Palmer v. BRG of Georgia, Inc.

Decision Date07 June 1989
Docket NumberNo. 87-8804,87-8804
Citation874 F.2d 1417
Parties, 1989-1 Trade Cases 68,612, 13 Fed.R.Serv.3d 1043 Jay PALMER, et al., Plaintiffs-Appellants, v. BRG OF GEORGIA, INC., a Georgia Corporation, d/b/a BAR/BRI, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

John C. Butters, Atlanta, Ga. and James Ponsoldt, Athens, Ga., for plaintiffs-appellants.

Trammell Newton, Hansell & Post and Kevin E. Grady, Alston & Bird, Atlanta, Ga., for defendants-appellees.

Appeal from the United States District Court For the Northern District of Georgia.

Before HATCHETT and CLARK, Circuit Judges, and FITZPATRICK *, District Judge.

HATCHETT, Circuit Judge:

In this action brought by former law students of the University of Georgia Law School against bar review companies, we affirm the district court's ruling that the bar review companies did not violate the Sherman Act.

FACTS

Appellants, all 1985 graduates of the University of Georgia Law School in Athens, Georgia, brought this antitrust action against BRG of Georgia, Inc. (BRG), a Georgia corporation, Ronald O. Pelletier, BRG's owner, and Harcourt Brace Jovanovich Legal and Professional Publications, Inc. (HBJ), a Delaware corporation. 1 The appellants took a bar review course offered by BRG during January and February of 1985 in preparation for the Georgia bar examination.

In 1979, BRG offered a bar review course which covered the federal multi-state and Georgia law components of the Georgia bar exam. The BRG course included written materials plus lawyers and professors' live and videotaped lectures. In 1979, BRG used West Publishing Company's (West) free standardized multi-state materials which were being test marketed. BRG offered its bar review course at a lower price than it would have charged otherwise due to the availability of the free multi-state materials.

In 1973, HBJ began offering a review course for the Georgia bar exam and has offered bar review courses and materials nationwide under the trade name "Bar/Bri." The record does not contain a precise description of HBJ's Georgia course, but the parties state that it is similar to the format of the BRG course. HBJ developed its own standardized multi-state materials and sold these as a part of its Georgia course.

In 1979, BRG and HBJ competed in Georgia. In response to the low price of BRG's course, HBJ reduced the price of its Georgia course and lost money as a result. Richard Conviser, chairman of HBJ's board of directors, states in his affidavit that HBJ lost $45,000 on revenues of $120,000 without accounting for overhead.

At some point in 1979, West informed BRG that it planned to sell its multi-state materials through book stores, thus ending the test market arrangement. At about the same time, the lawyer who had been in charge of conducting HBJ's Georgia course suffered a heart attack. Conviser's affidavit states that HBJ decided to withdraw from the Georgia market at this time, but no documentation of this decision has been offered.

Conviser met with Pelletier in early 1980. On April 22, 1980, BRG and HBJ entered into a written agreement which gave BRG an exclusive license to use HBJ's name "Bar/Bri" in Georgia. HBJ agreed that it would no longer offer a bar review course in Georgia and that it would not compete with BRG in Georgia. BRG agreed not to compete with HBJ outside of Georgia.

Immediately after execution of the 1980 agreement, the price of BRG's course rose from $150 to over $400. The record does not disclose what prices HBJ or other companies were charging for similar bar review courses. In February, 1982, a group of Georgia law students brought a class action lawsuit against BRG and HBJ alleging identical antitrust violations as are alleged in this case. See Edwards, et al. v. BRG of Georgia, Inc., et al., Middle District of Georgia, Circuit A, No. 82-13-Ath. The class included those students taking BRG's course between April 22, 1980 and June 15, 1984. By offering partial refunds to the class members, BRG and HBJ settled that class.

During the pendency of the 1982 class action, BRG and HBJ executed a modified agreement. In this modified agreement, HBJ withdrew BRG's exclusive right to market HBJ's multi-state materials in Georgia. However, BRG retained the exclusive right to use "Bar/Bri" in connection with its course. Also, the modified agreement dropped the express covenant not to compete which had been contained in the initial agreement. Since the execution of the 1982 agreement, HBJ has not competed with BRG in Georgia nor licensed its multi-state materials for use by any other Georgia bar review course.

