Opinion
No. 2:03-CV-221.
March 3, 2003
Ernest Gellhorn, Law Office of Ernest Gellhorn, Washington, D.C., Kyle M. Keegan, Chris D. Kiesel, Roy, Kiesel, Keegan DeNicola, Baton Rouge, LA, Counsel for Plaintiffs.
MEMORANDUM OPINION
This antitrust action is before the Court to address the defendant's motion to dismiss the intervening complaints filed by the State of Tennessee and State of Mississippi, and Count Two of the complaint of the wholesaler plaintiffs. [Doc. 80]. Subsequent to the filing of defendant's motion, the State of Tennessee filed a motion for voluntary dismissal of its complaint. [Doc. 112]. The motion of the State of Tennessee will be GRANTED. Therefore, only the defendant's motion as it pertains to the State of Mississippi and the wholesaler plaintiffs will be addressed by the Court. Though the defendant did not object to the intervention of Mississippi, it now seeks to dismiss it, arguing that it does not have standing to raise the claims alleged in its intervening complaint. The Court will address each of the defendant's arguments in turn as to the State of Mississippi, as well as, Count II of the wholesaler plaintiffs' complaint.
1. Sherman Act Section 2 Claims.
The defendant seeks to dismiss the plaintiffs' Sherman Act Section 2 claims for lack of standing as to the wholesaler plaintiffs, and for failure to state a claim as to all the plaintiffs.
A. Wholesaler's Standing
The wholesaler plaintiffs in Count Two of their complaint seek injunctive relief from the defendant for its alleged attempt to monopolize the cigarette and wholesale distribution markets. Section 16 of the Clayton Act provides for injunctive relief to persons injured by violations of Section 2 of the Sherman Act.
The defendant argues that the plaintiffs do not have standing because they are not direct competitors of the defendant. It submits that only direct competitors of Philip Morris, i.e. the fourth tier manufacturers, have standing to seek redress for the defendant's acts.
Certainly nothing in the statute implies such a narrow reading as that suggested by the defendant. Rather, the statute provides that " Any person, firm, corporation, or association shall be entitled to sue." 15 U.S.C. § 26 (emphasis added). The Sixth Circuit has recognized the following factors to be addressed in determining a plaintiff's standing to bring an action for violation of Section 2 of the Sherman Act:
(1) the causal connection between the antitrust violation and harm to the plaintiff and whether that harm was intended to be caused; (2) the nature of the plaintiff's alleged injury including the status of the plaintiff as consumer or competitor in the relevant market; (3) the directness or indirectness of the injury, and the related inquiry of whether the damages are speculative; (4) the potential for duplicative recovery or complex apportionment of damages; and (5) the existence of more direct victims of the alleged antitrust violation.Southaven Land Co., Inc. v. Malone Hyde, Inc., 715 F.2d 1079, 1085 (6th Cir. 1983) (citing to Blue Shield of Va. v. McReady, 457 U.S. 465(1982)).
Construing the plaintiffs complaint in the light most favorable to the plaintiffs, sufficient allegations have been made to establish standing pursuant to the factors set forth hereinabove. Because the plaintiffs only seek injunctive relief under Count 2, the Court need not consider the damages aspects of the factors. The plaintiffs' complaint clearly alleges direct harm to them, and that the harm was intended by the defendant, to foreclose distributors that sell 4th tier cigarette brands from the market, lessening the ability of the 4th tier manufacturers to compete. Likewise, the wholesaler plaintiffs are customers of the defendant. While, the competing cigarette manufacturers are the direct target of the alleged monopolistic behavior, as well as the consumers who ultimately suffer higher prices, the wholesaler plaintiffs are inextricably caught in the crossfire, as they are the vehicle allegedly utilized by the defendant to eliminate competition.
Accordingly, the Court FINDS that the wholesaler plaintiff's allegations are sufficient to establish their standing to bring their attempt to monopolize claim under Section 2 of the Sherman Act.
