Reply Brief — In re Atlantic Richfield Co.

Suprerne Court, U.S

FI, Ep

No. 92-1614 MAY 19 1993

TRE UF THE CLERK

IN THE

Supreme Coot of the United States

OCTOBER TERM, 1992

IN RE ATLANTIC RICHFIELD COMPANY,

Petitioner,

On Petition for a Writ of Mandamus to the

United States Court of Appeals

for the Ninth Circuit

and the Honorable Dorothy W. Nelson

and Stephen Reinhardt, Judges,

United States Court of Appeals

for the Ninth Circuit

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRIT OF MANDAMUS

MATTHEW T. HEARTNEY

JAMES F.. SPEYER

ARNOLD & PORTER

{77 South Figueroa Street

44th Floor

Los Angeles, California 90017

OTIs PRATT PEARSALL

Puiuip H. Curtis

ARNOLD & PORTER

899 Park Avenue

New York, New York 10022

FRANCIS X. MCCORMACK

RONALD C. REDCAY

(Counsel of Record)

DONALD A. BRIGHT

EDWARD E. CLARK

RICHARD C. MORSE

PAUL J. RICHMOND

Atlantic Richfield Company

515 South Flower Street

Los Angeles, California 90071

(213) 486-1997

Attorneys for Petitioner Atlantic Richfield Company

WILSON - Eras PRINTING Co., INC.

- 789-0096 - WASHINGTON, D.C, 20001

TABLE OF CONTENTS

TIT IIIIE eacisvvnsecinncns scccstsenscnicaccnnineticniceonnensanabannancinnennnanens 1

I. USA CHARACTERIZES THE NINTH CIR-

CUIT’S OPINION AS CONSISTENT WITH

THIS COURT’S MANDATE ONLY BY MIS-

READING THIS COURT’S OPINION, MIS-

CONSTRUING ARCO’S ARGUMENT AND

DISTORTING THE RECORD ........................--- 2

A. USA’s Argument That This Court Left Open

The Issue Of Whether USA Suffered Anti-

trust Injury Is Incorrect ............................... 2

B. USA’s Argument That This Court Did Not

Rule That A Competitor Must Prove Preda-

tory Pricing Under Sherman Act § 2 Stand-

ards In Order To Establish Antitrust Injury

Under Sherman Act § 1 Is Incorrect ............ 6

II. ARCO’S PETITION IS RIPE FOR REVIEW...

~]

COIL IIN asncvsnnnsnscescnscassscesensscscsngy: sesnrosecnssannsnentanananens 8

ii

TABLE OF AUTHORITIES

CASES

Atlantic Richfield Co. v. USA Petroleum Co., 495

NTR: BN SEO) ncesecesseoescamcsecan ae

Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979)...

Department of Banking v. Pink, 317 U.S. 264

ID vi pcan nv'saececeacacinedcecuchesevdsasintheebereent aaa

Hartford Life Ins. Co. v. Blincoe, 255 U.S. 129

T 1 } OE nian A Kein a.s eth | nee

Missouri v. Jenkins, 495 U.S. 33 (1990) .

NAACP v. Alabama, 360 U.S. 249 (1959) | er

Perkins v. Standard Oil Co., 399 U.S. 222 (1970) ..

Sprague v. Ticonic National Bank, 307 U.S. 161

OIE shcicciinosniscisinconnancvccssncerseus’chclcaabasleeteeee anne

USA Petroleum Co. v. Atlantic Richfield Co., 859

vt , _ } I EEE Sis

STATUTES AND RULES

Sherman Act €1 (16 U.S.C. § 2) q.ccccccccccciccccccpneeee es...

Sherman Act § 2 (165 U.S.C. § 2) ..............................

ees CUE TIO DI sac sscincsescseeccasaatsccsneeenee

Supreme Court Rule °0 02000000... PRR Diets

OTHER AUTHORITY

R. L. Stern, E. Gressman & S. M. Shapiro, Su-

preme Court Practice (6th ed 1986) 00000000...

Ward, The Federal Rules of Appellate Procedure,

y By BE Re | BG} eeenemenNn

Page

passim

2-3

IN THE

Siren Cort of thy United States

OcTOBER TERM, 1992

No. 92-1614

IN RE ATLANTIC RICHFIELD COMPANY,

Petitioner.

On Petition for a Writ of Mandamus to the

United States Court of Appeals

for the Ninth Circuit

and the Honorable Dorothy W. Nelson

and Stephen Reinhardt, Judges,

United States Court of Appeals

for the Ninth Circuit

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRIT OF MANDAMUS

Petitioner Atlantic Richfield Company (“ARCO”) re-

spectfilly submits this reply brief in support of its Peti-

tion for a Writ of Mandamus (tite ‘Petition’ ).

