177 F.3d 1228 (11th Cir. 1999), 98-6194, Lowell v. American Cyanamid Co.

Docket Nº:98-6194.
Citation:177 F.3d 1228
Party Name:Doug LOWELL, Mackey Nolte, et al., Plaintiffs-Appellants, v. AMERICAN CYANAMID COMPANY, a Corporation, Defendant-Appellee.
Case Date:June 09, 1999
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1228

177 F.3d 1228 (11th Cir. 1999)

Doug LOWELL, Mackey Nolte, et al., Plaintiffs-Appellants,

v.

AMERICAN CYANAMID COMPANY, a Corporation, Defendant-Appellee.

No. 98-6194.

United States Court of Appeals, Eleventh Circuit

June 9, 1999

        Arthur D. Levy, Michael F. Ram, San Francisco, CA, Kenneth S. Canfield, Atlanta, GA, for Plaintiffs-Appellants.

        A. Stephen Hut, Jr., James W. Lowe, Washington, DC, Daniel K. Mayers, Wilmer, Cutler & Pickering, Washington, DC, for Defendant-Appellee.

        Appeal from the United States District Court for the Southern District of Alabama.

        Before EDMONDSON and BLACK, Circuit Judges, and RESTANI [*], Judge.

        EDMONDSON, Circuit Judge:

        Plaintiffs, five Alabama farmers, have appealed a district court order dismissing an antitrust complaint for failure to join middlemen dealers as defendants pursuant to Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). We conclude that Illinois Brick has no application in a vertical conspiracy with no allegations of "pass-on." The district court decision is vacated, and the case is remanded.

Background

        Between 1989 and 1995, the defendant, American Cyanamid Company ("American Cyanamid"), maintained two similar rebate programs for its independent retail dealers nationwide. Under the programs, American Cyanamid entered into written contracts with its dealers whereby American Cyanamid would give the dealer a rebate on each sale of designated crop-protection products but only if the dealer sold the product at or above American Cyanamid's suggested resale price; the programs allegedly established a minimum resale price. Under these contracts, the specified resale price was equal to the wholesale prices paid by the dealer. American Cyanamid's dealers overwhelmingly responded by selling the product at or above the specified minimum resale price. 1

        In 1997, Plaintiffs filed a complaint, on behalf of themselves and all others similarly situated, alleging American Cyanamid had violated section one of the Sherman Act (15 U.S.C. § 1) and section four of the Clayton Act (15 U.S.C. § 15). Plaintiffs later amended their complaint, but at no time did they join any of the estimated 2,500 American Cyanamid distributors. American Cyanamid filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion with prejudice, holding that the independent dealers, as direct purchasers, must be parties to the action under the doctrine of Illinois Brick. Otherwise, Plaintiffs, according to the district court, lacked standing to maintain the suit. Plaintiffs appealed.

Discussion

        We review de novo a district court order dismissing a complaint for failure to state a claim, construing the allegations in the complaint as true and in the light most favorable to the plaintiff. See Harper v. Blockbuster Entertainment Corp., 139 F.3d 1385, 1387 (11th Cir.1998).

        Plaintiffs' complaint alleges that American Cyanamid engaged in a vertical price-fixing conspiracy with the independent dealers in violation of section one of the Sherman Act and section four of the Clayton Act. Plaintiffs claim that the district court erred in applying Illinois Brick to bar this complaint from proceeding directly against American Cyanamid without joining the independent dealers.

        Illinois Brick, so Plaintiffs' argument goes, does not apply to a vertical price-fixing scheme where (1) a plaintiff buys directly from a dealer who combined with a manufacturer to fix the prices and (2) no allegations are made of "pass-on." In other words, Plaintiffs claim they are not indirect purchasers at all under Illinois Brick, but are direct purchasers from a conspiring party.

        American Cyanamid counters that the rule of Illinois Brick--that indirect purchasers cannot maintain a suit without joining the appropriate middlemen--is on point and that the present case falls within neither of its two enumerated exceptions. 2 American Cyanamid also points out that the former Fifth Circuit applied Illinois Brick to bar claims somewhat similar to this one in In re Beef Industry Antitrust Litigation, 600 F.2d 1148 (5th Cir.1979).

        We agree with the Plaintiffs. Illinois Brick has no application in this case.

        Illinois Brick was an extension of the Court's earlier prohibition against the defensive use of passing on in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 491-94, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968). 3 In concluding that the indirect government purchasers of a product may not sue distant manufacturers, Illinois Brick cited two underlying rationales. The first of these was that "allowing offensive but not defensive use of pass-on would create a serious risk of multiple liability for defendants. Even though an indirect purchaser had already recovered for all or part of an overcharge passed on to it, the direct purchaser would still recover automatically the full amount of the overcharge that the indirect purchaser had shown to be passed on[.]" Illinois Brick, 431 U.S. at 730, 97 S.Ct. 2061...

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