Stifel, Nicolaus & Co. v. Dain, Kalman & Quail, Inc.

• Decision Date: 28 April 1977
• Docket Number: No. C 75-52.,C 75-52.
• Citation: 430 F. Supp. 1234
• Parties: STIFEL, NICOLAUS & COMPANY, INCORPORATED, a corporation, Plaintiff, v. DAIN, KALMAN & QUAIL, INCORPORATED, a corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of Iowa

430 F. Supp. 1234

STIFEL, NICOLAUS & COMPANY, INCORPORATED, a corporation, Plaintiff, v. DAIN, KALMAN & QUAIL, INCORPORATED, a corporation, et al., Defendants.

No. C 75-52.

United States District Court, N. D. Iowa, Cedar Rapids Division.

April 28, 1977.

COPYRIGHT MATERIAL OMITTED

John D. Randall, Cedar Rapids, Iowa, John H. Lashly, and Paul B. Rava, St. Louis, Mo., for plaintiff.

William L. Meardon, Thomas D. Hobart, Iowa City, Iowa, for defendant Gene Brawner.

James W. Hall, Cedar Rapids, Iowa, James H. O'Hagan, Peter S. Hendrixson, Minneapolis, Minn., for all defendants.

McMANUS, Chief Judge.

This matter is before the court on defendants' resisted motions seeking dismissal, summary judgment, or an order to arbitrate, all filed March 3, 1977.

Plaintiff Stifel, Nicolaus & Company, Inc. (Stifel) has brought this action against defendant Dain, Kalman & Quail, Inc. (DKQ) for alleged violations of §§ 1 and 2 of the Sherman Act¹ and for engaging in unfair trade practices, a common-law tort theory. Jurisdiction over the Sherman Act claims is undisputed. Pendent jurisdiction is invoked as to the state law tort claim.

Defendants again² move to dismiss plaintiff's Sherman Act claims for failure to state a claim upon which relief can be granted. Additionally defendants move for summary judgment on Count II of plaintiff's claim which is predicated upon § 2 of the Sherman Act. Finally, defendants moved the court in lieu of dismissal to stay the Sherman Act claims pending arbitration of the unfair competition matter pursuant to the rules of the New York Stock Exchange, an organization to which both parties are bound by membership.

In the setting of facially non-frivolous claims of anti-trust violations arising out of the same set of facts allegedly constituting unfair competition the court is disinclined to order arbitration. The antitrust issues raised by the pleadings and contested by motions to dismiss and for summary judgment are inappropriate for commercial arbitration but should be decided by this court. See e. g., Gutor International A. G. v. Raymond Packer Co., Inc., 493 F.2d 938, 948 n. 17 (1st Cir. 1974); Cobb v. Lewis, 488 F.2d 41, 47 (5th Cir. 1974); American Safety Eqpt. Corp. v. J. P. Maguire & Co., 391 F.2d 821, 828 (2d Cir. 1968). See also Helfenbein v. International Industries, Inc., 438 F.2d 1068, 1070 (8th Cir. 1971).

The standards for dismissal and summary judgment set the backdrop against which the facts of the case are judged. These related legal theories are substantially congruent. Thus under both theories there is a strong presumption against granting the motions.

Motions to dismiss are contraindicated unless it appears to a certainty that plaintiff is entitled to no relief under any set of facts which would be proved in support of the claim. See, e. g., Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972); Haines v. Kerner, 404 U.S. 519, 521, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Motions for summary judgment are unavailing unless there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Rule 56(c) FRCP; see Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). In the case of either motion the court is required to construe the facts in the light most favorable to the party opposing the motion. Compare Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) with Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969) and Park View Heights Corp. v. City of Black Jack, 467 F.2d 1208, 1212 n. 3 (8th Cir. 1972). The only perceived difference is the measure of factual scrutiny; in a motion to dismiss all well pleaded facts are taken as true, in a motion for summary judgment the opposing party is only given the benefit of all reasonable inferences to be drawn from those facts. Id. In either case it is apparent that the burden on DKQ is particularly heavy.

