United States Court of Appeals
For the First Circuit
No. 02-2114
DJ MANUFACTURING CORPORATION,
Plaintiff, Appellant,
v.
TEX-SHIELD, INC.,
Defendant, Appellee,
XYZ INSURANCE CO., CREATIVE APPAREL,
BLUCHER USA, BLUCHER GMBH.,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jay A. García-Gregory, U.S. District Judge]
Before
Torruella, Selya and Lipez,
Circuit Judges.
Marc Lamer, with whom Kostos & Lamer, PC, Eugene F. Hestres
and Bird, Bird and Hestres were on brief, for appellant.
Timothy K. Beeken, with whom Debevoise & Plimpton, Daniel M.
Abuhoff, Correa, Collazo, Herrero, Jiménez & Fortuño and Pedro
Jiménez were on brief, for appellee.
ON PETITION FOR REHEARING
October 20, 2003
TORRUELLA, Circuit Judge. Plaintiff-appellant DJ
Manufacturing ("DJM") alleges that Tex-Shield, Inc. ("Tex-Shield")
and Creative Apparel Associates ("Creative Apparel") violated,
inter alia, a Puerto Rican antitrust statute, 10 P.R. Laws Ann.
§ 264 (2002), by conspiring to destroy competition in the market
for chemical protective clothing in Puerto Rico.1 The district
court dismissed the complaint on a motion to dismiss. After
careful review, we affirm.
I. Facts
Because this is an appeal from a dismissal under Fed. R.
Civ. P. 12(b)(6), "[w]e glean the facts from the amended complaint,
stripped of any rhetorical gloss." Young v. Lepone, 305 F.3d 1, 4
(1st Cir. 2002).
DJM manufactures sewn clothing and equipage for the
United States military. It is a "small disadvantaged business"
under 48 C.F.R. § 19.001 (2003) and a certified participant in the
Small Business Administration's program for contracts set aside to
small disadvantaged businesses under Section 8(a) of the Small
Business Act, 15 U.S.C. § 637(a) (2000).
1
The plaintiffs also alleged violations of Sections 1 and 2 of
the Sherman Act, 15 U.S.C. §§ 1 and 2, Sections 2(a), (e), and (f)
of the Robinson-Patman Act, 15 U.S.C. §§ 13(a), (e), (f), the
Puerto Rican statute dealing with price discrimination, 10 L.P.R.A.
§ 263, and the Puerto Rican statute dealing with transactions in
restraint of trade, 10 L.P.R.A. § 258. The district court's
decision is unchallenged with respect to these other claims.
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Defendant Tex-Shield manufactures, and its parent Blucher
GmbH holds a patent for, technology used to produce a chemical
protective material known as "Saratoga Filter Cloth" (the "Cloth").
The Cloth is a protective shield against biological and chemical
agents sewn into garments purchased by the United States military
and used for protection against attack by chemical warfare.
In July 1993, the United States Air Force ("USAF")
requested bids for the production of 40,000 chemical defense
coveralls. The bidding was limited to businesses participating in
the SBA's § 8(a) program, such as DJM. The USAF specified that the
coveralls must be made using the Cloth and identified Tex-Shield as
the sole source. DJM won the contract.
DJM then subcontracted with Tex-Shield to buy the Cloth
for a price of $49.27 per yard. Subsequently, DJM and Tex-Shield
made a "technical services" contract, whereby, for a fee of $35,000
per month for twelve months, Tex-Shield agreed to provide DJM with
certain technical services.
On June 24, 1994, the Defense Personnel Support Center
("DPSC") solicited proposals for the production of at least 100,000
chemical and biological suits, with an option for more. As with
the USAF solicitation, the DPSC solicitation was limited to SBA's
§ 8(a) program participants. Also, the solicitation required the
suits be made with the Cloth; again, Tex-Shield was identified as
the Cloth's sole approved source.
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In preparing its bid for DPSC, DJM inquired as to the
cost of procuring the Cloth. Tex-Shield quoted DJM a price of
$38.71 per yard for the first 100,000 suits, and $41.07 per yard
for any additional yardage. Tex-Shield quoted DJM a price of
$148.95 for the first 100,000 suits in pre-cut "kits" and $154.43
per kit for any extra kits. Based on these quotes, DJM offered
DPSC a price of $186.62 per unit for the first 100,000 suits and
$183.50 for any more suits. Creative Apparel bid $179.55 for the
first 100,000 suits and $186.02 for any extra. Creative won the
contract.
DJM filed a complaint against Tex-Shield, Blucher USA,
Blucher GmbH, and Creative Apparel,2 alleging several federal and
state antitrust violations. The complaint included allegations
that Tex-Shield violated § 264 of the Puerto Rico Anti-Monopoly Act
by selling goods in Puerto Rico at prices different from the price
at which the articles were sold elsewhere.
The district court dismissed all of the claims, including
the § 264 count, for failure to state a cause of action. See Fed.
R. Civ. P. 12(b)(6). In dismissing the § 264 count, the district
court read the section only as an anti-dumping statute, forbidding
the sale of goods at lower prices in Puerto Rico.