In 1979, the majority of University of Georgia law students who used a bar review course conducted in Athens, Georgia, took either the HBJ or the BRG courses. The record contains no similar data for subsequent years. The BRG course is currently marketed statewide, and is conducted at various locations in Georgia, including Athens and Atlanta. Other bar review courses are offered to Georgia bar applicants, namely, the "NORD" and "PMBR" courses, but these are not described in the record.

PROCEDURAL HISTORY

The appellants sought to represent a class consisting of those law students who attended a BRG course in Athens, Georgia, between June 15, 1984, and the present. Counts I through IV each alleges section 1 violations of the Sherman Act, 15 U.S.C.A. Sec. 1. 2 A different theory of per se liability was advanced under each of these counts, namely, price-fixing cartel (Count I); market and customer allocation (Count II); boycott and concerted refusal to deal (Count III); and unreasonable joint venture (Count IV). 3 Counts V through IX of the complaint each alleged section 2 violations of the Sherman Act, 15 U.S.C.A. Sec. 2. 4 The allegations were: conspiracy to monopolize in Georgia (Count V); attempt to monopolize in Georgia (Count VI); monopoly in Georgia (Count VII); conspiracy to monopolize nationwide (Count VIII); and attempt to monopolize nationwide (Count IX).

BRG and HBJ answered denying liability and denying that the class described by the appellants could be properly certified. On February 7, 1986, appellants moved for class certification and later moved for partial summary judgment on one of the conspiracy counts of their complaint. On May 2, 1986, BRG and HBJ moved for summary judgment. Appellants subsequently filed a motion for Fed.R.Civ.P. 11 sanctions against Pelletier.

On January 9, 1987, the district court denied appellants' motion for summary judgment, but granted BRG's and HBJ's motion for summary judgment as to Counts II through IX of the complaint, and deferred ruling on Count I. The district court found that BRG Publications, Inc.

and Bar Review Group, Inc. were related corporations which have been defunct at relevant times and had no involvement in any allegedly anti-competitive activities. The district court granted summary judgment to BRG Publications, Inc. and Bar Review Group on all counts. In separate orders, the district court also denied appellants' motions for class certification and Rule 11 sanctions.

On February 9, 1987, appellants filed a Motion for Reconsideration of the January 9 rulings, and a memorandum responding to the district court's invitation to produce evidence to support a section 1 "rule of reason violation" of the Sherman Act. The district court declined to reconsider its previous rulings, held that the appellants had failed to support a rule of reason violation, and granted BRG's and HBJ's motion for summary judgment on Count I. On July 16, 1987, the district court entered judgment. Appellants filed a motion to alter or amend the judgment, and the district court denied that motion. Appellants then filed a timely notice of appeal.

ISSUES

The appellants raise five issues on appeal:

1) whether the district court's determination that the appellants "may lack financial commitment" to this consumer class action constitutes a proper legal standard;

2) whether the district court abused its discretion in denying a motion for sanctions against Pelletier;

3) whether the district court erred in granting BRG and HBJ summary judgment;

4) whether evidence that BRG's and HBJ's combination enabled them to: increase price 800-percent; reduce output; and eliminate consumer choice for a product uniformly perceived to be indispensable, is sufficient proof of anticompetitive effect to preclude summary judgment under section 2 of the Sherman Act; and

5) whether the district court erred in granting BRG and HBJ summary judgment when the appellants produced sufficient probative evidence from which a jury could have reasonably inferred that any relevant product and geographic market existed; monopoly power existed or was dangerously likely to exist in that claimed market; and that BRG and HBJ took actions to secure or intended to secure such monopoly power as required for appellants to establish a violation of section 2 of the Sherman Antitrust Act.

DISCUSSION
I. Consumer Class Certification

The appellants contend that the district court applied an erroneous legal standard in applying Fed.R.Civ.P. 23(a)(4) and misread the record in denying their motion for class certification. Citing Kirkpatrick, et al. v. Bradford, et al., 827 F.2d 718 (11th Cir.1987), the appellants argue that consumer class certification should not be denied because of a lack of subjective interest on the part of the named plaintiffs, unless their participation is so minimal that they virtually have abdicated the conduct of their case to their lawyer.

BRG and HBJ cite Kirkpatrick to argue that the adequacy of class representation under Fed.R.Civ.P. 23(a) is primarily a factual issue best left for the district court's determination. They argue that the trial court's denial of certification should be upheld absent an abuse of discretion. BRG and HBJ further argue...

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