IN THE SUPREME COURT OF IOWA
No. 137 / 04-1972
Filed June 22, 2007
JEFF SOUTHARD, TRISH SOUTHARD, JEFFREY STICKEL, HEATHER
STICKEL, MEL LINT, KEITH GOODYK, and GREG DANA, On Behalf of
Themselves and All Others Similarly Situated in the State of Iowa,
Appellants,
vs.
VISA U.S.A. INC. and MASTERCARD INTERNATIONAL INC.,
Appellees.
Appeal from the Iowa District Court for Dallas County, Darrell J.
Goodhue, Judge.
Plaintiff consumers appeal the dismissal of their class action against
defendant national bank card associations in which plaintiffs sought
recovery based on defendants’ alleged violation of Iowa’s competition law,
Iowa Code ch. 553 (2003), and based on a theory of unjust enrichment.
AFFIRMED.
Andrew B. Howie of Hudson, Mallaney & Shindler, P.C.,
West Des Moines, for appellants.
Edward W. Remsburg of Ahlers & Cooney, P.C., Des Moines;
Robert C. Mason of Arnold & Porter LLP, New York, New York; and
Stephen V. Bomse and David M. Goldstein of Heller Ehrman LLP,
San Francisco, California, for appellee Visa U.S.A. Inc.
2
Kim J. Walker of Faegre & Benson LLP, Des Moines; Kenneth A. Gallo
of Paul, Weiss, Rifkind, Wharton & Garrison LLP, Washington, D.C.; and
Gary R. Carney of Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York,
New York, for appellee MasterCard International Inc.
3
TERNUS, Chief Justice.
The plaintiffs, Jeff Southard, Trish Southard, Jeffrey Stickel, Heather
Stickel, Mel Lint, Keith Goodyk, and Greg Dana, filed this class action on
September 18, 2003, alleging the defendants, Visa U.S.A. Inc. and
MasterCard International Inc., violated Iowa’s competition law, Iowa Code
chapter 553 (2003). They also sought relief against the defendants on the
common-law ground of unjust enrichment.
The defendants filed a motion to dismiss the plaintiffs’ action on the
basis that under well-established, common-law principles the plaintiffs
could not recover for derivative or remote injuries. The district court
granted the defendants’ motion and dismissed the plaintiffs’ petition in its
entirety.
The plaintiffs appealed. We affirm.
I. Standard of Review.
We review a ruling on a motion to dismiss for the correction of errors
at law. Comes v. Microsoft Corp., 646 N.W.2d 440, 442 (Iowa 2002). A
dismissal will be affirmed “only if the petition shows no right of recovery
under any state of the facts.” Id.
A motion to dismiss tests the legal sufficiency of the challenged
pleading. Haupt v. Miller, 514 N.W.2d 905, 907 (Iowa 1994). Thus, the
motion must stand or fall on the contents of the petition and matters of
which the court can take judicial notice. See Leuchtenmacher v. Farm
Bureau Mut. Ins. Co., 460 N.W.2d 858, 861 (Iowa 1990). Well-pled facts in
the pleading assailed are deemed admitted. Haupt, 514 N.W.2d at 907. In
addition, the petition is assessed in the light most favorable to the plaintiffs,
and all doubts and ambiguities are resolved in the plaintiffs’ favor. State ex
rel. Miller v. Philip Morris Inc., 577 N.W.2d 401, 403 (Iowa 1998).
4
“If the viability of a claim is at all debatable, courts should not
sustain a motion to dismiss.” Muzingo v. St. Luke’s Hosp., 518 N.W.2d 776,
777 (Iowa 1994). Although motions to dismiss are not favored, they
continue to be used, particularly when the issue is standing or the capacity
to sue. See, e.g., Philip Morris Inc., 577 N.W.2d at 406-07 (affirming
dismissal of State’s claims against tobacco manufacturers as too remote
and derivative).