B. Dangerous probability of achieving monopoly power.
The defendant seeks to dismiss the Sherman Act claims of all plaintiffs on the basis that the plaintiffs have failed to sufficiently allege that the defendant has a dangerous probability of achieving monopoly power.
The greater a firm's market power the greater the probability of successful monopolization. In order to be found liable for attempted monopolization, a firm must possess market strength that approaches monopoly power — the ability to control prices and exclude competition.Tarrant Service Agency, Inc. v. American Standard, Inc., 12 F.3d 609, 615 (6th Cir. 1993). "Market strength is often indicated by market share." Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 826 (6th Cir. 1982) (emphasis added).
The "dangerous probability" element of the attempted monopolization offense reflects the well-established notion that section 2 of the Sherman Act governs single-firm conduct only when it threatens actual monopolization.Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413, 1422 (6th Cir. 1990).
While 30% or higher market share has often been held to be insufficient in and of itself to show a dangerous probability of achieving monopoly power, the plaintiffs have alleged additional facts, in addition to the defendant's market share in excess of 50%, which if true, could sustain a finding of a dangerous probability of achieving monopoly power. See White and White, Inc. v. American Hosp. Supply Corp., 723 F.2d 495, 508 (6th Cir. 1983). While this issue will likely be revisited in the form of a summary judgment motion, at this early stage of this litigation, given the construction of the complaint in the light most favorable to the plaintiffs, it is not clear that relief could not be granted under some set of facts proven consistently with the plaintiffs' allegations. Thus, the Court FINDS that the plaintiffs have set forth sufficient allegations that the defendant has a dangerous probability of achieving monopoly power.
II. The Robinson-Patman Act Claims of Mississippi
The Defendant seeks to dismiss the State of Mississippi's Robinson-Patman Act claims on the basis that, as it seeks to protect indirect purchasers, the state lacks standing. Under the Robinson-Patman Act, Mississippi seeks injunctive relief in its parens patriae capacity on behalf of its citizens. Clearly, states are not constrained to suits to protect their proprietary interests, but may seek injunctive relief to protect their economies. State of Ga. v. Pennsylvania R. Co. 324 U.S. 439, 447, 65 S.Ct. 716, 721 (U.S. 1945); Burch v. Goodyear Tire Rubber Co., 554 F.2d 633, 634-35, 1977-1 Trade Cases P 61, 421 (4th Cir. 1977). Notably, in Burch, Maryland only made a "mere allegation of general injury to the general economy."
While a state cannot assert a parens patriae damages claim on behalf of citizens who are indirect purchasers, such is not the case for suits seeking injunctive relief. Rather, "the indirect effects of the injury must be considered as well in determining whether the State has alleged injury to a sufficiently substantial segment of its population." Alfred L. Snapp Son, Inc. v. Puerto Rico, ex rel., Barez, 458 U.S. 592, 607, 102 S. Ct. 3260, 3269 (1982).
The defendant further argues that a state may not seek injunctive relief where injunctive relief is likewise sought by a private party plaintiff. The defendant cites to no case law on point to support its argument. Additionally, the Supreme Court has recognized that "the United States Government, the governments of each State, and any individual threatened with injury by an antitrust violation may all sue for injunctive relief against violations of the antitrust laws." Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 261, 92 S.Ct. 885, 890-891 (U.S. 1972). Additionally, the persons for whom the state seeks redress are its citizens, whose access to discount cigarettes Mississippi seeks to protect, not the wholesale plaintiffs.
Accordingly, this Court finds that Mississippi has set forth sufficient allegations to invoke the standing of this Court to entertain its claims for injunctive relief.
