IN THE SUPREME COURT OF TENNESSEE
AT KNOXVILLE
May 3, 2005 Session
FREEMAN INDUSTRIES, LLC v. EASTMAN CHEMICAL COMPANY,
ET AL.
Appeal by Permission from the Court of Appeals
Circuit Court for Sullivan County
No. C34355-L Richard E. Ladd, Chancellor
No. E2003-00527-SC-S09-CV - Filed August 25, 2005
We granted permission to appeal to determine: 1) whether an indirect purchaser may bring an action
under the Tennessee Trade Practices Act against defendants involved in an price-fixing scheme; 2)
whether the conduct complained of falls within the scope of the act; and 3) whether the trial court
erred in declining to grant summary judgment to the defendants as to the plaintiff’s unjust
enrichment claim. We conclude that although an indirect purchaser may bring an action under the
Tennessee Trade Practices Act, the conduct complained of in this case did not substantially affect
Tennessee commerce and thus falls outside the scope of the act. We further conclude that to sustain
an unjust enrichment claim, the plaintiff is not required to: 1) establish that the defendants received
a direct benefit or 2) exhaust all remedies against the party with whom the plaintiff is in privity if
the pursuit of the remedies would be futile. Because the plaintiff failed to provide a factual basis to
support its bare allegation that any attempt to exhaust its remedies would have been futile, the trial
court erred in failing to grant the defendants’ motion for summary judgment on the unjust
enrichment claim. Accordingly, the judgment of the Court of Appeals is affirmed in part and
reversed in part, and the case is remanded to the trial court for further proceedings in accordance
with this opinion.
Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed in
Part; Reversed in Part; Remanded to the Trial Court
JANICE M. HOLDER, J., delivered the opinion of the court, in which FRANK F. DROWOTA , III, C.J.,
and E. RILEY ANDERSON , ADOLPHO A. BIRCH , JR., and WILLIAM M. BARKER, JJ., joined.
Barry C. Barnett, Dallas, Texas; Daniel R. Karon, Cleveland, Ohio; Isaac L. Diel and Rex A. Sharp,
Prairie Village, Kansas; John S. Bingham, Kingsport, Tennessee; and Todd R. Seelman, Denver,
Colorado, for the appellant, Freeman Industries, LLC.
Herbert S. Washer, New York, New York, and Morris Hadden, Kingsport, Tennessee, for the
appellee, Daicel Chemical Industries, Ltd.
Michelle K. Fisher and Thomas Demitrack, Cleveland, Ohio, and William T. Gamble, Kingsport,
Tennessee, for the appellee, Eastman Chemical Company.
Jennifer B. Patterson and Michael D. Blechman, New York, New York, and Morris Hadden,
Kingsport, Tennessee, for the appellees, Hoechst Aktiengesellschaft and Nutrinova Nutrition
Specialities & Food Ingredients, GmbH.
Eugene G. Illovsky, Walnut Creek, California, and Morris Hadden, Kingsport, Tennessee, for the
appellee, Nippon Gohsei Industries, Ltd.
OPINION
Defendant Eastman Chemical Co. (“Eastman”) is a Delaware corporation with its principal
place of business in Kingsport, Tennessee. Defendants Hoechst Aktiengesellschaft (“Hoechst”) and
Nutrinova Nutrition Specialities & Food Ingredients, GmbH (“Nutrinova”) are German corporations
with principal places of business in Frankfurt, Germany. Defendants Daciel Chemical Industries,
Ltd. (“Daciel”) and Nippon Gohsei Industries, Ltd. (“Nippon”) are Japanese corporations with
principal places of business in Tokyo and Osaka, Japan, respectively. Eastman, Hoechst, Nutrinova,
Daciel, and Nippon (collectively “defendants”) are producers of sorbates. Sorbates are food
preservatives used in small quantities in high-moisture and high-sugar products to slow the growth
of mold.
Between 1998 and 2001, each defendant pleaded guilty to fixing the prices of sorbates in
violation of the Sherman Antitrust Act. See 15 U.S.C. § 1 (1997). The defendants also have settled
federal lawsuits brought by a nationwide class of direct purchasers of sorbates as well as lawsuits
brought by indirect purchasers in fourteen states, including Tennessee, and the District of Columbia.
Plaintiff Freeman Industries, LLC (“Freeman”) is a New York corporation with its principal
place of business in Tuckahoe, New York. Freeman is an end-user of food products containing
sorbates and purchases these products at supermarkets in New York. Freeman, as an indirect
purchaser of sorbates, filed a lawsuit against the defendants claiming a violation of the Tennessee
Trade Practices Act (“TTPA”), Tenn. Code Ann. § 47-25-101 et seq. (2001), and unjust enrichment.
