Summary
noting Supreme Court's refusal to extend the class of agreements to which a per se analysis applies
Summary of this case from Cool Wind Ventilation Corp. v. Sheet Metal Workers International Ass'n, Local Union No. 28Opinion
99 CIV. 11853 (DLC).
December 15, 2000.
David L. Just, Donald C. Lucas, Lucas Just New York, NY, For Plaintiff
Robert M. Heller, Marc D. Merriweather, Kramer Levin Naftalis Frankel LLP, New York, NY, For Defendant
OPINION AND ORDER
Defendant American Camping Association, Inc. ("ACA") and plaintiff National Camp Association, Inc. ("NCA") have cross-moved for summary judgment in this antitrust case. For the reasons discussed below, defendant's motion is granted and plaintiff's motion is denied.
BACKGROUND
Based on the evidence and arguments submitted by the parties, these facts are undisputed. NCA refers campers to camps in exchange for a fee or commission. ACA is an Indiana not-for-profit membership corporation, which seeks to promote camping throughout the United States through an accreditation system for camps. ACA is organized into twenty-four geographic regions called "sections." With minor exceptions, every member of ACA is also a member of one of ACA's sections. Members are usually assigned to the section where they live or where their camp is located. Membership is technically held by individuals, such as camp owners, camp directors, staff members, or other camp professionals. ACA also allows a business which serves the camp community to become a "Business Member." Business Members generally receive the rights of regular members and may also exhibit at ACA conferences. ACA's day-to-day operations are carried out by a paid professional staff. ACA also has a volunteer Board of Directors.
Jeffrey Solomon ("Solomon") is a former employee of the New York Section of the ACA ("NY-ACA") and currently serves as President of NCA. In early 1995, Solomon d/b/a NCA, applied to be a Business Member of ACA. By letter of March 14, 1995, John A. Miller, then Executive Vice President of ACA, informed Solomon that ACA could not accept him as a Business Member. Solomon was instead offered the opportunity to purchase the economic benefits offered to Business Members, at the same fees as are normally charged to Business Members. Such benefits included preferred rates on booth space at ACA's National Conference, a five percent discount on advertising in Camping Magazine, a subscription toCamping Magazine and Guide to Accredited Camps, free multiple listings in ACA's annual Buying Guide issue of Camping Magazine, and a discount on ACA's mailing list rental. Use of the ACA logo, however, was not allowed.
In March 1996, NY-ACA sought a temporary restraining order and preliminary injunction against Solomon, individually and on behalf of NCA, in the New York State Supreme Court for misrepresenting its services, engaging in deceptive practices in violation of the General Business Law, and misusing ACA's trademark. ACA contributed $12,500.00 to NY-ACA to assist with legal fees. On June 11, 1996, Justice Beatrice Shainswit found for NY-ACA, preliminarily enjoining NCA from using its trade name without "an appropriate disclaimer of any connection of affiliation" with NY-ACA and ordering NCA to "correct its omission to inform the public of its fee referral activities." NCA's appeal was denied.
On December 3, 1996, NY-ACA moved for a finding that NCA had failed to comply with the order. Justice Shainswit found the defendants to be in contempt, and, among other things, she enjoined them from using NCA's name "without the disclaimer to be displayed in a prominent manner 'No connection or affiliation with the New York Section-American Camping Association, Inc.'"
On December 31, 1997, NCA brought a declaratory judgment action in the Southern District of New York seeking a declaration that there is no confusion between the names "National Camping Association" and "American Camping Association." The parties signed a Stipulation agreeing that there is no likelihood of confusion by simultaneous use of the two names. That action was discontinued in 1999.
On May 11, 1999, Solomon, now on behalf of NCA, applied to be a Business Member of ACA. Margery Scanlin ("Scanlin"), the Executive Officer of Operations of ACA, after seeking advice of legal counsel and two other staff members, recommended to Peggy L. Smith ("Smith"), Executive Director of ACA, that the application be denied. Smith denied the application. ACA's Board of Directors and Executive Committee were not consulted with respect to this decision. ACA again offered NCA those economic benefits provided to Business Members, except for the use of the ACA logo. NCA has not attempted to use these economic benefits. NCA and Solomon are the only ones who have ever been denied Business Membership in ACA. Indeed, ACA "actively seeks" Business Members.
