Fontana Aviation, Inc. v. The Cessna Aircraft Company and Cessna Finance Corporation

CASTLE, Senior Circuit Judge,

dissenting.

I am unable to agree with the conclusions reached by the majority. For the following reasons, I dissent.

I.

According to the majority opinion, the district court failed to give adequate consideration to Fontana’s allegations that Cessna entered into a multifaceted anticompetitive conspiracy against Fontana. The majority then concludes that there is some “vitality” remaining in Fontana’s multifaceted conspiracy theory and that there are questions of motive and intent to be decided.

Hanover Shoe and Illinois Brick

In order to properly analyze the majority’s opinion, it is necessary to discuss the decisions in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968) and Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). In Hanover Shoe the defendant (United) was alleged to have been a monopolist and was sued for treble damages under Section 4 of the Clayton Act, 15 U.S.C. § 15.1 United maintained that the plaintiff (Hanover), a direct purchaser from United, merely passed excess costs on to Hanover’s own customers. Accordingly, United contended, Hanover was not injured within the meaning of Section 4. The Supreme Court rejected the use of such a “pass-on” defense and held that Hanover had indeed suffered Section 4 damages.

In Illinois Brick the plaintiffs, indirect purchasers from the defendants, claimed that the defendants illegally fixed prices. The plaintiffs claimed to have been damaged within the meaning of Section 4 of the Clayton Act because intermediaries in the chain of distribution passed the defendants’ illegally fixed prices on to the plaintiffs. The Supreme Court rejected this contention, holding that if a claim that illegal prices were passed on could not be used defensively (the holding of Hanover Shoe), such a claim could not be used offensively (as was attempted by the plaintiffs in Illinois Brick). Accordingly, the Supreme Court concluded that “the overcharged direct purchaser, and not others in the chain of manufacture or distribution, is the party *483‘injured in this business or property’ within the meaning of . [S]ection [4].” 431 U.S. at 729, 97 S.Ct. at 2066.

In deciding Illinois Brick, the Supreme Court noted that allowing Hanover Shoe to stand while permitting indirect purchasers to claim damages due to passed-on prices “would create a serious risk of multiple liability for defendants.” 431 U.S. at 730, 97 S.Ct. at 2067. The Court also noted that the rationale behind Hanover Shoe was equally applicable to both plaintiffs and defendants. A major reason for the decision in Hanover Shoe, explained the Court, was “an unwillingness to complicate treble-damages actions with attempts to trace the effects of the overcharge on the [indirect] purchaser’s prices, sales, costs, and profits, and of showing that these variables would have behaved differently without the overcharge.” 431 U.S. at 725, 97 S.Ct. at 2064.

The District Court’s Decision

The court below gave full and proper effect to both the relevant precedent and to the claims made by Fontana. The district court’s decision was not based on the “vitality” of Fontana’s allegations. Nor is the issue in this case whether the allegations made against Cessna are of “antitrust concern.” Rather, the issue is whether Fonta-na has claimed any injuries other than those inflicted through Cessna’s prices. The district court noted that Fontana’s claim for treble damages under Section 4 was only to recover those losses occasioned by Cessna’s prices. In light of the fact that Fontana purchased no aircraft directly from Cessna, the district court held that Cessna’s prices could not have injured Fontana within the meaning of Section 4 as that section was interpreted in Illinois Brick. Accordingly, the district court granted Cessna’s motion for summary judgment on Fontana’s Section 4 damage claims.

It should be noted that the district court recognized the possibility that it was misconstruing Fontana’s claims for damages. Accordingly, the district court gave Fonta-na leave to file an amended complaint if Fontana wished to allege that it suffered any Section 4 injury based on any of Cessna’s actions other than Cessna’s pricing policies. Fontana did not take advantage of this opportunity. It therefore seems particularly unfair that Fontana should now complain that it was injured by actions taken by Cessna other than Cessna’s pricing policy. See General Teamsters Chauffeurs & Helpers U. v. Blue Cab Co., 353 F.2d 687 (7th Cir. 1965). See also Wright & Miller, Federal Practice and Procedure § 2716 (1978).

Moreover, neither Fontana nor the majority opinion has demonstrated that the district court erred in its interpretation of Fontana’s claims. Fontana’s attorney, who was also a shareholder, director and officer of Fontana, stated that “[w]e are not seeking recovery of damages” for any actions taken by Cessna prior to the institution of the Cessna II Marketing Program (CMP) in late 1975. In discussing Fontana’s claims for damages under the CMP, Fontana’s president discussed the two theories under which Fontana sought damages. Both of those theories dealt with sales lost by Fon-tana due to the prices charged for Cessna aircraft by Fontana’s competitors. The prices charged by Fontana’s competitors, in turn, relate back to the prices charged by Cessna to its dealerships under the CMP. Despite this testimony, the majority continues to give weight to claims for damages based on a “conspiracy” which allegedly began in 1974, a year before the institution of the CMP.