The trial court granted the defendants’ motion to dismiss Freeman’s TTPA claim. The trial
court concluded that the TTPA does not apply to indirect purchasers or to transactions occurring
outside of Tennessee. The trial court denied the defendants’ motion for summary judgment as to
Freeman’s unjust enrichment claim.
On interlocutory review, the Court of Appeals concluded that although indirect purchasers
may recover under the TTPA, the act does not apply to indirect purchasers who are not “Tennessee
consumers.” The Court of Appeals further concluded that Freeman could not recover under the
TTPA because it failed to establish that it “had a transaction in Tennessee that was substantially
affected by the defendants’ illegal conduct.” With respect to Freeman’s unjust enrichment claim,
-2-
the Court of Appeals held that a plaintiff is not required to confer a direct benefit upon a defendant
to proceed with a claim for unjust enrichment. The Court of Appeals therefore modified the portion
of the trial court’s judgment that held that the TTPA is not applicable to indirect purchasers and
affirmed the trial court’s judgment in all other respects. We granted review.
ANALYSIS
A. Tennessee Trade Practices Act
We must first decide whether the trial court erred in granting the defendants’ motion to
dismiss Freeman’s TTPA claims pursuant to Tennessee Rule of Civil Procedure 12.02(6). A motion
to dismiss a complaint for failure to state a claim pursuant to Rule 12.02(6) “admits the truth of all
of the relevant and material allegations contained in the complaint, but it asserts that the allegations
fail to establish a cause of action.” Leach v. Taylor, 124 S.W.3d 87, 90 (Tenn. 2004). When
reviewing a dismissal of a complaint under Rule 12.02(6), we must take the factual allegations of
the complaint as true and review the trial court's legal conclusions de novo without any presumption
of correctness. Id.
1. Indirect Purchasers
Tennessee Code Annotated section 47-25-106 (2001) provides for a civil remedy against
those who violate the TTPA. Section 47-25-106 states that:
[a]ny person who is injured or damaged by any such arrangement, contract,
agreement, trust, or combination described in this part may sue for and recover, in
any court of competent jurisdiction, from any person operating such trust or
combination, the full consideration or sum paid by the person for any goods, wares,
merchandise, or articles, the sale of which is controlled by such combination or trust.
By providing a civil remedy to “[a]ny person who is injured or damaged” as the result of
violations of the TTPA, the plain language of section 47-25-106 provides a cause of action to
indirect purchasers. See City of Cookeville ex rel. Reg’l Med. Ctr. v. Humphrey, 126 S.W.3d 897,
902 (Tenn. 2004) (providing that where the language of a statute is clear and unambiguous, we must
apply the statute in accordance with its plain language). Contrary to the Court of Appeals’ holding,
the plain language of section 47-25-106 does not prohibit recovery to indirect purchasers who are
non-residents of Tennessee. Moreover, sections 47-25-101 and -1021 (2001) prohibit price fixing
1
Tennessee Code Annotated section 47-25-101 (2001) provides that
All arrangements, contracts, agreements, trusts, or combinations between persons or corporations
made with a view to lessen, or which tend to lessen, full and free competition in the importation or sale
of articles imported into this state, or in the manufacture or sale of articles of domestic growth or of
domestic raw material, and all arrangements, contracts, agreements, trusts, or combinations between
(continued...)
-3-
agreements that tend to affect the price to the “producer or consumer” of such products. These
statutes reflect a clear intent to protect and afford a remedy to ultimate consumers.
This Court has identified two purposes of the TTPA. See Baird v. Smith, 161 S.W. 492, 493
(Tenn. 1913). The first purpose is to preserve full and free competition in the sale of merchandise
that “had become a part of the mass of property in the State.” Id. The second purpose is to preserve
full and free competition in the manufacture and sale of “articles of domestic growth and domestic
raw material” and to prevent combinations tending to affect the price or cost of these articles to the
producer or consumer. Id. We believe that permitting indirect purchasers to recover under the
TTPA promotes these purposes.
The defendants contend that the language of Tennessee Code Annotated section 47-25-106
permitting recovery of “the full consideration or sum paid by the person” for the products, “the sale
of which is controlled by such combination or trust,” limits recovery to direct purchasers. According
to the defendants, the only sale “controlled by” an antitrust violator is the transaction between the
violator and the direct purchaser. We believe that their argument is flawed. First, “control” means
“[p]ower or authority to manage, direct, superintend, restrict, regulate, govern, administer, or
oversee” as well as “[t]he ability to exercise a restraining or directing influence over something.”
Black’s Law Dictionary 329 (6th ed. 1990). A sale “controlled by” an antitrust violation includes not
only a sale made by the violator to the direct purchaser but also a transaction between the direct
purchaser and the consumer in which the price of the product purchased by the consumer is
influenced by the antitrust violator’s conduct.