NCA filed the Complaint in this case on December 7, 1999, asserting that the various sections which comprise ACA conspired to prevent NCA from becoming a Business Member of the ACA and to cause the plaintiff "great financial damage," in violation of Section One of the Sherman Act, 15 U.S.C. 1. The parties filed competing motions for summary judgment in September 2000, following substantial discovery.
DISCUSSION
A. Summary Judgment Standard
Summary judgment may not be granted unless the submissions of the parties taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the Court must view all facts in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has asserted facts showing that the nonmovant's claims cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial," and cannot rest on the "mere allegations or denials" of his pleadings. Rule 56(e), Fed.R.Civ.P.; accord Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525-26 (2d Cir. 1994). When faced with cross-motions for summary judgment, the court is not required to grant judgment for one side or the other.Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993). The court "must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Id. In deciding whether to grant summary judgment, therefore, this Court must determine (1) whether a genuine factual dispute exists based on the evidence in the record, and (2) whether the fact in dispute is material based on the substantive law at issue.
In this case, plaintiff and defendant both assert that no material facts are at issue. The two sides disagree, however, as to the law which applies. Plaintiff asserts that the behavior involved amounts to a group boycott and that group boycotts are treated as per se antitrust violations under Section One of the Sherman Act. See 15 U.S.C. 1. Defendant asserts that the plaintiff has failed to provide the requisite evidence under the law to prove a conspiracy to restrain trade and that no antitrust injury exists.
B. Sherman Act
1. Overview
Section 1 of the Sherman Act provides: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1. In order to state a claim under Section 1, a plaintiff must allege "(1) a contract, combination, or conspiracy; (2) in restraint of trade; (3) affecting interstate commerce." Maric v. Saint Agnes Hosp. Corp., 65 F.3d 310, 313 (2d Cir. 1995) (citing Capital Imaging Associates v. Mohawk Valley Medical Associates., Inc., 996 F.2d 537, 542 (2d Cir. 1993)). In addition, a plaintiff must demonstrate that it has "antitrust standing" and has suffered "antitrust injury." The former requirement involves a showing that the antitrust claimant is a "proper plaintiff," i.e., that based on factors such as the directness and identifiability of his injuries, the plaintiff will be "an efficient enforcer of the antitrust laws." Balaklaw v. Lovell, 14 F.3d 793, 798 n. 9 (2d Cir. 1994). The latter requirement demands inquiry into "whether the plaintiff suffered antitrust injury," id., that is, "'injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation.'" Id. at 797 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). This definition "underscores the fundamental tenet that `[t]he antitrust laws . . . were enacted for "the protection of competition, not competitors."'" Id. (quoting Brunswick, 429 U.S. at 488 (quoting Brown Shoe v. United States, 370 U.S. 294, 320 (1962))). The plaintiff must show "that the challenged action has had an actual adverse effect on competition as a whole in the relevant market." Capital Imaging, 996 F.2d at 543 (emphasis in original); see also Clorox v. Sterling Winthrop, Inc., 117 F.3d 50, 56 (2d Cir. 1997) (discussing actual adverse effects requirement)
2. Existence of a Conspiracy
NCA alleges that ACA and its member sections conspired to prevent it from becoming a Business Member of the ACA. To establish such a conspiracy, the plaintiff must prove, pursuant to Section One of the Sherman Act, "a combination or some form of concerted action between at least two legally distinct economic entities." Capital Imaging, 996 F.2d at 542. The Second Circuit has held it "critical" to surviving a summary judgment claim that the plaintiff make a threshold showing that "a reasonable jury could find that the defendants' actions were concerted rather than independent." AD/SAT v. Associated Press, 181 F.3d 216, 233 (2d Cir. 1999). While inferences on summary judgment are to be viewed in the light most favorable to the party opposing the motion, antitrust law limits the range of permissible inferences from ambiguous evidence in cases brought under Section One of the Sherman Act. Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Conduct which is "'as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.'" AD/SAT, 181 F.3d at 233 (quotingMatsushita, 475 U.S. at 588). Rather, the plaintiff must present evidence "that tends to exclude the possibility that the alleged conspirators acted independently." Id. (internal quotation omitted).
