Opposition Brief — Bessemer & Lake Erie Railroad Co. v. Wheeling-Pittsburgh Steel Corp.

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No. 93-643

IN THI

Siyrenw Cort of the United States 4"

OcTOBER TERM, 1993

BESSEMER & LAKE ERIE RAILROAD COMPANY,

Petitioner,

Vv.

REPUBLIC STEEL CORPORATION, ef al..

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Respondents,

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF IN OPPOSITION OF RESPONDENTS

C.D. AMBROSIA TRUCKING COMPANY,

ERIE-WESTEKN PENNSYLVANIA PORT AUTHORITY

AND CODAN CORPORATION, AND TFAURO

BROTHERS TRUCKING COMPANY

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Counsel for La iro brothers

Trucking Company

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether the holding of Keogh vy. Chicago & N.W.

Ry. Co., 260 U.S. 156 (1922), should be expanded to bar

antitrust damages for any party—customer or competitor

—when: (a) plaintiffs did not challenge the lawfulness

of any rate filed with the Interstate Commerce Commis-

sion and did not seek any rebate of alleged filed-ra.e

overcharges; (b) damages were not measured by refer-

ence to hypothetical regulated railroad rates: (c) the jury

was specifically instructed that liability could not be prem-

ised on rate-related claims; and (d) the court of appeals

“conclude[d] from the evidence produced that .. . plain-

tiffs proved at trial an antitrust conspiracy that was not

grounded in rate-related claims.”

2. Whether, assuming Keogh is expanded to bar such

antitrust damage claims by shippers, it should further

be expanded to bar damages for competitors, where: (a)

this Court’s decisions and those of the lower courts have

consistently declined to apply Keogh to competitor claims;

(b) the competitor claims do not create the risk of dis-

criminatory rebates that was the concern in Keogh, and

to hypothetical rates that would require Interstate Com-

merce Commission approval.

3. Whether Illinois Brick Co. v. Illinois, 431 U.S. 720

(1977), should be extended to bar the antitrust damage

claims of the steel company plaintiffs, notwithstanding

that the court of appeals in this and a related case held

those steel companies to be directly-injured victims of a

conspiracy to exclude competition.

(i)

RULE 29 STATEMENT

Pursuant to Rule 29.1, there are no parent or sub-

sidiary corporations to be listed.

TABLE OF CONTENTS

TABLE OF AUTHORITIES

STATEMENT

A. The Facts

B. District Court Proceedings

1. Pretrial Proceedings ..

2. Trial Proceedings .

3. Post-trial Proceedings ................

C. The Third Circuit’s Decision

REASONS FOR DENYING THE WRIT

1. THE COURT OF APPEALS CORRECTLY

APPLIED SETTLED LAW RESPECTING

KEOGH

A. The Limits of the Keogh Doctrine Are Well-

Established and Were Properly Respected

by the Court of Appeals

B. There Is No Need For Plenary Review of the

Court of Appeals’ Holding That Keogh Does

Not Bar Damages In Suits Brought By Com-

petitors

Il. B&LE’S ILLINOIS BRICK ARGUMENT IS

INAPPLICABLE TO THE COMPETITOR

PLAINTIFFS, AND INCORRECT WITH RE-

SPECT TO THE STEEL COMPANIES

CONCLUSION

(iil)

Page

Oo)

TABLE OF AUTHORITIES

Cases Page

Associated General Contractors v. California

State Council of Carpenters, 459 U.S. 519

CRE sitssidcsouadeseussakaneecoanaeeca eee 26, 27

Barnes v. Arde n Mayfair, Inc., 759 F. 2d 676 (9th

Cir. 1985)... DRED Bre sanen hae 15

CLR. v. McCoy, 484 U Ss. 3 (1987). Rid Te spo eee hd 18

Capital Freight Serv. v. Trailer Marine Trans-

port, 704 F. Supp. 1190 (S.D.N.Y. 1989) ............ 15, 24

City of Groton v. Connecticut Light and Power

Co., 662 F.2d 921 (2d Cir. 1981) ....................15, 22, 23

City of Kirkwood v. Union Electric Company, 671

F.2d 1173 (8th Cir. 1982), cert. denied, 459

is St. 5 | er eee ae 15, 22, 23

City of Mishawaka, Indiana v. Indiana & Michi-

gan Electric Company, 560 F.2d 1314 (7th Cir.

1977), cert. denied, 436 U.S. 922 (1978) ........... 15

Clipper Exxpress v. Rocky Mountain Motor Tariff

Bureau, 690 F.2d 1240 (9th Cir. 1982), cert.

dented, 459 U.S. 1227 (1988)............................-..... 15, 23

Concord v. Boston Edison Co., 915 F.2d 17 (1st

Cir. 1990), cert. denied, 499 U.S. 931 (1991)... 23

Dart Drug Corp. v. Corning Glass Works, 480 F.

a, ROR CE Tete BCID ohcndancnecsteesccer eres 26

Delaware & Hudson Ry. Co. v. Conrail, 654 F.

Bane. TIGG CHIN. F . UBC). vcccen-cccncnvecesceservsnvies 15, 24

Essential Communications Systems, Inc. v. AT&T,

610 F.2d 1114 (3d Cir. 1979) ..................... 22

Federal Maritime Comm'n v. Seatrain Lines, Ine.

ee a ee I a laa ss eae 14

Fontana Aviation, Inc>v. Cessna Aircraft Co., 617

F.2d 478 (7th Cir. 1980) 2.0.0... 26

Frontier Enterprises, Inc. v. Amador Stage Lines,

624 F. Supp. 137 (E.D. Cal. 1985) —.....__.. 24

Georgia v. Pennsylvania R.R. Co., 324 U S. 439

2) URS ane iets Kainisssyanter asses ar esuie nn me et nner <i 13, 20, 21, 23

H.J. Inc. v. Northwestern Bell Telephone Co., 954

F.2d 485 (8th Cir.), cert. denied, 112 S. Ct. 2306

UN i a nO de 14

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) .... 24, 25,

26, 27

TABLE OF AUTHORITI&£:. -Continued

Page

In re Wheat Rail Freight Ry. Antitrust Litig., 759

F.2d 1305 (7th Cir. 1985), cert. denied sub nom.,

Little Crow Milling Co. Inc. v. Baltimore and

Ohio R.R., A476 U.S. 1158 (1986) ; ne 14

Keogh v. Chicago & N.W. Ry. Co., 260 U.S. 156

(1922 passim

Lifschultz Fast Freight, Inc. v. Consol. Freight-

ways Corp. of Delaware, 805 F. Supp. 1277

(D.S.C. 1992), aff'd mem., 998 F.2d 1009 (4th

Cir. 1993) 17, 18, 24

Litton Systems, Inc. v. AT&T, 700 F.2d 785 (1983),

cert. denied, 464 U.S. 1073 (1984) ............0000000.... 15

Marneel v. United States Parcel Serv. of America,

Inc., 260 F. Supp. 391 (N.D. Calif. 1966) 24

Nat'l Gerimedical Hospital & Gerontology v. Blue

Cross of Kansas City, 452 U.S. 378 (1981) 14

Petrol Stops Northwest v. Continental Oil Co.,

1978-2 Trade Cases © 62,304 (D. Col. 1978) .. 26

Pinney Dock and Transport Co. v. Penn Central

Corp., 838 F.2d 1445 (6th Cir.), cert. denied,

488 U.S. 880 (1988) .................... ine passim

Square D Co. v. Niagara Frontier Tariff Bureau,

Inc., 476 U s. | Gn I

Square D Co. v. Niagara Frontier Tariff Bureau,

Inc., 760 F.2d 1347 (2d Cir. 1985) Ad 21

Trans-Kentucky Transport v. L & N R. Co., 581

F. Supp. 759 (E.D. Ky. 1983) .- 15

United States v. Bessemer and Lake Erie R. Co.,

717 F.2d 593 (D.C. Cir. 1983)... 2, 6,8

United States v. Philadelphia Nat’l Bank, 374 U S.

321 (1963) PC MARA SRT Le ETO UTA 14

Miscellaneous

ABA Antitrust Section, ANTITRUST LAW DEVELOP-

MENTS (3d ed. 1992)

IN Tht

Supreme Cot of the United States

OcroBEeR Ttrem, 1993

No. 93-643

BrSSEMER & LAKE ErRIP RAI ROAD COMPANY,

Petitioner,

RepuBLIC STEEL CORPORATION, et al...

Respondents

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF IN OPPOSITION OF RESPONDENTS

C.D. AMBROSIA TRUCKING COMPANY,

ERIE-WESTERN PENNSYLVANIA PORT AUTHORITY

AND CODAN CORPORATION, AND TAURO

BROTHERS TRUCKING COMPANY

Respondents C.D. Ambrosia Trucking Company (Am

brosia), Erie-Western Pennsylvania Port Authority and

Codan Corporation (Erie), and Tauro Brothers Truck

ing Company (Tauro) respectfully oppose the petition

for certiorari.

STATEMENT

There is nothing “extraordinary” about this antitrust

case——except, perhaps, the audacity and scope of the

illegal conduct at issue. In a 1989 jury verdict, Petitioner

Bessemer & Lake Erie Railroad (B&LE) was held re-

sponsible for its leading role in a destructive 25-year

conspiracy that unlawfully monopolized the transporta-

tion of iron ore to this nation’s steel mills.’ In a prior

criminal case, B&LE pled nolo contendere to antitrust

charges based on its role in the conspiracy. See United

States v. Bessemer and Lake Erie Ry. Co., 717 F.2d 593

(D.C. Cir. 1983).

The Third Circuit’s judgment in this case does not

warrant plenary review. B&LE does not dispute the trial

court’s finding that “[l]Jiterally thousands of documents,

from the railroads’ own files, establish beyond dispute the

existence of an illegal conspiracy.”~ Nor does B&LE

challenge the Third Circuit's holding, agreeing with the

D.C. Circuit in the criminal case, that the Interstate

Commerce Act afforded the conspirators no antitrust

immunity. B&LE neither denies its role in the conspiracy

nor questions the fairness of the proceedings that awarded

compensation for its effect. B&LE instead asks this Court

to immunize its misconduct from treble damages through

a sweeping extension of the Keogh doctrine. Even with

respect to this issue, however, B&LE does not challenge

the instructions given the jury. Instead, B&LE secks to

manufacture a need for plenary review by presenting an

incomplete and seriously distorted picture of what was

decided below.

A. The Facts

Traditionally, iron ore in mud-like form was_ trans-

ported from mines in Michigan, Minnesota and eastern

Canada across the Great Lakes on ships known as “bulk-

1 Although B&LE describes itself as a “small, 200-mile railroad,”

it was one of the largest carriers of iron ore in the nation during

the period in question, and was established for the principal pur-

pose of transporting ore from Lake Erie to the steel mills of Ohio

and Pennsylvania.

2 Appendix to Petition for Certiorari (Pet. App.), 97a (opinion

denying motion for judgment notwithstanding the verdict).

ers.” On arrival at docks on the south shore of Lake

Erie, the ore was unloaded by huge and extremely ex-

pensive equipment, including large cranes known = as

huletts. From the docks, B&LE and other railroads trans-

ported the ore to steel mills in Ohio and Pennsylvania.’

So long as ore remained in mud form, this transportation

system was largely insulated from competition because the

railroads controlled the huletts needed to unload the

“bulker” ships, and the rail lines from the docks to the

mills.

In the early 1950s, the advent of “pelletized” ore por-

tended three important changes in ore transportation.

First, because pelletized ore could be unloaded with a

conveyor belt carried on the ship (rather than huletts on

the docks), a larger and more efficient type of vessel—

the “self-unloader’—could replace traditional bulkers. Sec-

ond, because huletts and other heavy equipment were no

longer necessary to unload ore, “private docks” not

owned by the railroads could compete for iron ore busi-

ness without facing the entry barrier of prohibitive cap-

ital investments. Third, because railroads could not bar

private docks from dealing with motor carriers, trucks

could compete with railroads for transportation of ore to

the mills. Pelletized ore therefore made possible a new

transportation system—self-unloaders, private docks, and

trucks—that could move ore at a cost far lower than

the monopoly rates charged by the railroads.

The railroads’ own documents demonstrate their collec-

tive determination to squelch this threat to their monop-

’ Other railroads, including the New York Central (NYC), the

Chesapeake & Ohio Railway Co. (C&O), the Baltimore & Ohio

Railroad Compiny (B&O), the Norfolk & Western Railway Com-

pany (N&W), Penn Central Corp., and the Consolidated Rail Cor-

poration (Conrail), also transported ore and were defendants in

this case. Defendants other than B&LE settled before trial, or were

dismissed from the case.

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Self-unloaders could unload ore at almost any dock and

could do so far more efficiently than the railroad-controlled

system. Because these vessels, and not the dock, performed

the unloading services, self-unloaders were direct

competitors of the railroad docks. Id.; CA App. 2754, 4067.

2. B&LE and its co-conspirators quickly perceived their

vulnerability to competition from an efficient, less costly

alternative system. Beginning in 1956, in a series of secret

meetings, that deliberately avoided ICC-mandated

procedures governing rate bureaus, high-ranking railroad

officials concluded that “something must be done to

overcome the threat such inexpensive [non-railroad]

facilities, which could spring up anywhere, are to our

established ore facilities and charges.” CA App. 6462.

Recognizing that the new system depended on the

availability of three interdependent components (self-

unloaders, dock services and inland transportation), B&LE

and the other railroads jointly attacked all three. Pet. App.

19a. For the next 25 years, B&LE and its co-conspirators

adhered to, carried out and enforced their oral agreements

by, among other means:

¢ Refusals to sell or lease property to non-railroad

firms interested in offering low-cost self-unloader service to

steel companies, and covenants or lease restrictions

prohibiting use of property for such purposes. Pet. App.

19a; CA App. 3011-3013, 6589, 6888-89, 6900, 6904, 7155,

7952. Evidence at trial showed numerous sites along Lake

Erie where the conspirators directly thwarted efforts to

establish private iron ore docks. See, e.g., id. at 6888, 6889,

7155, 7952 (Erie); 3002-03, 6874-75, 7453-55, 7463, 7464-67

(Lorain); 6798-99, 6904 (Huron): 3424-27, 3430-31, 7024-25,

7057-59 (Whiskey Island); 3506-07 (Toledo); 8379, 8416-17,

8418, 8419, 8420; 3011-13 (Penn Central Docks, Huron,

Conneaut, Lorain, Fairport, A&B Dock). One conspirator

boasted that “[w]Je have stronyly resisted for years all

proposals to sell or lease the Erie Ore Dock.” Id at 7952.

Similarly, the conspirators blocked attempts to lease

property for a self-unloader dock because “[i}f such a facility

is not established the [self-unloader] boats will not be

attractive.” Id. at 6875.

¢ Boycotts of non-railroad docks to prevent the

handling of iron ore by unregulated entities the railroads

could not control. Pet. App. 19a, 31a; CA App. 6469, 6527,

6535, 6579, 6596, 6876, 6894-95, 6898-99, 7546, 8260, 8391,

8393, 8394-96, 8419, 8420.

e Agreements not to act independently, and coercion

and threats of retaliation against any co-conspirator that

proposed independent action. Pet. App. 19a, 31a; CA App.

6527-28, 6579, 6631, 6637-38, 6640-41, 6643, 6590, 6894, 6897,

6950.

° Interference with efforts to transport iron ore by

truck from non-railroad docks, eliminating the only cost-

effective alternative to rail transportation. Pet. App. 19a,

31a, 57A; CA App. 3374, 7445, 7458, 7483, 7746, 7952.

°— Refusals to allow self-unloaders to dock at railroad-

owned facilities. Pet. App. 34a; CA App. 6495, 6883, 7311,

7317-18, 7391-92. B&LE specifically thought it “the better

part of wisdom to discourage the self-unloader ... .” Id. at

7317.

e Deliberately conducting the conspiracy in secrecy

and acting outside ICC regulations and procedures. Pet.

App. 95a-97a; CA App. 1273, 6457-59, 6460-63, 6483-84, 6495,

6631, 6640, 6890-91, 7154, 7312, 8242.

One episode epitomizes the depth, scope and

effectiveness of the railroad conspiracy, and establishes that

it was not the “rate” conspiracy petitioner suggests. In 1971,

after successfully forestalling self-unloaders for 15 years, the

conspirators were besieged by requests from steel

companies to accommodate self-unloaders and non-railroad

docks. See CA App. 7438. The “problem was all these [steel

companies] wanted something better .... Everybody that

had or thought he might have or could get the use of a self-

unloader was looking for less expensive transfer charges

...-” Id. at 2860. At the same time, conspirator Chessie’s

outmoded dock equipment for handling bulker vessels was

losing money. Id. at 7463. To serve its own business

interest, Chessie negotiated to lease its dock facilities to non-

railroad interests and “encourage use of self-unloaders.”

Bound by the conspiracy, however, Chessie was not

permitted to act independently. Id. at 7441-42, 7456-59, 7460-

62, 7465-67.

The conspirators’ “negative reaction” to Chessie’s plan

was “immediate and vocal.” CA App. 7454. They

threatened “rate wars” on eastern coal routes (an entirely

different commodity and a major revenue source for

Chessie) (id. at 7444), warned that such leases could enable

trucks to “break the rail rate on iron ore” (id. at 7458), and

told Chessie that “concessions” to self-unloaders or to the

steel companies could be avoided if “all lines hang together”

(id. at 7436). See also id. at 7435-36, 7441-42, 7453-55, 7456-58.

The President and CEO of conspirator Penn Central

wrote to his counterpart at Chessie concerning the “inherent

dangers of including a separate commercial interest” in the

iron ore transportation system, and objecting to “the

intrusion of another principal who would perform an

integral part of the transportation cycle on whatever

selective commercial and product considerations he may

choose.” CA App. 7461. The threat to retaliate worked;

Chessie did not lease its property. Id. at 7447, 7493-95, 7464,

7467.

3. It is preposterous for petitioner to argue that “there is

no evidence” linking it to this conspiracy. Pet. 14n.9. B&LE

was a leading figure in the conspiracy and a major

transporter of iron ore. A wholly-owned subsidiary of U.S.

Steel, B&LE had a special interest in preventing the use of

self-unloaders by its parent’s competitors. Because U.S.