II. Background Proceedings.
The plaintiffs filed a detailed, forty-eight-page petition. In their
petition, they allege they are and they represent consumers who purchased
goods for cash or used Visa or MasterCard debit cards to make purchases
from merchants who accept Visa or MasterCard credit cards as a form of
payment. The plaintiffs contend the defendants required merchants who
accepted Visa and MasterCard credit cards to also accept Visa and
MasterCard debit cards. Due to this tying arrangement, the plaintiffs
allege, merchants were forced to pay inflated fees for processing debit
transactions over the Visa and MasterCard networks. The plaintiffs assert
these magnified costs were passed along to all consumers in the form of
higher prices for the goods sold by the merchants.
The plaintiffs allege the tying arrangement orchestrated by the
defendants was a violation of Iowa’s competition law. See Iowa Code
§§ 553.4, .5. They claim they and others in the class were injured by the
defendants’ illegal conduct because all consumers paid merchants
artificially inflated prices for all merchandise. See id. § 553.12(2) (“[A]
person who is injured . . . by conduct prohibited under this chapter may
bring suit to . . . [r]ecover actual damages resulting from conduct prohibited
under this chapter.”).
5
The plaintiffs also allege the same conduct of the defendants resulted
in the defendants’ unjust enrichment at the expense of the plaintiffs and
other class members. The plaintiffs seek restitution of the monies received
by the defendants as a result of the defendants’ conduct. 1
The defendants filed a motion to dismiss for failure to state a claim
upon which relief can be granted. See Iowa R. Civ. P. 1.421(1). They
asserted the plaintiffs could not recover because the plaintiffs’ injuries were
derivative and remote. See Philip Morris Inc., 577 N.W.2d at 406-07
(explaining and applying the remoteness doctrine). They further contended
the plaintiffs were not “indirect purchasers” who may sue under Iowa’s
antitrust law. See Comes, 646 N.W.2d at 451 (allowing suit by indirect
purchasers under Iowa’s competition law). Finally, the defendants argued
the plaintiffs’ unjust enrichment claim was unsupported by the facts alleged
in the petition.
The district court granted the defendants’ motion to dismiss.
Employing the test set forth in Associated General Contractors v. California
Council of Carpenters, 459 U.S. 519, 103 S. Ct. 897, 74 L. Ed. 2d 723
(1983), the district court held the plaintiffs’ injuries were too remote to
support a claim under chapter 553. The court agreed with the defendants
that the plaintiffs in this action were not indirect purchasers like the
plaintiffs permitted to sue Microsoft in the Comes suit.
The district court also rejected the plaintiffs’ claim of unjust
enrichment. It concluded the same obstacles to recovery that existed with
1The plaintiffs also allege a claim for “money had and received.” This claim was
ultimately dismissed by the district court, who concluded this theory was indistinguishable
from the plaintiffs’ unjust enrichment claim. On appeal, the plaintiffs state the district
court erred in dismissing their claim for money had and received, but make no argument
with respect to this theory and cite no authorities to support this statement distinct from
their briefing of the unjust enrichment claim. We therefore do not separately consider or
discuss the plaintiffs’ theory of money had and received.
6
respect to the plaintiffs’ statutory claim precluded their recovery under an
unjust enrichment theory. The court further held that as a result of the
merchants’ previous recovery from the defendants for injuries the
merchants sustained as a result of the defendants’ illegal tying
arrangement, the defendants had been stripped of their ill-gotten gains and
no unjust enrichment remained. See In re Visa Check/MasterMoney
Antitrust Litig., 297 F. Supp. 2d 503, 506-09 (E.D.N.Y. 2003), aff’d sub nom.
Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005).
III. Issues on Appeal.
The plaintiffs claim the district court’s dismissal of their antitrust
claims due to the remoteness of their injuries was error. They maintain this
court rejected such a limitation when we held in Comes that indirect
purchasers could sue under Iowa’s competition law. The plaintiffs argue
that if we do not find Comes dispositive, we should use the “target area” test
to analyze whether they can bring suit under the Iowa competition law,
rather than the Associated General Contractors test employed by the district
court.