Applying these principles to a business association, the Second Circuit has noted that "every action by a trade association is not concerted action by the association's members." AD/SAT, 181 F.3d at 234. The plaintiff must present evidence "tending to show that association members, in their individual capacities,consciously committed themselves to a common scheme designed to achieve an unlawful objective." Id. (emphasis added). Further, members can conspire among themselves only where each member has independent and competing economic interests. Where each member lacks "final decisionmaking authority" because, for example, that authority is vested in a Board of Directors, each member is deemed an "agent" of the larger entity and not a separate economic actor. Capital Imaging, 996 F.2d at 544. Consequently, unless NCA shows that the sections have authority to participate in the decisionmaking process, the sections lack the capacity to conspire. See id.
The plaintiff has provided no evidence that the sections participate in the decisions made by ACA regarding membership. The sole factual dispute between the parties regarding decisionmaking does not concern the role of the sections in decisions on membership issues. As reflected in ACA's By-laws, the members of the Board of Directors (other than ACA officers) are chosen through an election "by the entire membership" and not by the sections. The fact that individual members or even Board members almost always also belong to sections is not sufficient to show that the sections — as independent economic actors — had "consciously committed themselves" to a scheme to exclude the plaintiff from membership.
The plaintiff and defendant disagree over whether or not ACA's Board of Directors involves itself in membership decisions. ACA asserts that membership decisions are made entirely and solely by the staff, while NCA asserts that membership decisions are made by the Board. Under either scenario, the plaintiff has failed to offer evidence that ACA's sections even have the capacity to conspire to deny it membership. Moreover, NCA did not object to defendant's stipulation that "ACA's Board and Executive Committee were not consulted" with respect to the second denial on May 11, 1999. The factual dispute is therefore limited to the first denial in 1995.
The sole evidence offered by the plaintiff to show joint action by ACA and one of its sections concerns the lawsuit filed to enforce ACA's trademark rights against infringement by the plaintiff. ACA contributed funds to assist ACA-NY in prosecuting that action. This joint funding of a trademark lawsuit, however, does not establish that there was a capacity for the ACA sections to conspire on membership issues.
Finally, the plaintiff relies on an admission by an ACA staff member involved in the decision to deny the plaintiff membership in May 1999, to show the capacity of the members to conspire with ACA on membership issues. Peggy Smith testified that the second denial of membership was based upon her assessment of staff recommendations, legal counsel, and "my assessment from the members and the conversations I'd had with them." Nothing in this brief testimony indicates that the ACA sections were consulted or that they were decision-makers. In sum, the plaintiff has failed to offer any evidence that the ACA sections had the capacity to conspire with ACA (or with each other) on ACA membership issues.
3. Unreasonable Restraint of Trade
Ordinarily, a court should consider whether an agreement is an unreasonable restraint of trade only after the existence of an agreement is established. See, e.g., AD/SAT, 181 F.3d at 232. Although there is insufficient evidence of a conspiratorial agreement to support a finding of a violation of the Sherman Act, it is in this case also useful, to address the legal arguments made by the parties concerning the alleged restraint of trade.
An analysis of any restraint of trade is guided by a "rule of reason" unless the challenged action falls into "the category of agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal." Northwest Wholesale Stationers Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284, 289 (1985) (internal quotation omitted). A plaintiff seeking application of this "per se" rule must present a threshold case that the challenged activity falls into a category likely to have predominantly anticompetitive effects. The mere allegation of a concerted refusal to deal does not suffice because not all concerted refusals to deal are predominantly anticompetitive." Id. at 298 (1985); see also Bogan v. Hodgkins, 166 F.3d 509, 514 (2d Cir. 1999). Only "'manifestly anticompetitive'" conduct is designated per se illegal. Bogan, 166 F.3d at 514 (quoting Continental T.V., Inc. v. GTE Sylvania. Inc., 433 U.S. 36, 49-50 (1977)).
