Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton College

• Decision Date: 10 October 1997
• Docket Number: D,No. 702,702
• Citation: 128 F.3d 59
• Parties: 1997-2 Trade Cases P 71,946, 121 Ed. Law Rep. 956 HAMILTON CHAPTER OF ALPHA DELTA PHI, INC., Alumni Association of Psi Chapter of Psi Upsilon, Inc., Beta of Sigma Phi Society, Inc., and Delta Kappa Epsilon Society of Hamilton College, Plaintiffs-Appellants, v. HAMILTON COLLEGE and Eugene M. Tobin, President of Hamilton College, Defendants-Appellees. ocket 96-7599.
• Court: U.S. Court of Appeals — Second Circuit

Page 59

128 F.3d 59

1997-2 Trade Cases P 71,946, 121 Ed. Law Rep. 956

HAMILTON CHAPTER OF ALPHA DELTA PHI, INC., Alumni

Association of Psi Chapter of Psi Upsilon, Inc., Beta of

Sigma Phi Society, Inc., and Delta Kappa Epsilon Society of

Hamilton College, Plaintiffs-Appellants, v. HAMILTON COLLEGE and Eugene M. Tobin, President of Hamilton

College, Defendants-Appellees.

No. 702, Docket 96-7599.

United States Court of Appeals,

Second Circuit.

Argued Jan. 21, 1997.

Decided Oct. 10, 1997.

Clark R. Silcox, Washington, DC (Cheryl M. Browning, Steele Silcox & Browning, Washington, DC, on the brief), for Plaintiffs-Appellants.

David M. Lascell, Rochester, NY (John R. Simon, Hallenbeck, Lascell, Norris & Zorn, Rochester, NY, Robert B. Bell, Wiley Rein & Fielding, Washington, DC, on the brief), for Defendants-Appellees.

Before: KEARSE and JACOBS, Circuit Judges, and GLEESON, District Judge. ^*

GLEESON, District Judge:

Four Hamilton College fraternities brought this action against Hamilton College ("Hamilton") and its president, Eugene M.

Tobin, alleging a violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. The fraternities challenge Hamilton's residential policy, which requires all of its students to live in college housing and participate in a college meal plan. According to plaintiffs, that policy unlawfully monopolizes the market for residential services in Clinton, New York. The United States District Court for the Northern District of New York, Rosemary S. Pooler, Judge, concluded that Hamilton's provision of room and board pursuant to its residential policy is not "trade or commerce" and lacks a substantial nexus to interstate commerce, and dismissed the complaint for lack of subject matter jurisdiction. For the reasons set forth below, we reverse.

BACKGROUND

A. The Facts

Hamilton is a private college located in Clinton, New York. Chartered in 1812 as an all-male college, it became fully co-educational upon its consolidation in 1978 with nearby Kirkland College. It draws more than half of its students from foreign countries and states other than New York. During the 1993-94 school year, for example, only 41% of its 1,668 students were residents of New York State.

For many years, Hamilton required only first-year students to live in college-owned housing and to participate in a college-run meal plan, and permitted students in their second, third and fourth years to room and board in fraternities or other private housing not owned or controlled by the college. In the spring of 1994, however, Hamilton began changing this residential policy by formally restricting the number of students who could live off-campus. Then, on March 3, 1995, Hamilton announced that, effective September 1995, all students would be required to live in college-owned facilities and to purchase college-sponsored meal plans.

In the 1993-94 school year, before the implementation of the new policy, Hamilton received more than $7 million in revenues for providing such services, while the fraternities and other off-campus landlords received approximately $1 million. Plaintiffs contend that Hamilton's new residential plan has a commercial purpose: to eliminate competition in the provision of "residential services" (essentially, room and board) to Hamilton students in order to raise revenues. They further allege that Hamilton, having announced that the private ownership societies that own the fraternity houses will be unable to house Hamilton students, has attempted to exercise monopoly power as the sole available buyer by attempting to purchase the fraternity houses at artificially low prices, intending to use them to provide housing for its students.