Second, we believe that this language pertains not to persons who may recover but to the
recovery itself. A plain reading of section 47-25-106 permits a person to recover the consideration
or sum that was “controlled by” or influenced by the antitrust violator. In other words, an indirect
purchaser may recover from the antitrust violator the amount of the overcharge that the direct
purchaser passed on to the indirect purchaser.2
1
(...continued)
persons or corporations designed, or which tend, to advance, reduce, or control the price or the cost
to the producer or the consumer of any such product or article, are declared to be against public policy,
unlawful, and void.
Tennessee Code Annotated 47-25-102 prohibits agreements “to sell and market . . . products and articles,
manufactured in this state, or imported into this state, to any producer or consumer at prices reduced below the cost of
production or importation into this state.” The statute further prohibits “any other arrangements, contracts, or
agreements, by and between its agents and subagents, which tend to lessen full and free competition in the sale of all such
articles manufactured and imported into the state, and which amount to a subterfuge for the purpose of obtaining the same
advantage and purposes.”
2
The defendants contend that permitting Freeman to recover the full consideration that it paid to the direct
purchaser for the food products violates the constitutional principles of fairness and due process. Because we interpret
Tennessee Code Annotated section 47-25-106 as permitting Freeman to recover only the amount of the overcharge that
the direct purchaser passed on to Freeman, we need not reach this issue.
-4-
Third, we conclude that the United States Supreme Court’s holding in Illinois Brick Co. v.
Illinois, 431 U.S. 720 (1977), does not require a different result. In that case, 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 [section 4 of the
Clayton Act].”3 Illinois Brick Co., 431 U.S. at 729. Thus, indirect purchasers do not have a cause
of action under federal antitrust law because they do not suffer a legally cognizable injury. See id.
The Court in Illinois Brick Co. was concerned that permitting offensive use of the “pass-on” theory
by indirect purchasers would create: 1) a risk of recovery of the entire overcharge by both the direct
and indirect purchasers, resulting in multiple liability for the defendant; 2) difficulty in apportioning
the responsibility for the overcharge among those in the chain of distribution; and 3) lack of
incentive for direct purchasers to bring suit. Id. at 737-38. The Court further reasoned that
permitting indirect purchasers to bring suit would result in highly complex litigation due to the
necessity of determining the amount of the overcharge passed on to the indirect purchasers. Id. at
732.
The Supreme Court’s holding in Illinois Brick Co., however, applies only to federal antitrust
law. Clearly, states may provide a remedy to indirect purchasers under their own antitrust laws.
California v. ARC Am. Corp., 490 U.S. 93, 103 (1989).
In response to Illinois Brick Co., many states amended their antitrust statutes to either provide
indirect purchasers with a private right of action or permit the state’s attorney general to bring an
action as parens patriae on behalf of indirect purchasers.4 The defendants identify various failed
attempts by the Tennessee legislature to amend the TTPA to expressly permit indirect purchaser
claims in support of its contention that the TTPA does not currently provide for such suits. While
legislative inaction is generally irrelevant to the interpretation of existing statutes, the legislature’s
failure to “express disapproval of a judicial construction of a statute is persuasive evidence of
legislative adoption of the judicial construction.” Hamby v. McDaniel, 559 S.W.2d 774, 776 (Tenn.
1977); see Forman, Inc. v. Nat’l Council on Comp. Ins., Inc., 13 S.W.3d 365, 373 (Tenn. Ct. App.
1999).
3
Section 4 of the Clayton Act, 15 U.S.C. § 15, provides:
[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.
4
See, e.g., Ala. Code § 6-5-60 (2004); Cal. Bus. & Prof. Code § 16750 (1987); Colo. Rev. Stat. § 6-4-111
(1992); D.C. Code Ann. § 28-4509 (1981); Haw. Rev. Stat. §§ 480-3 (1987),480-13 (2002), 480-14 (2003); 740 Ill.
Comp. Stat. 10/7 (2003); Kan. Stat. Ann. § 50-161 (2000); Me. Rev. Stat. Ann. tit. 10, § 1104 (2004); Mich. Comp.
Laws § 445.778 (1985); Minn. Stat. § 325D.57 (1984); Miss. Code Ann. § 75-21-9 (2005); Neb. Rev. Stat. § 59-821
(2002); Nev. Rev. Stat. § 598A.210 (1999); N.M. Stat. Ann. § 57-1-3 (1979); N.Y. Gen. Bus. Law § 340 (1999); N.D.
Cent. Code § 51-08.1-08 (1991); Or. Rev. Stat. § 646.775 (2001); R.I. Gen. Laws § 6-36-12 (1979); S.D. Codified Laws
§ 37-1-33 (1991); Vt. Stat. Ann. tit. 9, § 2465 (1999); W is. Stat. § 133.18 (1987).
