White v. R.M. Packer Co. Inc.

Decision Date18 February 2011
Docket NumberNo. 10–1130.,10–1130.
PartiesWilliam WHITE et al., Plaintiffs, Appellants,v.R.M. PACKER CO., INC., et al., Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

OPINION TEXT STARTS HERE

Stephen Schultz, with whom Engel & Schultz was on brief, for appellants.Brian A. O'Connell, with whom William J. Fidurko and Zizik, Powers, O'Connell, Spaulding & Lamontagne, P.C. were on brief, for appellees Drake Petroleum Co., Inc. and Kenyon Oil Company.Richard W. Paterniti, with whom Patrick T. Jones, Peter J. Schneider, and Cooley Manion Jones, LLP were on brief, for appellee R.M. Packer.Kevin C. Cain and Peabody & Arnold LLP on brief for appellee Depot Corner, Inc.Before LYNCH, Chief Judge, SELYA and HOWARD, Circuit Judges.LYNCH, Chief Judge.

The plaintiffs in this case complain that the prices for gasoline on Martha's Vineyard have been artificially high due both to an illegal price-fixing conspiracy among four of the island's nine gas stations and to unconscionable price-gouging in the aftermath of Hurricanes Katrina and Rita in 2005. As to the antitrust claims, the stations agree for the purposes of summary judgment that there is evidence of parallel pricing but say that is not illegal absent an agreement to fix prices. The district court granted summary judgment to defendants on both of plaintiffs' claims, which were brought under § 1 of the Sherman Anti–Trust Act and a price-gouging regulation under Mass. Gen. Laws ch. 93A. We affirm, discussing the law on “agreements,” as opposed to “conscious parallelism,” under the Sherman Act, and assessing the defendants' post-hurricane pricing patterns under the state price-gouging rule.

I. Standard of Review

We discuss separately the price-fixing and price-gouging claims. The standard of review for each is the same. We review the district court's grant of summary judgment de novo, taking all facts and reasonable inferences therefrom in the light most favorable to plaintiffs, the nonmoving parties, and affirming only if there are no genuine issues of material fact and defendants are entitled to judgment as a matter of law. See Cortes–Rivera v. Dep't of Corr. and Rehab., 626 F.3d 21, 26 (1st Cir.2010).

II. Sherman Act Price–Fixing Claim

An understanding of the legal structure of a price-fixing claim under the Sherman Anti–Trust Act gives context to the facts relied on by plaintiffs on summary judgment.

A. Legal and Economic Background

Section 1 of the Sherman Anti–Trust Act prohibits [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade.” 15 U.S.C. § 1.1 In general, practices challenged under the Sherman Act are struck down only if they are unreasonable and anticompetitive, but agreements to fix prices are “so plainly anticompetitive” that they are per se illegal. Texaco Inc. v. Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, 164 L.Ed.2d 1 (2006) (quoting Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 692, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978)).

Section 1 by its plain terms reaches only “agreements”—whether tacit or express. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). It does not reach independent decisions, even if they lead to the same anticompetitive result as an actual agreement among market actors.2 15 U.S.C. § 1; Am. Needle, Inc. v. Nat'l Football League, ––– U.S. ––––, 130 S.Ct. 2201, 2208–09 & n. 2, 176 L.Ed.2d 947 (2010); Clamp–All Corp. v. Cast Iron Soil Pipe Inst., 851 F.2d 478, 484 (1st Cir.1988). The statute “does not require sellers to compete; it just forbids their agreeing or conspiring not to compete.” In re Text Messaging Antitrust Litig., 630 F.3d 622, 627 (7th Cir.2010) (Posner, J.).

This limit means that bare “conscious parallelism” is “not in itself unlawful.” Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). Conscious parallelism 3 is a phenomenon of oligopolistic markets 4 in which firms “might in effect share monopoly power, setting their prices at a profit-maximizing, supracompetitive level by recognizing their shared economic interests and their interdependence with respect to price and output decisions.” Id. Each producer may independently decide that it can maximize its profits by matching one or more other producers' price, on the hope that the market will be able to maintain high prices if the producers do not undercut one another.

