Southaven Land Co., Inc. v. Malone & Hyde, Inc.

• Decision Date: 23 August 1983
• Docket Number: No. 81-5736,81-5736
• Citation: 715 F.2d 1079
• Parties: 1983-2 Trade Cases P 65,564 SOUTHAVEN LAND CO., INC., Plaintiff-Appellant, v. MALONE & HYDE, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1079

715 F.2d 1079

1983-2 Trade Cases P 65,564

SOUTHAVEN LAND CO., INC., Plaintiff-Appellant, v. MALONE & HYDE, INC., Defendant-Appellee.

No. 81-5736.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 9, 1982.

Decided Aug. 23, 1983.

Robert M. Fargarson, Bruce Brooke (argued), Neely, Green & Fargarson, Memphis, Tenn., for plaintiff-appellant.

Jef Feibelman, Memphis, Tenn., for defendant-appellee.

Before LIVELY and KRUPANSKY, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.

KRUPANSKY, Circuit Judge.

This action joins inquiry into the evolving doctrine of antitrust "standing" under Section 4 of the Clayton Act, 15 U.S.C. § 15. Plaintiff Southaven Land Company, Inc. (Southaven) initiated the instant cause of action against Malone & Hyde, Inc. (Malone) seeking injunctive and monetary relief for injuries allegedly resulting from Malone's violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Southaven appealed from the judgment of the United States District Court for the Western District of Tennessee granting Malone's motion to dismiss, Rule 12(b), Fed.R.Civ.P., adjudging that Southaven lacked "standing" to initiate an antitrust action.

The allegations of the complaint must be accepted as true for purposes of Rule 12(b)(6) analysis. Briefly summarized the complaint asserts Southaven is an owner-lessor of retail commercial space in the geographic area of Southaven, Mississippi. Malone is engaged in the wholesale and retail sale of food, drugs and sundries in a multistate area including the geographical area of Southaven, Mississippi. On or about May 15, 1974, Malone assumed a lease to premises owned by Southaven, which incorporated a covenant restricting the use of the premises to the operation of a retail grocery business. Subsequent to its assumption of the lease, Malone executed a series of subleases with successive third parties to operate grocery stores at the Southaven location in accordance with the above defined restrictive covenant. The last of these successive subtenants, Southaven Food Center, Inc. (SFC), filed a petition in bankruptcy. Malone has not subleased the premises since SFC's business demise.

During 1974, and thereafter, Malone also owned and operated other retail grocery outlets in the Southaven geographical area and, it is alleged, intentionally sought to destroy competition, monopolize and control the food supply in that area, and had undertaken to cut prices and otherwise destroy and foreclose the operation of a successful grocery store at Southaven's commercial property.

Subsequent to the bankruptcy of SFC, Malone's last subtenant, Southaven initiated negotiations with Malone seeking a cancellation of Malone's lease to enable Southaven to replace Malone with a viable grocery operator in the premises. Pursuant to the negotiations whereby Southaven sought to regain control of the property, an agreement ¹ was derived providing for the cancellation of the Malone lease and delivery of the premises and equipment to Southaven whereupon Malone would be released from its obligations at the site. In reliance upon said agreement, Southaven secured a viable tenant to operate a grocery store at the shopping center site.

Upon learning that Southaven was prepared to immediately implement the operation of a grocery store at its commercial location, Malone refused to execute the mutual cancellation agreement with the calculated purpose to further its monopoly and eliminate competition. Malone, with intent to destroy the site as a present and future location for the operation of a retail grocery outlet, removed its equipment from the premises thereby rendering them unfit as a retail grocery outlet.

Accordingly, Southaven's injury is charged to have accrued as a result of its contract negotiations with the alleged antitrust violator. The complaint noticeably fails to aver that Southaven sustained any injury as a competitor, purchaser, consumer or other economic actor in the grocery industry. The district court, styling the issue as "whether a 'non-operating' lessor of premises has standing to complain about conduct purportedly aimed at monopolizing a market in which the lessor's tenants compete", adjudged that Southaven lacked "standing" under § 4 of the Clayton Act. This appeal ensued.

Section 4 of the Clayton Act, 15 U.S.C. § 15, identifies in sweeping language those "persons" entitled to initiate an antitrust action:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue ... and shall recover threefold the damages by him sustained ... (emphasis added)

Although "[o]n its face, § 4 contains little in the way of restrictive language", Blue Shield of Virginia v. McCready, 457 U.S. 465, 472, 102 S.Ct. 2540, 2545, 73 L.Ed.2d 149 (1982), Reiter v. Sonotone Corp., 442 U.S. 330, 337, 99 S.Ct. 2326, 2330, 60 L.Ed.2d 931 (1979), and, consistent with congressional intent, the federal forum must guard against "engraft[ing] artificial limitations on the § 4 remedy", McCready, supra, 102 S.Ct. at 2545, application of § 4 has of necessity been judicially confined to limit the remedy available thereunder to particular classes of persons and for redress of particular forms of injury. See also: Associated General Contractors of California, Inc. v. California State Council of Carpenters, --- U.S. ----, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983).

