Mutual Fund Investors, Inc. v. Putnam Management Co., Inc.

• Decision Date: 09 May 1977
• Docket Number: No. 74-3359,74-3359
• Citation: 553 F.2d 620
• Parties: 1977-1 Trade Cases 61,445 MUTUAL FUND INVESTORS, INC., a corporation, Mark Kruse, E. O. Garrett, Vernon Haddox, Jr., Lindsay Garnett, J. Bruce Taylor, Sr., Gilbert Shwanee, Plaintiffs-Appellants, v. The PUTNAM MANAGEMENT COMPANY, INC., a corporation, the George Putnam Fund of Boston, a voluntary association, the Putnam Growth Fund, a voluntary association, Putnam Investors Fund, Inc., a corporation, the Putnam Income Fund, Inc., a corporation, Putnam Fund Distributors, Inc., a corporation, Mutual Fund Associates, Inc., a corporation, Western Travelers Life Insurance Company, a corporation, Neil T. Ferguson, Edward J. Delehanty, Max Brumfield, Robert Johnson, Lowell B. Martin, Robert H. Gilbert, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 620

553 F.2d 620

1977-1 Trade Cases 61,445

MUTUAL FUND INVESTORS, INC., a corporation, Mark Kruse, E.

O. Garrett, Vernon Haddox, Jr., Lindsay Garnett, J. Bruce Taylor, Sr., Gilbert Shwanee, Plaintiffs-Appellants, v. The PUTNAM MANAGEMENT COMPANY, INC., a corporation, the

George Putnam Fund of Boston, a voluntary association, the

Putnam Growth Fund, a voluntary association, Putnam

Investors Fund, Inc., a corporation, the Putnam Income Fund,

Inc., a corporation, Putnam Fund Distributors, Inc., a

corporation, Mutual Fund Associates, Inc., a corporation,

Western Travelers Life Insurance Company, a corporation,

Neil T. Ferguson, Edward J. Delehanty, Max Brumfield, Robert

Johnson, Lowell B. Martin, Robert H. Gilbert, Defendants-Appellees.

No. 74-3359.

United States Court of Appeals, Ninth Circuit.

May 9, 1977.

Hunt, Liljestrom & Wentworth, J. Gary Germann, Santa Ana, Cal., for plaintiff-appellants.

Charles W. Bender, O'Melveny & Myers, Los Angeles, Cal., Godfrey L. Munter, Jr., Cotton, Seligman & Ray, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before WRIGHT, KILKENNY and ANDERSON, Circuit Judges.

OPINION

EUGENE A. WRIGHT, Circuit Judge:

Appellants in this treble-damage antitrust action appeal from the entry of two summary judgments. The central question is the appropriateness of the summary judgment relief.

Mindful that summary judgments are disfavored in antitrust cases where motive or intent is critical, we are cognizant nevertheless that such relief, properly used, is a valuable means to avoid squandering judicial time and resources. Our careful review of the record leads inescapably to the conclusion that movants met their burden of proof, appellants failed to controvert that showing by producing any credible evidence from which a jury could infer the violations alleged and that the district court prudently granted the motions for summary judgment.

FACTS

The principal appellants are Kruse and Mutual Fund Investors, Inc. (MFI), a broker-dealer firm, founded by Kruse in 1966 while he was the manager of Mutual Fund Associates, Inc.'s (MFA) division offices in Santa Ana and Long Beach, California. Other appellants are MFI securities salesmen who were formerly employed by MFA.

Appellees are organizations and persons affiliated with the Putnam investment group. They include underwriters, consisting of The Putnam Management Co. and three of its subsidiaries, Putnam Fund Distributors, Inc. (Distributors), MFA, and Western Travelers Life Insurance Co. (Western Travelers). Also named are five Putnam mutual fund organizations: The George Putnam Fund of Boston, The Putnam Growth Fund, Putnam Investors Fund, Inc., The Putnam Income Fund, Inc. and Putnam Equities Fund, Inc.

Putnam Management is the investment adviser to the Putnam mutual fund groups. Distributor serves as the principal underwriter and national wholesale distributor of Putnam mutual fund securities. MFA, another wholly-owned subsidiary, operates as a broker-dealer selling mutual fund securities at retail to the public. Western Travelers is a life insurance company acquired by Putnam Management during the time covered by appellants' complaint.

The chain of events underlying this action is not complicated. Kruse surreptitiously decided to leave MFA in 1966 and found his own broker-dealer firm. He recruited MFA personnel, gathered selected MFA materials and data, and planned to transfer as much of MFA's Santa Ana division business as possible to MFI.

When discovered by MFA's regional manager in early November 1966, Kruse was discharged. He immediately opened MFI and took with him 13 MFA securities salesmen from the Santa Ana division who had accounted for 35 percent of that division's sales volume.

Two weeks later, MFA filed a state court complaint alleging unfair competition by MFI and Kruse. A temporary restraining order and a preliminary injunction were issued soon thereafter. The instant action was filed by appellants in April 1967 after the issuance of the state's preliminary injunction. The state court trial was held in 1968 and a judgment was entered against Kruse and MFI providing for a permanent injunction and compensatory and punitive damages.