Steel was the last stee] company to pelletize its ore and the

last to have ore suitable for shipment by self-unloader, it

was in U.S. Steel’s economic interest to deprive its

. -

competitors of a significant transportation cost savings while

boosting the revenues of its B&LE subsidiary. CA App.

4100-01, 4317, 4324-27.

Consistent with this dual economic incentive, B&LE was

an active member of the conspiracy. Pet. App. 19a. B&LE

representatives attended and participated in the first and

every significant conspiratorial meeting. CA App. 6457,

6483, 6897. Among B&LE’s many overt acts in furtherance

of the conspiracy were:

° 1956: B&LE participated in the June 7, 1956 meeting

at which the railroads reached their secret oral agreement to

block the use of self-unloader technology to transport iron

ore. CA App. 6457, 6460-63, 6532-34. B&LE and others

agreed to eliminate existing service frorn private docks such

as Columbus Road, National Terminal and Sycamore Slip.

Id. at 6469. B&LE agreed with its co-conspirators to enact

restrictive lease provisions to preclude competitors from

operating private iron ore docks in competition with the

railroads. Id. at 6454-56, 6478, 6485-86.

e 1961: B&LE chaired a special study committee to

investigate and ultimately block another railroad’s proposal

to handle self-unloaders. CA App. 6631, 6640-44.

e 1968: When the conspirators learned that one

railroad was planning to handle self-unloaders, B&LE

instigated the collective response that squelched that threat

to the conspiracy. CA App. 6883, 6887.

° 1971: B&LE actively participated in the meeting at

which the conspirators forced another railroad not to lease

lakeside land for use by self-unloaders. CA App. 7435-36,

7453-55, 7456-59.

combat competition from trucks. CA App. 7907-08. B&LE

chaired a “Special Committee” to monitor truck

competition; the committee held meetings in B&LE’s offices,

iin

and its final report was discussed at another meeting in

B&LE’s offices. Id. at 7943-45, 7955-89, 7990-91.

¢ 1978: B&LE coordinated the railroads’ joint response

to an effort to ship ore from a non-railroad dock in

Ashtabula. CA App. 8394-96. After learning of the potential

use of the non-railroad dock, B&LE immediately contacted

other conspirators and met with Conrail officials to

formulate retaliatory action that stopped all further

movements of iron ore from the non-railroad dock. Id.

4. The conspiracy had precisely the anticompetitive

results B&LE intended. As early as 1956, the conspirators

recognized that unless they acted to forestall competition

from the new self-unloader technology, there would be a

“switch in the movement of raw ore from 100% in bulk

freighters . . . to substantial self-unloader movements.” CA

App. 6460. By 1967, the conspirators anticipated that,

unless they acted, “10 of these large [self-unloader] vessels

[will] be built in. . . the next 5-10 years.” Id at 6817. The

conspirators’ documents repeatedly confirm that, absent the

conspiracy, there would have been a “proliferation” of non-

railroad docks “springing up” all along the lake, which

customers would have “preferred” over railroad docks. Id.

at 2459-60, 6596. See, e.g., id. at 2464-65, 2470, 6460, 6528,

6575, 6890-91, 6900-01, 7460-63.

The steel companies were keenly interested in using the

lower-cost alternative system to transport their iron ore. See,

e.g.,CA App. 2961, 2954 (Wheeling-Pitt); id. at 2993, 3010-12,

3039, 3667-68, 3044, 4205 (Republic); id. at 2754, 2757-58,

2796-98, 2800-03, 2845, 4604, 4662, 7421-22, 7394 -7405 (J&L);

id. at 3250-54, 3258-67, 3322, 7147-48, 8521 (National ); id. at

3134-37, 3169-70, 3177-78, 3186-87, 3192, 3382-83, 7948

(Sharon). But, the conspiracy prevented steel company use

of the new technology until the late 1970s and early 1980s.

Full utilization of the alternative iron ore transportation

system did not occur until after the conspirators were

indicted in 1981. Id at 2763, 2954-2956. Once allowed to

compete, the new technology’s efficiencies quickly made it

——————————————————————————————

the prevailing mode of iron ore transportation. Id. at 2754,

2797-98, 2802-03, 2953-55, 3044. Today, virtually all iron ore

is handled by self-unloaders.

District Court Proceedings

Pretrial Proceedings. The present consolidated civil

cases were filed by respondents in various district courts

from 1982 to 1984. On April 17, 1984, the Judicial Panel on

Multidistrict Litigation consolidated the ten cases and

assigned them for pretrial proceedings before then Chief

Judge John P. Fullam in the Eastern District of Pennsylvania.

Pet. App. 20a. In pretrial rulings, the district court

dismissed “[a]ll rate-related claims asserted by the steel

company plaintiffs” based on the allegation in the initial

complaints that, absent the conspiracy, these plaintiffs

would have paid lower railroad rates. App., infra 464A. Such

damage claims, the court held, were barred by Keogh v.

Chicago & N.W. Ry., 260 U.S. 156 (1922). See Pet. App. 21a.

Accordingly, as both the district court and the court of

appeals stated, these claims were not presented at trial and

were not part of the damages awarded in the judgments

affirmed by the Third Circuit. Id. at 96a, 29a-30a.

Prior to trial, the district court also ruled that steel

company plaintiffs had standing to claim damages for

injuries suffered as a result of the conspiracy. App., infra

38A-40A, 46A; see Pet. App. 21a-22a. The court held that the

steel companies were directly affected by the railroads’

exclusion of competing modes of transportation and

handling services, and that the steel companies “claim to

suffer one of the greatest antitrust harms, an inability to seek

lower prices from competitors destroyed or delayed by an

illegal conspiracy.” App., infra 38A.

The Liability Trial. The liability phase of the

consolidated trial lasted more than six weeks. Pet. App. 22a.

The jury was comprehensively instructed on the “limited”

application of the antitrust laws in the “heavily regulated

[railroad] industry,” including instructions on antitrust

-10-

immunity and the “concomitant principle” of Keogh. CA

App. 4971, 4981. The jury charge explained regulated

ratemaking and expressly instructed that “none of that kind

of agreement or collusive activity would be a violation of the

antitrust laws” and that “nobody can make a claim for

damages measured by or based upon the fact that they paid

a rate authorized by an ICC-approved tariff by claiming that

that rate was too high.” Id. at 4978, 5029-30. The jury was

given a set of 20 special interrogatories including, over

plaintiffs’ objections, two questions proposed by B&LE

allowing the jury to find B&LE not liable because of the

regulatory environment: (1) Was “each act in furtherance of

the ... conspiracy . . . taken in a good faith belief that it was

required by ICC regulations?” (2) Was B&LE’s “conduct

reasonable ... under the regulatory policies under which

defendant operated?” App., infra 62A.

The liability jury returned verdicts in favor of all but one

plaintiff (Reaney). Pet. App. 22a. In answering the special

interrogatories, the jury accepted some claims of the

successful plaintiffs and rejected others. The jury found that

B&LE participated in a conspiracy to monopolize and to

restrain trade in violation of the Ohio Valentine Act and the

Sherman Act; that acts in furtherance of the conspiracy

occurred within the federal statute of limitations period; that

B&LE did not withdraw from the conspiracy; that the

conspirators affirmatively acted to conceal the conspiracy;

and that the conspiracy in which B&LE participated was a

material cause of injury to each successful plaintiff.6 The

jury also expressly rejected B&LE’s “good faith” and

“regulatory climate” defenses, answering “no” to the two

questions included at B&LE’s insistence. App., infra 62A.

The Damages Trial. During the damages trial before a

new jury, plaintiffs again demonstrated that, absent the

6 With respect to each steel company plaintiff, the j found that

antitrust injury resulted from “foreclosure and/or delay in the utilization

of self-unloading vessels for the delivery of iron ore” and “inability to

fully use private docks to handle iron ore.” App., infra 50A-54A

"eee

ets

conspiracy, lower-cost self-unloaders and non-railroad

docks would have developed earlier. To measure damages

suffered by this delay, plaintiffs used contemporaneous

financial and cost records of actual competitors, among

other evidence, and estimated the costs that would have

existed earlier. CA App. 5259-69, 5429-44, 5450-51, 5454-73,

10351. Steel company damages were measured by the

difference between the costs they would have incurred by

utilizing excluded unregulated competitors and the higher

prices plaintiffs actually paid, shipment by shipment, ton by

ton, during the relevant period. Pet. App. 23a; CA App.

5251, 5456-69, 10565, 10628, 10690, 10335-47, 10327. Dock

and trucking company damages were measured by the

profits each would have earned on the business from which

they had been excluded. Pet. App. 23a. Plaintiffs’ damage

models avoided any overlap or duplication, and the jury

was instructed that overlapping damages were prohibited.

CA App. 6394-98.

Just as the liability jury had done, the damages jury

accepted some of plaintiffs’ claims and rejected others in

whole or in part. The jury awarded only a portion of the

damages sought by Republic, J&L and Wheeling-Pitt;

rejected whole categories of damages sought by National,

Sharon, Erie, Ambrosia and Tauro; and awarded ory

nominal damages to Wills. App., infra 48A-71A. Of the

single damages awarded to all plaintiffs, more than 40% was

awarded under Ohio’s Valentine Act for a period in which

no claim was made under federal law.

Post-Trial Proceedings. The district court denied

substantially all of B&LE’s motion for judgment

notwithstanding the verdict. Pet. App. 24a-25a. The jury

verdicts were reduced by $180.8 million to reflect

settlements by other defendants, and judgments were

entered aggregating $457.7 million. Pet. App. 24a-25a, 91a-

121a. B&LE’s former parent company, USX Corporation,

executed a supersedeas bond to secure the judgments on

appeal. CA App. 14.

Court Of Appeals Proceedings

A unanimous panel of the United States Court of

Appeals for the Third Circuit affirmed the district court

judgments in all respects material to the petition, with

special praise for the district court’s careful “shepherding

[of] the parties and issues through the complexities of the

lawsuit.” Pet. App. 88a. Noting the pretrial dismissal of

“Keogh” claims, the Third Circuit concluded that the claims

that went to trial were based on forceful evidence of “the

railroads’ agreements to restrict the sale and lease of dock

property, boycotts of unregulated docks, refusals to handle

self-unloaders in a way that would make economic sense for

a steel company to utilize them, and coercion to prevent

independent action.” Id. at 3la. The court of appeals found

that B&LE engaged in “market preclusion,” and that “the

steel company plaintiffs proved at trial an antitrust

conspiracy that was not grounded in rate-related claims.”

Id. at 31a, 34a. Moreover, the Third Circuit observed that the

jury was correctly instructed that rate-related conduct

within the meaning of Keogh could not give rise to liability.

Id. at 35a. The court explained that neither the injury nor the

measure of damages implicated the “filed rate” concerns of

Keogh (id. at 32a):

It is fully consistent with Keogh ...to accept these

[railroad] rates as lawful and nonetheless to

conclude that through non-rate activities,

particularly the restriction on the sale or lease of

dock space and the refusal to deal with potential

competitors, the railroads effectively retarded

entry of lower cost competitors to the market. The

instrument of damage to the steel companies was

the absence of the lower cost combination.

The court of appeals rejected B&LE’s additional

argument that Keogh should also be extended to bar claims

by competitors, such as the dock and trucking companies.

Adhering to its longstanding precedent and to consistent

holdings of the Second, Eighth and Ninth Circuits, the court

o{3-

held that Keogh posed no bar to claims by competitors

because “’[t]here is no policy conflict, actual or potential .. .

between the section 4 Clayton Act remedy and the

antidiscrimination purposes of the filed tariff rule.’” Pet.

App. 36a (quoting Essential Communications Systems, Inc. v.

AT&T, 610 F.2d 1114, 1122 (3d Cir. 1979)).

In assessing antitrust standing, the Third Circuit applied

the factors this Court enumerated in Associated General

Contractors, Inc. v. California State Council of Carpenters, 459

U.S. 519 (1983), with respect to each successful claim. The

court rejected B&LE’s contention that Republic, J&L and

Wheeling-Pitt lacked standing to recover their self-unloader

damages (the savings they would have realized from

utilizing the unregulated, lower-cost vessels that performed

unloading services in competition with the railroad docks)

because “it was unquestionably the steel companies who

bore the brunt of the increased costs” caused by the antitrust

violation. Pet. App. 51a.” The court explained the directness

of this injury: “steel companies were the sole customers of

the industry involved in the transhipment of ore; indeed the

industry existed for them.” Id. As the trial record

established, “the steel companies suffered the greatest harm

in connection with the delay in the use of the self-unloader

technology,” and the unmistakable directness of this harm

weighed heavily in favor of the steel companies’ standing.

Id.

The court also held that steel company plaintiffs had

standing to recover as dock-handling damages the

difference between the amounts plaintiffs actually paid for

dock-handling services and the lower costs of using

alternative, unregulated docks. Again, the railroads’

conspiracy unlawfully deprived steel companies of savings

from the use of lower-cost, unregulated competitors that

7 B&LE did not challenge National’s standing to recover damages

related to National’s ownership and operation of its »wn fleet of vessels.

The Third Circuit noted that B&LE’s arguments were inapplicable to

National. Pet. App. 42a n. 11.

ett.

were an integral part of the alternative transportation

system. Pet. App. 54a-55a.

ARGUMENT

The unanimous opinion of the Third Circuit fully

considered and correctly applied well-settled legal

standards to the lengthy, fact-intensive record in this case.

The judgment below does not conflict with decisions of this

Court or of any other court of appeals. This Court should

decline petitioner’s invitation to reweigh the facts found by

two separate juries, upheld by the district court, and

affirmed by the Third Circuit.

Three additional factors in this case strongly counsel

against further review. First, petitioner's arguments are

premised on glaring mischaracterizations of the record.

Petitioner asks this Court to decide whether Keogh bars a

claim “where tariff rates are the primary ... means of

precluding market entry” (Pet. i), but that is simply not this

case. Contrary to petitioner’s contention that this is

principally a “rate” case challenging a price-fixing conspiracy

of the sort alleged in Keogh, the jury found, with proper

instructions and abundant evidentiary support, that B&LE

participated ina conspiracy to exclude competition,

implemented through activity that was not “rate-related”

within the meaning of Keogh. The court of appeals affirmed,

expressly reciting the non-rate conduct that directly injured

plaintiffs and only “coincidentally implicate[d] rates.” Pet.

App. 32a. Petitioner’s effort to transform such ancillary

conduct into a cloak of protection for its ruthlessly predatory

non-rate conduct is light years removed from the record,

and merely seeks to relitigate in this Court fact issues on

which the jury and both lower courts agreed. It is fatal to

petitioner’s request for review of “Keogh” issues that the

district court dismissed all such claims prior to trial;

accordingly, “rate-related” claims of the sort in Keogh and

similar cases played no role in the judgments.

Similar distortions and omissions infect petitioner’s

request for review of the Third Circuit’s recognition that no

claims in this case are barred by Illinois Brick. Petitioner’s

argument is premised on the erroneous view that the Third

Circuit upheld the judgments in favor of the steel companies

“without regard to whether they have suffered antitrust

injury.” Pet. 27. The Third Circuit actually concluded that:

(1) “B&LE’s antitrust activity directly impacted the steel

companies;” (2) “it was unquestionably the steel companies

who bore the brunt of the increased costs attributed to the

railroads’ agreement to thwart development of the less

expensive technology;” and (3) the steel companies’ alleged

injury “was the type that Congress sought to redress in

providing a private remedy for violations of the antitrust

laws.” Pet. App. 51a, 52a. The liability jury similarly found

that the conspiracy was “a material cause of any injury to

the business or property” of each steel company plaintiff.

App., infra 50A-54A. In short, this case does not present the

questions that petitioner poses for review, and this Court

should be especially wary of petitioner’s invitation to decide

such issues on the record of this case.

Second, the major statutory revisions of the regulatory

scheme that occurred after the events at issue weigh

decisively against certiorari here. The Staggers Rail Act of

1980 so transformed the regulatory landscape and the roles

of the ICC and of railroad rate bureaus that B&LE advised

this Court more than five years ago in a case arising from the

same conspiracy that rate bureaus no longer exist and that

issues of the sort raised in the petition are a “dead letter”

and “virtually inconceivable” to arise “ever again.” Br. in

Opp., Pinney Dock & Transport Co. v. Norfolk & Western

Railway Co., No. 88-72 (Aug. 10, 1988), at 3, 6, 12. The

likelihood of recurrence is even more remote today, making

this case a singularly unsuitable vehicle for review.

Third, the unique factual setting and procedural posture

of this case also caution against review: a successful

conspiracy that forestalled development of a new and

unregulated technological system for more than a

generation; conduct occurring some 15-35 years ago in a

largely superseded regulatory climate; jury verdicts

supported by abundant evidence pursuant to instructions

petitioner does not challenge; and judgments anchored in

substantial part in state law violations that the petition also

does not challenge (and this Court would have no province

to review). Review is all the more inappropriate because —

without informing this Court —- B&LE now retreats from and

attacks positions it previously championed; and it relies on

unpublished, nonprecedential authority (without so

identifying it).

In sum, the petition is not rooted in this case, but in

B&LE’s flawed, after-the-fact reconstruction of the

proceedings below. Petitioner may well have reason to re-

think the litigation strategy it pursued in the lower courts,

but it cannot re-write the extensive record of those

proceedings. Certiorari should be denied.

I. PRIVATE TREBLE-DAMAGE ACTIONS FOR

UNLAWFUL, NON-RATE ACTIVITY THAT

EXCLUDES COMPETITION ARE CONSISTENT

WITH DECISIONS OF THIS AND OTHER

COURTS

The decision below does not hold that a conspiracy in

which filed rates are the “primary,” “dominant,” or “core”

component is subject to a private antitrust damage action.

Pet. i, 9, 14. Nor, as the petition contends, did the Third

Circuit “refuse[] to apply” precedents. Pet. 12. Rather, the

decision below embodies a straightforward application of

the holding in Keogh, reaffirmed in Square D Co. v. Niagara

Frontier Tariff Bureau, Inc., 476 U.S. 409 (1986), viz., that a

shipper cannot recover damoges on the ground that

regulated carriers fixed the rates it paid.