2
Tex-Shield is wholly owned by Blucher USA, which in turn is
wholly owned by Blucher GmbH. Creative Apparel is, like DJM, a
clothing and equipage manufacturer. Tex-Shield, the Cloth's sole
supplier, also makes finished chemical and biological protective
clothing.
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DJM appeals only the lower court's dismissal of the § 264
count.
II. Standard of Review
We review the district court's resolution of Tex-Shield's
motion to dismiss de novo. Beddall v. State St. Bank & Trust Co.,
137 F.3d 12, 16 (1st Cir. 1998). When a litigant is facing a
summary dismissal, we first accept the complaint's well-pleaded
factual allegations as true, drawing all reasonable inferences in
the plaintiff's favor, and then determine whether this reading of
the complaint justifies recovery on any cognizable theory. Martin
v. Applied Cellular Tech., Inc., 284 F.3d 1, 6 (1st Cir. 2002).
III. Analysis
We begin with the issue of statutory interpretation. The
district court limited the interpretation of the phrase "at prices
which are substantially different" contained in § 264 of the Puerto
Rico statute to only those situations where a supplier offers its
product at a substantially lower price to Puerto Rican customers as
opposed to non-Puerto Rican customers, and ruled out those
situations where a supplier charged the Puerto Rican company
substantially more than a non-Puerto Rican company.
Neither this circuit nor the Puerto Rican commonwealth
courts have determined the pricing behaviors covered by § 264. DJM
contends that the statute prohibits charging either less or more
for goods in Puerto Rico. Thus, DJM argues that the district court
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erred when it viewed the statute as an anti-dumping statute that
prohibits only the charging of lower prices in Puerto Rico.
Finally, DJM argues that § 264 is clear on its face and that we
should thus refrain from examining its legislative history. We
disagree -- as will be explained, we find the statute ambiguous and
turn to other sources for aid in construction.
A. Ambiguity
Section 264 states:
It shall be unlawful to sell, contract to
sell, offer to sell, or participate in any
step for the sale of articles in Puerto Rico,
after making due allowance for differences in
costs incident to the delivering of goods in
Puerto Rico and the costs of handling such
goods in Puerto Rico, at prices which are
substantially different from prices charged or
quoted by such sellers for goods of the same
grade or quality to buyers located outside of
Puerto Rico, when such difference in price is
granted with the purpose of destroying
competition or eliminating a competitor
located in Puerto Rico.
10 P.R. Laws Ann. § 264. Although DJM would have us consider only
the whether the phrase "prices which are substantially different"
("different price language") could, on its face, apply to the
charging of higher and lower prices, we must consider the phrase in
the context of the entire statutory provision in order to determine
if the statute covers situations such as the one alleged here.
See, e.g., Allied Chem. and Alkali Workers of Am. Local Union No. 1
v. Pittsburgh Plate Glass Co., 404 U.S. 157, 185 (1971) (indicating
that courts "must not be guided by a single sentence or member of
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a sentence, but look to the provisions of the whole law") (internal
quotations and citations omitted).
We begin by noting that the different price language does
not appear ambiguous when considered in isolation. Unlike the
Federal Anti-Dumping Act of 1916, which the district court viewed
as a model for this statute, there is no specific prohibition
against charging "a price substantially less" in Puerto Rico --
instead the legislature chose the broader term "substantially
different," which could cover both higher and lower pricing.3
Although it may appear quite obvious that the word "different"
could encompass both higher and lower prices, this does not mean
3
The Federal Anti-Dumping Act reads in pertinent part:
It shall be unlawful for any person importing or
assisting in importing any articles from any foreign
country into the United States, commonly and
systematically to import, sell or cause to be imported or
sold such articles within the United States at a price
substantially less than the actual market value or
wholesale price of such articles, at the time of
exportation to the United States, in the principal
markets of the country of their production, or of other
foreign countries to which they are commonly exported
after adding to such market value or wholesale price,
freight, duty, and other charges and expenses necessarily
incident to the importation and sale thereof in the
United States: Provided, That such act or acts be done
with the intent of destroying or injuring an industry in
the United States, or of preventing the establishment of
an industry in the United States, or of restraining or
monopolizing any part of trade and commerce in such
articles in the United States.
15 U.S.C. § 72 (2003) (emphasis added). Clearly, the Puerto Rican
legislature did not merely adopt the provision wholesale, but
rather changed significant portions of it.
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that the statute is unambiguous and that it clearly encompasses
DJM's claim.
When we consider whether the statute as a whole
encompasses DJM's claim, its ambiguity emerges. In particular,
here we have a situation where the alleged price discrimination is
having a potential detrimental effect not on the seller's
competition (horizontal competition or competitors), but rather on
the buyer's competition (vertical competition or competitors). On
its face, the statute does not clearly encompass claims involving
harm to vertical competitors caused by the charging of higher
prices in Puerto Rico.