ARGUMENT

The Brief in Opposition (“Opp. Br.) of USA Petro-

leum Company (“USA”) argues (1) that a writ of

mandamus 1s not justified because the Ninth Circuit deci-

sion permitting USA to try to prove antitrust injury does

not conflict with this Court’s mandate, and (2) that

ARCO’s petition is premature. USA is wrong on both

counts. USA’s first argument relies entirely on mischar-

acterizations of this-Court’s opinion, ARCO’s argument

and the record. See pp. 2-7. USA’s second argument

ignores the Ninth Circuit’s March 17, 1993 Order (Peti-

tion Appendix C), which shows that the Ninth Circuit

already has rejected ARCO’s argument that the remand

|

as

decision impermissibly conflicts with this Court’s mandate.

The Ninth Circuit’s rejection of that argument, which is

the only argument raised by ARCO’s Petition, makes the

issue ripe for review by this Court. See pp. 7-8.

J. USA CHARACTERIZES THE NINTH CIRCUIT'S

OPINION AS CONSISTENT WITH THIS COURT'S

MANDATE ONLY BY MISREADING THE COURT'S

OPINION, MISCONSTRUING ARCO’S ARGUMENT

AND DISTORTING THE RECORD

A. USA’s Argument That This Court Left Open The

Issue Of Whether USA Suffered Antitrust Injur¥ Is

Incorrect

USA’s effort to prove that this Court did not defini-

tively dispose of USA’s Sherman Act §$ 1 claim for lack

of antitrust injury is based on its assertion that:

“The single holding in this court’s decision was that

a vertical maximum price-fixing agreement ‘does not

cause a competitor antitrust injury unless it results

in predatory pricing.’ ”

Opp. Brief at 6-7. In describing this statement of anti-

trust injury law as the “single holding” in the opinion,

USA ignores the sentence in the opinion in which the

Court actually announced its holding. In language that

could not be clearer, the Court stated: “We... hold that

respondent has failed to meet the antitrust injury test in

this case.” Atlantic Richfield Co. v. USA Petroleum Co.,

495 U.S. 328, 335 (1990) (emphasis added). The

Court repeated its holding in the final paragraph of the

opinion: “Respondent has failed to demonstrate that it

has suffered any antitrust injury.” 495 U.S. at 346. This

holding unequivocally disposed of USA’s Sherman Act

§ 1 claim and left no issue open for the Ninth Circuit

to decide.’ Only by ignoring the parts of the opinion

1 Had this Court believed that it was leaving any issue open for

the Ninth Circuit to decide, it would have said so. See Broadcast

Music, Inc. v. CBS, 441 U.S. 1, 24 (1979) (reversing judgment of

3

where the Court stated its holding can USA construct an

argument that the Ninth Circuit’s decision permitting it to

try to prove antitrust injury does not conflict with this

Court’s mandate.

Notwithstanding this Court’s holding, USA argues that

it should be entitled on remand to establish antitrust in-

jury by proving predatory pricing. USA states: “[c]on-

trary to ARCO’s argument, this Court did not decide the

basic issue of whether USA could prove predatory pric-

ing that caused it antitrust injury.” Opp. Brief at 7.

USA misrepresents ARCO’s position and fails to grasp

the scope of this Court’s holding. ARCO has never con-

tended that this Court decided whether ARCO’s pricing

was predatory. Indeed, ARCO’s Petition acknowledges

that this Court’s holding is based upon the assumed prem-

ise that ARCO’s pricing was not predatory. Petition at

8. The point is that this Court did not need to determine

whether USA could prove that ARCO engaged in prede-

tory pricing because this Court was entitled to assume

(as it did assume) that USA could not make such a

showing. The Court was entitled to make this assump-

tion because USA had deliberately abandoned its preda-

tory pricing claim below. USA did not even try to prove

predatory pricing when such a showing was required to

oppose ARCO’s summary judgment motion, which was

based on the proposition that USA could not prove pred-

atory pricing. And it did not challenge in the Ninth Cir-

cuit the district court’s express finding that it could not

prove predatory pricing.” See USA’s Opening Brief ia

court of appeals and remanding “for further proceedings to con-

sider any unresolved issues that CBS may have properly brought

to the Court of Appeals’) (emphasis added). The Court here

simply remanded “for further proceedings consistent with this

opinion.” 495 U.S. at 346.

2 USA now argues that it was not required to raise the predatory

pricing issue in the lower courts because ARCO’s summary judg-

ment motion was not based on the absence of predatory pricing.

