George Haug Co., Inc. v. Rolls Royce Motor Cars Inc.

Decision Date24 June 1998
Docket NumberDocket No. 97-9238
Citation148 F.3d 136
Parties1998-1 Trade Cases P 72,191 GEORGE HAUG CO., Inc. Plaintiff-Appellant, v. ROLLS ROYCE MOTOR CARS INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Second Circuit

Davis Webber & Edwards, P.C. (C. Dennis H. Tracey III, of Counsel), for Defendant-Appellee.

Before: CALABRESI, Circuit Judge, POLLACK * and DRONEY **, District Judges ***.

POLLACK, Senior District Judge.

From 1967 until November 10, 1995, plaintiff ("Haug") was an authorized parts and service dealer of Rolls Royce automobiles in New York County. The defendant, Rolls Royce Motorcars, Inc. ("Rolls Royce") is an importer and wholesaler of Rolls Royce automobiles and parts and is the distributor thereof. Rolls Royce controlled the market for parts with respect to its automobiles known as the "after market parts". This action was commenced on August 16, 1996. The amended complaint alleged that at the instigation of a competitor of plaintiff, namely Carriage House, Rolls Royce conspired and agreed to drive plaintiff out of the business of repairing and servicing Rolls Royce automobiles as an authorized service center, to restrain trade and monopolize trade for parts and services, and to discriminate against plaintiff so as to prevent plaintiff from competing effectively. The amended complaint asserts that Rolls Royce officials were paid commercial bribes to do so. In furtherance of the conspiracy, the amended complaint further asserts that preferences were given by Rolls Royce to Carriage House consisting of more favorable credit and price terms to Carriage House with respect to parts; payment of the rent of Carriage House; allowing Carriage House a price differential and allowing Carriage House a more favorable basis for reimbursements for warranty work; and also enabling Carriage House to offer customers free work paid for by Rolls Royce while requiring Haug to charge similarly situated customers. The amended complaint alleges that during the four years prior to termination, the plaintiff was injured to a substantial monetary degree.

None of the allegations of the amended complaint were disputed by defendant. No depositions were taken, no discovery was had, and no supporting affidavits were filed by defendant; the motions were decided solely on the allegations of the amended complaint and the notice of the claims appearing from the pleading.

The District Court ruled that the amended complaint was insufficient as a claim for violation of the Sherman Act on the grounds that it did not allege "antitrust injury." Further, the District Court rejected Haug's attempt to assert Sherman Act claims on behalf of Rolls Royce dealerships due to lack of standing because Haug did not deal in new cars.

As to the Robinson-Patman claim, the District Court found that Haug failed to invoke any of the prohibitions contained in the statute therein. The District Court ruled that the amended complaint's allegation that Haug was harmed by price differentials given to Carriage House was insufficient in law as basis under Section 2(a) for a Robinson-Patman claim in the absence of some allegation of a threat thereby to competition as a whole. Haug's claim under Section 2(d) and (e) of the Act were dismissed for failure to plead that Haug is "functionally equivalent" to Carriage House. Supplemental jurisdiction over the additional State law claims was declined in the absence of a federal claim.

DISCUSSION

We first address Haug's argument that the District Court improperly dismissed its Sherman Act claims. We hold that the District Court properly dismissed these claims because the amended complaint does not sufficiently allege "antitrust injury." Next, we address Haug's contention that the District Court erred in dismissing its Robinson-Patman Act claim. We hold that the amended complaint adequately asserts causes of action under Sections 2(a) and 2(d) of the Robinson-Patman Act.

A. Standard of Review

This Court reviews de novo the District Court's decision to dismiss Haug's amended complaint under Fed.R.Civ.P. 12(b)(6). Electronics Communications Corp. v. Toshiba America Consumer Products, Inc., 129 F.3d 240, 242 (2d Cir.1997). Dismissal of a complaint should not be upheld "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). "When a federal court reviews the sufficiency of a complaint, before the reception of any evidence ..., its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). In antitrust cases in particular, the Supreme Court has stated that "dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Building Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976). Nonetheless, "[i]t is not ... proper to assume that the [plaintiff] can prove facts that it has not alleged or that the defendants have violated the antitrust laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983).

B. Sherman Act

Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States...." 15 U.S.C. § 1. Section 2 of the Sherman Act provides that "[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any person or persons, to monopolize any part of the trade or commerce among the several States ... shall be deemed guilty of a felony." 15 U.S.C. § 2.

A private plaintiff seeking to state a claim for violation of sections 1 or 2 of the Sherman Act must allege that it has suffered "antitrust injury." See Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 344, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990); G.K.A. Beverage Corp. v. Honickman, 55 F.3d 762, 766 (2d Cir.1995). The antitrust injury requirement obligates a plaintiff to demonstrate, as a threshold matter, "that the challenged action has had an actual adverse effect on competition as a whole in the relevant market; to prove it has been harmed as an individual competitor will not suffice." Capital Imaging v. Mohawk Valley Med. Assoc., 996 F.2d 537, 543 (2d Cir.1993). "The antitrust laws ... were enacted for 'the protection of competition, not competitors.' " Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962).)

Haug's amended complaint alleges that "[Haug] and Carriage House accounted for 80% of all repairs of Rolls Royce automobiles when both were in existence in New York County, New York." Haug further alleges that as a result of its de facto termination, "competition [was] eliminated for the repair and servicing of Rolls Royce automobiles for 80% of the market in New York City."

The District Court concluded that the amended complaint did not sufficiently allege "antitrust injury":

Plaintiff has failed to plead its own market share [for the repair and servicing of Rolls Royce automobiles in New York County] or the market share purportedly absorbed by Carriage House as a result of plaintiff's "de facto termination." ... Thus, plaintiff has alleged no facts from which I could conclude that plaintiff's elimination from the marketplace resulted in a decrease of Roll Royce service outlets. 1

In addition, the amended complaint asserts antitrust injury on behalf of authorized Rolls Royce dealerships. Specifically, Haug alleges that its elimination as a service outlet makes it less likely that consumers who are current or prospective owners of Rolls Royce automobiles living in New York County will purchase a Rolls Royce automobile from a dealer other than the Carriage House. Haug bases this allegation on the premise that these customers "would believe that they would have to go to Carriage House for warranty work and would probably not receive good treatment if they bought their Rolls Royce automobiles from a dealer other than Carriage House." Haug does not contend that it was a Rolls Royce dealership at any time during its existence. We agree with the District Court's determination that under applicable Supreme Court precedent, Haug does not have standing to assert any antitrust injury suffered by Rolls Royce dealerships. See Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 539, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) (dismissing claim of a plaintiff because plaintiff "was neither a consumer nor a competitor in the market in which trade was restrained").

In short, plaintiff had failed to satisfy the pleading requirements for a claim under the Sherman Act, and these claims were properly dismissed.

C. Robinson-Patman Act

It is hornbook law as cited hereinafter that anti-competitive injury need not be alleged to sustain a claim for violation of the Robinson-Patman Act; a price differential, direct or indirect, between secondary-line competitors is enough. The Act requires that each purchaser be given an "equal opportunity" by the seller to receive the benefit of higher or lower prices.

The amended complaint includes allegations which invoke three of the five basic prohibitions contained in the Robinson-Patman Act. Each of these prohibitions are discussed separately below.

1. Section 2(a)

Section 2(a) of the Robinson-Patman Act provides, in pertinent part, as...

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