The plaintiff alleges that the defendant's actions amounted to a group boycott and should be treated as per se illegal. While the Supreme Court has held group boycotts to be an example of per se illegal conduct, it has cautioned that this class of restraints "is not to be expanded indiscriminately." FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 458 (1986). The per se approach has generally been limited to cases in which "firms with market power boycott suppliers or customers in order to discourage them from doing business with a competitor." Id.; see also Bogan, 166 F.3d at 515. That situation is not present here. First, NCA has not offered evidence that ACA and/or its sections have market power. Further, there is no allegation that the defendant or its sections have used any market power they do possess to boycott any supplier or customer as part of any campaign against NCA. Finally, even if it is assumed that ACA or its constituent sections have the requisite market power, it is undisputed that neither ACA nor its sections compete with NCA. ACA accredits camps; NCA refers campers to camps for a fee. While NCA argues that it competes with ACA since it competes with ACA's members, its allegations of an antitrust violation concern a conspiracy between the "various sections" and not the individual members of ACA.
While the plaintiff cites several Supreme Court cases holding group boycotts to be per se violations of the Sherman Act, see Silver v. NYSE, 373 U.S. 341 (1963); Radiant Burners, Inc. v. Peoples Gas Light and Coke Co., 364 U.S. 656 (1961);Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959);Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457 (1941), the Supreme Court has more recently limited these cases by emphasizing that they involve boycotts which "often cut off access to a supply, facility, or market necessary to enable the boycotted firm to compete" or involve firms with a "dominant position in the relevant market." Northwest, 472 U.S. at 294.
Further, the Supreme Court has expressed a reluctance to "condemn rules adopted by professional associations as unreasonable per se" or to apply a per se analysis where "the economic impact of certain practices is not immediately obvious."FTC v. Indiana, 476 U.S. at 458-59; see also Bogan, 166 F.3d at 514; Capital Imaging, 996 F.2d at 543. In a case involving a purchasing cooperative that expelled the plaintiff, the Court held that "[u]nless the cooperative possesses market power or exclusive access to an element essential to effective competition, the conclusion that expulsion is virtually always likely to have an anticompetitive effect is not warranted."Northwest, 472 U.S. at 296 (emphasis added). Again, the plaintiff has failed to produce evidence establishing that membership in ACA is "essential" to the ability to compete effectively. As ACA has shown, without contradiction by NCA, there are numerous camp referral services which function without ACA membership. Further, membership has not even been shown to be essential to NCA's ability to compete. NCA has access to all the benefits of membership that are relevant to its business: The plaintiff represented to the Court and at Solomon's deposition that NCA does not intend to use ACA's name or logo on its materials even if admitted to membership. ACA has offered NCA all of the other benefits of business membership and NCA has declined the offer.
In cases, such as this one, where per se treatment is not warranted, the rule of reason governs. Under a rule of reason analysis, the plaintiff bears the initial burden of showing that the challenged action has had "an actual adverse effect on competition as a whole in the relevant market." Capital Imaging, 996 F.2d at 543. Proving only that an alleged conspiracy has harmed an individual competitor "will not suffice." Id. The plaintiff need not provide "detailed market analysis," however, and may rely instead on "proof of actual detrimental effects."Id. at 546 (internal quotation omitted). Where the plaintiff cannot demonstrate actual effects, it must "at least establish that defendants possess the requisite market power so that their arrangement has the potential for genuine adverse effects on competition." Id. (internal quotations omitted)
Plaintiff has provided evidence insufficient to show an "adverse effect" on competition as a whole in the relevant market. Not only has it failed to define or to offer evidence of a relevant market, it has also failed to demonstrate that ACA possesses the requisite market power to affect competition. Solomon asserts ipse dixit that ACA is "the leader in the camping industry and, by and large, controls the camping industry" but does not offer the basis for this assertion beyond the vague hearsay statement that it is "recognized by camps and businesses associated with camps that being a member of American is critical to success in the camping industry."
In sum, the plaintiff has failed to prove an unreasonable restraint of trade. Because NCA has failed to prove both the existence of a conspiracy and an unreasonable restraint of trade, it is unnecessary to reach the additional alleged defects in the plaintiff's case: the lack of antitrust standing or antitrust injury.
CONCLUSION
For the above-mentioned reasons, defendant's motion for summary judgment is granted and plaintiff's cross-motion for summary judgment is denied. The Clerk of Court shall close the case.
SO ORDERED: