792 F.2d 210 (D.C. Cir. 1986), 84-5845, Rothery Storage & Van Co. v. Atlas Van Lines, Inc.

Docket Nº:84-5845.
Citation:792 F.2d 210
Party Name:1986-1 Trade Cases 67,121 ROTHERY STORAGE & VAN CO., et al., Appellants v. ATLAS VAN LINES, INC.
Case Date:June 03, 1986
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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Page 210

792 F.2d 210 (D.C. Cir. 1986)

1986-1 Trade Cases 67,121

ROTHERY STORAGE & VAN CO., et al., Appellants

v.

ATLAS VAN LINES, INC.

No. 84-5845.

United States Court of Appeals, District of Columbia Circuit

June 3, 1986

Argued Oct. 16, 1985.

Page 211

C. Jack Pearce, with whom Timothy J. Shearer, Washington, D.C., was on the brief for appellants.

James vanR. Springer, with whom R. Bruce Holcomb, Washington, D.C., was on the brief for appellee.

Before WALD, GINSBURG and BORK, Circuit Judges.

Opinion for the Court filed by Circuit Judge BORK.

Concurring Opinion filed by Circuit Judge WALD.

BORK, Circuit Judge:

Appellants, plaintiffs below, seek review of the district court's decision dismissing their antitrust action against Atlas Van Lines, Inc. ("Atlas"). See Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 597 F.Supp. 217 (D.D.C.1984). Appellants are five present and three former agents of Atlas. For convenience, we will frequently refer to them by the name of the first-named appellant, Rothery Storage & Van Co. ("Rothery"). Rothery claims that Atlas and several of the carrier agents affiliated with Atlas adopted a policy constituting a "group boycott" in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982), which prohibits "[e]very contract, combination ... or conspiracy ... in restraint of trade." The trial court granted Atlas' motion for summary judgment on several alternative grounds. See infra pp. 213-14. Because we find that Atlas' policy is designed to make the van line more efficient rather than to decrease the output of its services and raise rates, we affirm.

I.

Atlas operates as a nationwide common carrier of used household goods under authority granted by the Interstate Commerce Commission. It contracts to provide moving services to individuals and to businesses transferring employees. Like most national moving companies, Atlas exercises its interstate authority by employing independent moving companies throughout the country as its agents. These companies execute a standard agency contract with Atlas, agreeing to adhere, when making shipments on Atlas' authority, to such things as standard operating procedures, maintenance and painting specifications, and uniform rates. Typically, such an agreement will contain a provision barring an agent affiliated with a particular van line from dealing with any other line. The agency agreement is supplemented by Atlas' bylaws, rules, and regulations governing the agents' interstate operations.

Some of these independent moving companies, the "non-carrier agents," have no interstate authority of their own and can move goods interstate only on Atlas' authority. Until recently, other companies, the "carrier agents," possessed their own interstate authority and could move goods to the extent of that independent authority

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as principals for their own accounts. Both types of agent may engage in intrastate carriage without Atlas' permission or governance. A carrier agent, however, could act in interstate commerce both as an agent of the van line it serves and as a competitor of that van line. The carrier agents could, and some did, use Atlas equipment, training, and the like for interstate carriage under their own authorities and pay Atlas nothing.

A van line and its agents constitute an enterprise on a scale not easily obtainable by a single carrier. Atlas, which is the sixth largest van line in the nation, provides a network of 490 agents capable of carrying household goods between any two points in the nation. Atlas coordinates and supports the agents' operations. The use of agents spares a van line the necessity of obtaining enormous amounts of capital to perform the same services and, quite possibly, avoids diseconomies of scale, i.e., the inefficiencies of a single management large and complex enough to perform all the functions that are now divided between the van line and its agents. The agents find customers and do the packing, loading, hauling, and storage. Atlas sets the rates, dispatches shipments, chooses routes, arranges backhauls so the agent's truck need not return empty, arranges services at the origin and destination of shipments, collects all revenues and pays the agents, establishes uniform rules for the appearance and quality of equipment, trains salespeople and drivers, purchases and finances equipment for use by the agents, and maintains insurance on all shipments made under Atlas' authority. In addition, Atlas conducts national advertising and promotional forums. With the assistance of agents, it handles customer claims. In short, Atlas, and its agents make up an enterprise or firm intergrated by contracts, one which is indistinguishable in economic analysis from a complex partnership.