On the other hand, Hamilton submitted affidavits and documentary evidence to the district court attempting to demonstrate that the primary purpose of the challenged residential plan was entirely noncommercial. According to Hamilton, the purpose of the plan is to create an academic environment that is more appealing to female applicants to Hamilton. According to the Chairman of the Board of Trustees,

fewer than 20% of the current students, self-selected [fraternity] males who have inherited these [fraternity houses,] virtually control social life on [Hamilton's campus]. Women students tell us time and again that, while they are fond of Hamilton, they do not feel they have the same social and residential opportunities as their male classmates. They do not enjoy--and cannot afford to replicate--the privileges of fraternity life. More disturbing is evidence that this disparity is leading many of the most talented prospective female applicants to seek education elsewhere.... The most disturbing result, however, has been increasing evidence that Hamilton is in danger of being perceived more for its social life than for its academic rigor....

B. Procedural History

On July 10, 1995, the four plaintiff fraternities--the Psi Chapter of Psi Upsilon, Inc., the Hamilton Chapter of Alpha Delta Phi, Inc., Beta of Sigma Phi Society, Inc., and Delta Kappa Epsilon Society of Hamilton College--brought this action pursuant to Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26), alleging that Hamilton's residential policy violates Section 2 of On August 1, 1995, defendants moved to dismiss the complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Defendants argued that the provision of room and board to Hamilton students is not "trade or commerce" within the meaning of Section 2 of the Sherman Act. They further argued that Hamilton's conduct had an insufficient nexus to interstate commerce to fall within the boundaries of the Sherman Act.

                the Sherman Act, 15 U.S.C. § 2. 1  Plaintiffs seek damages, injunctive relief and attorneys' fees.  Simultaneously with the filing of the complaint, the fraternities sought and the district court issued an order directing defendants to show cause why a preliminary injunction should not be entered enjoining the implementation of the residential policy announced on March 3, 1995
                

On October 2, 1995, the district court heard oral argument on plaintiffs' motion for a preliminary injunction and defendants' motion to dismiss. In addition to their jurisdictional arguments, defendants urged the court to dismiss the complaint because the relevant product market was not the market for room and board for Hamilton students, as alleged in the complaint, but the market for highly selective liberal arts colleges in which Hamilton competes for students with more than 100 colleges. In support of this claim, defendants submitted the affidavit of Jerry A. Hausman, a professor of economics at the Massachusetts Institute of Technology. Defendants acknowledged that any disposition on this ground would require the court to convert the motion to dismiss into one for summary judgment, as permitted by Rule 12(b) of the Federal Rules of Civil Procedure. At the conclusion of the oral argument, the court took both motions under advisement.

On October 12, 1995, the district court notified counsel by letter that it anticipated relying on the Hausman affidavit. Pursuant to the requirement in Rule 12(b) that the parties be given a reasonable opportunity to present affidavits and other material pertinent to a motion for summary judgment, the court invited any such material, expressing particular interest in plaintiffs' response to the relevant market and market power assertions in the Hausman affidavit. In response to the district court's invitation, plaintiffs submitted, among other things, the affidavit of an economist, William O. Kerr, who asserted that the primary market relevant to plaintiffs' antitrust claim is the market for the sale of residential services to Hamilton's students.

In a written decision dated April 12, 1996, the district court granted the defendants' motion to dismiss. Despite the numerous affidavits submitted by both parties, the court did not convert the motion into one for summary judgment, but rather stated that it based its decision on the complaint alone, and held that it lacked subject matter jurisdiction. Specifically, the court held that the allegations in the complaint failed to establish that the provision of residential services under the challenged residential policy was "trade or commerce," and thus subject to the prohibitions of the Sherman Act. It further held that the complaint failed to establish the requisite nexus between Hamilton's conduct and interstate commerce. The court did not reach the issues of the relevant product market and Hamilton's market power.

DISCUSSION

A. The Standard For Dismissal Under Rule 12(b)(1) and (6)

A court's task in determining the sufficiency of a complaint is "necessarily a limited one." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). The issue is not whether a plaintiff will or might ultimately prevail on her claim, but whether she is entitled to offer evidence in support of the allegations in the complaint. Id. "Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Id. A dismissal is warranted under Rule 12(b)(6) only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996). In addition, in ruling on defendant's motion, the court must accept as true all the factual allegations in the complaint and must draw all reasonable inferences in favor of the plaintiff. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 740, 96 S.Ct. 1848, 1850, 48 L.Ed.2d 338 (1976).

This generous approach to pleading applies in the antitrust context. Furlong v. Long Island College Hosp., 710 F.2d 922, 927 (2d Cir.1983). Where, as is the case here with respect to Hamilton's interstate...