-5-
The present case, however, involves the Tennessee legislature’s failure to amend a state
statute in response to a federal court’s interpretation of a federal statute. Furthermore, the United
States Supreme Court has emphasized that its holding in Illinois Brick Co. applies only to federal
antitrust law. ARC Am. Corp., 490 U.S. at 103. This case is this Court’s first opportunity to address
the issue of whether indirect purchasers have a cause of action under the TTPA. Under these
circumstances, it is
impossible to assert with any degree of assurance that [legislative] failure to act
represents (1) approval of the status quo, as opposed to (2) inability to agree upon
how to alter the status quo, (3) unawareness of the status quo, (4) indifference to the
status quo, or even (5) political cowardice.
Johnson v. Transp. Agency Santa Clara County, Cal., 480 U.S. 616, 672 (1987) (Scalia, J.,
dissenting). Therefore, we, like other jurisdictions, decline to presume that our state legislature
considered Illinois Brick Co. as affecting the TTPA and thus requiring an amendment to the current
statute.
Furthermore, unlike many states that have applied Illinois Brick Co. in disallowing indirect
purchasers from bringing a private action under their antitrust laws, Tennessee does not have a
statutory “harmony clause” mandating courts to interpret the TTPA consistently with federal law.
Cf. Stifflear v. Bristol-Myers Squibb Co., 931 P.2d 471, 476 (Colo. Ct. App. 1996); Vacco v.
Microsoft Corp., 793 A.2d 1048, 1056 (Conn. 2002); Davidson v. Microsoft Corp., 792 A.2d 336,
341 (Md. Ct. Spec. App. 2002); Major v. Microsoft Corp., 60 P.3d 511, 513 (Okla. Ct. App. 2002);
Siena v. Microsoft Corp., 796 A.2d 461, 464 (R.I. 2002); Abbott Labs., Inc. v. Segura, 907 S.W.2d
503, 505 (Tex. 1995). Thus, we join other jurisdictions in declining to interpret Illinois Brick Co.
as precluding indirect purchasers from bringing suit under the TTPA. See Bunker’s Glass Co. v.
Pilkington PLC, 75 P.3d 99, 107 (Ariz. 2003); Comes v. Microsoft Corp., 646 N.W.2d 440, 445
(Iowa 2002); Hyde v. Abbott Labs., Inc., 473 S.E. 2d 680, 686-87 (N.C. Ct. App. 1996); Arthur v.
Microsoft Corp., 676 N.W.2d 29, 38 (Neb. 2004).
In addition, the concerns identified by the United States Supreme Court in Illinois Brick Co.
do not justify prohibiting indirect purchaser suits under the TTPA. The Supreme Court expressed
concerns regarding the possibility of multiple liability. Illinois Brick Co., 431 U.S. at 730. The risk
that an antitrust violator may be subject to both a direct purchaser suit and an indirect purchaser suit
under the TTPA does exist. Our trial courts, however, are competent to handle such a problem. See
Bunker’s Glass Co., 75 P.3d at 108; Comes, 646 N.W.2d at 449-50. In fact, many Illinois Brick Co.
repealer statutes leave the solution of the risk of multiple liability to the trial courts. Bunker’s Glass
Co., 75 P.3d at 108 (citing statutes from Illinois, New Mexico, and South Dakota).
The Supreme Court also expressed concern regarding the decreased incentive for direct
purchasers to bring suit. Illinois Brick Co., 431 U.S. at 745. The Court, however, recognized that
direct purchasers likely will not bring suit due to fear of retaliation by their suppliers. Id. at 746.
Rather, the direct purchasers frequently pass on the overcharge to the indirect consumers who are
-6-
the injured parties. Id. at 764 (Brennan, J. dissenting); Comes, 646 N.W.2d at 450. The Supreme
Court conceded that by allowing only direct purchaser actions, the person “actually injured,” the
indirect purchaser who ultimately paid the overcharge, is not afforded redress. Illinois Brick Co.,
431 U.S. at 746. Thus, the indirect purchasers, the real victims of the antitrust violations, have the
true incentive to bring suit. By construing Tennessee Code Annotated section 47-25-106 (2001) as
permitting indirect purchaser suits, we are affording a remedy to the ultimate victims of the antitrust
conduct. Accepting the defendants’ position would leave such victims of illegal activity with no
redress, a result that hardly comports with notions of fair play.
Finally, the Supreme Court expressed concern regarding the risk of highly complex litigation
due to the difficulty in apportioning damages. Id. at 745-47. Antitrust, however, is a complex area
of law and generally involves highly complex litigation. See Comes, 646 N.W.2d at 451. We do
not believe that the ends of justice should be defeated simply because the risk of complicated
litigation exists. See id.
Accordingly, we conclude that an indirect purchaser may bring an action under Tennessee
Code Annotated section 47-25-106 for conduct in violation of the TTPA even though the indirect
purchaser is a non-resident of this state.