The plaintiffs also claim the dismissal of their unjust enrichment
claim constitutes error. They assert any deficiency in their antitrust claims
should not impact the viability of their unjust enrichment theory. The
plaintiffs further argue they have sufficiently alleged the required elements
for this common-law claim.
IV. Applicability of Comes.
We begin our analysis by addressing the plaintiffs’ assertion that our
decision in Comes—that indirect purchasers may bring suit under chapter
553—is dispositive of the present appeal. The premise underlying the
plaintiffs’ position is that this court in Comes held common-law rules
7
barring recovery for remote and derivative injuries do not apply to actions
brought under chapter 553.
Admittedly, our Comes decision contains some expansive statements
with respect to the reach of Iowa’s antitrust statute. See, e.g., Comes, 646
N.W.2d at 445 (“Given the clear, broad language of the state antitrust law,
we conclude the Iowa Competition Law creates a cause of action for all
consumers, regardless of one’s technical status as a direct or indirect
purchaser.”), 451 (“We conclude our antitrust law contemplates all injured
consumers are authorized to bring suit to enforce our antitrust laws.”).
Nonetheless, these statements must be interpreted within the context in
which they were made. As we stated in Comes: “The only issue on appeal
is whether the United States Supreme Court case, Illinois Brick [Co. v.
Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977)], should be
followed in interpreting the Iowa Competition Law.” Id. at 442. It is
appropriate, therefore, to briefly examine the holding in Illinois Brick.
In Illinois Brick, the Supreme Court held that “the overcharged direct
purchaser, and not others in the chain of manufacture or distribution, is
the party ‘injured in his business or property’ within the meaning of [the
federal antitrust law.]” 431 U.S. at 729, 97 S. Ct. at 2066, 52 L. Ed. 2d at
714. The Court pointed out that this issue was “analytically distinct from
the question of which persons have sustained injuries too remote to give
them standing to sue for damages” under federal law. Id. at 728 n.7, 97
S. Ct. at 2065 n.7, 52 L. Ed. 2d at 714 n.7.
In Comes, this court decided the Illinois Brick rule prohibiting
indirect-purchaser suits should not be followed in interpreting Iowa’s
competition law. 646 N.W.2d at 450. Accordingly, we held “indirect
purchasers may maintain an antitrust action in state court.” Id. at 441.
Because the plaintiffs in Comes qualified as indirect purchasers who had
8
standing under state law, we had no need in that case to determine whether
persons who were not indirect purchasers and who suffered injuries even
more remote than those sustained by indirect purchasers had standing.
Thus, with respect to setting the outer limits of what injuries are
compensable under Iowa’s competition law, our decision in Comes is
narrow. We simply rejected the federal rule barring claims by indirect
purchasers. We certainly did not, as suggested by the plaintiffs, determine
there were no limits on who could sue under chapter 553. Cf. Kanne v. Visa
U.S.A. Inc., 723 N.W.2d 293, 299-301 (Neb. 2006) (holding Nebraska
decision rejecting Illinois Brick indirect-purchaser rule in antitrust suit
against Microsoft did not reject all standing requirements).
Before discussing what limits exist with respect to who may sue
under Iowa antitrust law due to the common-law remoteness doctrine, we
address the plaintiffs’ argument that they are indirect purchasers in the
same position as the Comes plaintiffs. The plaintiffs in Comes had
purchased computers that came with the Windows 98 operating system
preinstalled. Comes, 646 N.W.2d at 441. As a precondition to the use of
this operating system, the plaintiffs became end-user licensees of Microsoft.
Id. at 441-42. The plaintiffs alleged in the class action filed on behalf of all
end-user licensees of Windows 98 living in Iowa that “Microsoft maintained
or used a monopoly in conjunction with its Windows 98 operating system
for the purpose of excluding competition or controlling, fixing, or
maintaining prices in violation of the Iowa Competition Law.” Id. at 442. As
a result of this illegal conduct, alleged the plaintiffs, Microsoft charged a
higher price for its Windows 98 system than what it would have been able
to charge in a competitive market. Id.
