Hennegan v. Pacifico Creative Service, Inc.

• Decision Date: 31 March 1987
• Docket Number: Civ. No. 83-0040.
• Citation: 674 F. Supp. 303
• Parties: Thomas J. HENNEGAN and Gloria E. Hennegan, Plaintiffs, v. PACIFICO CREATIVE SERVICE, INC., dba Jalpak Reef Hotel; Micronesian Hospitality, Inc.; Ric Tours "Guam," Inc.; Yusen Air and Sea Service Pacific, Inc., dba Diamond Tours Guam; J.B. Siatong Enterprise, Inc., dba Guam Travel Bureau; Duty Free Shoppers, Ltd. and Hakubotan Enterprise, Inc., Defendants.
• Court: U.S. District Court — District of Guam

674 F. Supp. 303

Thomas J. HENNEGAN and Gloria E. Hennegan, Plaintiffs, v. PACIFICO CREATIVE SERVICE, INC., dba Jalpak Reef Hotel; Micronesian Hospitality, Inc.; Ric Tours "Guam," Inc.; Yusen Air and Sea Service Pacific, Inc., dba Diamond Tours Guam; J.B. Siatong Enterprise, Inc., dba Guam Travel Bureau; Duty Free Shoppers, Ltd. and Hakubotan Enterprise, Inc., Defendants.

Civ. No. 83-0040.

United States District Court, D. Guam.

March 31, 1987.

Raymond C. Wagner, Agana, Guam, James K. Archibald, Pro Hac Vice, Venable, Baetjer and Howard, John O. Hennegan, Pro Hac Vice, Baltimore, Md., for plaintiffs.

Robert Schnabel, Gayle, Teker & Schnabel, P.C., Agana, Guam, for Pacifico Creative Service Inc., Micronesian Hospitality, Inc., Yusen Air and Sea Service Pacific, Inc.

Edward S. Terlaje, Law Offices of Edward S. Terlaje, Agana, Guam, for Ric Tours "Guam," Inc.

Timothy A. Stewart, Agana, Guam, for J.B. Siatong Enterprises, Inc. dba Guam Travel Bureau.

William J. Blair, Klemm, Blair, Sterling & Johnson, P.C., Agana, Guam, for Duty Free Shoppers, Ltd.

Jay Neil Fastow and Irving Scher, Pro Hac Vice, Weil, Gotshal & Manges, New York City, for Duty Free Shoppers, Ltd.

Richard A. Pipes, Carbullido & Pipes, Agana, Guam, for Hakubotan Enterprises, Inc.

MEMORANDUM ORDER

DUENAS, District Judge.

This matter comes before this Court on defendants'¹ motion for judgment on the pleadings. Plaintiffs, Thomas J. and Gloria Hennegan, husband and wife (hereinafter the "Hennegans"), are park vendors who sell goods to Japanese tourists in Guam. Defendants consist of five tour operators and two retail stores in Guam whose businesses are aimed primarily at Japanese tourists.

The Hennegans allege that the retail shops pay the tour operators to bring groups of tourists to their stores by bus at pre-arranged times and encourage tourists to make purchases in violation of Section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c). Additionally, the Hennegans claim a violation of Section 3 of the Sherman Act, 15 U.S.C. § 3, alleging that the tour operators refuse to bring tourists to the Hennegan's park stand because the Hennegans refuse to pay the tour operators.

PROCEDURAL BACKGROUND

The complaint in this matter was filed on June 14, 1983. On April 9, 1984, defendants filed a motion for summary judgment which was granted by Memorandum Order of this Court dated September 5, 1984. On appeal the United States Court of Appeals for the Ninth Circuit reversed, in part, this Court's order granting defendants summary judgment and remanded the matter to this Court for proceedings consistent therewith, 787 F.2d 1299 (1986). The Ninth Circuit thereafter denied defendants' petition for rehearing and the United States Supreme Court denied certiorari, ___ U.S. ___, 107 S.Ct. 279, 93 L.Ed.2d 254, on October 14, 1986.

Defendants now come before this Court on motion for judgment on the pleadings. Oral arguments were heard and the matter was taken under advisement. By amended order dated December 23, 1986, this Court held that defendants' motion on the pleadings is granted and that a memorandum order would be issued. This memorandum order sets forth the basis for the granting of defendants' motion.

ANALYSIS

BURDEN OF PROOF

Rules 12(c) and 12(h)(2) of the Federal Rules of Civil Procedure permit the dismissal of a complaint, after the pleadings are closed, for failure to state a claim upon which relief can be granted. Aldabe v. Aldabe, 616 F.2d 1089 (9th Cir.1980). A motion on the pleadings shall not be granted unless the "movant clearly establishes that no material issue of fact remains to be resolved and that defendant is entitled to judgment as a matter of law." Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir.1984).