2. Scope of the TTPA
We must next determine whether the conduct complained of falls within the scope of the
TTPA. Tennessee Code Annotated section 47-25-101 (2001) provides that
[a]ll arrangements, contracts, agreements, trusts, or combinations between persons
or corporations made with a view to lessen, or which tend to lessen, full and free
competition in the importation or sale of articles imported into this state, or in the
manufacture or sale of articles of domestic growth or of domestic raw material, and
all arrangements, contracts, agreements, trusts, or combinations between persons or
corporations designed, or which tend, to advance, reduce, or control the price or the
cost to the producer or the consumer of any such product or article, are declared to
be against public policy, unlawful, and void.
This Court last addressed the reach of the TTPA in Standard Oil Co. v. State, 100 S.W. 705,
709 (1907), in which we held that this state’s antitrust statutes did not apply to interstate commerce
“when properly construed” and that the statute’s purpose was to “correct and prohibit abuses of trade
within the state.” At the time of this holding, a theory of dual sovereignty presuming mutually
exclusive jurisdiction for state and federal regulation prevailed. See Abbott Labs. v. Durrett, 746
So. 2d 316, 330-34 (Ala. 1999) (discussing the theory of dual sovereignty).
In Standard Oil Co., this Court reasoned that the state legislature knew it did not have the
power to enact laws that regulated interstate commerce and thus did not intend to enact
unconstitutional law. 100 S.W. at 710. We further reasoned that the state legislature intended to
-7-
correct and punish the wrongs to trade that were being perpetrated against commerce within the state,
which the Sherman Antitrust Act could not reach and for which no efficient remedy was available.
Id. Thus, we concluded that “[t]he Legislature clearly intended to prohibit trusts, combinations, and
agreements affecting all commerce not covered by the federal statute, and upon which it had a right
to legislate. It did not intend to stop short of its power or to exceed it.” Id. at 711.
The language of Tennessee’s antitrust statutes have not changed significantly since Standard
Oil Co. Compare Standard Oil Co., 100 S.W. at 707, with Tenn. Code Ann. § 47-25-101 (2001).
In Standard Oil Co., however, this Court did not rely upon the plain language of this state’s antitrust
statutes in determining its scope. Rather, our holding was based upon two principles of statutory
construction. First, courts have a duty to construe statutes in such a manner as to avoid conflict with
the United States Constitution if the construction can be accomplished without disregarding the
legislature’s intent. Standard Oil Co., 100 S.W. at 710. Second, although a statute includes terms
that are overly broad, courts have a duty to limit a statute’s application to circumstances within the
legislature’s intent. Id. at 711. We based our holding upon the state legislature’s constitutionally
permitted scope of authority in the areas of antitrust law and interstate commerce that prevailed at
that time as well as upon our duty to construe a statute so as to avoid any unconstitutionality.
The dual sovereignty theory presuming mutually exclusive jurisdiction for state antitrust laws
and federal antitrust laws has since been rejected. The United States Supreme Court now considers
state antitrust regulations to supplement and complement the federal antitrust laws and the
enforcement of these state laws to be consistent with the federal antitrust laws. See ARC Am. Corp.,
490 U.S. at 101-02. Furthermore, a state generally is not prohibited from giving effect to its antitrust
laws merely because the regulation affects interstate commerce. See Standard Oil Co. v. Tenn., 217
U.S. 413 (1910). Specifically, a state antitrust regulation that has only incidental effects on interstate
commerce and is regulated evenhandedly to effectuate a legitimate local interest does not run afoul
of the Commerce Clause unless the burden imposed on interstate commerce is clearly excessive
when compared to the punitive local benefits. See Pike v. Bruce Church, Inc., 397 U.S. 137, 142
(1970).
In construing statutes, we must ascertain and give effect to the legislature’s intent and
purpose. See Lipscomb v. Doe, 32 S.W.3d 840, 844 (Tenn. 2000). Furthermore, we must construe
a statute so as to avoid a constitutional conflict if any reasonable construction exists that satisfies the
Constitution’s requirements. Davis-Kidd Booksellers, Inc. v. McWherter, 866 S.W.2d 520, 529
(Tenn. 1993). Thus, in construing the reach of the TTPA, we must develop a standard that is
consistent with the legislature’s intent and purpose without offending constitutional provisions.
The TTPA prohibits agreements adversely affecting competition in the “sale of articles
imported into this state” or influencing the “price or the cost to the producer or the consumer of any
such product or article.” Tenn. Code Ann. § 47-25-101 (2001). According to its plain language, the
TTPA prohibits arrangements that decrease competition or affect the prices of goods even if those
goods arrived in Tennessee through interstate commerce. The act does not contain any language
indicating that the legislature intended that the scope of the act be limited to intrastate commerce.
-8-
Had the legislature intended such a limitation, the legislature simply could have included the
limitation in the act.
