Gold Strike Stamp Company v. Christensen

• Decision Date: 30 December 1970
• Docket Number: No. 411-70.,411-70.
• Citation: 436 F.2d 791
• Parties: GOLD STRIKE STAMP COMPANY, a Utah Corporation, Petitioner, v. A. Sherman CHRISTENSEN, District Judge, Respondent, B. Delos Gardner et al., Real Parties In Interest.
• Court: U.S. Court of Appeals — Tenth Circuit

436 F.2d 791 (1970)

GOLD STRIKE STAMP COMPANY, a Utah Corporation, Petitioner, v. A. Sherman CHRISTENSEN, District Judge, Respondent, B. Delos Gardner et al., Real Parties In Interest.

No. 411-70.

United States Court of Appeals, Tenth Circuit.

December 30, 1970.

C. Preston Allen, Salt Lake City, Utah (Merlin O. Baker, Salt Lake City, Utah, on the brief) for petitioner.

Parker M. Nielson, Salt Lake City, Utah (Don A. Stringham, Salt Lake City, Utah, on the brief) for real parties in interest.

Before HILL, SETH and HOLLOWAY, Circuit Judges.

HILL, Circuit Judge.

Petitioner, Gold Strike Stamp Company, seeks a writ of mandamus from this court¹ staying an order issued by District Judge A. Sherman Christensen in the Central Division of the District of Utah in the case of Gardner v. Gold Strike Stamp Company. The order in question found that a class action was appropriate and called for a notice to be sent to all class members.

We have previously stated that "writs of mandamus and prohibition are drastic and extraordinary remedies and should be used sparingly by appellate courts. When used against a trial court, there must be a clear showing of abuse of discretion by the trial court and the right to such relief must appear clear and undisputable." Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 146-147 (10th Cir. 1967).² The question of whether to allow a suit to proceed as a class action is one primarily for the determination of the trial judge. If he applies the correct criteria to the facts of the case, the decision should be considered to be within his discretion. City of New York v. International Pipe and Ceramics Corp., 410 F.2d 295, 298 (2d Cir. 1969). From the findings of fact made by Judge Christensen in his order of July 21, 1970, it is apparent that he did apply the correct criteria and his finding that the class action should proceed did not constitute an abuse of discretion.³ In Esplin v. Hirschi, 402 F.2d 94 (10th Cir. 1968), cert. denied, 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459, this court discussed the basic rules concerning class actions allowable under the newly amended Federal Rule of Civil Procedure 23 and in particular class actions allowable under 23(b) (3). In Hirschi we held that a 10(b) (5) securities fraud case was suitable for class action even though there were individual questions of oral misrepresentations to each of the potential plaintiffs because "* * * the real basis of their allegations concerns the failure of the defendants to make any representations concerning relevant and material facts, i. e., certain omissions of material facts common to all purchasers * * *. Consequently, there does exist as to the totality of issues a common nucleus of operative facts * * *." Id. at 99. The general law from the other Circuits concerning the application of newly amended Rule 23(b) (3) was reviewed and discussed and the critical test was set out to be "whether there is `material variation' in elements like the representations made by the defendants * * *." upon which liability was based. Ibid. The court noted the superiority of class action procedures as opposed to intervention in a suit involving a large number of injured parties. It was stated that because of the great amount of control that the trial judge retains over the class action suit, specifically with respect to modification allowed under 23(c) (4), if there was to be error on the part of allowing or disallowing a class action suit it should be on the side of allowing class actions to proceed. Ibid.

The instant suit involves allegations of various antitrust violations by Gold Strike Stamp Corporation in the initiation of and conduct of their trading stamp business in the State of Utah.⁴ The plaintiffs, B. Delos, Vern, Lincoln, Darrel and Ken Gardner, and the class of injured parties they seek to represent are petroleum retailers, i. e., service station operators, within the State of Utah. They allege that the defendant corporation, Gold Strike Stamp, was set up and controlled by the retail food industry and has acted in concert with the retail food stores to monopolize the trading stamp business within the retail food industry in the State. Plaintiffs allege that since the retail food stores represent the majority of all retail sales, a large demand for defendant company's trading stamps was created which forced the plaintiffs to take part in the trading stamp program and in particular with Gold Strike Stamp Company. It is further alleged that the retail food stores were sold a pad of 5,000 stamps from Gold Strike for approximately $8.00 whereas plaintiffs were charged $12.50 for the identical book of stamps.

