been committed which harms him. He must show that he is within that area of the economy which is endangered by a breakdown of competitive conditions in a particular industry. Otherwise he is not injured ‘by reason’ of anything forbidden in the anti-trust laws.”’ 8. See, e.g., Kauffman v. Dreyfus Fund, 434 F. 2d 727 (3d Cir. 1970), cert. denied, 401 U. S. 974 (1971) (“shareholder”) ; Nation- wide Auto Appraiser Serv., Inc. v. Ass'n of Cas. & Sur. Cos., 382 F. 2d 925 (10th Cir. 1967) (“franchisor”); Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F. 2d 383 (6th Cir. 1962) (“sup- plier”) ; Miley v. John Hancock Mut. Life Ins. Co., 242 F. 2d 758 (Ist Cir.), aff'g per curiam 148 F. Supp. 299 (D. Mass.), cert. denied, 355 U. S. 828 (1957) (“creditor”) ; Melrose Realty Co. v. Loew’s, Inc., 234 F. 2d 518 (3d Cir.), cert. denied, 352 U. S. 890 (1956) (“owner-lessor”). ADS eal a OAS NIT SG AEPLNEATEN. A10 Court of Appeals Opimon Conference of Studio Unions v. Loew’s Inc., 193 F. 2d 51, 54-55 (9th Cir. 1951), cert. denied, 342 U. 8. 919 (1952). To attain standing, @ plaintiff must thus allege that the antitrust violation injured a commercial enterprise of the plaintiff in the area of the economy in which the elimination of competition occurred. Standing is denied, on the other hand, if the claimant’s commercial activity occurred outside that area of the economy. See id. Hence the ‘‘target area”’ approach provides a logical and flexible tool for analyzing whether a particular claimant falls within the class of per- sons slated by Congress for protection under section 4 of the Clayton Act. ‘“<[T]he basic and underlying purposes of the anti- trust laws [are] to preserve competition and to protect the consumer. Recovery and damages under the anti- trust law is available to those who have been directly injured by the lessening of competition and withheld from those who seek the windfall of treble damages because of incidental harm.”’ Id. at 55. See Karseal Corp. v. Richfield Oil Corp., 221 F. 2d 358, 365 (9th Cir. 1955). The ‘‘direct injury”’ approach to section 4 was im- plicitly undermined by the Supreme Court in Perkins v. Standard Oil Co., 395 U. S. 642 (1969), rev’g 396 F. 2d 809 (9th Cir. 1968). Attention centered on whether ‘‘fourth level’’ price discrimination is proscribed by section 2 of the Clayton Act, as amended by section 13 of the Robinson- Patman Act, 15 U.S. C. § 13. A panel of our court, focusing on the indirect commercial relationship between claimant and defendant, had concluded in the negative: ‘‘Section 2(a) of the Act does not recognize a causal connection, essential to liability, between @ supplier’s price discrimination and the trade practices of a cus- ET ROSE RAT ES. Se EI