Michigan Division-Monument v. Michigan Cemetery, 06-2524.

Citation524 F.3d 726
Decision Date01 May 2008
Docket NumberNo. 07-1169.,No. 07-1171.,No. 07-1168.,No. 06-2524.,06-2524.,07-1168.,07-1169.,07-1171.
PartiesMICHIGAN DIVISION-MONUMENT BUILDERS OF NORTH AMERICA et al., Plaintiffs-Appellants, v. MICHIGAN CEMETERY ASSOCIATION et al., Defendants-Appellees. Michigan Division-Monument Builders of North America et al., Plaintiffs-Appellees, v. Michigan Cemetery Association, Arborcrest Memorial Park (07-1168); Michigan Memorial Park, Inc. (07-1169); White Chapel Memorial Association (07-1171), Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

Buikema, Grand Rapids, Michigan, for Defendants. ON BRIEF: Barbara H. Kramer, Mitchell A. Kramer, Kramer & kramer, Rydal, Pennsylvania, David A. Nacht, David Blanchard, Nacht & Associates, Ann Arbor, Michigan, for Plaintiffs. Frederick R. Juckniess, Miller, Canfield, Paddock & Stone, Ann Arbor, Michigan, Jay W. Tower, Bingham Farms, Michigan, Jeffrey C. Gerish, Plunkett & Cooney, Bloomfield Hills, Michigan, L. David Lawson, Winegarden, Haley, Lindholm & Robertson, Grand Blanc, Michigan, Robert D. Goldstein, Garan Lucow Miller, Grand Blanc, Michigan, Timothy J. Jordan, Garan Lucow Miller, Detroit, Michigan, for Defendants.

Before: MOORE, GILMAN, and SUTTON, Circuit Judges.

OPINION

RONALD LEE GILMAN, Circuit Judge.

This case involves allegations of anticompetitive behavior in the market for burial monuments in the state of Michigan. Three independent monument builders and a nonprofit trade association of monument builders—the Michigan Division of the Monument Builders of North America(collectively, the Builders) filed the present lawsuit against 20 cemetery operators and the Michigan Cemetery Association (collectively, the Cemeteries). The lawsuit alleges that the Cemeteries are engaged in (1) an illegal tying arrangement, in violation of § 1 of the Sherman Act, (2) an illegal conspiracy to restrain competition and monopolize trade, also in violation of § 1 of the Sherman Act, (3) an illegal conspiracy to restrain trade, in violation of § 2 of the Sherman Act, and (4) violations of the Michigan Prepaid Funeral and Cemetery Sales Act, M.C.L. § 328.225.

The district court dismissed the Builders' claims after concluding that the proposed geographic market as set forth in the complaint was too narrow as a matter of law. Subsequently, the district court denied motions for sanctions against the Builders that were filed by several of the cemetery operators. For the reasons set forth below, we AFFIRM the judgment of the district court on the merits of the antitrust claims, but VACATE its denial of sanctions and REMAND the case for further proceedings on that issue.

I. BACKGROUND
A. Factual background

The Builders allege that the Cemeteries "have been engaging in a continuing unlawful combination and conspiracy to unreasonably restrain trade and engage in unlawful tying arrangements in cemeteries in the sale and installation of memorials and monuments and related items." According to the Builders' second amended complaint (the Complaint), the Cemeteries employ various tactics to prevent the independent monument builders from competing in the market. These tactics form the basis of the alleged Sherman Act violations. Three independent monument builders have brought claims on their own behalf against the named defendants only, while the Monument Builders trade association seeks relief on behalf of a class of all monument builders in Michigan against a defendant class comprised of all cemeteries in the state that engage in one or more practices that restrict free trade for monuments. Monetary damages are sought by the independent builders and injunctive relief is sought by the trade association. The Builders' collective claims are identical, however, with respect to all of the legal and factual issues.

