Cliff Food Stores, Inc. v. Kroger, Inc.

• Decision Date: 01 October 1969
• Docket Number: No. 26391.,26391.
• Parties: CLIFF FOOD STORES, INC., Appellant, v. KROGER, INC. and Bilo, Inc., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

417 F.2d 203 (1969)

CLIFF FOOD STORES, INC., Appellant, v. KROGER, INC. and Bilo, Inc., Appellees.

No. 26391.

United States Court of Appeals Fifth Circuit.

October 1, 1969.

Dennis White, Dallas, Tex., Murray Cohen, James R. Eagleton, Oklahoma City, Okl., for appellant.

Morris I. Jaffe, Wynne, Jaffe & Tinsley, Dallas, Tex., Norman Diamond, Arnold & Porter, Myron P. Curzan, Washington, D. C., for appellee.

Before THORNBERRY and SIMPSON, Circuit Judges, and CASSIBRY, District Judge.

THORNBERRY, Circuit Judge:

This is an appeal from the decision of the United States District Court for the Northern District of Texas dismissing appellant's complaint alleging violations of the antitrust laws and claiming trebled damages against the Kroger Company and its wholly-owned, unincorporated sales division, Bilo. Cliff Food Stores, Inc., appellant, is a grocery chain operating three stores in the Dallas area. The Kroger Company, appellee, is the third largest national retail grocery chain, operating more than fifteen hundred supermarkets in twenty-eight states. In the Dallas area it operates a total of forty stores, thirty-six under the Kroger name and four under the Bi-Lo name.

The Bi-Lo stores sold certain products at lower prices than the Kroger stores or the Cliff stores. Appellant attributed a sharp drop in his business to Bi-Lo's low prices, and instituted this suit alleging that:

(1) Kroger and Bi-Lo had conspired and combined to restrain trade in violation of section 1 of the Sherman Act.

(2) Kroger had engaged in unlawful practices in violation of section 2 of the Sherman Act.

(3) Kroger had engaged in unlawful predatory practices in violation of section 2(a) of the Clayton Act as amended by section 13(a) of the Robinson-Patman Act.

(4) Kroger and Bi-Lo comprise an illegal trust under the Texas antitrust laws.¹

The Standard of Review.

Summary disposition of litigation, especially antitrust cases, is disfavored and amendments should be liberally granted so that all cases may be decided on their merits. Food Basket, Inc. v. Albertson's, Inc., 10th Cir. 1967, 383 F.2d 785. Thus a motion to dismiss on the basis of the pleadings alone should rarely be granted. A court must accept as true all facts that are well pleaded in the complaint, and it must view those facts in the light most favorable to the plaintiff. Lewis v. Brautigam, 5th Cir. 1955, 227 F.2d 124, 55 A.L.R.2d 505. A complaint should not be dismissed unless there is no possibility that the plaintiff can recover under the allegations of his complaint. International Erectors, Inc., v. Wilhoit Steel Erectors & Rental Service, 5th Cir. 1968, 400 F.2d 465. Dismissal of a complaint, however, will be upheld when we are certain that the plaintiff cannot possibly be entitled to relief under any set of facts that could be proved in support of the allegations of the complaint. Id. Mindful of these standards, we proceed to a consideration of the merits of the case.

Alleged Kroger-Bi-Lo Conspiracy in Violation of Section 1 of the Sherman Act.

Appellant alleged that Kroger conspired with Bi-Lo in restraint of trade and thereby violated section 1 of the Sherman Act. The district court dismissed this count on the basis that "`Bi-Lo' is an assumed name under which Kroger retails its products and has no corporate identity of its own. `Bi-Lo' and Kroger cannot, therefore, conspire with each other." Appellant argues on appeal that although Bi-Lo is an unincorporated division and thus not a legal corporate entity, it nevertheless forms a separate entity capable of conspiring with its parent (Kroger) for the purposes of the antitrust laws.

It is settled that "common ownership and control does not liberate corporations from the impact of the antitrust laws," Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 1951, 340 U.S. 211, 215, 71 S.Ct. 259, 261, 95 L.Ed. 219, and subsidiary or affiliate corporations are capable of conspiring with their parent corporation for the purposes of section 1 of the Sherman Act. See, e. g., Timken Roller Bearing Co. v. United States, 1951, 341 U.S. 593, 598, 71 S.Ct. 971, 95 L.Ed. 1199; United States v. Yellow Cab Co., 1947, 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010. The courts, however, have been reluctant to expand the intracorporate conspiracy doctrine, and it has been held that a corporation cannot conspire with its officers or agents to violate the antitrust laws, Nelson Radio & Supply Co., Inc. v. Motorola, Inc., 5th Cir.1952, 200 F.2d 911; Chapman v. Rudd Paint & Varnish Co., 9th Cir.1969, 409 F.2d 635, 643 n. 9, and the same rule has been applied to unincorporated divisions. See Poller v. CBS, Inc., 109 U.S.App.D.C. 170, 1960, 284 F.2d 599, rev'd on other grounds, 1952, 368 U.S. 464, 82 S.Ct. 486, 7 L. Ed.2d 458; Deterjet Corp. v. United Aircraft Corp., D.Del., 1962, 211 F.Supp. 348. The basis of the rule that a corporation cannot conspire with its unincorporated divisions is that there must be at least two persons or entities to constitute a conspiracy, and a corporation cannot conspire with itself any more than a person can. See Johnny Maddox Motor Co. v. Ford Motor Co., W.D.Tex., 1960, 202 F.Supp. 103.

