Bridges & Brady v. Maclean-Stevens Studios Inc.

Decision Date08 October 1999
Docket NumberMACLEAN-STEVENS,No. 99-1126,99-1126
Citation201 F.3d 6
Parties(1st Cir. 2000) SALLY BRIDGES, TAMMY BRADY, Plaintiffs, Appellants, v.STUDIOS, INC., LAWRENCE MACLEAN, BLAIR MACLEAN, Defendants, Appellees. . Heard
CourtU.S. Court of Appeals — First Circuit

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE. Hon. Morton A. Brody, U.S. District Judge. [Copyrighted Material Omitted] Jon Holder, with whom Holder & Grover, P.A. was on brief, for appellants.

John H. Rich III, with whom David B. McConnell, and Perkins Thompson Hinckley & Keddy were on brief, for appellees.

Before Torruella, Chief Judge, Lynch and Lipez, Circuit Judges.

TORRUELLA, Chief Judge.

This appeal arises from an antitrust suit involving the school portrait industry. Plaintiff-appellants are parents of school-age children who attend schools that have entered into exclusive contracts with MacLean-Stevens Studios, Inc. Defendant-appellees are MacLean-Stevens Studios, Inc., a photography studio that services the school portrait market, and its owners Lawrence and Blair MacLean. Appellants allege that appellees engaged in commercial bribery in violation of 15 U.S.C. § 13(c) (Count I), price discrimination in violation of 15 U.S.C. § 13(a) (Count II), and conspiracy to restrain trade in violation of 15 U.S.C. § 1 (Count III). On December 17, 1998 the district court entered summary judgment for defendant-appellees on all counts. See Bridges v. MacLean-Stevens Studios, Inc., 35 F. Supp. 2d 20 (D. Me. 1998). This appeal followed. Having carefully considered the record and the law, we affirm.

BACKGROUND

The facts necessary to decide this case are not in dispute and were aptly summarized by the district court. Appellee MacLean-Stevens Studios, Inc. is a New Hampshire corporation that offers student portrait services in several New England states. Appellants are parents of school-age children who attend schools that have entered into exclusive contracts with MacLean-Stevens. These contracts provide that the school will receive a commission of twenty percent (20%) of the price of the portrait packages sold and designate MacLean-Stevens as the exclusive provider of portraits on school property. As a result the school portraits purchased by appellants are priced according to a "commission price list." Prices on the commission price list are generally twenty percent (20%) higher than portrait prices charged by MacLean-Stevens for children who attend schools that decline a commission. The nature and quality of the pictures are identical regardless of whether the commission price applies.

It is the schools' decision to accept or decline a commission. If a school enters into a contract that provides for a commission, the commission goes to the school's general fund. If a school declines the commission, the reduction in costs is passed on to parents in the form of lower portrait prices. Before 1996, parents were not informed that the prices on the commission price list included a commission paid to their children's school. At no time, however, has a school's contract with MacLean-Stevens obligated parents to purchase school portraits.

All schools provide some services to MacLean-Stevens regardless of whether they accept the commission and designate MacLean-Stevens as the exclusive portrait provider. These services include: scheduling photo sessions, providing and arranging space for the photo sessions, distributing the portrait packages to students, and collecting payment from students in the elementary grades. Appellees, in turn, provide yearbook, team, and identification photos to all schools free of charge. Appellees also provide each elementary school student with a free class portrait.

In the school portrait industry, the practice of entering into an exclusive dealing contract that provides for a commission to the school is not unusual. Some of appellees' competitors have even paid commissions of up to fifty percent (50%). Most of these contracts, including appellees', are one-year contracts, but some have a duration of up to three years. During the 1995-1996 school year, MacLean-Stevens had 159 accounts with schools in Maine, 112 of which accepted a commission and designated MacLean-Stevens as their exclusive photographer, and 49 of which did not.

In addition to MacLean-Stevens and other photography studios that take portraits on school property, numerous businesses in New England offer portrait services off school grounds. For example, both Wal-Mart and J.C. Penney have studio photography services. Appellants are aware of these options and have purchased portraits of their children from these businesses on several occasions.