On January 3, 1967, during the pendency of the state court litigation, Kruse requested a sales agreement with Distributors for MFI. George Putnam, president of Putnam Management and Chairman of the Board of Distributors, previously had decided not to sell Putnam fund securities through MFI until the state court proceedings were completed. Consequently, Kruse's request was rejected. Once the taking of evidence in the state court case was completed in May 1967, Putnam Distributors entered into a sales agreement with MFI.

Count I alleges a combination and conspiracy to restrain and monopolize trade under the Sherman Act (15 U.S.C. §§ 1, 2) in the sale of mutual fund securities and life insurance policies in the western states, California, and southern California beginning prior to November 7, 1966 (the date of Kruse's termination by MFA). Appellants contend that the circumstances surrounding Kruse's termination, the filing of the state court action by MFA Distributors' refusal to deal, and appellees' acts of disparagement, false complaints to regulatory agencies, and attempts to prevent appellants' licensing prove the allegations. Count I also alleges an attempt to monopolize in violation of 15 U.S.C. § 2.

Count II charges violations of §§ 1 and 2 beginning in 1961, incorporates by reference the allegations above, and focuses on (a) Putnam's acquisitions of MFA and Western Travelers and (b) the techniques used by MFA to increase the sales of Putnam mutual fund securities.

DISCUSSION

1. SUMMARY JUDGMENT.

It is axiomatic that the moving party must sustain the burden of demonstrating "the absence of a genuine issue as to any material fact," pursuant to Rule 56, F.R.Civ.Pr. A material issue is one which may affect the outcome of the litigation. A genuine issue supporting a claimed factual dispute requires a judge or jury to resolve the parties' differing versions of the truth at trial. First National Bank of Arizona v. Cities Service Co., Inc., 391 U.S. 253, 288-289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). This burden is particularly rigorous in antitrust cases. Javelin Corp. v. Uniroyal, Inc., 546 F.2d 276, 280 (9th Cir. 1976).

If the movants' papers are sufficient to support the motion, the opposing party must controvert the showing. In doing so, all evidence and inferences therefrom are to be construed in the light most favorable to the party opposing the motion. United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). Nevertheless, the opponents' version of the facts must support a viable legal theory which would entitle them, if accepted, to a judgment as a matter of law. See, e. g., Bushie v. Stenocord Corp.,460 F.2d 116, 119 (9th Cir. 1972); McGuire v. Columbia Broadcasting System, Inc., 399 F.2d 902, 905 (9th Cir. 1968).

As we pointed out earlier, the drastic nature of summary judgment relief has created a disfavored status for such dispositions in complex antitrust litigation where motive and intent are important. See, e. g., Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Norfolk Monuments Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 704, 89 S.Ct. 1391, 22 L.Ed.2d 658 (1969). The often cited Poller case, however, has become a magic wand waved indiscriminately by those opposing summary judgment motions in antitrust actions. We note that the Court in Poller cautioned only that summary judgment "be used sparingly. . . .", Poller, supra, 368 U.S., at 473, 82 S.Ct. 486, and not that such relief is inappropriate in all antitrust cases.

The Court, in fact, has specifically held that an opposing party may not defeat a summary judgment motion, once the movant has met his burden, in the absence of "any significant probative evidence tending to support the complaint." Cities Service, supra, 391 U.S. at 290, 88 S.Ct. at 1593. We have cast this rule in the following terms:

Once the allegations of conspiracy made in the complaint are rebutted by probative evidence supporting an alternative interpretation of a defendant's conduct, if the plaintiff then fails to come forward with specific factual support of its allegations of conspiracy, summary judgment for the defendant becomes proper.

ALW, Inc. v. United Airlines, Inc., 510 F.2d 52, 55 (9th Cir. 1975). To hold otherwise would give free rein to any plaintiff who can draft an antitrust complaint capable of withstanding a motion to dismiss to go to trial with only a wing and a prayer supporting his well drafted complaint.

Counsel for appellants agreed in open court that a trial in this matter would not develop additional evidence beyond that before the district court when summary judgment was granted. Moreover, it was conceded that the facts are undisputed and what is at issue on appeal are the inferences to be drawn from those facts.

Generally, when intent is at issue, a jury should be allowed to draw its own inferences from the undisputed facts unless all reasonable inferences defeat appellants' claims. The motions and record here indicate that all reasonable inferences do defeat a viable legal theory upon which appellants might prevail.

After appellees made their sufficient showing, appellants chose to file no affidavits in opposition to movants' papers "because the factual bases for the (appellants') opposition are amply set forth in the affidavits filed by (appellees) and by deposition testimony of (appellees) representatives." C.T. 798, n.1.

Although appellants have the right to rest their opposition to the motion on admissible evidence in the record, the Supreme Court has observed that: "(i)t has always been perilous for the opposing party neither to proffer...