Appellant has placed strong reliance on Hawaiian Oke & Liquors, Ltd. v. Joseph E. Seagram & Sons, D.Hawaii, 1967, 272 F.Supp. 915, in which the court held that the unincorporated divisions of Joseph E. Seagram & Sons were capable of conspiring with each other in violation of the antitrust laws. This case was a departure from existing authority and has now been reversed by the Court of Appeals for the Ninth Circuit. Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquor Ltd., 9th Cir. 1969, 416 F.2d 71 dated September 8, 1969. In refusing to apply the doctrine of intracorporate conspiracy to the case before it, the court stated:

Once the theory that "divisions" or other internal administrative units of a single corporation can "conspire" with each other is accepted, we can see no sensible basis upon which it can be decided that, in one case, there has been a conspiracy and that, in another, there has not. * * * It is most unlikely that partially autonomous * * * divisions of a single corporate enterprise will or can operate completely independently of each other. It is inevitable that there will be communication between them, either directly or through those persons in the corporate hierarchy to whom they report. And under the trial court\'s theory such communication can then be used as evidence that they arrived at understandings with each other as to what they would do. Thus, they are capable of conspiring because they are autonomous and they have conspired because they are, in fact and law, parts of a single corporation.

The reasoning of the Ninth Circuit applies with great force to the case at hand. Bi-Lo is not a corporation, it is not a separate legal entity. Indeed, from what we can tell from the briefs and the record, Bi-Lo is simply an assumed name under which Kroger operates four of its Dallas stores. Since Kroger and Bi-Lo are one, it would be contrary to reason and authority to hold that they were capable of conspiring with each other; in fact, to so hold would be to extend the intracorporate conspiracy doctrine to its ultimate limits. That we are not prepared to do. If there is anything wrongful or illegal in Kroger's operation of grocery stores under an assumed name, relief must be had elsewhere than under section 1 of the Sherman Act. We affirm the district court's dismissal of this count of the complaint.

Kroger's Alleged Attempt to Monopolize the Retail Grocery Business in Violation of Section 2 of the Sherman Act.

Appellant's complaint alleges that Kroger was violating section 2 of the Sherman Act by attempting to monopolize the retail grocery business in the Dallas market. The district court dismissed this count on the grounds that appellant's admission in its pleadings that "market conditions in the retail grocery business in the Dallas * * * area have been extremely competitive" precluded the requisite finding that the defendant was monopolizing or about to monopolize the relevant market, and that the appellant's allegations did not show specific intent on the part of Kroger to monopolize the retail grocery business in Dallas.

In order to maintain a charge of an attempt to monopolize under section 2 of the Sherman Act, it is necessary to show, inter alia, that there is a dangerous probability that the attempt will be successful. Lorain Journal Co. v. United States, 1951, 342 U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162. In American Tobacco Co. v. United States, 1946, 328 U.S. 781, 785, 66 S.Ct. 1125, 1127, 90 L.Ed. 1575. The Supreme Court approved the following definition of "attempt to monopolize":

The phrase "attempt to monopolize" means the employment of methods, means and practices which would, if successful, accomplish monopolization, and which, though falling short, nevertheless approach so close as to create a dangerous probability of it, * * *.

There is nothing whatsoever in appellant's complaint or in the record itself to indicate that Kroger is in dangerous probability of achieving monopoly power² in the Dallas market. At the time of this suit, Kroger had forty stores in the Dallas area and planned on expanding to forty-eight stores in the near future. According to appellant's complaint, Dallas is a market that is "saturated with grocery operations" and marked by "extremely competitive" conditions. Appellant also stated that Dallas is a market in which the competitors include

* * * both A & P and Safeway, the nation\'s largest and second largest grocery chains, * * * the Southland Corporation, with its 7-11 and Cabell\'s convenience drive-in markets, and several local chains such as Jiffy Food Stores, Minyard\'s and Tom Thumb as well as a multitude of single store operations.

In light of these admissions on the part of appellant, it seems obvious that Kroger is not in dangerous probability...