Huelsman v. Civic Center Corp.

• Citation: 873 F.2d 1171
• Decision Date: 09 May 1989
• Docket Number: No. 88-2153,88-2153
• Parties: 1989-1 Trade Cases 68,577 Terril W. HUELSMAN; Richard K. Yackey, Appellants, v. CIVIC CENTER CORPORATION; Sportservice Corporation, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1171

873 F.2d 1171

1989-1 Trade Cases 68,577

Terril W. HUELSMAN; Richard K. Yackey, Appellants, v. CIVIC CENTER CORPORATION; Sportservice Corporation, Appellees.

No. 88-2153.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 12, 1989.

Decided May 9, 1989.

Robert J. Selsor, St. Louis, Mo., for appellants.

Peter E. Moll, Washington, D.C., and Alan C. Kohn, St. Louis, Mo., for appellees.

Before WOLLMAN, Circuit Judge, BRIGHT, Senior Circuit Judge, and BEAM, Circuit Judge.

BRIGHT, Senior Circuit Judge.

Terril Huelsman and Richard Yackey appeal the district court's ¹ order dismissing their antitrust action, 690 F.Supp. 825, contending that the district court erred in finding that their amended complaint failed to satisfy the jurisdictional requirements of the Sherman Act. On review of the present record, we agree that Huelsman and Yackey failed to satisfy the burden of establishing the requisite nexus with interstate commerce. Accordingly, we affirm.

I. BACKGROUND

Huelsman and Yackey have operated as self-employed licensed street vendors selling goods and merchandise to the public before and during scheduled baseball games and other events at Busch Stadium in St. Louis. Civic Center Corporation (Civic Center) owns, manages and operates Busch Stadium. Sportservice Corporation (Sportservice) has a contract with Civic Center to sell souvenirs and refreshments inside Busch Stadium. Both Civic Center and Sportservice are Missouri for-profit corporations.

On March 23, 1984, only eleven days before the opening of the 1984 baseball season, the City of St. Louis enacted an ordinance prohibiting vending on any public street within a specified geographic area. ² An exception to the ordinance authorized vending in a specified area immediately surrounding Busch Stadium only if the vendors were parties to a street vending agreement with Civic Center. The ordinance further provided that a violation of the ordinance constitutes a misdemeanor punishable by imposition of a fine.

Pursuant to this ordinance, Civic Center awarded a contract for vending services to Sportservice. Huelsman and Yackey characterize this contract as one granting Sportservice exclusive control over selling goods and merchandise outside the stadium area. In their view, the exclusive nature of the contract effectively forced the closing of their vending operations because they faced the threat of prosecution if they continued their vending operations without an agreement with Civic Center, an option not available to them.

On July 31, 1987, Huelsman and Yackey filed a three-count complaint in federal district court, alleging violations of sections 1 and 2 of the Sherman Act and a pendent state-law claim of tortious interference with business expectancies. Specifically, they alleged that Civic Center and Sportservice: (1) conspired to restrain and eliminate the free and open competition that previously existed in the sale of goods sold in the Busch Stadium area; (2) acted in furtherance of a monopoly or an attempt to monopolize by controlling all aspects of the vending industry in the stadium area; and (3) tortiously interfered with the valid business relations of the vendors. Huelsman and Yackey further alleged that Civic Center, in a quid pro quo exchange with the City of St. Louis, agreed to spend $1,000,000 on landscaping the area immediately adjacent to Busch Stadium in return for passage of the vending ordinance.

Civic Center filed a motion to dismiss the complaint under Fed.R.Civ.P. 12(b)(1) and 12(b)(6) raising four grounds: (1) failure to allege a sufficient nexus with interstate commerce; (2) immunity under the Noerr-Pennington doctrine; (3) exemption from antitrust liability under the state action doctrine; and (4) lack of standing to sue. Sportservice moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) or for summary judgment under Fed.R.Civ.P. 56 on the same grounds. Huelsman and Yackey responded by amending their complaint to include allegations of a nexus with interstate commerce. Civic Center and Sportservice then renewed their motions, citing the same grounds. Throughout the litigation, no party had engaged in discovery.

Following briefing and oral argument, the trial court dismissed the federal claims without prejudice, stating that Huelsman and Yackey failed to allege a sufficient "nexus between the defendants' conduct and interstate commerce," and refrained from addressing the remaining grounds in the motions. The court also dismissed the pendent state-law claim without prejudice, noting the availability of a state forum.

Huelsman and Yackey then brought this appeal.

