Dart Drug Corp. v. Corning Glass Works, Civ. No. 72-664-W.

• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)
• Writing for the Court: WATKINS, Senior
• Citation: 480 F. Supp. 1091
• Parties: DART DRUG CORPORATION v. CORNING GLASS WORKS.
• Decision Date: 29 October 1979
• Docket Number: Civ. No. 72-664-W.

480 F. Supp. 1091

DART DRUG CORPORATION
v.
CORNING GLASS WORKS.

Civ. No. 72-664-W.

United States District Court, D. Maryland.

October 29, 1979.

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COPYRIGHT MATERIAL OMITTED

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COPYRIGHT MATERIAL OMITTED

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John F. Graybeal, Michael Fischer, Jay N. Varon, Foley, Lardner, Hollabaugh & Jacobs, Washington, D. C., for plaintiff; A. Jerome Diener, A. David Gomborov, Gomborov, Steinberg, Schlachman & Harris, Baltimore, Md., of counsel

Geoffrey S. Mitchell, Christopher R. West, David R. Owen, Semmes, Bowen & Semmes, Baltimore, Md., for defendant.

MEMORANDUM OPINION

WATKINS, Senior District Judge.

I

Procedural History

Plaintiff Dart Drug Corporation (Dart) filed a Motion to Compel Discovery in this antitrust action on November 27, 1973. Paper No. 27. The original motion sought to compel answers to Interrogatories 23, 24, 34, 35 and 36 and responses to Requests to Produce Nos. 10 and 15. A hearing was held on this motion on December 20, 1973. The Court then held the matter sub curia while awaiting additional material from the parties.¹ On July 2, 1975 plaintiff filed a Modification of the Motion to Compel which in fact withdrew the motion except as to Request to Produce No. 15.² Paper No. 54. The motion, as modified, sought to have the request be deemed to cover relevant material brought into existence up to the date of decision.

On the same day that plaintiff filed its Modification of the Motion to Compel, it also filed a Second Amended Complaint. Paper No. 56. Defendant Corning Glass Works (Corning) duly answered the complaint and responded to the Modification of the Motion to Compel. Plaintiff replied to this response on August 1, 1975. A conference was held regarding this motion on June 23, 1978.

The parties filed supplemental memoranda on the Motion to Compel following the conference. Defendant argued there for the first time that plaintiff was barred from recovery on its monopolization and price-fixing claims under the rule announced by the Supreme Court in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). This Court noted the possible relevance of the Illinois Brick case to the resolution of the pending motion in an August 11, 1978 letter sent to counsel on both sides. Paper No. 66.

On October 3, 1978 defendant filed a Motion to Dismiss Counts Four and Five of the Second Amended Complaint.³ Paper No. 68. Most of the materials sought in Request to Produce No. 15 are relevant only

480 F. Supp. 1095

to Count Four of the Complaint.⁴ The resolution of plaintiff's Motion to Compel is therefore dependent initially on the disposition of defendant's Motion to Dismiss. The Court accordingly turns its attention first to the pending Motion to Dismiss.⁵

II

Motion to Dismiss

A. Introduction

The standard under which the Court must test the complaint on a 12(b)(6) motion is clear. The complaint must be found sufficient to withstand a motion to dismiss for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-6, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

Defendant bases its Motion to Dismiss upon a single ground. It argues that plaintiff is foreclosed from bringing Counts Four and Five under Section 4 of the Clayton

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Act, 15 U.S.C. § 15, against defendant because plaintiff, as an indirect purchaser from defendant, can prove no "injury to business or property" as required by that section under the indirect purchaser rule set forth by the Supreme Court in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977).⁶

In Illinois Brick the State of Illinois and 700 municipalities brought a treble damage action under Section 1 of the Sherman Act, 15 U.S.C. § 1, against concrete block manufacturers, alleging that these manufacturers had engaged in a combination and conspiracy to fix the prices of concrete block. Plaintiffs argued that the overcharges resulting from this price-fixing had been passed on to them through the distributional scheme because the overpriced concrete block eventually resulted in overpriced buildings purchased by the plaintiffs.

The Supreme Court rejected this offensive use of the "pass-on" theory of damages. The Court reaffirmed its holding in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968) in which it rejected the defensive use of the pass-on theory, and held that

the overcharged direct purchaser, and not others in the chain of manufacture or distribution, is the party "injured in his business or property" within the meaning of Section 4 of the Clayton Act.