The Third Circuit correctly perceived that the claims in

this case do not rest on a theory of price-fixing as they did in

Keogh. All Keogh claims were dismissed by the district court

long before trial. Based on those rulings, the claims that

actually went to trial and are reflected in the judgments

reviewed by the court of appeals are not within the rationale

of Keogh and Square D.

Plaintiffs here proved a railroad conspiracy to preclude

competition from an alternative, unregulated system of

transporting iron ore. Pet. App. 32a. The excluded dock

and truck competitors established as damages their lost

profits. The steel companies proved that they were denied

the benefits of a competing, lower-cost iron ore

transportation system that was delayed by the conspiracy.

Id. at 33a. The steel companies did not seek any damages for

overcharges on railroad handling or rail transportation of

their ore, which would be barred by Keogh; their dock-

handling damages were the difference between amounts

actually paid for dock-handling services and the lesser

amounts that would have been paid to unregulated non-

railroad docks if they had not been excluded by the

conspiracy; and their self-unloader damages were the

difference between the actual cost of bulker/railroad dock

8 In Pretrial Order No. 4, the district court dismissed all claims in the

original complaints “based on rates charged the = by defendant

railroads” and permitted amended pleadings if plaintiffs could separate

rate-related claims from non-rate claims and could “show that carriers

caused injury to the -- business or property other than by higher

tariffs.” App., infra 110A, 13A. (The defendant carriers in Square D cited

this order as a correct application of Keogh, and y tyre the order to

their brief in this Court. Br. in Opp., Square D, No. 85-21 (Aug. 2, 1985), at

2a; Resp. Br., Square D, No. 85-21 (Jan. 3, 1986), at 10). Pretrial Order No.

11 scrutinized the amended complaints from the perspective of Keogh and

dismissed all rate-related claims involving hypothetical filed tariffs. At

the same time, the court upheld claims based on illegal activities other

than price fixing and claims for injuries “caused by actions outside the

ICC’s exclusive jurisdiction.” App., infra 37A. Pretrial Order No. 49

reiterated that Keogh precluded rate-related claims by shippers and

dismissed “[aJll rate-related claims asserted by the steel company

plaintiffs including claims that, but for the alleged conspiracy, these

plaintiffs could have obtained lower land-transportation costs.” Id. at

At trial, B&LE did not object to evidence it now denounces as _rate-

related.” Indeed, B&LE itself introduced evidence of rates as part of its

defense that the conspiracy involved only immune ratemaking. See, e.g.,

CA App. 4075-76, 4099-4101, 4806-07.

o18-

shipments and the lower cost of using unregulated self-

unloaders excluded by the conspiracy.

All plaintiffs’ damage calculations accepted the

lawfulness of all filed tariffs, and did not assume any change

in railroad rates. Hypothetical railroad rates played no role

in this case whatsoever. Based on its extensive review of the

trial record, and taking into account the district court’s

pretrial rulings and jury instructions (which the petition

ignores), the Third Circuit correctly recognized that the

claims actually tried in this case are dispositively distinct

from those addressed in Keogh and Square D. Pet. App. 3la-

33a.

Keogh was a price-fixing case where plaintiff complained

that filed rates violated the antitrust laws because they were

jointly agreed upon; plaintiff sought damages based on the

difference between those filed rates and hypothetical, lower

filed rates. The decision below correctly observed that, in

contrast, here "[t]he instrument of damage to the steel

companies was the absence of the low-cost combination [of

self-unloaders/private docks]." Pet. App. 32a. The Third

Circuit is thus in full accord with the conclusion reached by

the District of Columbia Circuit in affirming petitioner’s

antitrust conviction in the related criminal case, viz., that the

conspiracy here “only incidentally touched upon the setting

of rates; its real purpose was to ward off outside competition

heralded by the advent of the self-unloaders.” 717 F.2d at

601. The Third Circuit repeatedly identified non-rate

activity in support of its ruling, "particularly the restriction

on the sale or lease of dock space and the refusal to deal with

potential competitors,” and the court recognized that rate-

related conduct was merely “coincidental[]” or “ancillary.”

Pet. App. at 32a, 33a. Nonetheless, petitioner invites the

Court to reexamine the testimony of more than 40 trial

witnesses and thousands of trial exhibits for vestiges of

claims “primarily” based on rates, precisely the claims the

district court dismissed prior to trial.

-19-

Petitioner’s acknowledgment to this Court that the

claims include non-rate-related conduct is a tactical retreat

from its argument in the lower courts that all conduct in this

case is rate-related. At trial, B&LE presented expert

testimony that even the conspiracy’s restrictions on the sale

or lease of property were rate-related. Liab. Tr. 4105-06.

According to B&LE, anything the railroads did to preserve

their monopoly was rate-related. Similarly, in the court of

appeals, B&LE repeatedly argued that “the judgments below

were based solely on rate-related conduct.” B&LE 3d Cir.

Reply Br. 2 (emphasis added). See also id. at 18 (“Once

Plaintiffs’ Rate-Related Claims are Excluded, Nothing

Remains Of Plaintiffs’ Antitrust Claims, And The Case

Should Be Dismissed”); B&LE 3d Cir. Br. 34 (same).9

Having failed in the courts below with these extreme

contentions, B&LE’s certiorari-inspired conversion does not

warrant this Court's consideration.

Square D provides an additional reason why this Court

should decline petitioner’s invitation to expand Keogh. In

Square D, this Court reaffirmed Keogh on the narrow ground

of stare decisis and because Congress had chosen not to alter

Keogh. Neither of these factors justifies an expansion of

Keogh to create new law that Congress has not addressed

and that is not justified by precedent.

As petitioner concedes, Square D held that Keogh requires

dismissal only of certain claims for injury caused by rate-

setting conduct. See Pet 12. In Square D, this Court and the

9 B&LE’s aggressive arguments in the lower courts put the lie to its

representation to this Court that “Petitioner has never contended that

respondents are prevented from yo oe to prove that non-rate-related

activities by the railroads injured them.” Pet. 14.n.9. B&LE consistently

pressed the view below that railroads are effectively exempt from the

antitrust laws. In its opening statement at trial, B&LE argued that “in any

other industry,” the conspirators “would be guilty of per se violations of

the antitrust [aws [a]nd judges like Judge Fullam would be sending them

away for a little vacation in places like isburg.” CA App. 2434. In the

criminal case, the D.C. Circuit recognized that under B&LE’s view, “any

joint decision to freeze the level of services or to forego development of

modern services would be an agreement as to ‘rates.’” 717 F.2d at 601. It

correctly rejected B&LE’s argument, as did the Third Circuit.

=) -

Second Circuit permitted plaintiffs “to amend their

complaints to state possible claims for damages not arising

from the filed tariffs.” 476 U.S. at 414.19 That is precisely the

course followed below by the district court and affirmed by

the court of appeals. App., infra 18A, 25A; Pet. App. 29a-31a.

Similarly, in Pinney Dock & Transport Co. v. Penn Central

Corp., 838 F.2d 1445 (6th Cir.), cert. denied, 488 U.S. 880

(1988), the Sixth Circuit held that Keogh precluded damages

for rate-related conduct, but did not foreclose damages for

unlawful non-rate conduct. As is clear on the face of the

Sixth Circuit opinion, and as petitioner concedes, Pinney

remanded to enable plaintiffs “to pursue non-rate related

claims.” Pet. 15, see 838 F.2d at 1457.11 Far from triggering a

conflict, the decision below expressly harmonized its

holding with that of the Sixth Circuit, explaining that the full

trial record here provides “definite evidence of the railroads’

refusal to handle self-unloaders at their docks, restrictions

on the sale and lease of dock property to unregulated

entities, boycotts of unregulated docks and intra-industry

coercion claims which mirror those deemed by the court of

appeals in Pinney to escape Keogh.” Pet. App. 34a. See 838

F.2d at 1457 (non-rate claims, such as restrictions on sale and

lease of property, boycott of non-railroad docks, and

coercion to prevent independent action fall “outside of the

scope of the Keogh doctrine” and are “plainly not related to

filed rates”).!2

10 Such non-rate claims were then asserted against the regulated

carriers in Square D, and the litigation was later settled.

11 Plaintiffs in Pinney amended their complaints to pursue non-Keogh

claims which were settled by all defendants, including B&LE.

12 The Third Circuit clearly explained why its opinion does not conflict

with the Sixth Circuit’s decision in Pinney. Even ft there were any merit to

petitioner’s contention that the cases reached Hr saqeg results” (Pet. 15),

the very different records in the two cases preclude any true conflict.

One critical difference between this case and Pinney, which petitioner

fails to bring to this Court’s attention, is that plaintiffs in Pinney express]

waived all claims that the railroads failed to comply with their ICC-

approved rate bureau agreement. 838 F.2d at 1460. Thus, the

conspirators enjoyed the full extent of antitrust immunity under the

lll

This Court denied certiorari in Pinney and there are

compelling reasons for the same disposition here. As B&LE

emphasized in opposing certiorari in Pinney, extensive

changes in the statutory framework applicable to rail

transportation reduce the regulatory-based issues to

anachronisms with virtually no remaining jurisprudential

significance. The Staggers Rail Act of 1980 transformed the

operation of both the ICC and railroad rate bureaus. Pub.L.

No. 96-448, 94 Stat. 1895 (codified as amended in 49 U.S.C.

§§ 10101a et seq.). In B&LE’s words, “the railroads’ rate

bureau ceased operations many years ago,” making the

scope of regulatory protection, or exemption, from antitrust

remedies a “dead letter,” “largely beside the point,” and

"virtually inconceivable ... to ... arise ever again." Pinney, Br.

in Opp. at 3, 12. Changes imposed by the Staggers Act of

1980 include: circumscribing the immunity and rate-setting

functions of bureaus (49 U.S.C. § 10706); substantially

removing the ICC from rate-setting (id. at § 10701a); and

exempting railroads from tariff filing and reasonableness

determinations when a shipper contract is filed with the ICC

(id. at § 10713). See Pet. App. 16a n. 2, 28a n. 3.

Five years after this Court denied review in Pinney, and

thirteen years after the Staggers Act launched a regime of

deregulation, there is even less reason to examine the role of

Keogh on pre-Staggers Act conduct. As petitioner notes, in

-Square D this Court viewed Keogh as “an established

Interstate Commerce Act, irrespective of Keogh. In this case, respondents

did not waive such claims and the conspirators es py no blanket

a immunity. That issue was reserved for trial and respondents

proved by overwhelming evidence that the railroads repeatedly violated

procedural requirements. Indeed, the liability jury expressly rejected

petitioner’s regulatory framework and “good faith” defenses in response

to special interrogatories. App., infra 62A.

Another key factual distinction is that Pinney, which arose in the

context of interlocutory appeal under 28 U.S.C. § 1252(b) from the denial

of motions for summary judgment, reached the court of appeals with both

rate-related and non-rate-related claims remaining in the case. In

contrast, the Third Circuit decision arose after all Keogh claims had been

dismissed and following a full trial, which permitted the court of appeals

to assess the evidentiary basis for the claims actually presented to the

jury.

guidepost at the intersection of the antitrust and interstate

commerce statutory regimes.” Pet. 12 (quoting 476 U.S. at

423). The conduct in this case arose before the regulatory

road map was materially redrawn; the “intersection”

existing then has been closed. Even if the questions

addressed in the petition were actually presented in this

case, and even if those questions — in the abstract — merited

review, the dated context of this case would severely limit

any decision by this Court.

Nor will this case serve as a precedent for the application

of Keogh to other industries, as petitioner contends. Pet. 18-

19. The distinctive regulatory regimes in other industries

present factual and legal differences that make this railroad

transportation case an inadequate, and dangerous, vehicle to

settle the application of Keogh in other, dissimilar contexts.

Even in other regulatory contexts, the Court has recognized

that not all invocations of the filed-rate doctrine merit

review. See, e.g. the recent denials of certiorari in United

States Metroline Services, Inc. v. Southwestern Bell Telephone

Co., No. 93-99, cert. denied, Oct. 4, 1993 (114 S. Ct. 183); Ticor

Title Insurance Co. v. Brown, No. 92-1988, cert. granted on other

issue and denied on filed-rate issue, Oct. 14, 1993 (114S. Ct. 56).

Il. THE QUESTION WHETHER KEOGH BARS

CLAIMS BY COMPETITORS DOES NOT

WARRANT REVIEW

For the same reasons that this case does not implicate the

concerns of Keogh, it does not provide an opportunity for

this Court to decide the subordinate question — relating only

to some respondents -- whether Keogh should be extended

even further to bar claims by competitors.!3 It is also

directly contrary to this Court’s rationale in Square D for the

13 This as of the petition does not relate to claims by Republic, J&L,

Wheeling-Pitt and Sharon, but only to claims by the dock and trucking

companies and National. Both courts below held that Keogh has no

app ication to National because it owned vessels for — and

unloading iron ore and was a competitor of the railroad docks, not a

customer. Pet. App. 29a n. 4, 101a.

i ae

seventy-year precedent of Keogh suddenly to be expanded.

In any event, the Court denied review on this question in

Pinney and should do so again.

The decision below broke no new ground; it merely

applied longstanding precedents of the Second, Third,

Eighth and Ninth Circuits. Pet. App. 36a. The Third Circuit

also explained that in Keogh, Georgia v. Pennsylvania R.R., 324

U.S. 439 (1945), and Square D, this Court did not address

competitor claims, but rather claims by shippers that their

rates were “higher than [in] a freely competitive market,”

that they would have been “charged a lower rate absent the

conspiracy,” and that they were entitled to “treble damages

measured by that difference.” Pet. App. 33a, 36a-37a n. 6. In

those cases, private damage actions were barred for

customers alleging that joint ratemaking activities had

reduced competition among the defendant carriers, causing

plaintiffs to pay rates set at a supracompetitive level. In

contrast, the present case involves a conspiracy to exclude

an alternative mode of transportation. Claims asserted by

such excluded competitors do not conflict with the

regulatory framework. And, as Judge Friendly’s opinion in

Square D recognized, in “suits by competitors rather than

users of the service ... many of the considerations relied

upon in Keogh would not apply.” 760 F.2d 1347, 1356 (2d

Cir. 1985), aff d, 476 U.S. 409 (1986). In affirming Square D on

other grounds, this Court carefully limited its language to

claims by shippers (not competitors). After seventy years of

applying Keogh to customer claims challenging rates, there is

no justification for expanding Keogh to bar competitors’

claims arising from market exclusion. !4

14 There is no merit to petitioner’s reliance (Pet. 11, 16, 18) on Lifschultz

Fast Freight, Inc. v. Conso idated Freightways Corp., 998 F.2d 1009 4th Cir.

1993) (Table), pet. for cert. filed, No. 93-456 (Oct. 4, 1993). Petitioner’s

citation hides from this Court the fact that the Fourth Circuit’s summary

disposition in Lifschultz is an unpublished opinion with no recedential

value. See Fourth Cir. Internal Oper. Proc. 36.6. On its face, the slip

opinion states: “Un ublished opinions are not binding —— in this

circuit. See 1.O.P. 36.5 and 36.6.” Dkt. No. 92-2523 (4th Cir. July 6, 1993),

slip op. 2. In any event, the Fourth Circuit’s affirmance of the multiple

and alternative grounds for granting summary judgment in Lifschultz

Il. PETITIONER’S EFFORT TO EXPAND ILLINOIS

BRICK DOES NOT MERIT REVIEW

The Third Circuit rejected B&LE’s argument that the

claims of Republic, J&L and Wheeling-Pitt are barred by

Illinois Brick and its decision does not conflict with the

decisions of this Court or any court of appeals.!° The court’s

holding that these respondents have standing involves no

new rule of general application; it is, rather, an

unremarkable “exercise of judgment in deciding whether the

law affords a remedy in [these] specific circumstances.”

Associated General Contractors, Inc. v. California State Council of

Carpenters, 459 U.S. 519, 537 (1983) (“AGC”). Faithfully

adhering to the principles and factors this Court has

enumerated, the court below reached precisely the same

conclusion that the Sixth Circuit reached in Pinney, at

B&LE’s urging, namely, that “[t]he steel companies . . . were

the immediate victims” of the railroads’ unlawful conspiracy |

to exclude alternative modes of transporting iron ore. 838

F.2d at 1462.16

does not address or consider the Third Circuit’s detailed opinion in this

case, which had been issued more than one month earlier.

15 The petition does not raise Illinois Brick or standing issues with

respect to the dock and trucking company plaintiffs or National.

Although the petition refers to “steel companies” without noting the

factual differences in the steel companies’ claims, its argument is directed

to Republic, Wheeling-Pitt, J&L. B&LE did not raise an Illinois Brick

argument against National in the court of appeals and is therefore barred

from doing so ir this Court. Even under B&LE’s incorrect, overly-broad

view of Illinois Brick, that case has no application to National, which

owned its own fleet and was not a purchaser of the handling services

performed by self-unloaders. Both courts below noted this unique aspect

of National’s claims. Pet. App. 42a n. 11; App., infra 33A-35A.

16 In its briefs in Pinney, which B&LE acknowledges involved the same

conspiracy considered in this case (Pet. 2), B&LE stated that the steel

companies were directly injured parties. Brief of Defendant-

Appellees/Appellants in Pinney at 35, 40, 42. Having successfully urged

the Sixth Circuit to rule that the steel companies clearly have standing to

recover for injuries caused by the conspiracy, B&LE is scarcely in a

position to complain about an imagined “conflict.” The fact is that both

courts of appeals that considered the question held that the steel

companies are direct victims, suffered antitrust injury, and have standing.

-25-

Petitioner thoroughly misunderstands Illinois Brick Co. v.

Illinois, 431 U.S. 720 (1977). Contrary to petitioner’s

contention, that case affirmatively supports the steel

companies’ federal antitrust claims here. !7

Defendants in Illinois Brick conspired to fix the price of

concrete blocks sold to masonry contractors; the masonry

contractors sold the blocks to general contractors who used

the blocks to construct buildings. Plaintiffs in Illinois Brick

purchased those buildings from the general contractors and

sued the block manufacturers to recover the illegal

overcharge. This Court dismissed the claims of the remote

purchasers for three reasons: (1) the risk of duplicative

recoveries if all persons in the vertical chain of distribution

who purchased and resold the product could sue; (2) the

evidentiary complications in identifying affected parties and

apportioning their damages; and (3) the difficulties of

managing large, complex suits. Id. at 730, 738, 741, 745-47.

