Fontana Aviation, Inc. v. Cessna Aircraft Co.

• Citation: 617 F.2d 478
• Decision Date: 19 March 1980
• Docket Number: No. 79-1863,79-1863
• Parties: 1980-1 Trade Cases 63,230 FONTANA AVIATION, INC., Plaintiff-Appellant, v. The CESSNA AIRCRAFT COMPANY and Cessna Finance Corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 478

617 F.2d 478

1980-1 Trade Cases 63,230

FONTANA AVIATION, INC., Plaintiff-Appellant, v. The CESSNA AIRCRAFT COMPANY and Cessna Finance Corporation,

Defendants-Appellees.

No. 79-1863.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 4, 1979.

Decided March 19, 1980.

Francis J. McConnell, Chicago, Ill., for plaintiff-appellant.

Alan I. Becker, Kirkland & Ellis, Chicago, Ill., for defendants-appellees.

Before FAIRCHILD, Chief Judge, CASTLE, Senior Circuit Judge, and WOOD, Circuit Judge.

HARLINGTON WOOD, Jr., Circuit Judge.

Fontana Aviation, Inc., plaintiff, appeals the granting of the defendants', Cessna Aircraft Company and Cessna Finance Corporation, motion for summary judgment in Fontana's antitrust action alleging violation of the Sherman Act, 15 U.S.C. §§ 1, 2 (1976), and seeking treble damages and injunctive relief pursuant to the provisions of the Clayton Act, 15 U.S.C. §§ 15, 26 (1976). Judge Flaum, understanding Fontana's claim to be only for the recovery of damages arising from Cessna's pricing policy, held that damages were not recoverable under Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977).

The parties need to be identified and their relationships considered. Fontana was a Michigan corporation, now no longer in business, which had its principal place of business at a Michigan airport. It was in the business of selling new and used general aviation aircraft, including Cessna aircraft, but more importantly, so far as this case is concerned, was also in the business of selling and performing custom installations of avionics equipment manufactured by other than Cessna Aircraft Company (Cessna). ¹ Cessna, a Kansas corporation, with its principal place of business in Wichita, Kansas, is one of the larger domestic manufacturers of general aviation aircraft. Through its Aircraft Radio and Control Division (ARC), Cessna manufactures and sells its own line of avionics. Cessna Finance Corporation (CFC), also located in Wichita, Kansas, a wholly-owned subsidiary of Cessna, is in the business of providing financing for distributors, dealers and purchasers of Cessna products. Except for jet aircraft sold directly to consumers, Cessna's other aircraft and products are sold in the market by independent retail dealers. Although Fontana was a Cessna dealer, it did not purchase directly from Cessna, but from Aviation Activities, Inc., an independent Cessna distributor. Aviation Activities, Inc., however, was alleged to be a co-conspirator although not named as a defendant.

Procedurally, Judge Flaum granted Cessna's and CFC's motion for summary judgment on tie-in claims but denied it on the cognizability of the product market. However, Judge Flaum relying on Illinois Brick also granted summary judgment on Fontana's damage claims on the basis that Fontana had purchased its Cessna aircraft not directly from Cessna, but from Aviation Activities, Inc. As that holding left Fontana only its claims for injunctive relief which would afford little practical satisfaction as it had liquidated, Fontana filed an amended complaint omitting requests for injunctive relief so that in the event of a similar ruling on the damage claim, the ruling would be appealable. Judge Flaum reaffirmed his view on the damage claims and again disposed of the matter by summary judgment under the rationale of Illinois Brick.

In its amended complaint, Fontana alleges in Count I that Cessna, CFC and Aviation Activities, Inc. conspired to unreasonably restrain trade in the business of selling and installing non-Cessna avionics equipment in Cessna aircraft in violation of Section 1 of the Sherman Act, and in Count II of unreasonably restraining trade by monopolizing and attempting to monopolize the selling and installation of avionics equipment in Cessna aircraft in violation of Sections 1 and 2 of the Sherman Act. Fontana alleges the purpose and intent of the alleged conspiracy was to put it and similar Cessna dealers out of business so as to enhance Cessna's own avionics business. Fontana alleges that before Cessna changed its policies in the avionics field a substantial percentage of Cessna multi-engine aircraft was sold by Cessna without factory-installed avionics. This permitted the purchaser to freely select his own brand of avionics for custom field installation by those particular Cessna dealers who had that capability. Fontana prospered as a specialist in avionics installation, which distinguished Fontana from many other Cessna dealers who lacked that proficiency. Fontana further alleges that the "multi-faceted conspiracy" contained various elements which we shall examine briefly.