Opp. Br. at 7-8. USA’s assertion is wrong. ARCO rested its sum-

4

the Ninth Circuit, at 6 (acknowledging that USA had

“offered no proof on predatory pricing or dangerous

probability of monopolization” in the district court); see

also USA Petroleum Co. v. Atlantic Richfield Co., 859

F.2d 687, 689 (9th Cir. 1988) (identifying as the sole

issue on appeal “whether in the absence of predatory

pricing a competitor can recover damages because of a

resale price agreement”) (emphasis added ) .*

Contrary to USA’s assertion, there is no rule of law

that “[t]his Court’s failure to decide an issue explicitly

leaves that issue open for consideration by the lower court.”

Opp. Br. at 6. USA cites Perkins v. Standard Oil Co.,

399 U.S. 222, 223 (1970), and Hartford Life Ins. Co. v.

Blincoe, 255 U.S. 129, 134 (1921), but neither supports

USA’s argument. The correct rule is that an issue need

not be expressly decided by the Supreme Court to be fore-

mary judgment motion squarely on the proposition that USA could

establish antitrust injury only if it could establish predatory pric-

ing, and that USA could not establish predatory pricing. Docket

Number 83 at 10, 16-18. And, at the hearing on the motion, USA

agreed that it could not prove predatory pricing, because ARCO

posed no dangerous probability of monopolization. USA’s counsel

there stated: “I believe there is no dangerous probability of mo-

nopolization and therefore the idea that this price is predatory

. even by the most liberal standard, is probably going to fail.”

10/14/86 Tr. 19 (emphasis added). Finally, the district court

expressly found that USA could not prove that ARCO’s prices were

predatory: ‘“[U|nder the circumstances here concerned ... no

such showing [that ARCO prices were predatory] can be made.”

Petition Appendix E, © 5. It is far too late in the day for USA to

argue that ARCO’s original motion was not based on the absence of

predatory pricing.

3 ARCO’s Reply Brief In Support Of Petition For Writ Of Cer-

tiorari (at 5-8) spelled out these and other facts showing USA’s

abandonment of its predatory pricing claim in the district court and

the Ninth Circuit. These facts are also set forth in detail in Judge

Alarcon’s dissent from the Ninth Circuit’s opinion on remand and

the accompanying appendix. 972 F.2d at 1077-87; see, e.g., 972 F.2d

at 1081 (“USA informed the district court and this court that it

offered no evidence on predatory pricing’’).

5

closed from further consideration, as long as it is “within

{the} compass” of the Court’s mandate. Sprague v. Ti-

conic National Bank, 307 U.S. 161, 168 (1939) (matters

not expressly decided by the Supreme Court may still be

within the Court’s mandate). The issue whether USA

could prove antitrust injury by establishing predatory pric-

ing is certainly “within the compass” of this Court’s hold-

ing that USA “has failed to meet the antitrust injury test

in this case.” 495 U.S. at 335.

NAACP v. Alabama, 360 U.S. 240 (1959) (cited in

Petition at 13-14), demonstrates that the Court can fully

dispose of a case even when the disposition is based upon

a premise it assumed rather than decided. USA disputes

this, and contends that the Court in NAACP. based its

holding on a finding of fai that it made (rather than on

an assumed premise). But USA’s contention is incor-

rect. The Court did not make any finding that the

NAACP had complied with the production order ex-

cept for membership lists; rather, it assumed that this

was the case because the State of Alabama had never

argued otherwise. /d. at 243 (“[t]he State made not even

an indication that other portions of the production order

had not been complied with,” which led the Court to

presume that the NAACP had “apparently complied

satisfactorily with the production order, except for the

membership list’) (emphasis added). This was the as-

sumption, or “premise,” “on which the Court disposed of

the case,” and the Court held that the State’s post-dis-

position attack on that premise came too late. /d. at 243.

Similarly, USA’s attack on this Court’s assumption also

comes too late. ‘“ “Whatever was before the Court, and

is disposed of, is considered as finally settled.’”’ Jd. at

244-45.

By intentionally choosing not to challenge ARCO’s

showing on predatory pricing when it was required to in

the lower courts, USA foreclosed itself from raising this

issue, which permitted this Court to hold that USA “has

6

failed to demonstrate that it has suffered any antitrust

injury.” 495 US. at 346.

B. USA’s Argument That This Court Did Not Rule

That A Competitor Must Prove Predatory Pricing

Under Sherman Act §2 Standards In Order To

Establish Antitrust Injury Under Sherman Act § 1

Is Incorrect

In addition to failing to recognize that this Court’s

opinion completely disposed of USA’s showing on anti-

trust injury, the Ninth Circuit also ignored this Court’s

Statements that a competitor-plaintiff in a § 1 case can

prove antitrust injury only by establishing predatory pric-

ing in violation of § 2. USA does not dispute that the

Ninth Circuit on remand ruled that § 2 standards are

irrelevant to the antitrust injury issue in a § | case. But,

USA contends that the Ninth Circuit’s opinion is con-

sistent with this Court’s opinion, which it asserts “‘went

out of its way to note the distinction between Section

1... and Section 2.” Opp. Br. at 10-12.