DISCUSSION
I. Standard of Review

This Court reviews orders for summary judgment de novo, construing the record in the light most favorable to the nonmovant and resolving all reasonable inferences in that party's favor. See Houlton Citizens' Coalition v. Town of Houlton, 175 F.3d 178, 184 (1st Cir. 1999) (citing Mullin v. Raytheon Co., 164 F.3d 696, 698 (1st Cir. 1999)). This standard of review does not limit us to the district court's rationale; in contrast, we may affirm the entry of summary judgment on "any ground revealed by the record." Id.

II. 15 U.S.C. § 13(c) - Commercial Bribery

Appellants contend that the commissions paid by MacLean-Stevens constitute commercial bribery in violation of 15 U.S.C. § 13(c), commonly known as section 2(c) of the Robinson-Patman Act. Appellees counter that (1) appellants do not have antitrust standing because they have not suffered an antitrust injury; (2) commercial bribery is not a cognizable claim under § 13(c); (3) the commissions paid to the schools in this case do not cross the "seller-buyer line" as required by § 13(c); (4) the commissions are lawful pursuant to the statutory exemption for "services rendered"; and (5) appellees have antitrust immunity under the Nonprofit Institutions Act, 15 U.S.C. § 13c. The district court rejected appellees' argument that the commissions paid to the schools in this case were for services rendered, but agreed that the Nonprofit Institutions Act applied. See Bridges, 35 F. Supp. 2d at 25. The district court further concluded that even if the Nonprofit Institution Act were not applicable, appellants could not demonstrate that the schools acted as the agents of parents with regard to the purchase of school portraits from MacLean-Stevens. See id.

We agree with the district court that, as to the portrait sales, the schools are not agents or intermediaries of the parents, and therefore the commission agreements between MacLean-Stevens and the schools do not violate section 2(c) of the Robinson-Patman Act. Accordingly, the entry of summary judgment for appellees was proper. We thus need not reach the other arguments addressed by the district court or raised by appellees.

Section 2(c) of the Robinson-Patman Act states:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.

15 U.S.C. § 13(c). The Robinson-Patman Act was enacted "to curb and prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power." Federal Trade Comm'n v. Henry Broch & Co., 363 U.S. 166, 168 (1960). Prior to the statute's enactment in 1936, a congressional inquiry revealed that large buyers and sellers were circumventing the discriminatory price prohibitions of the Clayton Act by insisting on indirect price concessions. See id. at 168-69. The most widely used method for obtaining an indirect price concession was a "dummy broker." A dummy broker was a fiction, set up by the buyer, that rendered no services and yet collected a "brokerage" fee from the seller. The fictitious broker then paid the fee to its employer, the buyer. See id. at 169.

Although dummy brokers were the primary target of section 2(c), the Supreme Court has stated that Congress "phrased section 2(c) broadly, not only to cover the other methods then in existence but all other means by which brokerage could be used to effect price discrimination." Id. The Court further indicated, in dicta, that:

The Report of the House Judiciary Committee described the brokerage provision as dealing "with the abuse of the brokerage function for purposes of oppressive discrimination." And although not mentioned in the Committee Reports, the debates on the bill show clearly that § 2(c) was intended to proscribe other practices such as the "bribing" of a seller's broker by the buyer.

Id. at 169-70 n.6 (citations omitted); see also California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 513 (1972) ("bribery of a public purchasing agent" could violate section 2(c)) (dictum). The Senate Report discussing section 2(c) states:

The relation of the broker to his client is a fiduciary one. To collect from a client for services rendered in the interest of a party adverse to him, is a violation of that relationship; and to protect those who deal in the streams of commerce against breaches of faith in its relations of trust, is to foster confidence in its processes and promote its wholesomeness and volume.

S. Rep. No. 1502, at 7 (1936).

Against this background, five circuits have concluded that commercial bribery is within the ambit of section 2(c). See Harris v. Duty Free Shoppers Ltd....

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