In developing a standard for determining the application of the TTPA to a particular set of
circumstances, we must determine whether the focus should be upon the anticompetitive conduct
of the defendant or the effects of the anticompetitive conduct. In examining whether the
circumstances of a particular case fall within the TTPA, the Court of Appeals has employed a
conduct-based test focusing upon the character of the defendant’s anticompetitive conduct giving
rise to the dispute. See Lynch Display Corp. v. Nat’l Souvenir Ctr., Inc., 640 S.W.2d 837, 840
(Tenn. Ct. App. 1982) (holding that a lease between a Tennessee corporation and a Maryland
corporation and an associated franchise agreement between a Tennessee corporation and a District
of Columbia corporation were “predominantly interstate in character” and “only incidentally
affect[ed] intrastate commerce”). Any test focusing upon the anticompetitive conduct giving rise
to the dispute, however, would be difficult to apply when the plaintiff is an indirect purchaser who
did not transact directly with the defendant.
Furthermore, the purpose of the TTPA is to protect the state’s trade or commerce affected
by the anticompetitive conduct. See State ex rel. Astor v. Schlitz Brewing Co., 59 S.W. 1033, 1039
(Tenn. 1900) (“The thing condemned and punished by the Act is injury to trade. The thing intended
to be protected is trade. . . .”). Thus, we reject any standard that requires examination of the
anticompetitive conduct in determining whether a particular case falls within the scope of the TTPA.
Rather, the effect of the anticompetitive conduct on Tennessee trade or commerce is determinative
of whether the TTPA is applicable under the circumstances.
We must now determine the standard to employ in examining whether the effects of the
anticompetitive conduct on Tennessee trade or commerce fall within the scope of the TTPA. One
possible standard is a “predominant effects” standard. The term “predominant” is defined as
“[s]omething greater or superior in power and influence to others with which it is connected or
compared.” Black’s Law Dictionary 1177 (6th ed. 1990). Thus, anticompetitive conduct cannot
predominantly affect both intrastate commerce and interstate commerce. Under a “predominant
effects” standard, courts would be required to weigh the effects of anticompetitve conduct on
Tennessee commerce against its effects on interstate commerce and determine which effects are
greater. If the effects on interstate commerce are greater than the effects on Tennessee commerce,
the TTPA would not apply.
In construing the TTPA, other jurisdictions have utilized a “predominant” standard in
applying a conduct-based test. See e.g., In re Terazosin Hydrochloride Antitrust Litig., 160 F. Supp.
2d 1365, 1378 (S.D. Fla. 2001); FTC v. Mylan Labs., Inc., 99 F. Supp. 2d 1, 4 (D.C. Cir. 1999). In
our modern society, however, interstate and international transactions have become more common.
Numerous technological advances, including the internet, enable consumers and businesses from
opposite areas of the country to engage in transactions with ease. See generally, John Rothchild,
Protecting the Digital Consumer: The Limits of Cyberspace Utopianism, 74 Ind. L.J. 893 (1999)
(discussing the increase in business-to-consumer online commerce). Adoption of a predominant
-9-
effects standard would render the TTPA obsolete except in those rare circumstances in which the
effects on intrastate commerce are greater than the effects on interstate commerce. We do not
believe that this standard is sufficient to advance the TTPA’s purpose of protecting Tennessee trade
and commerce.
We conclude that the proper standard for determining whether a case falls within the scope
of the TTPA is a “substantial effects” standard. Pursuant to this standard, courts must decide
whether the alleged anticompetitive conduct affects Tennessee trade or commerce to a substantial
degree. Federal courts have applied the substantial effects standard to the Sherman Antitrust Act.
See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 (1993) (concluding that “the Sherman
Act applies to foreign conduct that was meant to produce and did in fact produce some substantial
effect in the United States”); McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 242
(1980) (holding that “[t]o establish the jurisdictional element of a Sherman Act violation it would
be sufficient for petitioners to demonstrate a substantial effect on interstate commerce” generated
by activity that is primarily local in nature). Other states also apply a form of substantial effects
standard in determining whether an action falls within their antitrust statute. See e.g., Amarel v.
Connell, 248 Cal. Rptr. 276, 284 (Cal. Ct. App. 1988) (holding that a cause of action under
California’s antitrust law is not precluded so long as the anticompetitive conduct had a “direct,
substantial and reasonably foreseeable effect within the state”); Olstad v. Microsoft Corp., 700
N.W.2d 139 (Wis. 2005) (concluding that Wisconsin’s antitrust statute applies if the actionable
conduct “‘substantially affects’ the people of Wisconsin and has impacts in [the] state, even if the
illegal activity resulting in those impacts occurred predominantly or exclusively outside [the] state”).
We believe that a “substantial effects” standard furthers the TTPA’s goal of protecting Tennessee
commerce without offending constitutional provisions.
The determination of whether an effect is substantial does not involve “mathematical nicety.”