USA’s argument simply cannot be squared with this

Court’s opinion. The Court “reject{[ed]”’ USA’s argu-_

ment that it “suffered antitrust injury even if petitioner’s

pricing was not predatory under § 2 of the Sherman Act.”

495 U.S. at 339. USA asserts that this means only that

a competitor must prove price-fixing at “‘predatory levels,”

and need not show conduct in violation of § 2. Opp.

Br. at 12. But USA’s interpretation gives no effect to the

phrase “under § 2 of the Sherman Act.” By adding “un-

der § 2 of the Sherman Act” after “predatory,” the Court

stated that predatory pricing required for antitrust injury

in a § 1 case must satisfy the requirements of § 2. includ-

ing threatened monopolization.*

4USA’s footnote 6 (Opp. Br. at 11), which notes that-ARCO’s

petition for certiorari did not seek review of the dangerous prob-

ability of successful monopolization issue, is beside the point.

ARCO did not need to seek review of that issue because it was

7

II. ARCO’S PETITION IS RIPE FOR REVIEW

Seven months after ARCO filed its petition for rehear-

ing and suggestion for rehearing en banc, the Ninth Cir-

cuit issued its order withdrawing the ‘“‘case” “from sub-

mission pending a decision from the Supreme Court in

Liggett.” Petition Appendix C. By issuing this order, the

Ninth Circuit showed that it had rejected ARCO’s rehear-

ing petition to the extent it is based on the failure of the

Ninth Circuit to obey this Court’s mandate in this case.

Nothing in Liggett is or possibly could be relevant to this

issue, which is determined solely by comparing the Ninth

Circuit’s opinion on remand with this Court’s opinion.

By rejecting ARCO’s inconsistency argument, the Ninth

Circuit effectively has made its final required disposition.’

The Ninth Circuit’s disobedient action is therefore ripe

for correction by this Court by a writ of mandamus.

The two cases cited by USA to support its contention

that ARCO’s petition for a writ of mandamus is premature

are inapposite. Each of those cases involved a petition

for a writ of certiorari. Department of Banking v. Pink,

317 U.S. 264 (1942); Missouri v. Jenkins, 495 U.S. 33

(1990) (cited in Opp. Br. at 4). The time limitations

involved in applying for a writ of certiorari do not apply

to a petition for an extraordinary writ. Compare S. Ct.

Rules 13 and 20. Indeed, the Court’s discretion to grant

entitled to rely on the district court’s unchallenged finding that

USA could not prove predatory pricing. In any event, USA did

present this issue in its “Questions Presented” in its brief on the

merits. See USA’s Brief for Respondent, at i (“must a competi-

tor prove, in order to demonstrate antitrust injury, that the price-

fixers . . . had a dangerous probability of successful monopoliza-

tiem. . .”).

5 The Ninth Circuit is not required to rule on ARCO’s suggestion

for rehearing en banc. “‘A suggestion is neither a petition nor a

motion; consequently, it requires no disposition by the Court.’”

Missouri v. Jenkins, 495 U.S. 33, 47 n.14 (1990) (quoting Ward,

The Federai Rules of Appellate Procedure, 28 Federal B.J. 100,

110-11 (1968) ).

8

a writ of mandamus is “very broad,” and, as opposed to a

writ of certiorari, the Court need not wait for a formal

entry of judgment or denial of rehearing in the circuit

court. R. L. Stern, E. Gressman & S. M. Shapiro, Supreme

Court Practice 503 (6th ed. 1986). Under the unique

circumstances of this case, in which the Ninth Circuit has

effectively denied ARCO’s rehearing petition but has pre-

cluded ARCO from petitioning for a writ of certiorari,

mandamus is the only remedy available.

CONCLUSION

For the reasons stated above and in ARCO’s Petition,

a writ of mandamus should issue to compel Judges Nelson

and Reinhardt to follow this Court’s mandate.

Respectfully submitted,

MATTHEW T. HEARTNEY FRANCIS X. MCCORMACK

JAMES F'. SPEYER RONALD C,. REDCAY

ARNOLD & PORTER (Counsel of Record)

777 South Figueroa Street DONALD A. BRIGHT

44th Floor EDWARD E. CLARK

Los Angeles, California 90017 RICHARD C. MORSE

- PAUL J. RICHMOND

nai 9p Saga Atlantic Richfield Company

ARNOLD & PORTER 515 South Flower Street

399 Park Avenue Los Angeles, California 90071

New York, New York 10022 (213) 486-1997

Attorneys for Petitioner Atlantic Richfield Company

May 19, 1998.