A tacit agreement—one in which only the conspirators' actions, and not any express communications, indicate the existence of an agreement—is distinguished from mere conscious parallelism by “uniform behavior among competitors, preceded by conversations implying that later uniformity might prove desirable or accompanied by other conduct that in context suggests that each competitor failed to make an independent decision.” Brown v. Pro Football, Inc., 518 U.S. 231, 241, 116 S.Ct. 2116, 135 L.Ed.2d 521 (1996) (internal citations omitted). In the seminal case, Interstate Circuit v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939), the Supreme Court found a tacit agreement where a dominant movie theater company sent a letter openly addressed to all eight major national film distributors stating that it would show a distributor's films only if the distributor imposed certain restrictions on later runs of the films in secondary theaters. Id. at 215–19, 59 S.Ct. 467. The Supreme Court held that the distributors, who never communicated directly with one another, nonetheless had entered into a tacit agreement with one another by acting in accordance with the letter's demands, because the letter made it clear that all eight had received the letter, the economic context made it clear that all eight needed to act uniformly or all would lose business, and all eight did in fact impose the conditions. Id. at 222, 59 S.Ct. 467. The opinion has been criticized, see, e.g., 3B Areeda & Hovenkamp, Antitrust Law ¶ 810b, at 470–71 (3d ed. 2008), but the Supreme Court has recently reiterated that tacit agreements are still agreements under the Sherman Act, Twombly, 550 U.S. at 553, 127 S.Ct. 1955.

Some markets are particularly conducive to maintaining consciously parallel pricing without the need for agreement among the producers. “Tacit coordination is facilitated by a stable market environment, fungible products, and a small number of variables upon which the firms seeking to coordinate their pricing may focus.” Brooke Grp., 509 U.S. at 238, 113 S.Ct. 2578. Such coordination is also easier to maintain when these fungible goods “are repeatedly sold in market transactions that are immediately known in every detail by customers and rivals.” 6 Areeda & Hovenkamp, Antitrust Law ¶ 1430b, at 225 (3d ed. 2010). A geographically constrained gasoline market with publicly posted prices has these characteristics.

Because supracompetitive prices—prices above what they would be in a perfectly competitive market—can result from both lawful conscious parallelism and an unlawful agreement to fix prices, antitrust doctrine has developed evidentiary standards to minimize the risk that legal conduct will be chilled or punished. Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 763, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). Plaintiffs must establish that it is plausible that defendants are engaged in more than mere conscious parallelism, by pleading and later producing evidence pointing toward conspiracy, sometimes referred to as “plus factors.” See Twombly, 550 U.S. at 556 & n. 4, 127 S.Ct. 1955 (requiring antitrust plaintiffs to plead behavior more consistent with agreement than with independence); In re Flat Glass Antitrust Litig., 385 F.3d 350, 360 (3d Cir.2004) (explaining that “plus factors” are “proxies for direct evidence of an agreement”).

In addition, the Supreme Court has “limit[ed] the range of permissible inferences from ambiguous evidence in a § 1 case,” holding that, at summary judgment, “conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy” that allows plaintiffs' evidence to reach a jury. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

In order to survive summary judgment, plaintiffs must produce direct or circumstantial evidence that is not only consistent with conspiracy, but “tends to exclude the possibility of independent action.” Monsanto, 465 U.S. at 764, 104 S.Ct. 1464. Such evidence could show “parallel behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence unaided by an advance understanding among the parties.” Twombly, 550 U.S. at 557 n. 4, 127 S.Ct. 1955 (quoting 6 Areeda & Hovenkamp, Antitrust Law ¶ 1425, at 167 (2d ed. 2003)) (internal quotation marks omitted).

These special rules apply to claims of horizontal conspiracies such as this claim of price-fixing.5 See Twombly, 550 U.S. at 554, 127 S.Ct. 1955 (stating that a § 1 plaintiff must meet the Monsanto and Matsushita requirements, and not distinguishing among types of § 1 claims); see also, e.g., Flat Glass, 385 F.3d at 357–59 (applying Matsushita in price-fixing case, because lawful conscious parallelism can lead to same economic result as conspiracy); Blomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan, 203 F.3d 1028, 1032 (8th Cir.2000) (stating that circuit applies Matsushita “broadly, and in both horizontal and vertical price fixing cases). This is the common understanding and plaintiffs do not disagree.

B. Factual and Procedural Background

The underlying facts of the case, including the district court's description of the retail gasoline market on Martha's Vineyard, are undisputed.

Plaintiffs are summer and year-round residents of Martha's Vineyard and an island real estate agency. D...

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