Anesthesia Advantage, Inc. v. Metz Group, 912 F.2d 397, 401 (10th Cir. 1990). Rather, the test is
pragmatic, turning upon the particular facts of the case. See id. at 402; Huelsman v. Civic Ctr. Corp.,
873 F.2d 1171, 1175 (8th Cir. 1989). The anticompetitive conduct, however, need not threaten the
demise of Tennessee businesses or affect market prices to substantially affect intrastate commerce.
See Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 745-47 (1976) (referring to the Sherman
Antitrust Act).
In the present case, Freeman alleges that Eastman engaged in conduct from its principal place
of business in Kingsport, Tennessee, including: 1) communicating with its co-defendants through
in-person meetings, telephone calls, letters, and email resulting in an agreement to fix the prices of
sorbates; 2) implementing the agreement by drafting price schedules and letters to third parties,
adjusting prices and production volumes of sorbates, and taking orders and implementing sales to
customers at the new prices; and 3) attempting to conceal its conduct by limiting the number of its
employees having knowledge of the agreement. These allegations primarily relate to the defendants’
actions in conspiring and implementing the conspiracy to fix the prices of sorbates.
-10-
The focus under the substantial effects standard, however, is not on the anticompetitive
conduct itself but on the effects of the conduct on Tennessee commerce. While Freeman alleged that
Eastman took orders and implemented sales to customers at the new prices from Tennessee, we do
not believe that this bare allegation without more is sufficient to establish that Tennessee commerce
was substantially affected. Furthermore, Freeman fails to establish how the defendants’
anticompetitive conduct affected Tennessee commerce to a substantial degree even though the
conduct resulted in Freeman paying higher prices to retailers for items containing sorbates. To the
contrary, there is no indication that the items that Freeman purchased contained sorbates
manufactured by Eastman, the lone defendant with ties to Tennessee. Therefore, we conclude that
Freeman’s claim does not fall within the scope of the TTPA and that the trial court properly granted
the defendants’ motion to dismiss Freeman’s claim.
B. Unjust Enrichment
We must next determine whether the trial court erred in denying the defendants’ motion for
summary judgment regarding Freeman’s claim of unjust enrichment. Summary judgment is
appropriate only when the moving party demonstrates that no genuine issues of material fact exist
and that the moving party is entitled to judgment as a matter of law. See Tenn. R. Civ. P. 56.04;
Penley v. Honda Motor Co., 31 S.W.3d 181, 183 (Tenn. 2000). Its purpose “is to resolve controlling
issues of law rather than to find facts or resolve disputed factual issues.” XI Props., Inc. v. Racetrac
Petroleum, Inc., 151 S.W.3d 443, 446 (Tenn. 2004) (citation omitted). Thus, we must review a trial
court’s decision to grant or deny summary judgment de novo with no presumption of correctness
attached to the trial court’s conclusions. See Mooney v. Sneed, 30 S.W.3d 304, 306 (Tenn. 2000).
We must also view the evidence in the light most favorable to the non-moving party, drawing all
reasonable inferences in the non-moving party’s favor. Staples v. CBL & Assocs., Inc., 15 S.W.3d
83, 89 (Tenn. 2000).
We have previously recognized two types of implied contracts: contracts implied in fact and
contracts implied in law. See Paschall’s, Inc. v. Dozier, 407 S.W.2d 150, 153-54 (Tenn. 1966).
Contracts implied in fact arise under circumstances establishing the parties’ mutual intention to
contract. Id. at 154 (citation omitted). Contracts implied in law or quasi contracts are created by law
without the parties’ assent and are based upon reason and justice. Id. (citation omitted); Angus v.
City of Jackson, 968 S.W.2d 804, 808 (Tenn. Ct. App. 1997). Courts may impose a contract implied
in law where no contract exists under various quasi contractual theories, including unjust enrichment.
Whitehaven Cmty. Baptist Church v. Holloway, 973 S.W.2d 592, 596 (Tenn. 1998).
The elements of an unjust enrichment claim are: 1) “[a] benefit conferred upon the defendant
by the plaintiff”; 2) “appreciation by the defendant of such benefit”; and 3) “acceptance of such
benefit under such circumstances that it would be inequitable for him to retain the benefit without
payment of the value thereof.” Paschall’s, Inc., 407 S.W.2d at 155. The most significant
requirement of an unjust enrichment claim is that the benefit to the defendant be unjust. Id.;
Whitehaven Cmty. Baptist Church, 973 S.W.2d at 596. The plaintiff must further demonstrate that
he or she has exhausted all remedies against the person with whom the plaintiff enjoyed privity of
-11-
contract. Paschall’s, Inc., 407 S.W.2d at 155; Whitehaven Cmty. Baptist Church, 973 S.W.2d at
596.