Fontana complains of a change in pricing policy instituted by Cessna in 1974. Cessna at that time began offering certain of its aircraft with factory-installed avionics at a special package price which was less than the price if the aircraft and avionics were separately purchased. In 1975 the list price of unequipped aircraft went up and the price of factory-installed avionics went down, amounting to both overcharges and undercharges according to Fontana. Also in 1975 CFC changed its financing policy and declined to finance other than Cessna avionics. All other brand avionics, however, after installation would become subject to Cessna's lien on the aircraft. A number of other claimed misdeeds are charged to be a part of the "multi-faceted conspiracy" including a national advertising campaign disparaging the custom installation of non-Cessna avionics; introduction of a dealer rebate program; introduction of a line of Cessna aircraft which could be purchased only with factory-installed Cessna avionics; the pressuring of Cessna dealers not to engage in sales outside their own areas; the informing of Cessna dealers that they could not sell Cessna aircraft and also be in the business of installing non-Cessna avionics; and, the temporary withdrawal of trade-in financing for used aircraft received by Fontana in the course of its business. Those activities are claimed by Fontana to have been conspiratorially calculated to cause it competitive injury.

Cessna and CFC explain that their pricing policy and other changes were only to enhance their own competitive position in the avionics markets. Cessna points as justification for its commercial behavior to Fontana's own allegation that Cessna avionics were inferior and overpriced. It is Cessna's position that in the trial court Fontana focused only on the pricing policy and that the other allegations were either shown to be nonexistent or to be ordinary and lawful pro-competitive business reaction and behavior. Cessna and CFC claim that any damages suffered by Fontana were due only to the loss of Fontana's temporary enjoyment of a substantial competitive advantage over other Cessna dealers on which Fontana had no justification to rely. Cessna explains that there was no tying of the sale of Cessna avionics to the purchase of Cessna aircraft as both continued to be available separately. The purchase of one product was not conditioned on the purchase of the other. The trial judge rejected any tying theory based only on economic incentives. Lupia v. Stella D'Oro Biscuit Co., 586 F.2d 1163, 1173 (7th Cir. 1978), cert. denied, 440 U.S. 982, 99 S.Ct. 1791, 60 L.Ed.2d 242 (1979). As to financing, Cessna and CFC deny any obligation to finance a competitor's avionics, but in any event it is claimed financing was available from others. Cessna and CFC further claim there was no disparaging advertising chargeable to them; that a rebate program also questioned provided only for discounts on financial purchases for prompt payment; and that the line of Cessna aircraft available exclusively with Cessna avionics was not introduced in the market until after Fontana had liquidated. Cessna and CFC dispute any territorial restrictions and the purported withdrawal of financing for used aircraft.

Cessna argues that Illinois Brick controls Fontana's case because only the first person upon whom an illegal price has been imposed suffers any legally cognizable antitrust injury. It is urged that Illinois Brick applies because in between Cessna and Fontana was Aviation Activities, Inc., a totally independent Cessna dealer with whom Fontana did its Cessna business. Illinois Brick prohibits any pass on theory of damages. Fontana, on the other hand, argues that Illinois Brick is not applicable because the theory of its case is that as an avionics competitor of Cessna it suffered competitive injury. Fontana does not claim to be a customer complaining about an overcharge. Further, Fontana claims that the trial court considered only one aspect of its conspiracy allegations, the pricing policy, and ignored the other charges, whereas the conspiracy as alleged consisted of a combination of things including not only pricing but other acts as well. Although Judge Flaum did not reach the issue, Cessna and CFC, relying on Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), argue that Fontana is seeking damages for injury resulting only from increased, non-predatory competition to which it is not entitled.

Illinois Brick must be examined. Ultimate users of concrete blocks, the owners of buildings, brought suit against the manufacturers of the concrete blocks alleging a conspiracy to fix prices in violation of Section 1 of the Sherman Act and seeking treble damages under Section 4 of the Clayton Act. It was claimed by plaintiffs that the intermediaries in the chain of distribution, masonry contractors and general contractors, had passed on to them the increased fixed prices. The Court held that indirect purchasers, the plaintiff building owners, had no claim for Clayton Act Section 4 treble damages against the manufacturers under an expansion of the rationale of Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (196...