Motion to Dismiss Count I

The following facts are taken as true in accordance with the forementioned standards. Plaintiff corporation was at all times material a brokerage firm providing investment services in the Middle West region with offices situated in Cedar Rapids, Iowa and Iowa City, Iowa. Defendant Dain, Kalman & Quail, Inc. (DKQ) was at all times material a brokerage firm with an office located in Cedar Rapids, and was a competitor of plaintiff and a dominant factor in the brokerage and investment services business in that locality. Defendant Fischer was chairman of the board and chief executive officer of DKQ and its holding company, defendant Inter-Regional Financial Group, Inc. Defendants Stamp, Brawner and Jackson were registered representatives and employees of plaintiff Stifel.³

Commencing prior to August 25, 1975, the defendants conspired together to lessen and eliminate competition of plaintiff company in the brokerage business in the Cedar Rapids-Iowa City area. To effectuate said conspiracy, Brawner and Jackson precipitously terminated their employment with plaintiff and immediately commenced employment with DKQ. Prior to leaving Stifel, Brawner and Jackson together with the other defendants induced and enticed all of plaintiff's employees, from manager to secretary, to leave plaintiff's employ and become employees of DKQ. The departure of the complete staff effectively closed down plaintiff's offices in Cedar Rapids and Iowa City. Brawner, Jackson and Stamp began to solicit future patronage for DKQ while still employed by plaintiff. The three former employees of plaintiff also delivered to DKQ copies of certain confidential business records belonging to plaintiff.

Plaintiff maintains that these facts establish a conspiracy among the defendants to eliminate plaintiff as a competitor and that such conduct constitutes unfair competition and an unreasonable restraint of trade, and thus is violative of § 1 of the Sherman Act. The court, initially persuaded that the complaint sufficiently alleged the essential elements of an antitrust claim under § 1 to withstand a motion to dismiss, tentatively agreed in a previous order.⁴ The conclusions reached in that order are now withdrawn.

The court in the previous order canvassed the essential elements of a viable treble damage action under § 1. Because most of these elements are not implicated in the decision to grant defendants' motion to dismiss, it is necessary only to allude to them.

To state a claim upon which relief can be granted under § 1 of the Sherman Act "allegations adequate to show a violation and, in a private treble damage action, that plaintiff was damaged thereby are all that the law requires". Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 660, 81 S.Ct. 365, 367, 5 L.Ed.2d 358 (1961); Knuth v. Erie-Crawford Dairy Coop. Ass'n, 395 F.2d 420, 423 (3d Cir. 1968). Stifel clearly has satisfied the requirement that it show that it was damaged. The requisites of violation, therefore, need be addressed.

A sufficient nexus with interstate commerce to trigger application of the Act is perhaps the threshold consideration. The multistate character of the corporate parties, their regional competitive status, the subject matter of the alleged conspiracy, brokerage of securities and similar investments on local and national exchanges all indicate a sufficient connection between the activities complained of here and interstate commerce to invoke Sherman Act analysis. See United States v. Bensinger Co., 430 F.2d 584, 588-89 (8th Cir. 1970); Cook v. Ralston Purina Co., 366 F.Supp. 999, 1009-1010 (M.D.Ga.1973).

A conspiracy or combination in restraint of trade must be found. The interaction among defendants Stamp, Brawner, Jackson and DKQ at a time when the individual defendants were in the employ of Stifel constitutes conspiracy within the meaning § 1. See C. Albert Sauter Co., Inc. v. Richard S. Sauter Co., Inc., 368 F.Supp. 501, 510 (E.D.Pa.1973); Beacon Fruit & Produce Co. v. H. Harris & Co., 152 F.Supp. 702, 704-05 (D.Mass.1957).

The question remaining concerns whether plaintiff has averred such facts and circumstances as can be reasonably considered to imply a conspiracy "in restraint of trade or commerce". Although the proscription of conspiracies in restraint of trade or commerce is literally all-encompassing, "the courts have construed it as precluding only those contracts or combinations which `unreasonably' restrain competition. Northern Pac. Ry. v. United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958); see United States v. American Tobacco Co., 221 U.S. 106, 179, 31 S.Ct. 632, 55 L.Ed. 663 (1911); Standard Oil Co. v. United States, 221 U.S. 1, 59-68, 31 S.Ct. 502, 55 L.Ed. 619 (1911). The "rule of reason" requires that the restraint of trade affect market prices or otherwise deprive consumers of the advantages of free competition. Apex Hosiery Co. v. Leader, 310 U.S. 469, 500-501, 60 S.Ct. 982, 84 L.Ed. 1311 (1939).

There is, however, a rather amorphous category of activities and commercial practices in restraint of trade that are so inimical to competition or so frequently impede the free flow of commerce that they are presumed unreasonable. Commercial conduct held to be in the forbidden category as per se unreasonable include price fixing agreements, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940); United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700 (1927), group boycotts, Klor's, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959); Fashion Originators Guild of America v. F.T.C., 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941), and patent-related tying arrangements. International Salt Co. v. United States...