II. DISCUSSION

Huelsman and Yackey challenge the district court's dismissal of their amended complaint on the ground that they have sufficiently pleaded the required nexus between the defendants' conduct and interstate commerce to establish subject matter jurisdiction under the Sherman Act.

In reviewing a district court's dismissal of an antitrust case before the initiation of discovery, an appellate court must employ a "concededly rigorous standard" of scrutiny. Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976). Initially, we note the existence of a policy disfavoring the dismissal of antitrust actions before discovery begins because the proof of illegal conduct lies largely in the hands of the alleged conspirators. Id.; Quality Mercury, Inc. v. Ford Motor Co., 542 F.2d 466, 472 (8th Cir.1976), cert. denied, 433 U.S. 914, 97 S.Ct. 2986, 53 L.Ed.2d 1100 (1977); see also Tarleton v. Meharry Medical College, 717 F.2d 1523, 1529 (6th Cir.1983) (dismissals of antitrust claims prior to discovery should be granted very sparingly); Chapiewsky v. G. Heileman Brewing Co., 297 F.Supp. 33, 38 (W.D. Wis.1968) (recognizing the difficulty of precisely pleading the effects on interstate commerce before completion of discovery).

The record does not clearly indicate whether the district court dismissed the complaint for lack of subject matter jurisdiction under Rule 12(b)(1) or for failure to state a claim upon which relief could be granted under Rule 12(b)(6). Under either standard, the dismissal is on the pleadings and should be "granted sparingly and with caution." 5 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1349 at 541 (1969). As the district court correctly noted, whether the dismissal is granted under either rule, the same interstate commerce analysis applies--whether the complaint adequately alleges the nexus between defendants' conduct and interstate commerce. See Hospital Bldg. Co., 425 U.S. at 742 n. 1, 96 S.Ct. at 1851 n. 1.

Jurisdiction under the Sherman Act arises when anticompetitive activity prohibited by the Act occurs in the flow of interstate commerce or, where wholly local in nature, substantially affects interstate commerce. McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 241, 100 S.Ct. 502, 508-09, 62 L.Ed.2d 441 (1980); Hayden v. Bracy, 744 F.2d 1338, 1342 (8th Cir.1984). In situations where the source or application of the business restraint is entirely local, jurisdiction will lie if the necessary effect is to stifle or restrain commerce among the states. United States v. Women's Sportswear Mfr.'s Ass'n, 336 U.S. 460, 464, 69 S.Ct. 714, 716, 93 L.Ed. 805 (1949). As Justice Jackson stated: "If it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze." Id.

As a procedural matter, a plaintiff attempting to invoke the jurisdiction of the Sherman Act must do more than merely identify a relevant local activity and presume an interrelationship with some unspecified aspect of interstate commerce. McLain, 444 U.S. at 242, 100 S.Ct. at 509. Rather, the plaintiff:

must allege the critical relationship in the pleadings and if these allegations are controverted must proceed to demonstrate by submission of evidence beyond the pleadings either that the defendants' activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce.

Id. (emphasis added); Heille v. City of St. Paul, Minn., 671 F.2d 1134, 1136 (8th Cir.1982) (quoting McLain ).

While it is unnecessary for the plaintiff to submit evidence quantifying the adverse impact of the defendant's conduct, McLain, 444 U.S. at 243, 100 S.Ct. at 509-10, a plaintiff must demonstrate that this conduct "as a matter of practical economics" has a substantial effect on interstate commerce. Hospital Bldg. Co., 425 U.S. at 745, 96 S.Ct. at 1852-53. Additionally, a plaintiff must demonstrate that the defendant's alleged unlawful conduct, and not the defendant's general activities, substantially affects interstate commerce. Hayden, 744 F.2d at 1343 n. 2. Lastly, no talismatic test exists to determine the adequacy of the interstate commerce nexus under the effects test; rather, jurisdiction must be determined through a case-by-case analysis of the relevant economic facts. Heille, 671 F.2d at 1136.

In this case, no party contends that the conduct at issue is itself "in" interstate commerce. Therefore, the controversy rests on whether the appellees' alleged illegal conduct substantially affects interstate commerce.

As proof of the existence of a substantial effect on interstate commerce, Huelsman and Yackey point to portions of the complaint which allege that they purchased goods from out-of-state distributors and sold goods to out-of-state visitors. They also submit Richard Yackey's affidavit, which contains estimates of the volume of the merchandise purchased and sold, the state residencies of those purchasing the merchandise and the manufacturing location of the merchandise.

In response, Civic Center and Sportservice argue that the complaint pleads only conclusory allegations of an effect on interstate commerce. They contend that even if Huelsman and Yackey...