The Robinson-Patman Act, on which this statutory
provision was loosely modeled,4 has been applied to secondary line
competition and does explicitly cover effects on non-sellers. See
15 U.S.C. § 13 (2003) (stating "[i]t shall be unlawful for any
person engaged in commerce . . . to discriminate in price between
different purchasers of commodities of like grade and quality . . .
where the effect of such discrimination may be substantially to
lessen competition or tend to create a monopoly in any line of
commerce, or to injure, destroy, or prevent competition with any
person who either grants or knowingly receives the benefit of such
discrimination, or with customers of either of them").
4
See Arturo Estrella, Antitrust Law in Puerto Rico, 28 Revista
del Colegio de Abogados de Puerto Rico, 505, 624-25 (1968).
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State statutes that cover behavior affecting secondary
line competition do not typically have explicit terms to that
effect -- quite the contrary, where secondary line competition is
not covered, the statutes are explicit. See, e.g., Cal. Bus. &
Prof. Code § 17040 (2003) (prohibiting price discrimination in a
given locality by "any person engaged in the production,
manufacture, distribution or sale of any article or product of
general use or consumption, with intent to destroy the competition
of any regular established dealer in such article or product"); see
also Erwin S. Barbre, Annotation, Validity and Construction of
State Statutes Forbidding Area Price Discrimination, 67 A.L.R.3d 26
(2001) (citing only three cases involving a finding that state
statutes did not apply to secondary line competition). Absent an
explicit term to the contrary, § 264 could apply to secondary line
competition, thus encompassing DJM's claim. It is precisely
because the statute could but does not explicitly encompass DJM's
claim that consultation of other sources would be not only prudent,
but necessary. See, e.g., United States v. O'Neil, 11 F.3d 292,
297-98 (1st Cir. 1993) (noting that "ambiguity is commonly thought
to exist when statutory language is susceptible to differing, but
nonetheless plausible, constructions").
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B. Legislative History
As will presently be seen, the legislative history5
clarifies that the different price language was meant to apply only
to the charging of lower prices. Although on its face the
different price language may appear to include the charging of
higher or lower prices, "[e]ven the most basic general principles
of statutory construction must yield to clear contrary evidence of
legislative intent." National R.R. Passenger Corp. v. National
Ass'n of R.R. Passengers, 414 U.S. 453, 458 (1974). Indeed, the
First Circuit has "overridden literal language where it appeared
inadvertent and undermined [the legislature's] aim." United States
v. Estrella, 104 F.3d 3, 8 (1st Cir. 1997).
The legislative history supports a narrow reading of
§ 264 as an anti-dumping statute. Most persuasively, a section in
the Senate committee report indicates that "[t]he purpose of this
section is not to prevent merchandise from entering Puerto Rico at
prices that are lower than those prevalent in other markets. The
prohibition is limited to classic dumping." Diario de Sesiones,
Vol. XVIII, at 1708.
5
We assume that the official translations included in the record
contain all relevant portions of the legislative history. See,
e.g., Estades Negroni v. Assocs. Corp. of N. Am., 2003 U.S. App.
LEXIS 20066, *11 (1st Cir. 2003) (reiterating that "'this Court may
not consider non-English documents unless a translation is
provided'") (quoting Ramos-Báez v. Bossolo-López, 240 F.3d 92, 94
(1st Cir. 2001)).
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Similarly, an article written by Arturo Estrella, the
then Deputy Secretary of Justice, a few years after the enactment
of § 264 indicates that the law's "main purpose - though not the
exact wording - coincides with that of the United States Anti-
Dumping Act of 1916, prohibiting importation into the United States
of articles for sale at prices that are less than their market
value outside the United States . . ." Arturo Estrella, Antitrust
Law in Puerto Rico, 28 Revista del Colegio de Abogados de Puerto
Rico 505, 624-25 (1968). According to DJM, the fact that this is
the main purpose of the statute allows for the interpretation that
§ 264 also applies to the charging of higher prices in Puerto Rico.
If one reads the entire excerpt, however, it is clear that this
reading is not possible because Estrella states, "The phrase
'substantially different' was used with the intention of outlawing
'lower prices.'" Id. (quoting Diario de Sesiones, Vol. XVIII, at
1708).
Although there are only limited portions of legislative
history in the record,6 those excerpts indicate that the statute
was meant to apply only to lower prices. We interpret the statute
6
Only Tex-Shield has provided excerpts of legislative history for
this Court's consideration. In its response brief, DJM merely
analyzes the excerpts provided by its opponents and does not bring
to the Court's attention any other relevant portions of the
legislative history. Previously, DJM relied on a plain language
argument rather than resorting to legislative history, which
certainly suggests that there is little or no history to support
DJMs interpretation.
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narrowly and hold that it does not embrace the charging of higher
prices by a supplier to a Puerto Rican company. Dumping behavior
is not alleged here, thus DJM has failed to state a valid claim
under the statute and the district court properly dismissed the
complaint.7
III. Conclusion
For the foregoing reasons, the district court's dismissal
of the complaint is affirmed.
Affirmed.
7
With regard to the issue of whether the statute applies to
vertical competition, none of the excerpted portions of the
legislative history brought to the Court's attention address the
issue. We need not decide if the statute covers both vertical and
horizontal competition, however, because we find that only cases
involving the charging of lower prices in Puerto Rico can be
brought under the provision.
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