The Court emphasized that increasing the cost of litigation

and diffusing its benefits among a larger group of plaintiffs

would seriously diminish the incentive to sue and thus

reduce effective antitrust enforcement. Id. at 747.

To avoid duplicative recoveries, Illinois Brick restricted

the class of plaintiffs to the first purchasers, the ones who

were direct customers of the defendants. Id. at 737.18 That is

precisely the position of the steel companies in this case;

they purchased dock-handling services directly from the

conspirators. The steel companies are the only direct

purchasers of iron ore transportation services. Indeed, the

whole purpose of the conspiracy was to keep the steel

17 The petition does not challenge respondents’ claims under the Ohio

Valentine Act, which its conduct was also found to violate. There is no

occasion for this Court to review questions of state law that are not

preempted by federal antitrust law. Cf. California v. ARC America Corp.,

490 U.S. 93, 105-06 (1989).

18 Kansas v. Utilicorp United, Inc., 497 US. 199 (1990), also involved a

rice-fixing scheme in which a single unlawful overcharge was passed on

png initial purchaser to indirect purchasers in a vertical distribution

in.

companies as direct purchasers of the railroads and prevent

them from becoming direct purchasers of new entrants with

alternative means of handling iron ore (ze., self-unloaders

and private docks). That is why the court below reached

precisely the same conclusion that the Sixth Circuit reached

in Pinney.

Nor are there any evidentiary complications or unusual

difficulties in identifying the injured parties and

apportioning their damages. The steel companies that lost

the benefit of new entry and the dock and trucking

companies who were excluded were all easily identified. As

the Third Circuit noted, the damages suffered by the

different classes of plaintiffs were analytically distinct so

that apportionment did not present the difficulties of sorting

out losses in a vertical distribution chain where degrees of

passing on may be impossible to determine. Pet. App. 52a-

53a, 89a n. 22. Not only are the damages analytically

distinct, but each form of damage is of a sort familiar in

antitrust litigation. The damages trial here was no more

complex and arduous than it is in any large antitrust case.!9

19 Petitioner's argument that every type of antitrust injury has, at most,

a single ype of victim, and thus a single category of plaintiffs with

standing, has never been accepted by this Court or any court of appeals.

The fallacy in petitioner’s argument is particularly apparent in cases of

market exclusion such as this, where this Court has held that standing

“cannot reasonably be rez*-icted to those competitors whom the

conspirators hoped to eliminate from the market.” Blue Shield ov.

McCready, 457 U.S. 465, 483 (1982) (injury suffered by customer of

excluded psychologist did not duplicate 7 suffered by ps woe

see Yellow Pages Cost Consultants, Inc. v. GTE Directories Corp., 951 F.2d

1158, 1162-63 (9th Cir. 1991), cert. denied, 112 S. Ct. 1947 (1992) (publisher’s

refusal to allow consultants to place advertisements conferred antitrust

standing on both competitor-consultants for lost profits and customer-

advertisers for lost savings); Los Angeles Memorial Coliseum Comm'n v.

NFL, 791 F.2d 1356, 1365 (9th Cir. 1986), cert. denied, 484 U.S. 826 (1987)

(defendant’s conduct caused different direct injuries to football team that

could not lease lower-cost stadium and to stadium that could not obtain

lease revenues); Pennsylvania Dental Ass’n v. Medical Service Ass'n, 815 F.2d

270, 277 (3d Cir.), cert. denied, 484 U.S. 851 (1987) (injury suffered by

subscriber to boycotted health plan did not — injury suffered by

heaith ne: Crimpers Promotions, Inc. vo. HBO, 724 F.2d 290, 293-294 (2d

Cir. 1983), cert. denied, 467 U.S. 1252 (1984) (defendants’ antitrust damages

would have been less if they had injured only the competitor-facilitator

and not the producers and stations as well); Litton Systems, Inc. v. AT&T,

-7-

In any event, claims of all categories of plaintiffs were

tried together in this consolidated multidistrict litigation.

Since the steel, dock and truck company damage models

excluded overlap, and the jury was expressly instructed not

to award overlapping damages (CA App. 6394-98), there is

no basis in this record for any such concern. Finally, the

Third Circuit also properly rejected petitioner’s simplistic

effort to evade responsibility for the injury it inflicted: “we

do not hold that litigation must be avoided solely because it

might be difficult to ascertain damages.” Pet. App. 53a.

Petitioner’s version of Illinois Brick bears no resemblance

to that case. Petitioner’s analysis leads, not coincidentally, to

the conclusion that no injured party has standing to sue and,

therefore, that B&LE should be allowed to keep every cent of

its millions of dollars of illegal profits. A rule could hardly

be devised that would do greater harm to antitrust

enforcement.

IV. THE HOLDING THAT THE STEEL COMPANIES

HAVE STANDING TO RECOVER FOR INJURIES

DIRECTLY CAUSED BY THE CONSPIRACY IS IN

ACCORD WITH SETTLED PRINCIPLES

Petitioner misrepresents the record by stating that the

Third Circuit held that although Illinois Brick bars the steel

companies’ claims, plaintiffs may avoid that bar under a

balancing of AGC factors. That is not the Third Circuit's

holding and, therefore, the “conflict” petitioner conjures up

simply does not exist. Rather, after correctly holding that

Illinois Brick posed no bar, the decision below applied the

AGC factors to the particular facts, just as other circuits do.2°

700 F.2d 785, 821-22 (2d Cir. 1983), cert. denied, 464 U.S. 1073 (1984)

(standing recognized for both customer and competitor claims).

20 E.g., Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566, 1571

11th Cir. 1991), cert. denied, 113 S. Ct. 295 (1992); Reazin v. Blue Cross &

lue Shield, Inc., 899 F.2d 951, 960-63 (10th Cir.), cert. denied, 497 U.S. 1005

(1990); Adams v. Pan American World Airways, Inc., 828 F.2d 24, 27-31 (D.C.

Cir. 1987), cert. denied, 485 U.S. 961 (1988), Southwest Suburban Board of

Realtors, Inc. v. Beverly Area Planning Ass‘n., 830 F.2d 1374, 1382 (7th Cir.

1987); Los Angeles Memorial Coliseum Comm’n v. NFL, 791 F.2d 1356, 1363

, =

Illinois Brick aside, petitioner does not challenge the Third

Circuit’s application of the AGC factors to the claims of

Republic, J&L and Wheeling-Pitt.

The Third Circuit’s routine application of the factors

prescribed in AGC presents no question warranting review.

In AGC, this Court emphasized that it is “virtually

impossible to announce a black-letter rule that will dictate

the result in every case” (459 U.S. at 536), and, therefore, one

must “evaluate the plaintiff's harm, the alleged wrongdoing

by the defendants, and the relationship between them.” Id.

at 535.

The Third Circuit undertook precisely the analysis this

Court required in AGC, and correctly concluded that the

steel companies satisfied the applicable standards. The

court of appeals observed that “[t]he steel companies were

the sole customers involved in the transhipment of ore;

indeed, the industry existed for them.” Pet. App. 51a. Also,

because the goal of antitrust laws is “to assure customers the

benefits of price competition[,]” (id. at 52a, citations

omitted), the Third Circuit correctly found that the steel

companies’ injuries were of the type that Congress sought to

redress.2! Finally, the Third Circuit recognized that because

by Cir. 1986), cert. denied, 484 U.S. 826 (1987); Walker v. U-Haul Co., 747

.2d 1011, 1014 (Sth Cir. 1984); Crimpers Promotions, Inc. v. HBO, Inc., 724

F.2d 290, 297 (2d Cir. 1983), cert. denied, 467 U.S. 1252 (1984); McDonald v.

ae & Johnson, 722 F.2d 1370, 1374 (8th Cir. 1983), cert. denied, 469 US.

(1984).

21 An alternative ground for affirming the judgment in this case is the

trial court’s finding that the steel companies were competitors in the

restrained market by their investment in and ownership of transportation

equipment and facilities that reduced their costs, and that “but for the

conspiracy, [the steel companies] would have been similarly involved

with self-unloaders, and would have achieved direct cost-reductions.”

Pet. App. 101a. Contrary to petitioner’s contention that the Third Circuit

“expressly rejected” (Pet. 8) this alternative basis for liability, the court

noted that the district court’s rationale “might well relieve the steel

companies from dismissal under Illinois Brick.” Pet. App. 44a. Given its

alternative disposition, the Third Circuit did not reach or dispose of this

ground for affirmance. Thus, even if there were any merit to petitioner’s

attack on the stated basis for the judgment below, that would not lead to

reversal of the judgment, which could be affirmed on the alternate

ground upon which the district court relied. In short, the question posed

. . ————rrrr

-29 -

petitioner’s exclusionary conduct caused two unique forms

of direct antitrust injury, the steel companies’ claims and the

claims of the precluded competitors were not duplicative.

See Pet. App. 52a-53a, 89a n. 22.

The decision below is also consistent with this Court’s

holding in Blue Shield v. McCready, 457 U.S. 465 (1982), that a

health plan subscriber had standing to sue Blue Shield for

conspiring to exclude clinical psychologists from a segment

of the psychotherapy market. This Court observed that

Section 4 of the Clayton Act is “comprehensive in its terms

and coverage, protecting all who are made victims of the

forbidden practices by whomever they may be perpetrated.”

Id. at 472 (quoting Mandeville Island Farms, Inc. v. American

Crystal Sugar Co., 334 U.S. 219, 236 (1948)).

Consistent with this Court’s teachings, the Third Circuit

found that the harm to the steel companies “was clearly

foreseeable,” indeed, they were the intended victims. The

injuries they sustained were an “integral aspect” of the

conspiracy because “the steel companies suffered the

greatest harm in connection with the delay of the use of the

self-unloader technology.” Pet. App. 51a. The injury the

steel companies suffered and the injury the conspirators

sought to inflict were the same — and precisely the injury the

Sherman Act was enacted to prevent. Id. at 52a (quoting

AGC and McCready). Accordingly, the decision below is in

full accord with the antitrust standing principles announced

by this Court.

In holding that the steel company plaintiffs have

standing, the Third Circuit agreed with the Sixth Circuit’s

conclusion that the steel companies were immediately and

directly injured victims of the railroads’ conspiracy to

monopolize services for transporting and handling iron ore.

by the petition is directed only at language in the opinion below and

would not affect the judgment.

The application of these settled principles to the massive

evidentiary record in this case does not warrant further

review.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

William M. Wycoff

Kevin C. Abbott

George P. Faines

THORP, REED &

ARMSTRONG

One Riverfront Center

Pittsburgh, PA 15222

412-394-7711

Counsel for Respondents

National Steel Corp. and

Sharon Steel Corp.

November 23, 1993

Richard T. Colman

Robert F. Ruyak

Jerrold J. Ganzfried

Counsel of Record

HOWREY & SIMON

1299 Pennsylvania Ave., NW

Washington, DC 20004

202-783-0800

Counsel for Respondents

Republic Steel Corp., Jones &

Laughlin Steel Inc., and

Wheeling-Pittsburgh Corp.

APPENDICES

ee ee er ee

APPENDIX A

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE LOWER LAKE ERIE ~ MASTER FILE

IRON ORE ANTITRUST

LITIGATION NO. MDL 587

THIS DOCUMENT RELATES TO:

JONES & LAUGHLIN STEEL,INC. : CIVIL ACTION

PENN CENTRAL CORP. , et al. NO. 84-2135

REPUBLIC STEEL CORP. CIVIL ACTION

V. :

PENN CENTRAL CORP. ; NO. 84-2079

NATIONAL STEEL CORP. CIVIL ACTION

PENN CENTRAL CORP. et al. NO. 84-2134

WHEELING-PITTSBURGH

STEEL CORP. CIVIL ACTION

Vv. :

PENN CENTRAL CORP. et al. NO. 84-2138

SHARON STEEL CORP. CIVIL ACTION

PENN CENTRAL CORP. et al. NO. 84-5562

M MA P IAL ER 4

FULLAM, J. : June 5, 1985

In this multidistrict litigation (MDL), 11 antitrust suits

have been consolidated in this court for pretrial proceedings.

Among the many motions now before the court are

defendant railroads’ motions to dismiss or, in the alternative,

for a stay pending reference of certain issues to the ICC, filed

in the actions brought by the steel company plaintiffs.!

The steel companies, Jones & Laughlin Steei, Inc. (Jones

& Laughlin), Republic Steel Corp. (Republic), National Steel

Corp. (National), Wheeling-Pittsburgh Steel Corp.

(Wheeling-Pittsburgh), and Sharon Steel Corp. (Sharon),

allege (as do all of the MDL plaintiffs with minor variations),

that from the mid-1950s “until at least 1980" the railroad

defendants (The Penn Central Corp., The Chesapeake &

Ohio Railway Co., The Baltimore & Ohio Railroad

Company, CSX Corporation, Bessemer and Lake Erie

Railroad Co., Pittsburgh and Lake Erie Railroad Co.,

Consolidated Rail Corp., Norfolk & Western Railway Co.,

and Norfolk Southern Corp.) and other non-defendant

railroads conspired to destroy competition and monopolize

dock-handling, storage and land transportation of iron ore

and other bulk commodities along lower Lake Erie.

Accepting as true all of plaintiffs’ allegations, as I must

on a motion to dismiss, the relevant facts are as follows.

Much of the iron processed into steel by plaintiffs originates

in mines located in Michigan, Minnesota, and Eastern

Canada. The ore is shipped across the Great Lakes and

unloaded at docks along lower Lake Erie in Pennsylvania

and Ohio. Many of these docks were and still are owned by

defendant railroads, and these docks were the primary

1 This Memorandum does not address Penn Central's motions to

dismiss, which rest on alternative grounds. Those will be addressed in a

subsequent memorandum.

handlers of iron ore. For many years, the prevailing method

of unloading bulk commodities was by means of huletts,

large cranes affixed to the docks. The huletts lifted the ore

and other bulk commodities from the ships, known as

"pulkers” or "straight deckers"; the cargo was then placed

either in waiting railroad cars for immediate transportation

or in a location designated for later movement to storage.

During the period of the alleged conspiracy, rates for these

services at all of the railroad docks were identice'. The non-

railroad docks in the vicinity were not equipped with

huletts, and thus could not compete for iron ore traffic.

In the 1950s, some iron ore producers began to "pelletize"

their ore. This innovation made possible the transport of

iron ore by means of already existing self-unloading vessels.

These vessels, as their name implies, were capable of

unloading themselves by means of a conveyor belt.

According to plaintiffs, the self-unloaders greatly lessened

dock-handling time, and with the advent of "super-size" self-

unloaders in the 1960s, these ships could carry twice the

load carried by the conventional bulkers and could unload

themselves in one-fourth the time at docks with no special

handling equipment. Plaintiffs claim that the railroads, loath

to lose supremacy in the iron ore trade to non-railroad

docks, and fearful of losing their substantial investments in

potentially useless off-loading equipment, determined to

halt the progress of self-unloader technology,* in part by

keeping dock-handling rates for self-unloaders artificially

high. The railroads charged the steel companies the same

dock-handling rates for the self-unloaders as they did for the

bulkers, thereby diminishing the economic attractiveness of

water shipment by self-unloaders.

2 Litton Industries, at one time a producer of self-unloading vessels,

has brought suit against defendant railroads on grounds identical to those

—— in these cases. That case, proceeding in the Northern District of

hio, was not consolidated for pretrial purposes with the other actions in

this MDL.

A further aspect of the alleged conspiracy involves line

haul rates, which are the rates charged by the railroads for

transporting the ore and other commodities from specific

docks to the plaintiffs’ mills. Plaintiffs charge that the rates

from defendant railroads’ docks to all the steel mill

customers were identical, notwithstanding the difference in

distances. Moreover, plaintiffs charge that the private

commercial or non-railroad docks?’ were effectively

precluded from handling ore from the self-unloaders by

defendants’ refusal to publish competitive commodity line

haul rates? from the private docks to the steel mills, and the

concomitant inhibition of truck competition for land

transportation.

The steel company plaintiffs charge that, by the conduct

elucidated above, defendants violated §§ 1, 2 and 3 of the

Sherman Act (15 U.S.C. §§ 1, 2, 3). Jones & Laughlin,

Wheeling-Pittsburgh, and National also claim that this

behavior gives rise to violations of the antitrust provisions of

the District of Columbia Code (D.C. Code Ann. §§ 28-4501,

28-4502, 28-4503, 28-4508). All plaintiffs seek treble

damages, attorneys fees, and costs pursuant to § 4 of the

Clayton Act (15 U.S.C. § 15). Jones & Laughlin, Republic,

and Wheeling-Pittsburgh also specifically seek injunctive

relief pursuant to § 16 of the Clayton Act (15 U.S.C. § 26).

(Sharon and National do not, but instead include a catchall

request for other appropriate relief.)

3 Those docks are represented in this litigation by Erie-Western

Pennsylvania Port Authority and Codan Corporation. Pinney Dock and

Transport Company is also pursuing an action against the defendant

railroads in the Northern District of Ohio; that action was not

consolidated for pretrial purposes with the other actions in this MDL.

4 Commodity line haul rates are, in general, cheaper than class line

haul rates. Plaintiffs claim that Pittsburgh and Lake Erie Railroad

Company tried to take independent action in establishing such

competitive commodity line-haul rates in response to trucking

competition in 1977, but was thwarted by pressure from other defendant

railroads. Nevertheless, all railroads had published such competitive

rates by March 1978.

—————————

I. PL d I FOR MAGE

Plaintiffs’ damage claims are couched in terms of "denied

savings,” i.e., they claim that the railroads’ predatory

behavior denied them (1) the across-the-board savings that

would have resulted from swifter development of self-

unloader technology; (2) the savings that would have

resulted from lower dock-handling rates at private

commercial docks had the self-unloader industry been more

robust; (3) the savings that would have resulted from lower

dock-handling rates at the railroad docks, had there been

competition from private docks; (4) the savings that would

have resulted from lower trucking rates, had such

competition not been restrained; (5) the savings lost as a

result of the railroads’ artificially high line-haul rates; and (6)

the savings plaintiffs would have realized had they had the

option to choose the most efficient and economical

combination of transportation alternatives. See, ¢.g.,

Complaint of National at { 28.

