Bell v. Dow Chemical Co.

• Decision Date: 29 June 1988
• Docket Number: No. 87-2306,87-2306
• Citation: 847 F.2d 1179
• Parties: 1988-1 Trade Cases 68,114 T.O. BELL, Plaintiff-Appellant, v. DOW CHEMICAL COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1179

847 F.2d 1179

1988-1 Trade Cases 68,114

T.O. BELL, Plaintiff-Appellant, v. DOW CHEMICAL COMPANY, Defendant-Appellee.

No. 87-2306.

United States Court of Appeals Fifth Circuit.

June 29, 1988.

Nancy McCoy, Fritz Barnett, Glickman & Barnett, Houston, Tex., for bell.

David M. Bond, Houston, Tex., for Dow Chemical Co.

Appeal from the United States District Court for the Eastern District of Texas.

Before BROWN, GEE and GARWOOD, Circuit Judges.

GEE, Circuit Judge:

T.O. Bell seeks relief under Section 2 of the Sherman Act. His action below included claims under both Sections 1 and 2 for anticompetitive activities of Dow Chemical Company ("Dow") and others in the phenoxy herbicide market. The district court granted summary judgment on both claims to the defendants; Bell appeals only his monopoly claim against Dow; and we affirm the judgment of the district court.

Facts

Phenoxy herbicides are used to control or eliminate weeds and brush. The United States Government was the largest consumer of 2,4-D and 2,4,5-T phenoxies (the main types) in the latter half of the 1960s, as it combined these chemicals into the well-known herbicide "Agent Orange." After the government ceased ordering the chemicals in 1969, the number of manufacturers contracted, leaving only four by 1972. Dow was and continues to be the largest manufacturer of phenoxy herbicides in the United States.

Phenoxy herbicides are manufactured in three forms. The initial form, an acid powder, cannot be directly applied for weed and brush control. It is uncontested that Dow was the only manufacturer of the acid form in the United States when Bell filed this suit. The acid powder is converted into "technical material" through a manufacturing process. Technical material has been infrequently applied to brush and weeds. ¹ Through further processing, technical materials are made into water-or petroleum-soluble "formulated" herbicides. Consumers buy the formulated variety from different manufacturers and dealers and apply them through various methods.

In the past, Dow has sold its herbicidic acid to several manufacturers of formulated herbicides. ² In turn, Dow and the principal purchasers of its acid, Rhodia and Transvaal, sold both acids and technical materials to many other companies that produced the formulated phenoxy herbicides containing 2,4-D and 2,4,5-T. In addition, Dow has sold its brand of formulated herbicides to hundreds of independent distributors who have sold them at retail to the public. Into this net of manufacturers and distributors Bell stepped in 1972, seeking a supplier of technical material.

Bell had invented a phenoxy herbicide applicator. The applicator uses an "ultra low volume" method of applying herbicide to pastures and rangelands. This low volume translates to cost savings for the farmer because less herbicide is needed to control an area with Bell's applicator than is needed with other applicators. Bell contends that the technical herbicide form is most suitable for his machine. By requiring fewer pounds of active ingredient to control weeds and brush, and by using the more cost efficient technical form of phenoxy herbicide, ³ Bell anticipated reaping huge profits from the sale of his applicator to end users of phenoxy herbicides. From his perspective, the only barrier to his success was the alleged refusal of Dow and others in the early 1970s to sell him the technical material and to label the technical materials with his method of application. His pursuit of redress comes to us as a claim of illegal monopolistic behavior by Dow in the phenoxy herbicide market.

Discussion

Bell alleges that Dow monopolized or attempted to monopolize the phenoxy herbicide market in violation of Section 2 of the Sherman Act. Bell must prove three elements in order to obtain recovery: 1) Bell has antitrust standing to challenge Dow; 2) Dow either possesses or intends to possess monopoly power in a relevant market; and 3) Dow has acquired or maintained its power or intends (with a dangerous probability of success) to do the same in a manner that exhibits willfullness, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. Aspen Skiing Company v. Aspen Highlands Skiing Corporation,472 U.S. 585, 105 S.Ct. 2847, 2854 n. 19, 86 L.Ed.2d 467 (1985); United States v. Grinnell, 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); Transource International v. Trinity Industries, Inc., 725 F.2d 274 (5th Cir.1984).