III. Mississippi's Damages Claim
Mississippi seeks damages in its proprietary capacity as a purchaser of cigarettes. The defendant argues that Mississippi, as an indirect purchaser of cigarettes, lacks standing to bring a damages claim under Section 2(a). For this proposition, the defendant relies upon Barnosky Oils, Inc. v. Union Oil Company of California, 665 F.2d 74 (6th Cir. 1981). In Barnosky, the alleged Section 2(a) violation was that the defendant sold gasoline to independent wholesalers at a higher price than it sold gasoline to its direct-served dealers. Barnosky, an independent wholesaler, would pass along the price increase to its dealers, who were thereby paying a higher price for Union gasoline than the direct-served dealers. Barnosky contended that Union thus engaged in price discrimination between its direct-served dealers and the dealers served by Barnosky. The Sixth Circuit concluded that Barnosky had failed to allege sufficient facts to invoke the indirect purchaser doctrine, indicating that there was no allegation that Union set or controlled Barnosky's resale price.
The Court recognized that "[t]he purpose of the indirect doctrine is to prevent a manufacturer from insulating itself from the Robinson-Patman liability by using a `dummy' wholesaler to make sales at terms actually controlled by the manufacturer."Id. at 84. Notably, Barnosky in some of its other arguments represented itself as a competitor of Union. The Court further recognized that the direct purchaser doctrine typically raises a factual issue unresolvable in a motion to dismiss. Id. Thus, contrary to the defendant's assertions, Barnosky does not stand for the proposition that Mississippi must have directly purchased from the defendant.
While Barnosky does indicate that the extent of control exerted by the defendant over the wholesaler's resale prices is a required consideration for the indirect purchaser doctrine, Mississippi has set forth at least a minimum of factual allegations of such control. The Court cannot, based upon the allegations before it at this time, conclude that Mississippi has not purchased from the defendant for purposes of the Robinson-Patman Act, which prohibits price discrimination between purchasers "either directly or indirectly." 15 U.S.C. § 13(a). Accordingly, the defendant's motion to dismiss Mississippi's damages claim will be denied.
An appropriate order will enter.
MOTION FOR ADMISSION PRO HAC VICE
The Defendant Philip Morris USA, Inc. ("Philip Morris USA"), moves the Court for admission pro hac vice of Robert M. Cooper. The affidavit of Robert M. Cooper and his certificate of good standing in the United States District Court for the District of Columbia are attached hereto.
AFFIDAVIT OF ROBERT M. COOPER
DISTRICT OF COLUMBIA ) ) ss. CITY OF WASHINGTON)I Robert M. Cooper, being duly sworn upon his oath, states:
1. I am a practicing attorney with Boies, Schiller Flexner LLP, 5301 Wisconsin Avenue, NW, Washington, D.C. 20015. I provide this affidavit in support of Defendant's Motion for Admission Pro Hac Vice by which Defendant seeks to have me admitted as co-counsel in this matter.
2. I am currently licensed to practice law in the District of Columbia. I am in good standing in all courts before which I have been admitted to practice, and no disciplinary action or investigation of my conduct is pending.
3. I am admitted to practice before federal courts including the United States District Court for the District of Columbia. Attached as Exhibit A is an original Certificate of Good Standing from that Court.
4. I agree to subject myself to the jurisdiction of the courts of Tennessee in any matter arising out of my conduct in these proceedings, and I agree to be bound by the Code of Professional Responsibility applicable to Tennessee lawyers and the interpretation thereof by Tennessee Courts.
Further deponent saith not.
United States District Court for the District of Columbia CLERK'S OFFICE 333 Constitution Avenue, NW Washington, DC 20001
I, NANCY M. MAYER-WHITTINGTON, Clerk of the United States District Court for the District of Columbia, do hereby certify that:ROBERT M. COOPER
was, on the 1st day of December A.D. 1997 admitted to practice as an Attorney at Law at the Bar of this Court, and is, according to the records of this Court, a member of said Bar in good standing.
In Testimony Whereof, I hereunto subscribe my name and affix the seal of said Court in the City of Washington this 28th day of January, A.D. 2004.