A. Antitrust Immunity

The defendants in the present case are members of a

protected and highly regulated industry, now charged with

violating the antitrust laws. For the public good,

participants in such industries are permitted a measure of

freedom to cooperate with each other not enjoyed by those

engaged in other endeavors, on the theory that the public's

interest in preventing conspiracies in restraint of trade and

monopolies must be partially subordinated to the public's

need for the services being rendered. But, of course, this

accommodation does not totally immunize the defendants

from antitrust scrutiny.

The defendant railroads' limited antitrust immunity has

two sources: the statutory immunity conferred by the 1948

Reed-Bulwinkle Amendment to § 5(a) of the Interstate

Commerce Act (ICA) and the opinion of the Supreme Court

in Keogh v. Chicago & Northwestern Ry. Co., 260 U.S. 156

(1922).

Keogh was a manufacturer of excelsior and flax, who

shipped his goods via defendant railroads. The railroads

were members of an association through which uniform

interstate rates were set. These rates had been duly filed

with the Interstate Commerce Commission (ICC); moreover,

the rates had been investigated by the Commission and

found reasonable. Nevertheless, Keogh claimed that the

rates were discriminatorily set by an unlawful conspiracy in

violation of the antitrust laws.

The Court ruled otherwise; it held that the shipper could

not recover treble damages “because he lost the benefit of

rates still lower, which, but for the conspiracy he would

have enjoyed." 260 US. at 162. Justice Brandeis, writing for

a unanimous court, gave several reasons for this result.

First, he noted that the "Act to Regulate Commerce” (the

ICA) is the proper vehicle for determining the legality of a

rate. Under its enforcement provision (now at 49 U.S.C. §

11705), a shipper could receive actual damages and

attorneys fees. He questioned whether Congress could have

"intended to provide the shipper, from whom illegal rates

had been exacted, with an additional remedy under the

Anti-Trust Act.” Id. at 162.

Second, Justice Brandeis stated:

The legal rights of shipper as against carrier in

respect to a rate are measured by the published

tariff. Unless and until suspended or set aside, this

rate is made for all purposes, the legal rate, as

between carrier and shipper. The rights as defined

by the tariff cannot be varied or enlarged by either

contract or tort of the carrier.

Id. at 163. To rule otherwise, he concluded, would allow

piecemeal discrimination in favor of shippers who chose to

litigate. Finally, Justice Brandeis concluded that the

damages sought were both hypothetical and speculative.

Plaintiffs here contest the application of Keogh to these

cases, arguing that the immunity it provided was subsumed

by the express immunity conferred by the Reed-Bulwinkle

Act, that subsequent rulings of the Supreme Court

demonstrate that Keogh is distinguishable on its facts from

the present cases, and that its rationale is no longer

compelling. For the reasons that follow, I reject plaintiffs’

arguments.

The Reed-Bulwinkle Act amended the ICA to allow the

railroads to enter into agreements to establish jointly rates,

classes, routes, and the like, so long as these agreements are

first approved by the ICC. See Pub. L. No. 80-662, 62 Stat.

472 (1948) (amending § 5(a) of the ICA) (current version as

amended at 49 U.S.C. § 10706). In order to gain approval, such

agreeinents must preserve the right of any party to act

independently. See 49 U.S.C. § 10706(d)(2)(C). So long as

the procedures set forth in the agreement for joint activity

are followed, railroads are shielded from antitrust liability

for that activity.> Under the statutory provisions in effect

during the bulk of the alleged conspiracy period, any party,

including the ICC, cou!d initiate proceedings to determine

whether the rates so promulgated were reasonable and/or

whether they were issued pursuant to appropriate

agreement procedures.® If the ICC concluded that the filed

° The defendant railroads are parties to the Eastern Railroads

Agreement. See 277 ICC 279 (1950). The Coal, Coke and Iron Ore

Committee (CCIOC) was established by defendants to carry out the

agreement by, inter alia, meeting publicly to discuss and propose rates.

Plaintiffs charge that defendants failed to comply with the agreement

procedures in setting rates, although this charge is only a corollary to

plaintiffs’ larger concern with the railroads’ predatory behavior.

6 oe changes have been made in the jurisdiction of the ICC by

recent legislation. See The Staggers Rail Act of 1980, Pub. L. No. 96-448, 94

Stat. 1895 | (1980); The Railroad Revitalization And Regulatory Reform (4R)

Act of 1976, Pub. L. No. 94-210, 90 Stat. 31 (1976). Although the ICC's

power to regulate rates has been curtailed, it still possesses the authority

to ensure that rates are promulgated pursuant to approved agreements

and to award damages, costs, and attorneys fees as reparation for illegal

rates were improper for any reason, it could disapprove

them and, if circumstances warranted, award the

complainant its actual damages, together with costs and

attorneys fees. See 49 U.S.C. §§ 10706, 10762, 11705.

An exhaustive review of the legislative history of the

Reed-Bulwinkle Amendments is found in Square D Co. v.

Niagara Frontier Tariff Bureau, Inc., No. 84-7831 (2d Cir. Apr.

9, 1985), in which the court rejected every argument pressed

by plaintiffs here, and concluded that the rule of Keogh is still

valid.” In light of the admirable summary presented by

Judge Friendly in Square D, I will present here only a brief

capsulization of the relevant history. In Georgia v.

Pennsylvania R.R. Co., 324 U.S. 401 (1945), decided shortly

before the enactment of Reed-Bulwinkle, the Court held that

Keogh barred Georgia from recovering treble damages in its

parens patriae suit against defendant railroads for price-fixing

on the basis of rates paid by private shippers. The Court

noted, however, that Keogh was not a bar to government or

so-called public antitrust actions against the railroad; nor

did it prevent private shippers from obtaining injunctions

against conspiratorial behavior, a matter not within the

jurisdiction of the ICC. See id. at 454-55. Nor does Keogh

apply to suits by competitors. See, e.g., Pinney Dock and

Transport Co. v. Penn Central Corp., No. C80-1733, slip op. at

46 (Memorandum and Order denying Motion to Dismiss)

(N.D. Ohio Aug. 26, 1983).

rates. In any event, much of the conspiracy here alleged occurred before

the enactment of the amendments alluded to above, and plaintiffs have

not suggested that these amendments are in any way outcome

determinative.

7 As transferee judge, I am bound to apply the law as if | were sitting

in the transferor district. See Manual for Complex Litigation § 5.22 n.410 at

197 (2d ed. 1984). Hence, I am bound by the Second Circuit's

- determination in Square D, supra, in ruling on the present motion in the

Republic Steel case, which was filed in the Southern District of New York.

The other four cases were filed in the District of Columbia; I am aware of

no binding precedent treating Keogh in that Circuit.

iiaiatietaaeeineeeinnamamaall

There being a general consensus to the effect that the

public would be better served by filling some of the gaps

alluded to in Georgia, at least to the extent that railroads

could not be subjected to antitrust liability by any entity for

the appropriate joint setting of rates, routes, fares,

classifications, etc., Reed-Bulwinkle was enacted. As Judge

Friendly points out in Square D, Congress had been

reminded of Keogh several times during the hearings that

preceded the bill's enactment (see Square D, supra, slip op., at

3269-70), and nevertheless announced:

The bill leaves the antitrust laws to apply with full

force and effect to carriers, so far as they are now

applicable, except as to such joint agreements or

arrangements between them as may have been

submitted to the Interstate Commerce Commission

and approved by that body ....

H.R. Rep. No. 1100, 80th Cong., 2d Sess., reprinted in 1948

U.S. Code Cong. & Ad. News 1844, 1848 (emphasis added).

Several courts have thus rightly held that Keogh was not

swallowed up by Reed-Bulwinkle. See, e.g., Square D, supra;

In the Matter of Wheat Rail Rate Antitrust Litigation, Nos. 84-

1883, 84-1505 (7th Cir. Apr. 17, 1985). As I noted above,

Keogh held that shippers could not pursue antitrust claims

for treble damages against railroads on the basis of filed

rates (although plaintiffs dispute this latter characterization,

see discussion infra). Reed-Bulwinkle extended that

protection by granting immunity against suits from all

comers, not simply shippers, for all matters, not simply filed

rates, that were jointly undertaken in compliance with an

ICC-approved agreement; thus, the simple act of filing rates

would not be sufficient to warrant Reed-Bulwinkle

protection, but would, under the right circumstances,

warrant Keogh protection. In view of Congress’ expressed

intention that Reed-Bulwinkle only add to the railroads’

existing antitrust protection, it would be improper to shun

Keogh on this basis.

10A

Finally, as Judge Friendly noted:

Beyond this, the legislative history contains no

suggestion of any intention to overrule Keogh, and

it is somewhat difficult to suppose that an act for

relief of railroads silently operated against them in

so material a respect.

Square D, supra, slip op. at 3269.

Plaintiffs next contend that their cases do not fall within

the proscriptions of Keogh, since (1) Keogh was a "rate" case,

and in this case a much broader conspiracy is alleged, rates

being only a "symptom" of the problem, and (2) the rates in

Keogh had been approved by the ICC, whereas the rates

charged here were simply filed with the ICC, thus

occasioning no conflict between agency and court

jurisdiction.

I do not find these arguments persuasive. Although it is

true that the conspiracy alleged goes farther than the mere

fixing of rates, that does not divest the court of its duty to

ensure that antitrust immunity is afforded as the law directs.

The attempts of both sides of this litigation to label it as a

rate matter or a monopolization matter do little to advance

the inquiry. I am aware of no law that dictates that I view

these actions with tunnel vision; on the contrary, a legal line

has been drawn by the Keogh court which I am not free to

cross, no matter how “artificial” it may seem to plaintiffs.

See, e.g., Square D, supra, slip op. at 3248-49, 3282 ("A shipper

[should be allowed to amend its complaint and] may recover

damages if it can show that carriers caused injury to the

shipper's business or property other than by higher tariffs,

such as by impeding its ability to transport its goods to other

markets and thus decreasing its sales."). The portion of

plaintiffs’ damage claims which involves rates must, under

Keogh, be separated from the rest of the action.

And this is so whether the rates at issue have been

approved by the ICC or simply filed with that body. See,

11A

e.g., Square D, supra, slip op. at 3280. As noted above, Justice

Brandeis clearly stated in Keogh that the filed rate is "the

legal rate" under the ICA unless and until the rate is

disallowed by the ICC or otherwise displaced. 260 U‘S. at

163. Notwithstanding this straightforward language,

plaintiffs argue that subsequent Supreme Court decisions

have revealed that ICC approval is a prerequisite to Keogh

immunity. In Hanover Shoe, Inc. v. United Shoe Machinery,

Inc., 392 U.S. 481 (1968), the Court rejected the "passing on"

defense to claimed overcharges in antitrust suits. The

Hanover Court took note of Keogh in a footnote, since Justice

Brandeis had appeared to give credence to that defense. He

wrote that the same legal rate had been exacted from all

shippers, and that a lower rate (one that would have existed

but for the conspiracy)

might not have benefited [ Keogh] .... Under these

circumstances, no court or jury could say that, if

the rate had been lower, Keogh would have enjoyed

the difference between the rates or that any other

advantage would have accrued to him. The benefit

might have gone to his customers, or conceivably,

to the ultimate consumer.

Keogh, 260 U.S. at 165. The Hanover Court stated that in

Keogh "[b]ecause the rates had been approved as reasonable

after a proceeding before the Interstate Commerce

Commission, the shipper was held to have no cause of action

under the antitrust laws .... We ascribe no general

significance to the Keogh dictum for cases where the plaintiff

is free to prove that he has been charged an illegally high

price.” Hanover, 392 U.S. at 491 n.8. It is thus clear that the

concern of the Hanover Court was to distance itself from one

of several arguments advanced by Justice Brandeis in

support of his ruling in Keogh. The Court did not, and

indeed had no need to focus on the issue of filed rates versus

approved rates. Hence, it would be folly to hold that the

12A

dictum in Hanover rejecting the dictum in Keogh in any way

detracts from the holding of the latter.®

In Carnation Co. v. Pacific Westbound Conference,

383 U.S. 20 (1966), the Court held that a shipper in foreign

commerce could maintain an antitrust action for treble

damages against maritime conferences and their members

based on rates set without prior approval of the Federal

Maritime Commission (FMC) pursuant to the Shipping Act.

The Shipping Act, like the ICA, provides the commercial

maritime industry with limited antitrust immunity for rates

jointly set in accordance with FMC-approved agreements.

See 46 U.S.C. § 814. Without mention of Keogh, the Court

held that if rates were set pursuant to an unapproved

agreement, the carriers could be subjected to antitrust

liability for joint rate-setting. Paying due heed to the

doctrine of primary jurisdiction, the Court concluded that

such an antitrust action, whether for damages or for an

injunction, should be stayed pending the FMC's resolution

of whether the rates were set in conjunction with an

approved agreement. Id. at 221, 223. If the FMC should find

that the rates were not lawfully set, the shipper would then

have the option of seeking recovery under the Shipping Act

or under the antitrust laws. Id. at 224.

The shippers in the present cases do not overtly argue

that Carnation overrules Keogh sub silentio, but that it limits

its application to approved rate cases. But the Carnation

Court was concerned with unapproved agreements, not

unapproved rates.? Moreover, it was construing an

8 The same may be said with respect to Terminal Warehouse Co. v

Pennsylvania R.R. Co., 297 U.S. 500 (1936), which the plaintiffs argue is

inconsistent with Keogh. But, although the Terminal Warzhouse Court

found Keogh “apposite and helpful", it stated that it was not “decisive”. Id.

at 511. Its musings regarding when an antitrust action may be pursued

by a shipper are dicta and cannot be construed to alter Keogh. Id. at 515.

9 Indeed, one might venture that if Keogh were to be read as an

approved rate case, the Carnation Court would have cited it as support for

its position that in un- or disapproved rate cases, an antitrust action could

lie.

13A

exemption contained not in the ICA, but in the Shipping Act,

a statute which, albeit similar in many respects to the ICA, is

not at issue in the present cases. Nor was the Keogh Court

confronted with a statutory exemption of any kind, since

none existed in the ICA at that time.

Hence, I must reject plaintiffs’ contention that Keogh does

not apply to this case, and with it their arguments regarding

the changing regulatory climate. Keogh continues to be cited

by the Court as good law. See, e.g., ATA v. McLain v. Real

Estate Board of New Orleans, Inc., 444 U.S. 232, 243 (1980). See

also Minsky v. Auto Driveway Co., 757 F.2d 718 (7th Cir. 1984);

Square D, supra; Wheat Rail Cases, supra; Essential

Communication Systems, Inc. v. American Telephone & Telegraph

Co., 610 F.2d 1114, 1121-22 (3d Cir. 1979). Although

plaintiffs may well be correct in arguing that the Supreme

Court would elect to overrule Keogh if it had the opportunity

to do so today, that is not for this court to decide.

Thus, insofar as plaintiffs’ damage claims are based on

rates charged the plaintiffs by defendant railroads -- all

dock-handling and storage rates at railroad docks and

railroad line haul rates (class or commodity) from private

and railroad docks -- their claims will be dismissed.

As I read the various complaints, this leaves the steel

companies with two presently animated antitrust claims: (1)

that they could have paid lower dock-handling rates

(sooner) to the private docks than they did to the railroad

docks if the railroads had not retarded the development of

the self-unloader industry; and (2) that they could have paid

lower land transport rates (sooner) to the truckers, had the

railroads not restrained competition by that industry and

monopolized line-hauling from their docks.!° In my view,

10 In Jones & Laughlin's summary of facts, presented to the transferor

court but not alluded to in its present motion to dismiss, it contends that

the railroads intended to “cramp” the trucking industry by, inter alia,

threatening “elimination of services to steel companies.” Puzzlingly,

however, no such allegation of a refusal to deal by the railroads is found

in any of the present steel company complaints, nor for that matter, in the

— Oe ‘ ,

14A

plaintiffs’ generalized claims regarding savings they would

have realized had defendants not impeded self-unloader

development and had they been able to choose the most

economic combination of transportation alternatives come

within these two categories.

Defendants vigorously contest plaintiffs’ standing to

pursue these remaining claims.

B. Antitrust Standing

The definition of who may be an antitrust plaintiff has

been an elusive one. From the wording of § 4 of the Clayton

Act (15 U.S.C. § 15), one might not have imagined that such

a problem would evolve:

[A]ny person who shall be injured in his business

or property by reason of anything forbidden in the

antitrust 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 the amount in controversy, and

shall recover threefold the damages by him

sustained and the cost of suit, including a

reasonable attorney's fee.

Read literally, this all-encompassing language would seem

to contemplate litigation recoveries by all who claim to have

suffered any form or degree of antitrust injury. But the

courts do not read this section literally; indeed, over the

years, the appellate courts have devised a variety of tests,

through which prerequisites for maintaining suit beyond the

simple allegation of injury have been engrafted upon this

language. See Merican, Inc. v. Caterpiller Tractor Co., 713 F.2d

958, 964, n.12 (3d Cir. 1983) (and cases cited therein).

complaints of the trucking companies. Hence, none is now properly

before the court.

15A

In Associated General Contractors of California, Inc. v.

California State Council of Carpenters, 459 U.S. 519 (1983), the

Supreme Court attempted to harmonize the various

standards by setting forth a list of factors which are to

“circumscribe and guide the exercise of judgment in

deciding whether the law affords a remedy in specific

circumstances." Id. at 537. As elucidated by our court of

appeals in Merican, supra, those factors are (1) the causal

connection between the alleged antitrust violation and the

harm to plaintiff (specific intent to harm plaintiff is not

required); (2) the nature of plaintiff's injury (Is it the sort of

injury Congress intended § 4 to address, and does it flow

from the unlawful nature of defendant's acts?); and (3) the

directness or indirectness of the injury. Merican, 713 F.2d at

964-65 & nn.13-15 (citing Associated General Contractors, 459

U.S. at 537-40).

