Haff v. Jewelmont Corp.

• Decision Date: 05 October 1984
• Docket Number: No. C-83-3104-MHP.,C-83-3104-MHP.
• Citation: 594 F. Supp. 1468
• Parties: Charles E. HAFF, Plaintiff, v. JEWELMONT CORPORATION and Mervyns, Inc., Defendants.
• Court: U.S. District Court — Northern District of California

594 F. Supp. 1468

Charles E. HAFF, Plaintiff, v. JEWELMONT CORPORATION and Mervyns, Inc., Defendants.

No. C-83-3104-MHP.

United States District Court, N.D. California.

October 5, 1984.

Christopher R. Lucas, Law Offices of Edward A. Weiss, Walnut Creek, Cal., for plaintiff.

Stephen C. Tausz, Keith R. Weed, Bronson, Bronson & McKinnon, San Francisco, Cal., for Mervyn's, Inc.

Ralph C. Alldredge, San Francisco, Cal., Thomas Darling, Dylan J. McFarland, Cray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., for Jewelmont Corp.

OPINION

PATEL, District Judge.

This matter is before the court on a motion to dismiss. The issue addressed by the motion is whether plaintiff has standing to sue for alleged violations of § 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(c) (1970), the so-called "brokerage" provision of the Robinson-Patman Act.

I. FACTS

Plaintiff, Charles E. Haff ("Haff"), is engaged in the business of selling jewelry from wholesale manufacturers to retailers on a commission basis. Prior to August 1, 1981 Haff was employed by defendant Jewelmont Corporation ("Jewelmont") as a manufacturer's representative, at a 12% commission rate, to sell Jewelmont's Golden Mist line of jewelry. Haff was given an exclusive territory to sell the Golden Mist line to department stores and retail chain jewelry stores in the western United States. As Jewelmont's manufacturer's representative, Haff developed an account with defendant Mervyn's, Inc. ("Mervyn's"), a large California-based chain department store. Haff earns substantial commissions from Jewelmont's sales to Mervyn's prior to August 1, 1981.

On August 1, 1981, Jewelmont converted the Mervyn's account into a "house account." Under this arrangement, Jewelmont sold directly to Mervyn's, with no commissions payable to Haff. This action breached an alleged oral agreement between Haff and Jewelmont that Jewelmont would not convert any accounts developed by Haff into house accounts. Mervyn's was granted an 18% discount on these direct sales, or 6% more than Haff had been receiving in commissions prior to August 1, 1981. This 18% discount was not made available to other Jewelmont buyers.

Count I of the complaint alleges violations of § 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(c) (1970), in that the discount to Mervyn's was "in lieu of" brokerage previously paid to Haff. Counts II through V are pendent state claims for conspiracy, intentional interference with business advantage, fraudulent misrepresentation, and negligent misrepresentation.

Jewelmont and Mervyn's have both moved to dismiss the antitrust claim on the ground that Haff does not allege the requisite competitive injury to confer standing under the antitrust laws.¹ In addition, Jewelmont argues that even if Haff does have standing, a manufacturer's conversion from the use of a broker to a direct selling arrangement, at a discount reflecting the elimination of commissions, does not without more constitute a violation of § 2(c).

Because the court concludes plaintiff lacks antitrust standing, the merits of this § 2(c) argument are not reached except to the extent necessary to resolve the standing issue.

II. DISCUSSION

A. The Legislative Intent Behind § 2(c)

Haff claims that the defendants' actions violated the "brokerage" provision of the Robinson-Patman Act, § 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(c) (1970). Section 2(c) provides:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.

The legislative history of § 2(c) establishes that the section was primarily designed to prohibit "dummy brokerage" arrangements by which large, institutional buyers would exercise their leverage to demand discounts under the guise of "brokerage." See H.R.Rep. No. 2287, 74th Cong., 2d Sess. 15 (1936). As the Supreme Court noted in its most comprehensive analysis of § 2(c):

The Robinson-Patman Act was enacted in 1936 to curb and prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power. A lengthy investigation revealed that large chain buyers were obtaining competitive advantages in several ways other than direct price concessions and were thus avoiding the impact of the Clayton Act. One of the favorite means of obtaining an indirect price concession was by setting up "dummy" brokers who are employed by the buyer and who, in many cases, rendered no services. The large buyers demanded that the seller pay "brokerage" to these fictitious brokers who then turned it over to their employer. This practice was one of the chief targets of § 2(c) of the Act.