The Cemeteries are individually identified in paragraph 9 of the Complaint, but the Complaint contains no specific allegations of wrongdoing by the individual cemeteries. Instead, the Complaint alleges generally that "each of the defendants, and each member of the defendant class, has engaged in all or certain of the following anticompetitive actions and activities." The Builders then assert four claims against the Cemeteries, although each claim is presented twice, once as a claim by the three independent builders (Counts I through IV) and once as a claim by the trade association (Counts V through VIII). The relevant geographic market for all four claims is defined in the Complaint as "each individual cemetery in the State of Michigan." Each cemetery is its own market, according to the Builders, "[b]ecause of the uniqueness of land and the fact that once a grave is purchased[,] the owner or his or her family who wish to memorialize the deceased must install the memorial or monument in that cemetery."

Count I (and Count V) allege an illegal tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Specifically, the Builders allege that the Cemeteries "have sufficient economic power in the tying product—the cemetery burial lots—to impose restrictions in the tied product or service, monuments and memorials and related products and installation of monuments and memorials and related products and services—and a substantial volume of commerce in said market was in fact restrained."

In Count II (and Count VI), the Builders allege that the Cemeteries are engaged in an illegal conspiracy to restrain competition and monopolize trade, also in violation of Section 1 of the Sherman Act. The alleged conspiracy is designed to "drive plaintiffs out of business by engaging in the predatory practices set forth in paragraph 32, in particular, by exclusion of plaintiffs from defendant cemeteries and by price fixing, thereby impeding plaintiffs' ability to sell or install monuments, memorials, foundations, benches, mausoleums, and other related items for the memorialization of the dead." According to the Builders, this conspiracy is part of a historical practice by cemeteries to "eliminate competition by adopting practices that violate the antitrust laws." The Builders explain that "[t]his avowed position to pursue illegal practices in violation of antitrust laws was articulated by Mr. C.H. Shackelfold, past president of the American Cemetery Association, in his speech in February 1982, in San Antonio, Texas." In that speech, Shackelfold said:

The cemeterian is not going to give up the installation rule until he is told to do so by the Supreme Court that he has to. If it reaches that point, you and I are going to have a lot more problems than we have now. Cemeteries will figure out other ways to collect these charges through maintenance, supervision and bookkeeping charges.

The Complaint makes no allegation, however, that Shackelfold is involved in the present litigation.

According to the Builders, "[h]aving secured the agreement from major private cemeteries that sell monuments and memorials, defendants, individually and through the aegis of the Michigan Cemetery Association, have attempted to bring smaller cemeteries into the conspiracy." The attempts to bring in smaller cemeteries are allegedly demonstrated by a letter from Leonard Krawczyk, President of Hillcrest Memorial Gardens and a Director of the Michigan Cemetery Association, that was sent to Jeff Davis of Great Lakes Monument Co. in December of 2004. A copy of the letter is attached to the Complaint as Exhibit 1. The letter discusses a dispute between Hillcrest and Great Lakes regarding the costs associated with placing two monuments in Hillcrest's cemetery. In addition to being sent to Mr. Davis at Great Lakes, the letter was sent to the Shiawassee County Prosecutor, Suzanne Jolicour of the State Cemetery Commission, and a number of other cemeteries and monument builders.

Count III (and Count VII) alleges a "conspiracy to restrain trade and/or attempt to monopolize" in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. The Builders allege that because of their proposed geographic market—with each individual cemetery being a market unto itself—the Cemeteries "have sufficient market power to come dangerously close to monopolizing the defined market" in burial memorials and monuments.

Finally, in Count IV (and Count VIII), the Builders allege a number of violations of the Michigan Prepaid Funeral and Cemetery Sales Act. Among the alleged state-law violations is a failure to comply with price disclosure rules.

B. Procedural background

The Builders filed their initial complaint in December of 2005. In January of 2006, and again in August of 2006, the Builders were allowed to amend their complaint. Most of the Cemeteries then filed a joint motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The others filed their own separate motions to dismiss.

Finding that the Builders' proposed geographic market was inadequate as a matter of law, the district court granted the Cemeteries' motions to dismiss the federal antitrust claims in October of 2006. The court also declined to exercise supplemental jurisdiction over the Builders' state-law claims, thereby dismissing them without prejudice. A timely appeal was filed by the Builders, with the issues limited to the federal antitrust claims.

Meanwhile, four of the individual cemeteries filed motions for sanctions against the Builders pursuant to Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and the court's inherent authority. The district court denied the motions without explanation. That decision has been cross-appealed by the individual cemeteries seeking the sanctions.

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