The latter factor requires an analysis of (a) whether there

exists ‘an identifiable class of persons whose self-interests

would normally motivate them to vindicate the public

interest’; (b) the speculative nature of the damages; (c) the

potential for duplicative recovery; and (d) the danger of the

court becoming involved in complex apportionment of

damages. Associated General Contractors, 459 U.S. at 541-44;

Merican, 713 F.2d at 965 n.15. This final set of considerations

is precisely the one focused upon in Hanover Shoe, Inc., supra,

and Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977); in Hanover,

the Court rejected the "passing on" (of the overcharge)

defense to the claim of an innocent middleman in a price-

fixing scheme, and in Illinois Brick, the Court completed its

thought: it barred the indirect purchaser from maintaining

an antitrust action based on the overcharge.

Although plaintiffs clearly allege the requisite form of

injury, and thereby satisfy the second requirement of

Associated General Contractors, their claims cannot withstand

the scrutiny mandated by factors 1 and 3.

With respect to factor 3, the Third Circuit's opinion in

Mid-West Paper Products Co. v. Continental Group, 596 F.2d

16A

573 (3d Cir. 1979), is instructive. The Mid-West Paper court

applied the Hanover Shoe-Illinois Brick rationale to a case

without a middleman,!! a case analogous in many respects

to those presently under consideration. The court held that

a customer of a non-conspiring competitor of defendant

supplier could not maintain an antitrust action based on an

“umbrella” pricing theory (ie., the notion that the effect of

defendant's conduct in an oligopolistic market was to inflate

the prevailing market rates charged by all competitors in the

relevant market, and not simply by defendant). In an

analysis which mirrors that prescribed by Associated General

Contractors,12 the Court conceded that the nature of

plaintiff's injury was within the reach of the antitrust laws

(factor 2), but ruled that the chain of causation was too

speculative (factor 1) and the amount of the damages too

conjectural (factor 3). Id. at 584. Said the Court:

The outcome of any attempt to ascertain what price

the defendants’ competitors would have charged

had there not been a conspiracy would at the very

least be highly conjectural. As noted in Hanover

Shoe, "[a] a wide range of factors influence a

company's pricing policies. Normally, the impact

of a single change in the relevant conditions cannot

be measured after the fact; ... ."

Id.

The Mid-West Paper opinion was not met with universal

agreement (see, e.g., In re Uranium Antitrust Litigation, 552

F.Supp. 518, 523 (N.D. Ill. 1982) (and cases cited therein).!%

11 Criticism of the Mid-West Paper court should now be abated in light

of the ruling in Associated General Contractors to the effect that these factors

are of concen in any antitrust case.

12 The Mid-West Paper analysis was cited with a proval by the post-

Associated General Contractors Merican court. See 713 F.2d at 965 n.15.

13 But neither the Second Circuit nor the District of Columbia Circuit

has rejected Mid-West Paper; indeed, the Second Circuit embraced its

reasoning in Reading Industries, Inc. v. Kennecott Copper Corp., 631 F.2d 10,

17A

Nevertheless, I am persuaded that the Hanover Shoe-Illinois

Brick rationale applies with even more force in the present

circumstances (where plaintiffs are only potential customers

of non-conspiring competitors) than in the Mid-West Paper

scenario. With respect to plaintiffs’ first claim -- that they

could have paid less sooner to the private dock owners had

the railroads not retarded the development of self-unloaders

-- the plaintiffs ask the Court to engage in an exercise in

prophecy. I have not lost sight of the fact that plaintiffs

claim they can prove that the private docks did charge less

than the railroads when they finally began to avail

themselves of the self-unloaders. Nevertheless, had the

railroads not interfered, when would the private docks have

begun to handle the self-unloaders? Moreover, even if a

date could be pinpointed with reasonable accuracy, there is

no assurance that the rate charged would be the rates

alluded to by plaintiffs. As the Mid-West Paper court

observed, quoting Hanover Shoe, "[a] wide range of factors

influence a company's pricing policies.” 596 F.2d at 584

(quoting 392 U.S. at 492). This is precisely the sort of

complex apportionment of damages which the Supreme

Court has warned must be avoided. Furthermore, there

exist in this litigation two identifiable classes which are

actively pursuing their antitrust remedies against the

defendants -- the self-unloader manufacturer, Litton, and the

non-railroad dock owners, Pinney and Erie-Western.

I also note my firm belief that these damages are actually

claims for overcharge in other clothing.!* Although plaintiffs

claim to be seeking recovery for "lost savings,” this is only an

exercise in semantics. What plaintiffs actually seek is

reimbursement for the inflated rates they suffered as a result

of defendants’ predatory practices; while this brings

14 (2d Cir. 1980), cert. denied, 452 U.S. 916 (1981). Hence, I perceive no

problem with alluding to it here. See n.7 supra.

14 The tortured nature of the description of the surviving claims is

probably in direct proportion to the tenuousness of their causation. In

any event, I need not rule on this factor in view of the findings expressed

above.

18A

plaintiffs out from under the constraints of Illinois Brick (i.e.,

they are no longer indirect potential purchasers), it runs

them squarely into the brick wall of Keogh. !°

I need not repeat the above analysis with respect to

plaintiffs’ claim for denied savings on truck hauling because

of defendants’ conspiratorial and monopolistic behavior; it is

the same. I will only add that five trucking concerns are

currently pursuing their antitrust remedies against the

defendants in this MDL.

All of plaintiffs' damage claims must therefore be

dismissed. But plaintiffs will be granted leave to amend

their damage claims in accordance with this Memorandum,

if it is possible for them to do so. See Square D, slip op. at

3248-49 (quoted at p. 12 supra).

II. PLAINTIFFS' CLAIMS FOR INJUNCTIVE RELIEF

Neither Keogh nor the antitrust standing restrictions that

have grown out of § 4 affect plaintiffs’ ability to maintain

actions for injunctive relief (although, curiously, no one has

addressed this issue). See, e.g., Square D, slip op. at 3280-81;

Weiss v. York Hospital, 745 F.2d 786, 806-07 (3d Cir. 1984).

The only possible complication with respect to this issue is

whether the discretionary doctrine of primary jurisdiction

15__No matter which view is taken of these claims, Blue Shield of Virginia

v. McCready, 457 U.S. 465 (1982), which plaintiffs advance in support of

their position, is inapposite. In McCready, plaintiff challenged Blue Cross’

olicy of refusing to reimburse subscribers for fees paid to psychologists

or psychotherapy, while at the same time reimbursing such fees when

paid to psychiatrists. The Court noted at the outset that the Illinois Brick

rationale did not apply since there was no risk of duplicative recovery

and nothing speculative about the damages (precisely equal to

McCready's out-of-pocket expenses). Moreover, the court observed that

McCready's injury was not remote, since "it was a necessary step in

effecting the ends of the alleged conspiracy.” Id. at 479. McCready is

readily distinguishable from the present ae since here the indirect

damages are clearly speculative and since the savings allegedly denied

the plaintiffs did not constitute a "necessary step” in the effectuation of the

yer Soo -- they are consequential. And I note, a rhage gw ff that

McCready cannot be construed to impinge on the holding of the later-

decided Associated General Contractors, supra.

19A

requires that the actions be stayed pending referral to the

ICC. In my view, neither stay nor referral is required.

The policy underlying primary agency jurisdiction is to

avoid conflict between the roles of court and agency, and to

utilize special agency expertise while conserving the

resources of the court. In these actions, plaintiffs seek a

finding that defendants’ conduct violated antitrust laws and

an injunction ordering an end to that behavior and barring

defendants from resorting to such illegal combinations in the

future. The ICC does not have the power to issue such an

injunction. See Georgia, 324 U.S. at 454-55, cited in Square D,

slip op. at 3281. Moreover, there are no underlying facts to

be established that could best be sifted by the ICC; the issue

here is not whether the railroads conformed to a rate

agreement, but whether they engaged in a broad-based

conspiracy. As a panel of the District of Columbia Circuit

noted in the criminal adjunct to this civil litigation:

[Reed-Bulwinkle] immunity reaches only those

actions factually taken “in conformity with" the

rate agreement and the terms and conditions laid

down by the ICC. It does not sweep within it a

larger conspiracy which utilizes a Section 5a rate

bureau as a means to an end; it does not legitimate

illegal schemes which happen to coincide at points

with the legitimate actions of a rate bureau.

United States v. Bessemer and Lake Erie R.R. Co., 717 F.2d 593,

600 (D.C. Cir. 1983).

In view of this, I perceive no reason why the matter,

now devoid of all rate-based damage claims, should be

referred to the ICC; plaintiffs may proceed with their claims

for injunctive relief. !¢

16 Although, as I noted above, neither Sharon nor National specifically

requested injunctive relief, they did include catch-all requests and

hooey the court's jurisdiction, inter alia, on 15 U.S.C. § 26 (§ 16 of

layton Act) which addresses injunctive relief. Hence, their complaints

will be construed to include such claims.

20A

Ill. DI I BI AIM

Plaintiffs Jones & Laughlin, National, and Wheeling-

Pittsburgh also charge defendants with violations of the

antitrust laws of the District of Columbia. See D.C. Code

Ann. §§ 28-4501, 28-4502, 28-4503, 28-4508. Defendants

assert that these pendent claims must be dismissed since (1)

the D.C. Code must be construed in a manner consistent

with federal law (which, in light of the conclusions

expressed above, would leave standing plaintiffs’ injunction

claims); (2) none of the trade or commerce alleged to have

been restrained is within the District of Columbia; and (3)

application of the D.C. Code to these cases would violate the

Commerce Clause of the U.S. Constitution.

In my view, detendants’ second argument is dispositive;

in order to obtain relief under District of Columbia law,

plaintiffs must allege that defendants’ conduct restrained

trade in the District. That law provides:

Every contract, combination in the form of a trust

or otherwise, or conspiracy in restraint of trade or

commerce, all or any part of which is within the

District of Columbia, is declared to be illegal.

D.C. Code Ann. § 28-4502. Section 28-4503 provides:

It shall be unlawful for any person to monopolize,

attempt to monopolize, or combine or conspire

with any other person or persons to monopolize

any part of trade or commerce, all or any part of

which is within the District of Columbia.

In my view, the above-quoted language, read together and

individually,!” clearly requires that, before the alleged

17 Admittedly, a strained reading of § 28-4501 could lead one to

conclude that any conspiracy, etc., any part of which occurs in the

District, which has as its effect the restraint of trade anywhere (in or out of

- the District), is illegal. But the “Ey of the next section counsels that

such an interpretation would be unwise; for various reasons of

grammatical immutability, it clearly demonstrates that the phrase “all or

21A

offensive conduct can rise to the level of an antitrust

violation, it must restrain trade or commerce in the District

of Columbia.

In so construing the statutes to require local effect as a

jurisdictional prerequisite, I do nothing unusual. I note first

that the stated purpose of the law is "to promote the

unhampered freedom of commerce and industry throughout

the District of Columbia by prohibiting restraints of trade

and monopolistic practices.” D.C. Code Ann. § 28-4501(b).

Clearly, the concern is with local trade.

Second, this chapter of the Code also provides that

[i]t is the intent of the Council of the District of

Columbia that in construing this chapter, a court of

competent jurisdiction may use as a guide

interpretations given by feceral courts to

comparable antitrust statutes.

Id. § 28-4515. Section 1 of the Sherman Act is a comparable

antitrust statute: "Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint of trade or

commerce among the several states, or with foreign nations,

is declared to be illegal. . ." (emphasis added). Federal

courts routinely construe the emphasized language as a

jurisdictional prerequisite which must be pleaded. See, e.g.,

McLain v. Real Estate Board of New Orleans, 444 U.S. at 242.

In this regard, plaintiffs’ complaints are lacking. In their

complaints, they allege that all of the defendants reside, are

found, transact business, or have agents in the District of

Columbia. This allegation may suffice for Sherman Act

venue purposes,!§ but clearly does not support plaintiffs’

any part of which is within the District of Columbia” is meant to modify

“trade or commerce,” and not "contract, combination . . . or conspiracy."

See also the following discussion in the text on the chapter's purpose and

proposed rules of construction.

18 In so stating, I express no opinion on the motions of Norfolk and

Western Railway to dismiss the Jones & Laughlin and Wheeling-Pittsburgh

22A

claims for breach of the substantive law of the District of

Columbia. In further support of venue in the District, Jones

& Laughlin and Wheeling-Pittsburgh (but not National) do

allege that "[c]ertain of the unlawful acts alleged herein were

performed or had effects within the District of Columbia."

Complaints of Jones & Laughlin and Wheeling-Pittsburgh,

{@ 2 (emphasis added). But in those portions of their

complaints entitled "Trade and Commerce", these plaintiffs

(and National) state only that "[t]he violations of law alleged

herein occurred in and substantially and adversely affected

interstate and foreign commerce." Id. at 14; see also

complaint of National, { 9.

National thus makes no allegation of restraint of trade in

the District of Columbia, while the allegations of Jones &

Laughlin and Wheeling-Pittsburgh in that regard are, at

best, ambiguous. In response to the present motions to

dismiss, the latter argue only that they have "alleged a

conspiracy which took place, at last [sic] in part, within the

District of Columbia."!? Brief of Jones & Laughlin at 76

(emphasis added). Curiously, in response to defendants’

square challenge on the issue, plaintiffs do not even allude

to the "effects" language contained in the venue allegations

of their complaints.

actions for lack of venue. That motion will be addressed in a subsequent

Memorandum and Order.

19 Jones & Laughlin points out in its summary of facts that in the

companion criminal case, it was established that two overt acts

evidencing the conspiracy occurred in the District of Columbia: (1) the

filing of tariffs with fhe ICC, and (2) a meeting of the conspirators on July

6, 1976, to discuss trucking competition. Summary at 30. Even assumin

that I could properly take note of these "facts", plaintiffs’ claims woul

still be deficient, since, in my view, the fact that a part of the conspirac

occurred in the District of Columbia (while perhaps sufficient to establis

venue, but see n.18 supra) is in itself insufficient to state a claim under

District law. See n.17 supra.

23A

Hence, I conclude that none of the three plaintiffs has

properly pleaded its District of Columbia claims. Those

claims will therefore be dismissed, but with leave to amend.

An appropriate Order follows.

24A

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE LOWER LAKE ERIE

IRON ORE ANTITRUST

LITIGATION

THIS DOCUMENT RELATES TO

JONES & LAUGHLIN STEEL, INC.

PENN CENTRAL CORP, et al.

REPUBLIC STEEL CORP.

PENN CENTRAL CORP.

NATIONAL STEEL CORP.

PENN CENTRAL CORP, et al.

WHEELING-PITTSBURGH

STEEL CORP.

PENN CENTRAL CORP, et al.

SHARON STEEL CORP.

PENN CENTRAL CORP, et al.

MASTER FILE

NO. MDL 587

CIVIL ACTION

NO. 84-2135

CIVIL ACTION

NO. 84-2079

CIVIL ACTION

NO. 84-2134

CIVIL ACTION

NO. 84-2138

CIVIL ACTION

NO. 84-5562

25A

_ ORDER NO. 4

AND NOW, this 5th day of June, 1985, in consideration

of the motions of defendants Chesapeake & Ohio Railway

Co., Baltimore & Ohio Railroad Co., Norfolk & Western

Railway Co., Norfolk Southern Corp., Pittsburgh & Lake

Erie Railroad Co., Bessemer & Lake Erie Railroad Co.,

Consolidated Rail Corp., and CSX Corp. to Dismiss the

above-captioned actions or for a Stay Pending Reference of

Certain Issues to the ICC, and the responses and replies

thereto, it is ORDERED:

1. Defendants’ Motions are hereby GRANTED with

respect to plaintiffs’ claim for damages, costs, and attorneys’

fees. Said claims are DISMISSED WITHOUT PREJUDICE.

Plaintiffs may file amended complaints in accordance with

the foregoing Memorandum within thirty (30) days of the

date of this Order.

2. Defendants’ motions are hereby DENIED with

respect to plaintiffs’ claims for injunctive relief.

3. Defendants’ motions are GRANTED with respect to

the claims of plaintiffs’ Jones & Laughlin, Wheeling-

Pittsburgh and National for relief pursuant to the District of

Columbia Code. Said claims are DISMISSED without

prejudice. Plaintiffs may file amended complaints in

accordance with the foregoing Memorandum within thirty

(30) days of the date of this Order.

/s/ John P. Fullam

} 4

ENTERED: 6-6-85

CLERK OF THE COURT

26A

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE LOWER LAKE ERIE MASTER FILE

IRON ORE ANTITRUST

LITIGATION NO. MDL

587

THIS DOCUMENT RELATES TO

JONES & LAUGHLIN STEEL,INC. _ : CIVIL ACTION

PENN CENTRAL CORP, et al. NO. 84-2135

REPUBLIC STEEL CORP. : CIVIL ACTION

PENN CENTRAL CORP. NO. 84-2079

NATIONAL STEEL CORP. : CIVIL ACTION

PENN CENTRAL CORP, et al. NO. 84-2134

WHEELING-PITTSBURGH

STEEL CORP. CIVIL ACTION

PENN CENTRAL CORP, et al. NO. 84-2138

SHARON STEEL CORP. CIVIL ACTION

v. :

PENN CENTRAL CORP, et al. : NO. 84-5562

27A

N IAL 11

FULLAM, Ch. J. FEBRUARY 12, 1987

In Pretrial Order No. 4 for this multidistrict litigation, I

dismissed plaintiffs’ antitrust claims for treble damages,

costs, and attorneys’ fees. The dismissals were without

prejudice, however, and plaintiffs were allowed to file

amended complaints. This they did, prompting defendants

again to move for dismissal. The renewed motion will be

granted in part and denied in part.

Pretrial Order No. 4 details the background of this

litigation. Allegations relevant to the present motion,

presumed true, are as follows:

Plaintiffs are steel companies that, from the early 1950s

through the early 1980s, hired transport for ore from iron

mines in Michigan, Minnesota, and Canada, to mills in

Pennsylvania and Ohio. The ore traveled overland and

aboard ships from the mines to docks on lower Lake Erie,

and again overland to the mills.

Through the early 1950s, ore left the mines in a mud-like

form containing a relatively low concentration of iron. This

raw material crossed the Great Lakes on ships that required

special dock unloading equipment. The ships were owned

and operated by companies whose conduct is not here being

challenged. However, on lower Lake Erie most docks were

controlled by defendants and, in Pennsylvania and Ohio,

defendants also provided rail facilities used by plaintiffs. To

supply these services, defendants invested in equipment to

unload and carry the ore in this form.