The plaintiffs bringing suit in Comes were indirect purchasers of the
Windows 98 operating system because “Microsoft did not directly sell its
9
products [to the plaintiffs, but the plaintiffs] ultimately obtained the
products through the stream of commerce.” Comes v. Microsoft Corp., 696
N.W.2d 318, 320 (Iowa 2005). The plaintiffs in the present action are not in
a comparable position because they did not purchase, directly or indirectly,
the product that is the subject of anticompetitive activity by Visa and
MasterCard—debit processing services. It is clear from the petition that the
plaintiffs are nonpurchasers; they simply bought merchandise from
businesses that used the defendants’ debit processing services. Kanne, 723
N.W.2d at 301 (holding consumer plaintiffs in identical Nebraska antitrust
suit were not indirect purchasers of Visa and MasterCard services).
Consequently, our decision in Comes is not dispositive of the issue
presented by the present appeal: can a nonpurchaser suffering a derivative
injury recover under Iowa’s competition statute?
V. Recovery by Person Having a Derivative or Remote Injury.
Iowa law bars recovery of derivative and remote injuries in a variety of
situations. See, e.g., Philip Morris Inc., 577 N.W.2d at 406-07 (suit by state
against tobacco manufacturers for state’s payment of medical expenses for
citizens’ tobacco-related illnesses); Anderson Plasterers v. Meinecke, 543
N.W.2d 612, 613 (Iowa 1996) (suit by employer for its losses due to third-
party’s negligent injury of employee). As we explained in Philip Morris Inc.,
“The remoteness doctrine ‘is not based upon a factual inquiry to determine
whether the damages claimed were foreseeable or whether they were a
proximate cause; rather, it is a legal doctrine incorporating public policy
considerations.’ ” 577 N.W.2d at 406 (quoting Kraft Chem. Co. v. Ill. Bell Tel.
Co., 608 N.E.2d 243, 245 (Ill. App. Ct. 1993)).
In determining whether this doctrine precludes the plaintiffs’ antitrust
claims, we first examine whether recovery for derivative or remote injuries is
permitted under Iowa’s competition law. As we noted in Comes, the Iowa
10
statute authorizes recovery by a very broad category of persons: “[A] person
who is injured . . . by conduct prohibited under this chapter may bring suit
to: . . . [r]ecover actual damages resulting from conduct prohibited under
this chapter.” 646 N.W.2d at 443 (quoting Iowa Code § 533.12(2)). In part
due to the broad language of the statute, this court in Comes rejected
application of the federal rule barring suits by indirect purchasers. Id. at
445. Our decision was also based on the fact that although Iowa’s
competition law “took its cues from federal law,” the indirect-purchaser rule
was not a part of federal antitrust law at the time the Iowa general assembly
enacted its statute. Id. at 447 (noting “six of the seven federal courts of
appeals that considered this issue [had] held indirect purchasers could
recover damages for antitrust violations”). We concluded, therefore, that “it
was impossible for the legislature to have adopted a judicial construction
which did not exist at that time.” Id.
Obviously, in considering the application of the remoteness doctrine
in the present case, we are dealing with the same broad statutory language
interpreted in Comes. The history of federal antitrust law is, however, quite
different with respect to the remoteness doctrine than it was with respect to
the indirect-purchaser rule. Prior to the enactment of the Iowa competition
law in 1976, see 1976 Iowa Acts ch. 1224, the United States Supreme Court
observed, “The lower courts have been virtually unanimous in concluding
that Congress did not intend the antitrust laws to provide a remedy in
damages for all injuries that might conceivably be traced to an antitrust
violation.” Hawaii v. Standard Oil Co., 405 U.S. 251, 264 n.14, 92 S. Ct.
885, 892 n.14, 31 L. Ed. 2d 184, 193 n.14 (1972).