Despite the policy that summary procedures are used sparingly in antitrust litigation where motive and intent are important factors, courts recognize the importance of motions to dismiss since the statutory treble damages remedy may tempt parties and result in vexatious litigation. T.W. Electrical Serv. v. Pacific Electrical, No. 86-1646 (9th Cir.1987); Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc. et al., 637 F.2d 1376 (9th Cir.), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981); Franchise Realty Interstate Corp. et al. v. S.F. Local Joint Executive Board of Culinary Workers, et al., 542 F.2d 1076, 1082 (9th Cir. 1976), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d 787 (1977).

To overcome a Rule 12(c) motion a complaint must allege facts that if proven would establish each element of each claim. Conclusionary assertions are not accepted as facts. Lombard's Inc. v. Prince Manufacturing, Inc., 753 F.2d 974, 975 (11th Cir.1985), cert. denied, 474 U.S. 1082, 106 S.Ct. 851, 88 L.Ed.2d 892 (1986); Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir.1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983). A conclusionary statement without a supporting factual basis cannot withstand a motion to dismiss. Lombard's, Inc. v. Prince Manufacturing, Inc., supra; Heart Disease Research Foundation v. General Motors Corp., 463 F.2d 98 (2nd Cir.1972); Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.1984), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985); GVF Cannery, Inc. v. California Tomato Growers Assn. Inc., 511 F.Supp. 711, 717 (N.D.Cal.1981).

For purposes of Rule 12, well-pleaded allegations of the complaint are accepted as true. Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 61 (2nd. Cir.1985); Doleman v. Meiji Mutual Life Ins. Co., supra.

For purposes of this motion we accept as true the following relevant facts. Defendant retail stores sell souvenir and other products. Defendant tour operators organize tour groups, transport the tourists by bus to defendant retail stores at pre-arranged times, promote these stores to tourists and encourage the tourists to make purchases. Defendant tour operators are paid by defendant retail stores for these acts.

Defendant tour operators refuse to take tourists to vendors such as the Hennegans, who fail or refuse to pay the tour operators. Because the Hennegans refuse to pay the tour operators the tour operators do not bring tourists to their park stand.

Section 2(c) of the Robinson-Patman Act

Defendants' motion on the pleadings is granted with regard to allegations of violation of the Robinson-Patman Act because the complaint alleges facts which constitute services within the meaning of § 2(c) of the Robinson-Patman Act, 15 U.S. C. § 13(c) (hereinafter "The Act").

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 any 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, or any party to such transaction other than the person by whom such compensation is so granted or paid.

The Hennegans urge that defendant tour operators, without performing any legitimate service and without any legitimate reason, deliver tourists to defendant retail stores solely because of improper payments made to the tour operators. These "illegal payments" are made in exchange for benefits which cannot be construed as "services rendered" within the meaning of the Act. The complaint recognizes that defendant tour bus operators transport passengers at pre-arranged times to defendant retail shops, where they are encouraged by the tour bus operators to buy souvenirs. In return, defendant retail stores pay the tour bus operators. The Hennegans characterize this activity as illegal bribery.

In Rangen, Inc. v. Sterling Nelson & Sons, Inc., 351 F.2d 851, 859 (9th Cir.1965), cert. denied, 383 U.S. 936, 86 S.Ct. 1067, 15 L.Ed.2d 853 (1966), the Ninth Circuit recognizes that a "payment or grant ... for services rendered in connection with the sale or purchase of goods, wares or merchandise,.... is not forbidden by section 2(c)."

In Burge v. Bryant Public School District, 520 F.Supp. 328 (E.D.Ark.1980), aff'd, 658 F.2d 611 (8th Cir.1981), the school district received a ten percent commission from a photographer with whom it contracted to photograph students. A rival photographer complained that the commission constituted commercial bribery in violation of Section 2(c).

In granting a motion for summary judgment the court found that the school district performed services for the photographer, namely assisting in organizing the photography shooting schedule, assistance in bookkeeping, assistance in collection of monies and assistance in setting up studio space.

Certainly, these are valuable services rendered by the school district and are of great benefit to the photographer. Id., 520 F.Supp. at 333.

The Hennegans allege that in exchange for payments the defendant tour operators transport tour groups to defendant retail stores at pre-arranged times, and encourage the tourists to purchase goods. These services are not de minimus. Burge, 658 F.2d at 612. Without the tour operators bringing tourists to the retail stores the retail stores would either lose business or have to resort to other means to promote their stores. We agree with defendants that the tour bus operators render valuable services to the retail stores.²

Antitrust laws were not intended to undermine free enterprise. They were intended to ensure that businesses start out on a fair footing. The Hennegans acknowledge that the tour bus...