By the mid-1950s, mines began preparing ore for

shipment by processing it into concentrated pellets of iron.

This enabled development of cheaper transport services.

28A

Specifically, the ore could be carried in self-unloading ships

that obviated much of the old dock equipment and, for some

inland routes, could be carried more efficiently by trucks

than by trains. Whenever introduced, these services would

have saved plaintiffs money.

Recognizing the prospect of owning obsolete equipment

in markets ripe for picking by competitors, defendants

conspired to preserve (or increase) their profit margins. In

concert, they fixed prices for dock and rail services that

exceeded the amounts chargeable in fairly competitive

markets. The set prices were protected by coordinated

action to frustrate use of self-unloaders for lake transport,

provision of dock services by independent operators, and

truck carriage of ore.

The protective strategy capitalized on defendants’

dominance of the market for dock services on the lower

Lake Erie shore. At the docks they controlled, defendants

sometimes refused to permit self-unloaders to discharge

cargo and sometimes refused to let trucks pick up ore. When

self-unloaders and trucks could gain access to the docks,

defendants imposed non-cost-based charges that

significantly reduced or eliminated plaintiffs’ economic

advantages gained with the new technologies. Moreover,

defendants blocked some would-be competitors from

buying sites where new docks could be built and, where the

blocking strategy failed, interfered with the non-

conspirators’ construction and operation plans; defendants

also discouraged investment in self-unloaders by lake

transporters. Thus, for many years defendants postponed

full-scale implementation of a new transport system

whereby pelletized ore could be shipped on self-unloaders,

modern docks, and trucks, perpetuating a more costly

system of shipping by outdated vessels, wasteful docks, and

trains.

29A

These facts, if true, would demonstrate violations of the

Sherman Act §§ 1 & 2, 15 U.S.C. §§ 1 & 2. They allegedly

caused treble-able damages that plaintiffs, at pages 3-4 of

their brief opposing dismissal, sort into seven categories (J

1-7). These claims will be assessed in four groups.

All plaintiffs identify harms based on hypothetically

lower prices that, but for the conspiracy, defendants would

have charged for dock and rail services. Generally, plaintiffs

claim "damages directly resulting from defendants’ fixing

the charges paid by plaintiffs for unloading, transshipment

and inland transportation services at artificially high and

non-competitive levels." ¥7. Particularly, they claim

"damages directly resulting from charges by defendants for

unloading and transshipment services never rendered to

plaintiffs." { 5. Under either theory, recovery would require

estimation of what charges would have been accepted by the

Interstate Commerce Commission (ICC).

Such an inquiry is forbidden by Keogh v. Chicago &

Northwestern Railway Co., 260 U.S. 156 (1922), reaffirmed in

Square D Company v. Niagara Frontier Tariff Rate Bureau, Inc.,

106 S. Ct. 1922 (1986). "In Keogh, the Court held that an

action for damages consisting of the difference between rates

set illegally and the rates that would have been set absent a

conspiracy was barred because plaintiff's sole remedy was

an action before the ICC." Barnes v. Arden Mayfair, Inc., 759

F.2d 676, 679 (9th Cir. 1985); see also Minsky v. Auto Driveway

Co., 757 F.2d 718, 720 (7th Cir. 1984) ("A customer of a

carrier, who was charged the filed rate, cannot maintain an

antitrust action against the carrier for an alleged conspiracy

in setting the rate.") (emphasis original). Keogh applies

whether filed tariffs "result from a combination to file higher

tariffs or from a combination to prevent others from taking

30A

independent action to file lower tariffs," Square D Co. v.

Niagara Frontier Tariff Bureau, Inc., 760 F.2d 1347, 1365 (2d

Cir. 1985) (Friendly, J.), aff'd, 106 S. Ct. 1922 (1986), and

applies even when defendant carriers cover up their

conspiracy by failing to follow procedures specified in an

agreement with the ICC, In re Wheat Rail Freight Rate, 759

F.2d 1305, 1313-16 (7th Cir. 1985), cert. denied, 106 S. Ct. 2275

(1986). Under this precedent, I will dismiss these claims.

Concerning the market for lake transport services,

plaintiffs make two sets of claims. National Steel

Corporation, with an in-house fleet, claims "damages

directly resulting from defendants’ delay and suppression of

National's use of self-unloader technology ...." 2. The

other plaintiffs, having hired lake transport services, claim

"damages directly resulting from defendants’ foreclosure of

self-unloading vessels . . ." from the lake transporters’ fleets.

71. These claims depend on proof that plaintiffs would

have realized saviags whenever lake transporters began

using self-unioaders.

By quantifying the costs saved by lake transporters using

self-unloaders, and from evidence of the lake transport

industry rates of return, plaintiffs other than National offer

to prove what prices they would have been charged for lake

transport of ore. Such an endeavor might make sense in

another context, but not to justify treble damages under the

federal antitrust laws.

Notwithstanding the broad language in 15 U.S.C. § 15,

Congress clearly intended to limit the type of harms

entitling victims to treble damages. Associated General

Contractors of California, Inc. v. California State Council of

Carpenters, 459 U.S. 519, 529-35 (1983). Although "the infinite

variety of claims that may arise" has prevented

31A

announcement of "a black-letter rule that will dictate the

result in every case," the Supreme Court instructs that

"previously decided cases identify factors that circumscribe

and guide the exercise of judgment in deciding whether the

law affords a remedy in specific circumstances." Id. at 536-

37. The case most relevant for the present purposes is IIlinois

Brick Co. v. Illinois, 431 U.S. 720 (1977).

In Illinois Brick, the Court "held that treble damages

could not be recovered be indirect purchasers of concrete

blocks who had paid an enhanced price because their

suppliers had been victimized by a price-fixing conspiracy.”

Associated General Contractors, 459 U.S. at 544. To hold

otherwise, the Court explained, would have created great

unavoidable difficulties: if indirect purchasers could recover

while suppliers’ claims against defendants were not

correspondingly reduced, antitrust violators would be

exposed to hextuple damages, far more than Congress

envisioned and engendering complicated evidentiary efforts

by indirect purchasers to prove how, precisely, the increased

price charged to suppliers generated in increased prices

charged by suppliers, 431 U.S. at 730-32; if courts attempted

to apportion the harm suffered between suppliers and

indirect purchasers, the pressure to adjudicate in one action

the claims of all persons affected in some way by the

conspiracy would create massive lawsuits with concomitant

complexity, id. at 731 n.11 & 737-45. By preventing indirect

purchasers from suing and by reaffirming the rule that

defendants could not argue that indirect rather than direct

purchasers were injured by antitrust violations, id. at 736-37

(citing Hanover Shoe, Inc. v. United Shoe Machinery Corp. , 392

U.S. 481 (1968)), the Court minimized the potential for

complexity and gave one class of plaintiffs the full statutory

incentive to sue, thus maximizing the chance that the most

directly injured party would enforce the antitrust laws.

The problems recognized in Illinois Brick are not limited

to circumstances where defendants conspire to effect above-

market fixed prices on sales to providers of goods or services

to indirect purchasers. Therefore, in each case involving

32A

purchasers from providers of goods or services whose prices

might be elevated because of defendants’ antitrust

violations, as here, judges must consider the policies

underlying Illinois Brick to decide if lawsuits by the indirect

purchasers could enable improper duplicative recovery or

massive and complex litigation. Merican, Inc. v. Caterpillar

Tractor Co., 713 F.2d 958, 967-68 & n.20 (3d Cir. 1983), cert.

denied, 465 U.S. 1024 (1984). In general, under the

“mutuality” principle, an indirect purchaser may sue if and

only if the antitrust defendant may argue for a

corresponding reduction in the provider's damages. Illinois

Brick, 431 U.S. at 728.

Justifications for such actions constitute passing-on

theories. "Absent unusual circumstances, Illinois Brick and

Hanover Shoe limit the use of passing-on theory in antitrust

actions without regard to the parties’ characterization of the

offense." In re Beef Industry Antitrust Litigation, 600 F.2d

1148, 1157 (5th Cir. 1979) (Wisdom, J.), cert. denied, 449 U.S.

905 (1980). Unusual circumstances have been recognized

when the amount passed on is indisputably determinable, as

with cost-plus contracts, and when the provider is either

owned or controlled by a plaintiff or functionally united

with a defendant, as a division or co-conspirator. E.g.,

Illinois Brick, 431 U.S. at 735-36 & n.16; see also von

Kalinowsky, 16G Business Organizations: Antitrust Laws and

Trade Regulations § 101.02[3] n.35 (Nov. 1986 Supp.)

(collecting cases). Neither exception is pled in this case.

Instead, plaintiffs’ claims for damages in the lake

transport market closely resemble the claim made in Hanover

Shoe. There, defendants attempted to monopolize a market

by leasing, but refusing to sell, certain advanced technology.

392 U.S. at 483-84. This supported an action by would-be

buyers of the machines, who could have reduced their

production costs. Id. at 487. Defendants unsuccessfully

urged the Supreme Court to approve a passing-on theory to

the effect that plaintiffs were not damaged; in view of the

prices then charged their customers (indirect purchasers).

Id. at 487-94. Under the mutuality principle, those indirect

33A

purchasers could not have sued defendants for potential

reduced shoe prices that, but for the conspiracy, plaintiffs

would have set. In the present context, by analogy, |

conclude that the steel company plaintiffs other than

National cannot succeed on this claim; damages related to

the lake transport market should be pursued by more

directly injured plaintiffs, the transporters that could have

reduced their costs but for the conspiracy.

In response, plaintiffs suggest that a simple proceeding

could allocate damages between lake transporters and the

mills. They propose to prove the price that, but for

defendants’ conspiracy, lake transporters would have

charged. The Supreme Court, however, has anticipated

difficulties in such an endeavor: "A wide range of factors

influence a company’s pricing policies. Normally the impact

of a single change in the relevant conditions cannot be

measured after the fact; indeed a businessman may be

unable to state whether, had one fact been different (a single

supply less expensive, . . . for example), he would have

chosen a different price.” Id. at 492-93. Accordingly, I reject

plaintiffs’ suggestion and will dismiss claims based on

potential savings in the lake transport market by plaintiffs

other than National.

National's claim for damages in the lake transport

market depends on evidence that defendants’ actions

delayed introduction of the cheaper self-unloader

technology by National; it does not implicate any hired lake

transporters. No Keogh problem arises because damages will

not be measured by reference to any tariffs filed with the

ICC and, allegedly, the damages in significant part flow

from defendants’ illegal activities other than price-fixing. See

also Square D, 106 S. Ct. at 1925 (acknowledging the Second

Circuit's decision that plaintiffs could amend their

complaints to state possible claims for damages not arising

from the filed tariffs"); Barnes, 759 F.2d at 679 (Keogh

34A

inapplicable to antitrust violation interfering with markets

tangential to those where defendants do business). Further,

National's claim should not be barred by the rule against

unduly speculative actions, because the causal connection is

reasonably alleged, the injury is of a type Congress intended

to prevent, no potential plaintiff suffers from this injury

more directly, and no other plaintiff could pursue such

recovery. See Associated General Contractors, 459 U.S. at 536-

45.

Defendants respond with two contrary arguments. First,

they suggest that National's claim should be dismissed

because it creates potential for duplicative recovery. This

might occur because National's claim depends on proof of

its costs to buy self-unloaders, and Litton Industries also

may be claiming damages for lost sales of such vessels (or

parts thereof) to National, see Litton Industries, Inc. v. Penn

Central Corp., No. C81-372 (N.D. Ohio). Given separate

trials, it is argued, the price of sale proven by Litton may, to

defendants’ detriment, exceed the cost of purchase proven

by National.

Assuming arguendo that Litton can claim treble damages

for lost sales to National, the potential for duplicative

recovery is not impermissible. Defendants’ antitrust

violation affects the price of self-unloaders only to the extent

that economies of scale come into play. This uncertainty

cannot be of the type feared by the Supreme Court, because

otherwise all companies losing business due to antitrust

activity would face a claim-barring uncertainty in the cost of

their inputs for production. This shows that defendants’

first argument proves too much. I reject it.

Defendants’ second, related argument is that too much

speculation would attend any attempt to prove how rapidly

the self-unloader technology would have developed. |

disagree.

It cannot be denied that the technology did develop, so

the only question is how much earlier the technology would

35A

have been introduced, absent the alleged antitrust violations.

Although this involves some uncertainty, if National can

prove that defendants did delay use of self-unloaders, it

proves a real harm; the magnitude of harm being made

uncertain by defendants’ acts, and National, as a buyer of

the product, being a party well placed to develop the facts,

the claim is not too speculative. See also Zenith Radio Corp. v.

Hazeltine Research, Inc., 395 U.S. 100, 123 (1969) (recognizing

‘practical limits of the burden of proof which may be

demanded of a treble-damage plaintiff who seeks recovery

for injuries from a partial or total exclusion from a market’).

Accordingly, I will not dismiss National's claim for excessive

costs incurred in lake transport.

Republic Steel Corporation claims "damages directly

resulting from the delay in the construction and use of

Republic's own dock facilities for the unloading and

transshipment of iron ore." { 4. These facilities allegedly

would have served self-unloaders at a net cost below the

prices defendants charged, but were delayed both by the

delay in building a self-unloader fleet and by defendants’

blocking strategies involving docks and inland transport.

This claim provokes a two-pronged response by

defendants. First, citing Associated General Contractors,

defendants argue that the claim entails too much speculation

to prosecute. However, any uncertainties relate to the

measurement, not the direct causation of damages, and if

defendants did violate the antitrust laws then they created

the uncertainties. For the reasons I rejected the speculation

defense with respect to National's individual claim, I reject

the speculation defense with respect to Republic's individual

claim. See also Pinney Dock & Transport Co. v. Penn Central

Corp., 600 F.Supp. 859, 882-85 (N.D. Ohio 1983) (allowing

claims by a non-railroad dock that allegedly lost business

due to defendants’ conspiracy).

36A

Defendants also argue that Keogh bars Republic's claim.

This would require an untenably broad reading of Keogh, to

the effect that if a party pays for services under a tariff filed

with the ICC, then the party never can claim that antitrust

violations prevented use of a cheaper but otherwise

equivalent service.

Keogh stands for the proposition that legislation creating

the ICC's regulatory authority causes an implied repeal of

the antitrust laws “only . . . in cases of plain repugnancy

between the antitrust and regulatory provisions." United

States v. Philadelphia National Bank, 374 U.S. 321, 351 & n.29

(1963); see also United States v. Radio Corp. of America, 358 U.S.

334, 347-48 (1959) (Keogh “emphasized the need for

administrative uniformity and uniform rates"). Such plain

repugnancy exists with respect to the determination of rates

that defendants would have charged, but not with respect to

costs that Republic would have incurred in operating a dock.

Indeed, in this claim Republic makes no assertion that

defendants’ dock tariffs were illegal, but only for damages

caused by actions outside the ICC's exclusive jurisdiction,

those constituting an illegal blockade of what, in effect,

would have been a competitor dock.

Competitor docks retain power to sue defendants in this

case, Keogh notwithstanding. Pinney Dock, 600 F.Supp. at

878-82; see Essential Communications Systems, Inc. v. American

Telephone & Telegraph Co., 610 F.2d 1114, 1121-22 (3d Cir.

1979). These docks will attempt to establish what, but for

the conspiracy, would have been their costs, prices, and

volume of business. Republic similarly deserves the chance

to prove what would have been its costs and volume of ore

off-loaded, from which its damages may be calculated.

Accordingly, I will not dismiss Republic's claim for excessive

expenditures to obtain dock services.

37A

All plaintiffs join in raising two final claims. They seek

"damages directly resulting from defendants’ elimination of

competitive non-railroad dock facilities from the market of

providing unloading and transshipment services to

plaintiffs.” ¥ 3. They also seek "damages directly resulting

from defendants’ elimination of competition from trucking

in the market of inland transportation services to plaintiffs."

{ 6. These claims both depend on proof that the conspiracy

delayed competitors’ entry into defendants’ markets (for

dock services and inland transport) and that the competitors’

prices (for docks tailored to self-unloaders and for trucks)

would have undercut defendants’ prices, with damages to

be calculated by multiplying the difference between

defendants’ actual and the competitors’ probable prices

times the volume of ore shifted from defendants’ carriers to

the competitors’ carriers.

In response, defendants argue that Keogh and Associated

General Contractors preclude plaintiffs’ claims. I disagree.

With respect to Keogh analysis shows that these claims

resemble Republic's individual claim (discussed in II.C).

Plaintiffs need not prove what prices, but for the conspiracy,

defendants would have charged; plaintiffs need prove only

that, in the context of tariffs that I must accept as legitimate,

defendants’ exclusionary activities and other antitrust

violations slowed penetration of the relevant markets by

defendants’ competitors. Thus, plaintiffs’ damages do not

depend on proof of price-fixing by defendants, which Keogh

would bar, but on proof that defendants conspired to

exclude low-cost competitors from the market, which does

not implicate the ICC's exclusive jurisdiction and therefore is

not barred by Keogh. In short, as Judge Friendly has

explained, "[a] shipper may recover damages if it can show

that carriers caused injury to the shipper's business or

<< e

38A

property other than by higher tariffs . . .." Square D, 760 F.2d

at 1365; cf. Litton Systems, Inc. v. American Telephone &

Telegraph Co., 700 F.2d 785, 820-21 (2d Cir. 1983), cert. denied,

464 U.S. 1073 (1984) (notwithstanding defendants’ non-

liability for monopolistic pricing, plaintiffs may claim in

court that tying arrangements violated antitrust laws).

Accordingly, I will not rely on Keogh to dismiss these claims.

With respect to Associated General Contractors, analysis

requires distinguishing two possible components of these

claims. To the extent, if any, that plaintiffs purchased dock

or inland transport services from non-conspiring transport

companies, I will dismiss plaintiffs claims under Illinois

Brick. See supra II.B.1. However, to the extent that plaintiffs

purchased services from defendants, I will not dismiss the

claims.

Plaintiffs straightforwardly allege that, but for the

conspiracy, competitors would have provided substitute

dock and inland transport at prices below those charged by

defendants. As defendants’ customers, plaintiffs allege

direct injury, not injury passed through an intermediate

provider. Thus plaintiffs claim to suffer one of the greatest

antitrust harms, an inability to seek lower prices from

competitors destroyed or delayed by an illegal conspiracy.