The ability of the carrier agents to exercise their independent authority traditionally has been governed by "pooling agreements" that dictate the business relationship between a van line and a carrier agent affiliated with it. The van line could, of course, set the rates at which its agents carried goods on its authority. ICC regulations required that carrier agents use the same rates as their van line principal when carrying shipments under independent authority. Because the relationship between a carrier agent and a van line constitutes an agreement between competitors, Congress provided antitrust immunity for any such relationship governed by a pooling agreement approved by the ICC. See 49 U.S.C. Secs. 11341-11342 (1982). In 49 U.S.C. Sec. 10934(d) (1982), Congress also allowed agents to sit on the boards of their van lines without antitrust liability.

The deregulation of the moving industry, beginning in 1979, produced changes that had a profound impact on the relationship between van lines and their agents. Prior to the regulatory changes, independent moving companies had little ability to obtain their own interstate transportation authority. The ICC's Policy Statement on Motor Carrier Regulation, 44 Fed.Reg. 60,296 (1979), and the Motor Carrier Act of 1980, Pub.L.No. 96-296, 94 Stat. 793, greatly increased the ability of common carriers to obtain interstate moving authority. In 1981, moreover, the ICC repealed its requirement that carrier agents charge the same rate for agency shipments and shipments carried on their own accounts. See North American Van Lines, Inc. v. ICC, 666 F.2d 1087, 1094-96 (7th Cir.1981). Thus, agents could obtain interstate authority and could cut prices to attract business for their own accounts that otherwise might have constituted agency shipments for the van line's account.

This increased potential for the diversion of interstate business to its carrier agents posed two potential problems for Atlas. Each of these problems is a version of what has been called the "free ride." A free ride occurs when one party to an arrangement reaps benefits for which another party pays, though that transfer of wealth is not part of the agreement between them. The free ride can become a serious problem for a partnership or joint

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venture because the party that provides capital and services without receiving compensation has a strong incentive to provide less, thus rendering the common enterprise less effective. The first problem occurs because, by statute, a van line incurs strict liability for acts of its agents exercising "actual or apparent authority." 49 U.S.C. Sec. 10934(a) (1982). Thus, an increase of shipments made on the agents' independent authority, but using Atlas' equipment, uniforms, and services would create the risk of increased liability for Atlas although Atlas received no revenue from those shipments. Second, because carrier agents could utilize Atlas services and equipment on non-Atlas interstate shipments, the possible increase of such shipments meant that Atlas might make large outlays for which it received no return. We return to the free-ride problem in Part IV of this opinion.

To meet these problems, Atlas could have amended its pooling agreement to redefine the terms on which it allowed its carrier agents to compete with the principal company. Had Atlas chosen this course and obtained ICC approval of its amended pooling agreement, the new agreement would have enjoyed antitrust immunity under 49 U.S.C. Secs. 11341-11342 (1982). Instead, on February 11, 1982, Atlas announced that it would exercise its statutory right to cancel its pooling agreement and would terminate the agency contract of any affiliated company that persisted in handling interstate carriage on its own account as well as for Atlas. Under the new policy, any carrier agent already affiliated with Atlas could continue to exercise independent interstate authority only by transferring its independent interstate authority to a separate corporation with a new name. These new entities could not use the facilities or services of Atlas or any of its affiliates.

II.

Because Atlas and its affiliates refuse to deal with any carrier agent that does not comply, several Atlas carrier agents, appellants here, charged that Atlas' new policy constitutes a "group boycott." They filed this action, and after the completion of discovery on the issue of liability, both sides filed cross motions for summary judgment.

The district court granted summary judgment to Atlas on alternative grounds. First, relying on Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 2741 n. 15, 81 L.Ed.2d 628 (1984), the court held that, because the challenged policy was promulgated by Atlas' board of directors, the plurality of actors essential to a finding of conspiracy did not exist. See 597 F.Supp. at 225. The court rejected Rothery's argument that Copperweld did not apply because some of the directors represented carrier agents and...

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