There are four basic theories postulated by the plaintiffs as to Gold Strike's violations of the antitrust laws.⁵ Their first theory is that Gold Strike, by its practices and in conspiracy with its "favored" customers, the retail food industry, has restrained trade and has monopolized the trading stamp business⁶ in violation of the provisions of § 1 and § 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. See Northern P. R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958); Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911); United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); United States v. Consolidated Laundries Corporation, 291 F.2d 563, 572-573 (2d Cir. 1961).

Plaintiffs' second theory of violation is that they were required to enter into franchise agreements with Gold Strike, the provisions of which required the plaintiffs to deal with them to the exclusion of all other trading stamp companies, in violation of § 3 of the Clayton Act, 15 U.S.C. § 14. See Standard Oil Co. of California and Standard Stations v. United States, 337 U.S. 293, 69 S.Ct. 1051, 93 L.Ed. 1371 (1949), Tampa Electric Co. v. Nashville Coal Co., 365 U. S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961).

Plaintiffs' third theory of violation is that by selling the stamps to the retail food store industry at a lower price Gold Strike violated § 2 of the Robinson-Patman Act⁷ in that the price difference given to the two different classes had the tendency to or enabled Gold Strike to create a monopoly in the trading stamp business. In particular it was alleged that the price discrimination enabled Gold Strike to saturate the market creating an artificial demand for its stamps and thus enabling it to achieve or tend to achieve a monopoly position in the trading stamp business. See Van Camp & Sons Co. v. American Can Co., 278 U.S. 245, 49 S.Ct. 112, 73 L.Ed. 311 (1929); cf. Federal Trade Comm. v. Anheuser-Busch, Inc., 363 U.S. 536, 547, 80 S.Ct. 1267, 4 L.Ed.2d 1385 (1960). By focusing on the creation of a monopoly in the trading stamp business, plaintiffs do away with the need to show effect upon competition between themselves and other buyers of Gold Strike Stamps, as normally required in price discrimination cases. E. g., Federal Trade Comm. v. Borden Co., 383 U.S. 637, 86 S.Ct. 1092, 16 L.Ed.2d 153 (1966).

In each of the above three theories of violation there is little question but that the case is superbly suited for class action. The various elements which plaintiffs must show to establish the requisite violations are common to all members of the alleged injured class, i. e., that the trading stamp business is a line of commerce, that Gold Strike acted in conspiracy or concert with the retail food industry, that Gold Strike discriminated in price between the retail food industry and service station operators, and that Gold Strike achieved a monopoly position in the trading stamp business in the relevant geographical area.

Plaintiffs' fourth theory of antitrust violation also involves a price discrimination question under § 2 of the Robinson-Patman Act, 15 U.S.C. § 13. As to this theory, plaintiffs are alleging a lessening of competition between themselves and the favored customers, i. e., the retail food industry, on various specific items in which the two classes compete. It is this aspect of the case that petitioner contends unsuitable for the class action procedure.

To be entitled to a recovery under the above theory, plaintiffs must first show that there was a price discrimination on goods of like grade and quality. Federal Trade Comm. v. Borden Co., 383 U.S. 637, 86 S.Ct. 1092, 16 L.Ed.2d 153 (1966).⁸ Secondly, the plaintiffs must show that this price differential had an effect on their ability to compete with the favored customers and, thirdly, of course, plaintiffs must show the amount of their damages. It is petitioners' primary contention that establishing the effect on competition will of necessity involve questions concerning each individual class member; that each class member must show the extent to which they compete and the effect that the trading stamp price difference made upon their ability to compete; and therefore individual issues predominate over common issues making a class action on this theory of recovery unsuitable. For this proposition petitioner relies primarily upon Minneapolis-Honeywell Regulator Co. v. Federal Trade Comm., 191 F.2d 786 (7th Cir. 1951); Quaker Oats Co., 1963-65, Transfer Binder, CCH Trade Reg. Reporter ¶ 17,134 (FTC 1964); Chicken Delight, Inc. v. Harris, 412 F.2d 830 (9th Cir. 1969); and Moscarelli v. Stamm, 288 F.Supp. 453 (E.D.N.Y.1968).

If petitioner's contentions are true as to what must be shown to establish the required effect upon competition, a definite problem as to the appropriateness of the class action would arise. A sound argument could be made that the suit would then break down into individual suits on the question of liability. In previous 23(b) (3) antitrust cases it appears that a dichotomy has arisen where the question of liability is established by common issues and where the question of liability depends upon the determination of individual issues. Eisen v. Carlisle & Jacquelin, ...