The district court found that Bell failed to satisfy any of the elements. Although we reject the district court's disposition of the third element concerning Dow's monopolizing conduct, we affirm the grant of summary judgment.

1. Antitrust Standing

Recent Supreme Court and Fifth Circuit decisions concerning whether a party has antitrust standing have left some confusion as to the role that "antitrust injury" plays in the standing inquiry. We initially address a formal misapprehension of the district court.

The district court addressed antitrust injury as a "separate inquiry" from the standing determination. After concluding that, as a potential customer and competitor of Dow in herbicide sales, Bell had standing to sue, the district court ruled that Bell had failed to offer any proof that he had been injured by anticompetitive activities of Dow. The formal progression of the district court's analysis is improper. Antitrust injury is a component of the standing inquiry, not a separate qualification. In Walker v. U-Haul Co. of Mississippi, 734 F.2d 1068, 1073 (1984), we held that "standing defines the plaintiff's right to sue and the existence of injury is a component of the substantive right." Proving antitrust injury is a necessary requirement for proving standing; the former cannot stand alone from the latter. As such, the district court should not have determined first that Bell had standing to sue, but that he lost the right because he did not offer adequate proof of antitrust injury. ⁴

The district court first found that Bell does not have standing as a manufacturer and seller of the herbicide applicator. Bell argues that Dow's monopolization of the phenoxy herbicide market injured his equipment sales. As the district court noted, "there is no evidence that Dow's conduct caused the loss of future sales, as opposed to any number of factors--e.g. price, market conditions, unproven technology, limited product uses, or Bell's inability to purchase technical material from other distributors." After considering the factors outlined in Associated General Contractors v. Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), the court found that Bell's attested harm was speculative and the directness of his injury was remote: " 'Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to antitrust violation.' " 459 U.S. at 535, 103 S.Ct. at 907, quoting Hawaii v. Standard Oil Co., 405 U.S. 251, 263, n. 14, 92 S.Ct. 885, 891 n. 14, 31 L.Ed.2d 184 (1972).

We agree with the district court's disposition of this issue. Associated General Contractors articulated the high standing threshold that plaintiffs must cross in the antitrust setting. Unlike the case of the more modest constitutional standing requirement of injury in fact, courts addressing antitrust claims "must make a ... determination whether the plaintiff is a proper party to bring a private antitrust action." 459 U.S. at 535 n. 31, 103 S.Ct. at 907 n. 31. In making the determination, courts may assess several factors: 1) the nature of plaintiff's alleged injury; 2) the directness of the injury; 3) the speculative measure of the harm; 4) the risk of duplicative recovery; and 5) the complexity in apportioning damages.

Regarding the first factor, plaintiff's injury must be the type that the antitrust laws were intended to prevent. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). The court's focus must be upon competition in the allegedly restrained market. Restraint in the market affects consumers and competitors in the market; as such, they are the parties that have standing to sue. 459 U.S. at 539, 103 S.Ct. at 909; Eagle v. Star-Kist Foods, Inc., 812 F.2d 538, 540 (9th Cir.1987).

As an inventor, manufacturer, and seller of an herbicide applicator, Bell was neither a consumer nor a competitor in the phenoxy herbicide market. To surmount this standing barrier, Bell alleges--and the district court found--that he was a "potential consumer and competitor" in the market. In his deposition and affidavit, Bell testified that he attempted to purchase technical phenoxies from Dow on several occasions. After his first attempt, he purchased phenoxies from another supplier. When he ceased purchasing from that supplier because of the price charged, he contends that he returned to Dow and was refused sales again. Dow argues that Bell failed to meet minimum purchase requirements, and Bell insists that Dow did not have any such requirements and simply intended to restrain trade in the market. On loose footing, Bell frocks himself as both a consumer and competitor in the phenoxy herbicide market.

As we noted above, the district court found that Bell failed to demonstrate antitrust injury. We find a lack of standing on other, more apparent grounds. Bell seeks damages from Dow for alleged lost profits from the sale of his herbicide applicator. The district court correctly noted that these losses were very speculative. Bell made no claim of damages for lost profits from the sale of technical phenoxy that he intended to sell with his machine. Bell's machine should have sold well during the 1972-74 period when Bell purchased materials from Transvaal. Bell blames the lack of sales on the high price Transvaal charged for the materials; other causal possibilities abound, such as the price of the machine or...