Judicial limitation of the § 4 remedy to those persons and injuries within the core of congressional concern, while simultaneously guarding against the imposition of "artificial limitations" of the facially unrestrictive § 4 remedy, has proven to be less than an empirical judicial science. In an attempt to relieve this dichotomy, the circuit courts have embraced various analytical doctrines including the "direct injury" test and "target area" test. Under the target area test the injured party "must be the 'target' of the anti-competitive practice before he may sue." Pan-Islamic Trade Corp. v. Exxon Corp., 632 F.2d 539, 546 (5th Cir.1980). The oft-cited decision of Calderone Enterprises Corp. v. United Artists Theatre Circuit, 454 F.2d 1292 (2d Cir.1971) provides the following rule:

[T]his court has committed itself to the principles that in order to have "standing" to sue for treble damages under § 4 of the Clayton Act, a person must be within the "target area" of the alleged antitrust conspiracy, i.e., a person against whom the conspiracy was aimed, such as a competitor of the persons sued. Accordingly, we have drawn a line excluding those who have suffered economic damage by virtue of their relationships with "targets" or with participants in an alleged antitrust conspiracy, rather than being "targets" themselves.

Id. at 1295 (emphasis added). ² Calderone, therefore, excludes as targets those "who have suffered economic damage by virtue of their relationships with 'targets' ". Id. at 1295.

The Fifth Circuit, referencing a "target area" test, has also framed the pertinent inquiry in terms of sector of the economy:

The "target area" test arose as a means of limiting the class of potential treble-damage plaintiffs to those persons who could most adequately vindicate the purposes of the anti-trust laws. To attain standing a person (whether a corporation or individual) must be one against whom the conspiracy is aimed. Or, put in plutonomic terms, the complainant must show that he is within that sector of the economy which is endangered by a breakdown of competitive conditions in a particular industry. (emphasis added)

Jeffrey v. Southwestern Bell, 518 F.2d 1129, 1131 (5th Cir.1975). Accord: In re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122, 129 (9th Cir.1973), cert. denied sub nom. Morgan v. Automobile Manufacturing Association, 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973) (compilation of cases referring to "direct injury" and "target area" tests). See also: In re Industrial Gas Antitrust Litigation, 681 F.2d 514 (7th Cir.1982); Reading Industries, Inc. v. Kennecott Copper Corp., 631 F.2d 10, 12 (2d Cir.1980); Long Island Lighting Co. v. Standard Oil Co. of Calif., 521 F.2d 1269, 1274 (2d Cir.1975), cert. denied, 423 U.S. 1073, 96 S.Ct. 855, 47 L.Ed.2d 83 (1976); In re Municipal Bond Reporting Antitrust Litigation, 672 F.2d 436 (5th Cir.1982); Engine Specialties Inc. v. Bombardier, Ltd., 605 F.2d 1, 18-19 (1st Cir.1979); Schwimmer v. Sony Corp. of America, 637 F.2d 41, 46 (2d Cir.1980); Ostrofe v. H.S. Crocker Co., Inc., 670 F.2d 1378 (9th Cir.1982).

Under the "direct injury" test the injury of the § 4 plaintiff must not be too remote from the alleged antitrust violation:

The concept of "direct injury," derived from Loeb v. Eastman Kodak, 183 F. 704 (3rd Cir.1910), focuses on the relationship between the plaintiff and the defendant. If the alleged injury is "remote," such as that of a stockholder or creditor of a corporation injured by the defendant, standing is denied. Loeb, supra; Gerli v. Silk Association of America, 36 F.2d 959, 960 (S.D.N.Y.1919).

Chrysler Corporation v. Fedders Corporation, 643 F.2d 1229, 1233 (6th Cir.1981). The direct injury test, accordingly, injects into the § 4 inquiry concepts of "relationship" very analogous to those of foreseeability developed in doctrines of common law negligence.

This Circuit has on two occasions expressly rejected the "direct injury" and "target area" tests as limiting the § 4 remedy. See: Malamud v. Sinclair Oil Corp., 521 F.2d 1142 (6th Cir.1975); Chrysler Corp. supra. In Malamud it was concluded that both tests "demand[ed] too much from plaintiffs at the pleading stage of a case", 521 F.2d at 1149, and further "enabled [the court] to make a determination on the merits of a claim under the guise of assessing the standing of the claimant." Id. at 1150 (original emphasis). The less restrictive test of "standing" as pronounced in Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S....