....

Congress enacted the Robinson-Patman Act to prevent sellers and sellers' brokers from yielding to the economic pressures of a large buying organization by granting unfair preferences in connection with the sale of goods.

FTC v. Henry Broch & Co., 363 U.S. 166, 168-69, 174, 80 S.Ct. 1158, 1160, 4 L.Ed.2d 1124 (1960). By outlawing such indirect price concessions, Congress hoped "to force price discriminations achieved by manipulation of brokerage fees and discounts out into the open where they would be subject to the scrutiny of those interested, particularly competing buyers." Biddle Purchasing Co. v. FTC, 96 F.2d 687, 692 (2d Cir. 1938); see also Allen Pen Co. v. Springfield Photo Mount Co., 653 F.2d 17, 25 (1st Cir.1981).

B. Antitrust Standing, Antitrust Injury, and § 4 of the Clayton Act

Sec. 2(c) of the Clayton Act is the substantive provision which plaintiff claims establishes his entitlement to relief for an abuse of the brokerage function. Plaintiff confuses this section, which defines the anticompetitive conduct, with the procedural or remedial requirements of § 4 of the Clayton Act, 15 U.S.C. § 15 which gives the right to sue to a person injured "by reason of" an antitrust violation. Cf. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486, 97 S.Ct. 690, 696, 50 L.Ed.2d 701 (1977) ("Intermeshing a statutory prohibition against acts that have a potential to cause certain harms with a damage action intended to remedy those harms is not without difficulty.") Whether a party's interests are protected by the antitrust laws is analytically distinct from whether that party has standing to sue under the antitrust laws. As one antitrust scholar has remarked, "Even where there is a violation and an injury to competition, the plaintiff may still not be the `right' person to complain of these acts." E. Kintner & J. Bauer, Federal Antitrust Law, Vol. III § 30.11, at 663 (1983).

Whether one has standing to sue under the antitrust laws is determined by reference to § 4. This inquiry is not conducted solely in the vacuum of § 4. As the Supreme Court has pointed out in its recent efforts to lay down some specific guidelines for determining antitrust standing, "the question requires us to evaluate the plaintiff's harm, the alleged wrongdoing by the defendants and the relationship between them." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 907, 74 L.Ed.2d 723 (1983). See also Blue Shield of Virginia v. McCready, 457 U.S. 465, 482, 102 S.Ct. 2540, 2550, 73 L.Ed.2d 149 (1982) ("the injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation") (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. at 489, 97 S.Ct. at 697). Nevertheless, the inquiry begins with § 4, a provision wholly overlooked by plaintiffs.

The class of persons who may maintain a private action for treble damages under the antitrust laws is broadly defined in § 4 of the Clayton Act, 15 U.S.C. § 15:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

On its face, § 4 seems broad enough "to encompass every harm that can be attributed directly or indirectly to the consequences of an antitrust violation." Associated General, 459 U.S. at 529, 103 S.Ct. at 904. However, for a variety of reasons not the least of which is the fear that the lure of treble damages and attorney's fees would inundate the courts with spurious antitrust claims, the judiciary has consistently limited the scope of recovery under § 4. Id. at 912 (citing Illinois Brick Co. v. Illinois, 431 U.S. 720, 745, 97 S.Ct. 2061, 2074, 52 L.Ed.2d 707 (1977)). See also Calderone Enterprises Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir.1971). It is by now well-established that the "by reason of" language of § 4 imposes a standing requirement on private antitrust plaintiffs which requires proof of legal causation, similar to the concept of proximate cause in the law of torts, as a predicate to recovery.² Berger & Bernstein, An Analytical Framework for Antitrust Standing, 86 Yale L.J. 809, 810-11 (1977); see also Associated General, 103 S.Ct. at 906-08. As the Supreme Court recently noted:

An antitrust violation

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