Further, where conspirators act to dissuade potential

competitors even from trying to enter a market, as is alleged

in this case, the conspirators reduce (sometimes to zero) the

number of competitor plaintiffs with standing to sue. Such

standing requires proof of preparation and intent to enter

the market. See Delaware Valley Marine Supply Co. v.

American Tobacco Co., 184 F.Supp. 440, 443-44 (E.D. Pa. 1960),

aff'd, 297 F.2d 199 (3d Cir. 1961); cert. denied, 369 U.S. 839

(1962). In general, this preparation may not be undertaken

by companies well suited to compete, because such efforts

would not appear worthwhile, if conspirators impose

39A

sufficient barriers; in particular in this case, few trucking

companies have filed suit. To the extent that potential

market entrants eschewed substantial preparations, only

defendants’ customers are in a position to prosecute

antitrust actions.

Finally, often in such circumstances, as here, defendants’

customers have the most information and greatest incentive

to start litigation. Uncertainties in the measurement of

damages will remain, but these will be due to defendants’

actions and should not impose an absolute barrier to~

recovery by defendants’ customers.

Defendants argue that the potential for excessive

speculation and duplicative recovery should preclude these

claims. With respect to the inland transport claims,

however, it cannot be denied that numerous trucking

companies did business in Ohio and Pennsylvania, so that

even if few truckers substantially prepared to enter the

market, a market price for truck carriage will be

determinable. Likewise, the prices for dock services may be

estimated reasonably accurately in various ways (such as by

reference to docks servicing self-unloaders in other markets

or by reference to the prices charged by Pinney and other

non-railroad docks when these docks did open on lower

Lake Erie). A similar level of uncertainty did not stop the

Supreme Court from affirming a jury verdict of damages in

Thomsen v. Cayser, 243 U.S. 66 (1917), an early case where

ocean transporters illegally prevented competitors from

serving shippers.

Given this relative lack of uncertainty surrounding the

prices that plaintiffs would have paid for dock and inland -

transport, there exists little potentia! for duplicative

recovery. This potential should not pre. !uide these claims.

See Amey, Inc. v. Gulf Abstract & Title, imw., 798 F.2d 1486,

1499-1500 (11th Cir. 1985), cert. denied, 106 S.Ct. 1513 (1986);

see also Southaven Land Co., Inc. v. Malone & Hyde, Inc., 715

F.2d 1079, 1087 (6th Cir. 1983).

40A

Similar potentials for speculation and duplicative

recovery were present in Pinney Dock, 600 F.Supp. at 882-85,

but did not bar plaintiff's claims. Likewise, I will not rely on

Associated General Contractors to dismiss these claims.

Il.

With respect to the four surviving sets of plaintiffs’

claims, all parties should remain aware that denial of a

motion to dismiss does not preclude a grant of summary

judgment for defendants, after completion of discovery. An

Order follows.

APPENDIX D

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE LOWER LAKE ERIE

IRON ORE ANTITRUST

LITIGATION

THIS DOCUMENT RELATES TO

JONES & LAUGHLIN STEEL, INC.

PENN CENTRAL CORP, et al.

REPUBLIC STEEL CORP.

_ PENN CENTRAL CORP.

NATIONAL STEEL CORP.

PENN CENTRAL CORP., et al.

WHEELING-PITTSBURGH

STEEL CORP.

PENN CENTRAL CORP, et al.

SHARON STEEL CORP.

PENN CENTRAL CORP, et al.

MASTER FILE

NO. MDL 587

CIVIL ACTION

NO. 84-2135

CIVIL ACTION

NO. 84-2079

CIVIL ACTION

NO. 84-2134

CIVIL ACTION

NO. 84-2138

CIVIL ACTION

NO. 84-5562

42A

PRETRIAL ORDER NO. 11

AND NOW, this 12th day of February, 1987, it is

ORDERED that defendants’ motion to dismiss is GRANTED

IN PART AND DENIED IN PART. Plaintiff's claims for

damages will be limited as follows:

1. Jones & Laughlin Steel, Inc. and Republic Steel

Corporation shall not recover the damages claimed in their

Consolidated Amended Complaint { 43 (a, f, g, & h).

2. National Steel Corporation shall not recover the

damages claimed in its Amended Complaint { 33 (a, d, e, f,

& h).

3. Sharon Steel Corporation shall not recover the

damages claimed in its Amended Complaint { 34 (a, c, e, f,

& g).

4. Wheeling-Pittsburgh Steel Corporation shall not

recover the damages claimed in its Amended Complaint

38 (a, d, e, & f).

/s/John P. Fullam

Ch. J.

43A

APPENDIX E

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE LOWER LAKE ERIE MASTER FILE

IRON ORE ANTITRUST

LITIGATION : MDL NO. 587

THIS DOCUMENT

RELATES TO:

ALL ACTIONS

M UM AN _49

FULLAM, Ch. J. APRIL 19, 1989

SUMMARY OF CONCLUSIONS AND RULINGS

ON PENDING MOTIONS

FOR SUMMARY JUDGMENT

Trial of these 10 MDL cases is scheduled for early May

1989. The parties have recently completed briefing their

numerous motions for summary judgment. It is essential

that these motions be decided, as an aid to trial preparation;

but time-pressures preclude completion of a full-blown

opinion. It is therefore appropriate to set forth my rulings

without extended discussion at this time:

For the reasons discussed previously (see Memorandum

and Order Nos. 4 and 11), I have concluded that Keogh

precludes assertion of rate-related claims by shippers. Keogh

v. Chicago & Northwestern Ry. Co., 260 U.S. 156 (1922). The

recent decision of the Sixth Circuit Court of Appeals in

Pinney Dock v. Penn Central Corp., 838 F.2d 1444 (6th Cir.

1988) concluded that Keogh also rules out rate-related claims

444A

by competitors. I have concluded, however (contrary to a

view suggested by my earlier memoranda in this case), that

it is appropriate for this court to apply Third Circuit law in

all of these MDL cases, essentially for the reasons asserted in

In re Korean Airlines Disaster, 829 F.2d 1171 (D.C. Cir. 1987).

The Third Circuit has intimated a similar view, where

federal law is involved. See In re Pittsburgh & Lake Erie R.R.

Co. Securities and Antitrust Litigation, 543 F.2d 1058, 1065 n.19

(3d Cir. 1976).

Applying Third Circuit law, see Essential Communications

Systems, Inc. v. American Telephone & Telegraph Co., 610 F.2d

1114 (3d Cir. 1979), I conclude that Keogh immunity does not

extend to rate-related claims brought by a regulated

defendant's competitors.

On the other hand, many of the claims asserted in this

case, whether rate-related or not, and whether asserted by

competitors or customers, are barred either because the

defendants’ alleged conspiratorial activities benefitted,

rather than harmed, a given plaintiff, or because barred by

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (indirect

purchasers), or Associated General Contractors of California, Inc.

v. California State Council of Carpenters, 459 U.S. 519 (1983) (no

antitrust standing).

Defendants’ statute-of-limitation arguments are accepted

in part and rejected in part: I conclude that the steel

company plaintiffs are precluded from recovering damages

sustained more than four years before their respective

complaints in this action were filed. Not only did they

plainly have knowledge of facts which should reasonably

have made them aware of a basis for asserting the very

claims now being asserted, but it is also clear that they were

specifically being urged to support an antitrust suit by

Pinney Dock -- at least as early as 1972, and more than four

years before the criminal indictment. The indictment did not

revive claims theretofore barred. Cf. Dungan v. Morgan

Drive-Away, Inc., 570 F.2d 867 (9th Cir.), cert. denied, 439 U.S.

829 (1978).

45A

With respect to the Reaney plaintiffs and Erie-Western

Port Authority, the record is less clear. Because there may

be a factual basis for tolling the statute as to these plaintiffs,

the limitations issues in their cases should be decided at

trial.

I have concluded that the record is insufficiently clear to

permit summary disposition of defendants’ argument that

none of the Reaney plaintiffs has standing to pursue these

claims.

Finally, I have concluded that the plaintiffs have no

evidence sufficient to impose liability on Penn Central

Corporation for any of the claims asserted in the litigation.

In view of the conclusions summarized above, I now

summary judgment.

I. LAI A AIN

A. Defendants’ motions for summary judgment are

granted with respect to claims by these plaintiffs concerning

excessive charges for self-unloaders at railroad docks,

excessive handling charges from railroad docks, and refusal

to sell or lease property to third parties for dock use.

B. In all other respects, defendants’ motions for

summary judgment are denied as to these plaintiffs.

Il. PLAINTIFF-ERIE WESTERN PORT AUTHORITY

Defendants’ motions for summary judgment are denied

with respect to plaintiffs’ claims of refusal to sell an ore dock

without restrictions. In all other respects, the rulings set

forth above with respect to the Reaney plaintiffs shall apply

also to this plaintiff.

Til. TRUCKING COMPANY PLAINTIFFS

46A

A. Defendants’ motions for summary judgment are

granted with respect to the claims of these plaintiffs relating

to the alleged suppression of self-unloader technology,

denial of line-haul rates, and suppression of (refusal to sell

to) private docks.

B. In all other respect, defendants’ motions for

summary judgment are denied, as to these plaintiffs.

IV. CLAIMS OF THE STEEL COMPANY PLAINTIFFS

A. All rate-related claims asserted by the steel company

plaintiffs are dismissed. This includes claims that, but for

the alleged conspiracy, these plaintiffs could have obtained

lower land-transportation costs, whether it be from the

defendants or truckers. All claims of these plaintiffs for

damages sustained more than four years before their

respective complaints were filed in this litigation are

dismissed.

B. Defendants’ motions for summary judgment with

respect to the steel company plaintiffs’ claims relating to

economic losses directly sustained by reason of

suppression/delay of self-unloader technology /availability

are denied, without prejudice to reconsideration at an early

stage of the trial, on the basis of specific offers of proof.

V. N N CEN L

CORPORATION

All claims against the defendant Penn Central

Corporation are dismissed.

47A

VI. MISCELLANEOUS

All pending motions not covered by the foregoing

rulings are denied.

/s/John P. Fullam

Ch. J.

48A

APPENDIX F

MDL 587

QUESTIONS TO BE ANSWERED BY THE JURY

SHERMAN ACT (§ 1) CONSPIRACY IN

RESTRAINT OF TRADE

Did the Bessemer & Lake Erie Railroad participate in

an agreement, combination or conspiracy in restraint

of trade in violation of § 1 of the Sherman Act.

Yes _vV No _.

SHERMAN ACT (§ 2):

CONSPIRACY TO MONOPOLIZE

Did the Bessemer & Lake Erie Railroad

participate in a combination or conspiracy to

monopolize in violation of § 2 of the Sherman

Act?

Yes Vv No __

If you answered "Yes" to either question 1 or 2,

answer questions 3 and 4. If you answered "No"

to questions 1 and 2, answer question 5.

ACT IN FURTHERANCE

Did any participant in the agreement,

combination or conspiracy take any act in

furtherance of the agreement, combination or

conspiracy after October 13, 1977?

Yes Vv. No __

49A

4. Did the Bessemer & Lake Erie Railroad withdraw

from the conspiracy before October 13, 1977?

Yes __ No _V

(a) If so, when?

OHIO VALENTINE ACT

> Did the Bessemer & Lake Erie Railroad

participate in a conspiracy which had the

purpose of restricting trade or preventing

competition in the transportation of iron ore

through or in the State of Ohio in violation of the

Ohio Valentine Act?

Yes Vv No __

50A

CLAIMS OF REPUBLIC STEEL CORPORATION

6. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Republic Steel Corporation?

Yes vv No _

If Yes, did injury result from:

(a) foreclosure and/or delay in the utilization of

self-unloading vessels for the delivery of iron

ore?

Yes Vv No __

(b) inability to fully use private docks to handle iron

ore?

Yes _V No __

(c' inability to fully use trucks to move iron ore to

its Warren and Youngstown, Ohio mills?

Yes _ No _V_

51A

CLAIMS OF JONES & LAUGHLIN STEEL

INCORPORATED

7. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Jones & Laughlin Steel

Incorporated?

Yes Vv No _

If Yes, did injury result from:

(a) foreclosure and/or delay in the utilization of

self-unloading vessels for the delivery of iron

ore?

(b) inability to fully use private docks to handle iron

ore?

Yes _¥ No __

its Ohio, mills?

52A

CLAIMS OF WHEELING-PITTSBURGH STEEL

CORPORATION

8. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Wheeling-Pittsburgh Steel

Corporation?

Yes Vv No __

If Yes, did injury result from:

(a) foreclosure and/or delay in the utilization of

self-unloading vessels for the delivery of iron

ore?

Yes Vv No _

(b) inability to fully use private docks to handle iron

ore?

Yes Vv No _

53A

CLAIMS OF NATIONAL STEEL CORPORATION

9. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of National Steel Corporation?

Yes Vv No __

If Yes, did injury result from:

(a) foreclosure and/or delay in the utilization of

self-unloading vessels for the delivery of iron

ore?

Yes Vv No _

(b) inability to fully use private docks to handle iron

ore?

Yes Vv No _

10.

544

CLAIMS OF SHARON STEEL CORPORATION

Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Sharon Steel Corporation?

Yes Vv No __

If Yes, did injury result from:

(a)

(b)

foreclosure and/or delay in the use of self-

unloading vessels for the delivery and

unloading of iron ore?

foreclosure and/or delay in the use of

independent docks to handle iron ore?

foreclosure and a delay in the use of trucks to

move iron ore to its Farrell, Pennsylvania, mill?

CLAIMS OF THE REANEY PLAINTIFFS

11. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Reaney?

If Yes, did injury result from:

(a) acts to prevent the Reaneys from engaging in an

iron ore business at Grand River?

(b) acts to prevent the Reaneys from engaging in an

iron ore business at the Minnesota slip?

56A

CLAIMS OF ERIE-WESTERN PENNSYLVANIA

PORT AUTHORITY AND CODAN CORPORATION

12. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of the Erie plaintiffs?

If Yes, did injury result from:

(a) acts to prevent the Erie from subleasing or

' purchasing the Erie ore dock?

Yes _v_ No

(b) acts to prevent Erie from having competitive

iron ore rail rates at the Erie ore dock?

57A

CLAIMS OF C.D. AMBROSIA

TRUCKING COMPANY

13. Was the unlawful conspiracy a material cause of

any injury to the business or property of the C.D.

Ambrosia Trucking Company?

Yes wv. No

If “Yes,” did injury result from:

(a) acts to remove hopper cars from steel mills or

otherwise cramp and impede _ truck

transportation of iron ore?

(b) acts to discourage or prevent truck

transportation of iron ore from railroad-owned

docks?

Yes __ No _\N

from Minnesota slip dock by use of a lease

restriction prohibiting trucking from that dock?

(d) acts to prevent or delay iron ore handling by

private docks that would permit trucking of iron

ore?

58A

CLAIM OF TAURO BROTHERS

TRUCKING COMPANY

14. Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Tauro Brothers?

If Yes, did injury result from:

(a) denial of access to railroad docks to truck iron ore?

Yes __ No _V_

(b) foreclosure and/or delay in the utilization of

self-unloading vessels to be used to bring iron

ore to docks to which truckers were allowed

access?

Yes vV No

to which trucks were allowed access.

59A

CLAIMS OF THE WILLS COMPANIES

Was the agreement, combination or conspiracy a

material cause of any injury to the business or

property of Wills’ dock companies (Toledo

World Terminals, Inc., and its predecessors,

Consolidated Dock, Inc. and Consolidated Dock

& Storage, Inc.)?

If Yes, did any such injury result from:

(a)

(b)

(c)

acts in furtherance of the conspiracy, including

the refusal to lease dock property without

restrictions, to prevent Wills from engaging in

an iron ore business at the Minnesota slip

(Ashtabula)?

Yes No _yv

acts in furtherance of the conspiracy, including

the refusal to lease dock property, to prevent

Wilis from engaging in an iron ore business at

Whiskey Island (Cleveland)?

acts in furtherance of the conspiracy, including

the refusal to lease or sell dock properties or the

refusal to lease or sell dock properties without

restrictions, to prevent Wills from engaging in

an iron ore business at Toledo, Ohio?

16.

60A

Was the agreement, combination or conspiracy

a material cause of any injury to the business or

property of Wills Trucking, Inc. because it was

unable to provide a trucking service in

combination with Wills' dock services?

61A

CONCEALMENT

17. Did any participant in the unlawful conspiracy

take affirmative acts to conceal the conspiracy,

or to conceal any act in furtherance of the

conspiracy?

[f you answered "Yes" to question 17, answer question 18.

18. Have the following plaintiffs shown that they

did not have actual knowledge of the unlawful

conspiracy prior to October 14, 1977 and did not

have knowledge of facts prior to that time

which, through the exercise of due diligence,

should have caused them to discover the

unlawful conspiracy?

(Answer as to each plaintiff.)

(a) C.D. Ambrosia Trucking Co., Inc.

Yes _V._ No

(b) Erie-Western Pennsylvania Port Authority and

Codan Corporation

(c)

(d)

(e)

19.

20.

62A

Reaney Dock Company and David W. Reaney,

individually or on behalf of Warford Reaney

Yes _V_ No

Tauro Brothers Trucking Co.

Yes _V_ No

Wills Trucking Co. and Toledo World Terminal,

Inc., including Consolidated Dock and Storage,

Inc. and Consolidated Dock, Inc.

Yes Vv No __

If you have found that the defendant violated

the antitrust laws, state whether each act in

furtherance of the agreement, combination or

conspiracy was taken in a good faith belief that it

was required by ICC regulations.

Was defendant's conduct reasonable under the

circumstances, including possible justification

under the regulatory policies under which

defendant operated?

63A

MDL 587

QUESTIONS TO BE ANSWERED BY THE JURY

DAMAGE CLAIMS OF REPUBLIC STEEL CORPORATION

(b)

State the amount of damages that will fairly and

reasonably compensate Republic Steel

Corporation for injury to its business or property

resulting from (i) foreclosure and/or delay in

the utilization of self-unloader vessels for the

delivery of iron ore and (ii) inability to fully use

private docks to handle iron ore.

(Answer for each

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