The Applicability of Illinois Brick

Nothing in the majority opinion demonstrates that Illinois Brick does not apply to this case. Both Hanover Shoe and Illinois Brick dealt with the general treble damages provision of the antitrust laws. Illinois Brick specifically noted that exceptions to Hanover Shoe should be rare and, when created, should be narrowly drawn. 431 U.S. at 745, 97 S.Ct. at 2074. More significant, however, is the fact that the rationale of Illinois Brick is fully applicable to Fonta-na’s claims.

*484As noted above, one basis for the decisions in Illinois Brick and Hanover Shoe was the inherent difficulty in determining the effect of a manufacturer’s prices on an indirect purchaser. 431 U.S. at 725, 731-32, 741—44, 97 S.Ct. at 2064, 2067, 2072. One of Fontana’s major claims demonstrates the applicability of that reasoning to this case. Fontana’s complaints charged that in 1976 Cessna raised the price of a Model 421 aircraft without optional accessories or avionics to $273,950. At the same time, Fontana continues, Cessna increased the price of a Model 421 with a full accessories and avionics package to $316,950. Fontana then contends that Cessna had been charging $57,-235 for the individual accessories and avionics components included in the Model 421; that $316,950 minus $57,235 equals $259,-715; and that Cessna was therefore exacting an illegal “penalty” of $14,235. This “penalty” is Fontana’s perceived difference between the price of the airplane as part of a package ($259,715) and the price of such an airplane alone ($273,950).

The applicability of Illinois Brick becomes apparent when it is revealed that all of these claims are based on the manufacturer’s suggested retail price. In an affidavit, Cessna’s Senior Vice-President of Marketing stated that Cessna charged its independent dealerships the same price for Model 421 aircraft regardless of whether or not the aircraft was purchased as part of a package. The only difference was that Cessna gave the dealers a discount of $2,747 if the aircraft was purchased with avionics. Additionally, Cessna reduced the price it charged dealerships for accessories and avionics by $5,732. However, even after the price reductions, the difference between the amount Cessna charged its dealers and the suggested retail price varied between $54,000 and $63,000. Thus, the $14,000 “penalty” or “overcharge” alleged by Fon-tana was imposed, not by Cessna, but by independent Cessna dealerships. These dealerships could have absorbed this entire difference, if they so desired, by altering their markup on avionics equipped and unequipped aircraft. The impossibility of determining the effect of Cessna’s prices upon Fontana is evident. Accordingly, Illinois Brick should fully apply to any Section 4 damages which Fontana claims were inflicted upon it through Cessna’s pricing policies.

Fontana’s “Competitor” Status

Fontana also argues that Illinois Brick should not apply here because Fontana competed with Cessna in the sale of avionics for Cessna aircraft. However, Fontana’s competitor status should not affect the applicability of Illinois Brick to those Section 4 damages which Fontana seeks due to Cessna’s prices. Illinois Brick appears to have dealt with all purchasers seeking Section 4 damages based on the prices charged by indirect sellers. As indicated by the district court, Fontana was free to seek recovery of those losses actually occasioned by any anti-competitive acts, aside from Cessna’s pricing policies, committed by Cessna. Those acts, described in the majority opinion, included product disparagement and territorial restrictions. However, Fontana’s only claimed damages under Section 4 were due to Cessna’s prices. Illinois Brick squarely prevents Fontana from recovering these damages.

An additional point is the meritless nature of Fontana’s alleged competitor status. Fontana sold all of its aircraft and avionics at the retail level; Cessna sold neither aircraft nor avionics at the retail level. Indeed, Fontana is no more a competitor of Cessna’s than is any retailer who, in purchasing various components of a product line from various manufacturers, only buys portions of the product line from each manufacturer. An example of the fallacy of Fontana’s competitor argument is In Re Beef Industry Antitrust Litigation, 600 F.2d 1148 (5th Cir. 1978). The Beef Industry case plaintiffs included parties that raised cattle. The defendants included twenty-five supermarket chains. Under Fontana’s theory the plaintiffs (who were concerned with selling as much beef as possible) competed with the defendants (who sold foods which competed with beef). Despite this “competition” between the plaintiffs and the defendants, the Fifth Circuit ruled that the plaintiffs’ claims for damages were within the ambit of Illinois *485Brick.2 Therefore, even if “competitor” status does affect the application of Illinois Brick to a claim for Section 4 damages, Fontana is not entitled to that status.

II.

I also disagree with the majority’s decision not to reach the applicability to this case of Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). The Brunswick issue was addressed in the briefs filed before this Court. Additionally, the record before this Court includes the briefs which the parties filed with the district court on the applicability of Brunswick. Finally, I fail to see how the disposition of the Brunswick issue will be aided by any further development of the facts of this case.

. Section 4 of the Clayton Act, 15 U.S.C. § 15, is the general treble damage provision of the antitrust laws. It provides, in pertinent part, that:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . . and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.

. The Fifth Circuit went on to hold that the Illinois Brick cost-plus contract exception applied. However, that exception was not raised before this Court and is not applicable to the case at hand.