As we determined in Comes, the interpretation given to the federal
antitrust law at the time the Iowa competition law was adopted informs our
search for legislative intent. Therefore, we conclude the Iowa legislature did
11
not intend to allow every person tangentially affected by a violation of the
statute to have a remedy in damages. This conclusion leads us to consider
whether the plaintiffs’ injuries are too remote to be recoverable under
chapter 553.
VI. Test to Determine Antitrust Standing.
Although lower courts had unanimously rejected claims for remote
injuries prior to Iowa’s adoption of its antitrust law in 1976, the United
States Supreme Court did not directly address this issue until its 1983
decision in Associated General Contractors. In that case, the Court noted
the federal antitrust statute was “broad enough to encompass every harm
that can be attributed directly or indirectly to the consequences of an
antitrust violation,” but concluded “Congress intended the Act to be
construed in the light of its common-law background.” Associated Gen.
Contractors, 459 U.S. at 529, 531, 103 S. Ct. at 904-05, 74 L. Ed. 2d at 733.
This common-law background encompassed constraints on who could
recover, including limitations on recovery for remote injuries. Id. at 532
n.25, 103 S. Ct. at 905 n.25, 74 L. Ed. 2d at 734-35 n.25. In determining
who could recover under the federal act, i.e., who has “antitrust standing,”
the Court focused on “the plaintiff’s harm, the alleged wrongdoing by the
defendants, and the relationship between them.” Id. at 535, 103 S. Ct. at
907, 74 L. Ed. 2d at 736.
The plaintiffs urge us to reject the Associated General Contractors
(AGC) test and employ the “target area” test to analyze standing. Under the
latter test, a plaintiff must simply be in the “target area” of the antitrust
conspiracy, that is, “the area of the economy which is endangered by a
breakdown of competitive conditions in a particular industry.” Id. at 537
n.33, 103 S. Ct. at 908 n.33, 74 L. Ed. 2d at 737 n.33. The United States
Supreme Court rejected this test in Associated General Contractors,
12
instructing courts to consider the multiple factors set forth in that decision.
Id. Moreover, contrary to the plaintiffs’ claim the “target area” test is more
widely accepted, it appears federal and state courts have uniformly applied
the AGC test.
The “target area” test, which is in essence an analysis of
foreseeability, is inconsistent with Iowa’s common-law limitation on
recovery for remote injuries, which is not based on the foreseeability of the
plaintiff’s damages. See Philip Morris Inc., 577 N.W.2d at 406 (“The
remoteness doctrine ‘is not based upon a factual inquiry to determine
whether the damages claimed were foreseeable . . . .’ ” (quoting Kraft Chem.
Co., 608 N.E.2d at 245)). We think the AGC test is more reflective of the
legal context within which the Iowa legislature enacted Iowa’s competition
law. Therefore, we apply the AGC factors to determine whether the
plaintiffs may recover under Iowa law.
VII. Application of the AGC Test.
To determine standing under our antitrust law, we will examine “the
plaintiff’s harm, the alleged wrongdoing by the defendants, and the
relationship between them.” Associated Gen. Contractors, 459 U.S. at 535,
103 S. Ct. at 907, 74 L. Ed. 2d at 736. In Associated General Contractors,
the Court focused on five factors to guide its examination: (1) whether the
claim alleges a causal connection between the antitrust violation and the
plaintiff’s alleged harm; (2) whether the plaintiff’s alleged injury is of a type
sought to be redressed by the antitrust laws; (3) the directness or
indirectness of the asserted injury; (4) whether denying a remedy is likely to
leave a significant antitrust violation undetected or unremedied; and (5)
whether the damages claimed are highly speculative or abstract. Id. at 536-
45, 103 S. Ct. at 908-12, 74 L. Ed. 2d at 737-43. We think the district
13
court properly applied these factors in deciding the plaintiffs had no
standing under Iowa’s competition law.
It is not disputed the plaintiffs have alleged a causal connection
between the defendants’ illegal conduct and the plaintiffs’ alleged injuries.