A plaintiff need not be in privity with a defendant to recover under a claim of unjust
enrichment. See Paschall’s, Inc., 407 S.W.2d at 154. Thus, Freeman may bring a cause of action
for unjust enrichment against the defendants even though Freeman did not purchase the items
containing sorbates directly from the defendants. The defendants, however, contend that Freeman
must establish that it conferred a direct benefit, rather than an indirect or incidental benefit, upon the
defendants. A benefit is any form of advantage that has a measurable value including the advantage
of being saved from an expense or loss. Lawrence Warehouse Co. v. Twohig, 224 F.2d 493, 498
(8th Cir. 1955). The underlying principle of the doctrine of unjust enrichment is that a party who
receives a benefit that he or she desires, under circumstances rendering retention of the benefit
without providing compensation inequitable, must compensate the provider of the benefit.
Paschall’s, Inc., 407 S.W.2d at 154. In accordance with this underlying principle, we conclude that
to recover for unjust enrichment, a plaintiff need not establish that the defendant received a direct
benefit from the plaintiff. Rather, a plaintiff may recover for unjust enrichment against a defendant
who receives any benefit from the plaintiff if the defendant’s retention of the benefit would be
unjust. Our conclusion is consistent with other jurisdictions that have also concluded that the benefit
received by a defendant need not be direct to establish an unjust enrichment claim. See, e.g., Hirsch
v. Bank of Am., 132 Cal. Rptr. 2d 220, 229 (Cal. App. 2003) (holding that to confer a benefit, the
plaintiff need not pay the money directly to the defendant); HPI Health Care Servs., Inc. v. Mt.
Vernon Hosp., Inc., 545 N.E.2d 672, 679 (Ill. 1989) (permitting recovery of a benefit transferred to
the defendant by a third party where the third party mistakenly gave the benefit to the defendant
instead of the plaintiff, where the defendant procured the benefit from the third party through
wrongful conduct, or where the plaintiff’s claim to the benefit is superior to the defendant’s claim);
State v. ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 155 (Iowa 2001) (concluding that “benefits
can be direct or indirect, and can involve benefits conferred by third parties”).
The defendants further contend that Freeman failed to establish that it exhausted its remedies
against the supermarket from which it purchased the food products that contained sorbates. The
defendants submitted various affidavits to demonstrate that Freeman had not sought to recover from
the supermarket. We conclude that through these affidavits, the defendants have negated the
exhaustion of remedies element of Freeman’s unjust enrichment claim. Thus, the burden shifts to
Freeman to provide specific facts establishing the existence of disputed issues of material fact that
must be resolved by the trier of fact. See Blair v. West Town Mall, 130 S.W.3d 761, 767 (Tenn.
2004).
In response, Freeman submitted an affidavit from its counsel maintaining that he was
unaware of any viable claims against the supermarket. Freeman essentially contends that pursuit of
any causes of action against the supermarket would have been futile. Although our courts have not
addressed the issue of futility with regard to the exhaustion of remedies element of an unjust
enrichment claim, our courts have recognized this exception in other causes of action with an
exhaustion of remedies requirement. See e.g., Wilson v. Miller, 250 S.W.2d 575, 578 (Tenn. 1952)
-12-
(action by a union member to recover union funds pursuant to a union agreement); Cantrell v.
Walker Die Casting, Inc., 121 S.W.3d 391, 396 n.3 (Tenn. Ct. App. 2003) (ERISA action).
Likewise, we conclude that to maintain an action for unjust enrichment, a plaintiff is not required
to exhaust all remedies against the party with whom the plaintiff is in privity if the pursuit of the
remedies would be futile. We do not believe, however, that a bare allegation that any attempt to
exhaust its remedies against the supermarket would be futile without providing a factual basis to
support the allegation is sufficient to establish a disputed issue of material fact as to the exhaustion-
of-remedies element of Freeman’s unjust enrichment claim against the defendants. Thus, the trial
court erred in denying the defendants’ motion for summary judgment.
CONCLUSION
We conclude that although Freeman may bring a claim against the defendants under the
TTPA as an indirect purchaser, the conduct of which Freeman complains does not fall within the
scope of the act because Tennessee commerce was not substantially affected by the conduct. As to
the unjust enrichment claim, we hold that Freeman was not required to establish that the defendants
directly benefitted from the transaction between Freeman and the supermarket. We further hold,
however, that the trial court erred in declining to grant the defendants’ motion for summary judgment
as to the unjust enrichment claim due to Freeman’s failure to provide a factual basis to support its
allegation that any attempt to exhaust its remedies against the supermarket would have been futile.
Accordingly, we affirm the judgment of the Court of Appeals in part and reverse in part, and we
remand the case to the trial court for further proceedings consistent with this opinion.
The costs of appeal are taxed to the appellant, Freeman Industries, and its sureties, for which
execution may issue if necessary.
___________________________________
JANICE M. HOLDER, JUSTICE
-13-