431 U.S. at 729, 97 S.Ct. 2061. It is undisputed that plaintiff here is an indirect purchaser as to defendant, and indeed, this fact constitutes the heart of plaintiff's claims for relief.⁷ See, e. g., Plaintiff's Second Amended Complaint, Paper No. 56, July 2, 1975. The Court must consider whether plaintiff's status is dispositive as to the question before it.

B. Plaintiff's Fourth Cause of Action

Most of the discussion by the parties focuses on Plaintiff's Fourth Cause of Action (Monopolization). This count states in toto:

15. Beginning several years ago, the exact date being unknown to plaintiff, and continuing up to and including the date of filing of this Second Amended Complaint, the defendant, together with certain co-conspirators, has engaged in an unlawful combination to monopolize and has attempted to and has monopolized that part of intra- and interstate trade and commerce consisting of the manufacture, distribution and sale of glass and glass ceramic utensils for the cooking and storage of food which have the characteristic of being resistant both to extreme high and low temperatures while at the same time having decorative qualities rendering them useful and desirable for the serving of food, in violation of Section 2 of the Sherman Act, 15 U.S.C. Sec. 2, and Section 38(a)(2) of the Maryland Antitrust Act. The attempt, combination and monopolization charged in this paragraph was, in the State of Maryland, for the purpose of excluding competition or of controlling, fixing or maintaining

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prices in trade or commerce. Plaintiff was damaged by the violation charged in this paragraph.

The only other allegation of monopolization in the complaint appears in paragraph 1 where plaintiff states:

Defendant has attempted to, has combined with others to and has monopolized that part of intra- and interstate commerce herein specified, in violation of the Sherman Act and the Maryland Antitrust Act.

Sherman Act § 2 provides that it is unlawful to:

monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States . . ..

The majority of the allegations in plaintiff's Fourth Cause of Action relate to Corning's monopoly power. It is well-settled that possession of monopoly power⁸ in a relevant market does not by itself constitute a violation of Sherman Act § 2. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 at 273 (2 Cir. 1979) (Section 2 does not prohibit monopoly simpliciter). See J. Von Kalinowski, Antitrust Laws & Trade Regulation, ¶ 802(3), at 8-41 (1979). Nevertheless, two types of conduct mentioned in the complaint may form a basis for a claim under Sherman Act § 2.

1. Defendant's Conduct

a. Plaintiff's Claim of Competitive Advantage

Monopoly power, even if lawfully acquired, may not be wielded to prevent or impede competition. Berkey Photo, at 274. This rule is generally understood to prevent a monopolist from using monopoly power in one market to gain a competitive advantage in another, even when no attempt is made to monopolize the second market. Id. See Lorain Journal Co. v. United States, 342 U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162 (1951); Eastman Kodak Co. v. Southern Photo Co., 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927). Plaintiff nowhere in its complaint alleges that defendant competes on the wholesale distributor or retailer level and therefore does not make a claim based on this theory. There is, however, some case law to the effect that a monopolist who engages in conduct similar to that alleged in plaintiff's First, Second and Third Causes of Action and in Paragraphs 1, 8 and 9 violates Section 2 of the Sherman Act. Thus, certain discriminatory conduct by a monopolist which injures competition in a market has been held to constitute an abuse of monopoly power sufficient to state a claim under Section 2 even if the monopolist does not itself compete in that market. See Peelers Co. v. Wendt, 260 F.Supp. 193 (W.D.Wash.1966). Cf. La Peyre v. F.T.C., 366 F.2d 117 (5 Cir. 1966). See generally L. Sullivan, Antitrust § 47 at 124 n.35, § 48 at 131 (1977).

It is clear from plaintiff's memoranda in opposition to the motion to dismiss that plaintiff considers its complaint to have alleged defendant's discriminatory policies as at least one type of conduct violative of Section 2 of the Sherman Act.⁹

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However, plaintiff makes no factual allegations within the count at issue which would by themselves suggest such a theory of recovery. Unlike the other four causes of action in plaintiff's Second Amended Complaint, the "monopolization" count provides no supplementary paragraph alleging that "the aforesaid violation has occurred by virtue of the following facts" along with a recitation of defendant's allegedly unlawful conduct. Rather, such a theory of recovery can be found within the complaint only by means of the most sympathetic perusal of the pleading

Nevertheless, it is just such a sympathetic perusal that this Court is called upon to make in deciding a Rule 12(b)(6) motion. In Wolman v. Tose, 467 F.2d 29 (4 Cir. 1972) the Fourth Circuit stated:

Under the liberal rules

...