On the other hand, the plaintiffs are neither consumers of the defendants’
products nor competitors of the defendants. Therefore, the plaintiffs are not
“participants in the relevant market,” and their injuries are not of the type
sought to be compensated by antitrust laws. Id. at 538, 103 S. Ct. at 908-
09, 74 L. Ed. 2d at 738. Clearly, the injuries alleged by the plaintiffs are
not even indirect, as the plaintiffs are not in the chain of distribution. Their
injuries are better described as derivative. Denying a remedy will not leave
the alleged antitrust violation undetected or unremedied. Indeed, the action
brought by merchants against Visa and MasterCard was settled by the
defendants’ payment of more than three billion dollars into a settlement
fund and an agreement to abandon the alleged tying arrangements. See In
re Visa Check/MasterMoney Antitrust Litig., 297 F. Supp. 2d at 506-09.
Finally, a determination of the plaintiffs’ damages would be a complex
process at best and speculative at worst because many factors impact a
retailer’s decision-making process when setting prices on products sold to
consumers. Considering the AGC factors, we hold the district court
properly determined the plaintiffs’ injuries were too remote to be
compensable under Iowa’s competition law. See Kanne, 723 N.W.2d at 298-
99 (affirming dismissal of identical action brought under Nebraska antitrust
law, holding consumers’ injuries were too remote under AGC test); Ho v.
Visa U.S.A., Inc., 793 N.Y.S.2d 8, 9 (App. Div. 2005) (same).
VIII. Unjust Enrichment Claim.
The plaintiffs alleged in their petition that the defendants’ illegal tying
arrangements unjustly enriched the defendants at the plaintiffs’ expense
14
because the merchants who paid artificially high prices for the defendants’
debit processing services passed those costs along to the plaintiff
consumers. The district court dismissed this claim, concluding it suffered
from the same remoteness-of-injury problem as the plaintiffs’ antitrust
claims and that there was no enrichment due to the defendants’ settlement
of the antitrust action brought by merchants.
Plaintiffs rely on the broad and open-ended nature of the equitable
doctrine of unjust enrichment to support their claim. See State ex rel.
Palmer v. Unisys Corp., 637 N.W.2d 142, 150 (Iowa 2001) (stating that
unjust enrichment “can stand on its own as an open-ended, broad theory of
restitution”). Plaintiffs overlook that this common-law theory is subject to
the common-law rule that bars recovery for remote injuries. Relying on the
remoteness doctrine, this court, in Philip Morris Inc., concluded the district
court had correctly dismissed the State’s claim for indemnity, a form of
unjust enrichment. 577 N.W.2d at 406. See generally Unisys Corp., 637
N.W.2d at 149-50 (noting the theory of unjust enrichment has “given rise to
specific derivative theories, such as contribution and indemnity”). We held
the State’s injury—payment of citizens’ medical expenses made necessary
by the defendants’ conduct—was too remote to recover. Philip Morris Inc.,
577 N.W.2d at 406-07.
The same conclusion must logically be reached here. Therefore, the
district court did not err in dismissing the plaintiffs’ unjust enrichment
claim on the basis the plaintiffs’ injuries were too remote.
IX. Summary.
Iowa’s competition law does not provide a remedy to every person who
can trace an injury to a defendant’s anticompetitive conduct. Injuries that
are remote under the analysis used in the Associated General Contractors
case may not be recovered under chapter 553.
15
In the present case, the plaintiff consumers’ injuries are remote, and
therefore, the plaintiffs lack antitrust standing. Moreover, the plaintiffs are
not indirect purchasers of the defendants’ services; they are nonpurchasers.
Consequently, they cannot benefit from our decision in Comes to allow
indirect purchasers to bring suit under Iowa’s competition law.
Finally, the plaintiffs cannot recover under a theory of unjust
enrichment because their injuries are too remote.
The district court correctly granted the defendants’ motion to dismiss
the plaintiffs’ claims. Accordingly, we affirm.
AFFIRMED.
All justices concur except Hecht and Appel, JJ., who take no part.