Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc.
| Decision Date | 29 September 1980 |
| Docket Number | HUNT-WESSON,No. 77-2286,77-2286 |
| Citation | 627 F.2d 919 |
| Parties | 1980-2 Trade Cases 63,491 FOODS, INC., Plaintiff-Appellant, v. RAGU FOODS, INC. and Chesebrough-Pond's, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Martin J. Trupiano, argued, Blecher, Collins & Hoecker, Los Angeles, Cal., for plaintiff-appellant.
Richard L. Fruin, John G. Wigmore, Los Angeles, Cal., for defendants-appellees.
Appeal from the United States District Court for the Central District of California.
Before WRIGHT, HUG and FLETCHER, Circuit Judges.
Hunt-Wesson Foods, Inc. (Hunt) appeals from the dismissal of those portions of its complaint that charged Ragu Foods, Inc. (Ragu) and its parent, Chesebrough-Pond's, Inc., with conduct other than price discrimination that violated sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1976). Hunt also appeals from the district court's grant of summary judgment in favor of defendants with respect to alleged "primary line" price discrimination that Hunt charged violated both sections 1 and 2 of the Sherman Act and section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a) (1976). This court has jurisdiction under 28 U.S.C. § 1291 (1976). We reverse the dismissal of Hunt's Sherman Act claims and affirm the grant of summary judgment.
Hunt's complaint alleges essentially that Ragu sought to impede Hunt's introduction of a new product, "Hunt's Prima Salsa Spaghetti Sauce," in furtherance of Ragu's actual or attempted monopolization of the prepared spaghetti sauce market. Hunt contends that when it attempted to test-market Prima Salsa, Ragu, with intent to preclude Hunt from the market, gave discounts on its regular spaghetti sauce in the test markets, precipitously introduced its own comparable product, "Ragu Extra Thick and Zesty Spaghetti Sauce," and engaged in various acts of unfair competition. Hunt alleges that Ragu violated section 2 of the Sherman Act by unilaterally attempting to monopolize, actually monopolizing, and conspiring with its parent corporation to monopolize the spaghetti sauce market. Hunt further alleges that the discriminatory pricing violated section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, which prohibits discriminatory pricing "where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce . . . ." Hunt also contends that Ragu conspired with Chesebrough-Pond's to restrain trade in violation of section 1 of the Sherman Act. Finally, Hunt joined a pendent claim based upon defendants' alleged violation of the state law of unfair competition.
Hunt's antitrust, price discrimination, and unfair competition claims are predicated on the following allegations summarized from the complaint. Ragu's spaghetti sauce has, since at least 1972, outsold all other brands combined in the United States. Ragu's share of national sales of prepared spaghetti sauce was 61.4 per cent in 1973, and the share rose to 65.5 per cent in 1975. In late 1973, Hunt decided to enter the prepared spaghetti sauce market. It developed a spaghetti sauce, "Prima Salsa," that differed from Ragu's in that it was thicker and spicier. In August 1975, Hunt test-marketed Prima Salsa in two metropolitan markets: the Syracuse-Buffalo area of New York and the Cincinnati-Dayton area of Ohio.
The amount of shelf space retailers give to spaghetti sauce and the number of brands they carry are limited. Hunt intended to obtain shelf space for Prima Salsa on the basis of the distinctiveness of the sauce, packaging, label, and advertising. It engaged in expensive marketing activities designed to differentiate Prima Salsa from Ragu's product on the basis of consistency and taste. As part of this campaign, Hunt developed a label that described the product as "Extra Thick and Zesty." The test marketing continued, as planned, until Hunt put Prima Salsa into nationwide distribution in August 1976.
Ragu responded by engaging in "price related" and "non-price related" activities. Beginning in August 1975, Ragu selectively granted both promotional allowances (which, in effect, were price reductions) and introductory discounts 1 in the test market
areas where it was threatened by Hunt. The non-price related activities concerned Ragu's introduction of its own thicker and spicier spaghetti sauce, Ragu Extra Thick and Zesty. Hunt alleged that Ragu did the following:
1. Precipitously announced plans to market Ragu Extra Thick and Zesty in June 1976, shortly before Hunt was scheduled to begin its national promotion;
2. Appropriated the phrase "thick and zesty," thus impeding consumer identification of the phrase with Hunt's product;
3. Copied a figure used in one of Hunt's advertising layouts (a spoon pouring sauce over spaghetti) for use in a Ragu national advertisement;
4. Labelled the Ragu sauce to conceal that it was actually thickened by starch, rather than long simmering;
5. Appropriated Hunt's creativity and preparatory work and derived the benefit from investments made by Hunt in product development, test marketing, distinctive packaging, advertising, and promotion;
6. Precipitously released the new product;
7. Rendered Hunt's investment in product packaging, promotion, and advertising worthless;
8. Preempted shelf space and past and future sales; and
9. Created confusion and deception as to the source, quality, and nature of Ragu's new sauce.
Ragu responded to Hunt's complaint by filing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). On December 16, 1976, the trial court denied the motion, but in the course of doing so effectively dismissed Hunt's Sherman Act monopolization and attempted monopolization claims. The court ruled that Hunt's allegation that Ragu held 65 per cent of the market was an insufficient allegation of market power on which to found a monopolization claim. The court noted that the complaint contained no allegations indicating that Ragu had the power to control prices or restrict competition. In addition, the trial court held that Hunt had failed to plead in its attempted monopolization claim that there was a dangerous probability that Ragu would succeed in monopolizing the market. The trial court also dismissed from consideration any claimed antitrust violation founded upon the non-price related activities, stating that even assuming a claim for unfair competition was sufficiently alleged, "it is not every act of unfair competition which constitutes the kind of predatory and anticompetitive conduct proscribed by the Sherman Act." Because the non-price related activities could not support a Sherman Act claim, the court ruled, any Sherman Act claim Hunt had would rest upon its ability to establish substantive violations of section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. In sum, the trial court boiled down Hunt's allegations of Sherman Act and Robinson-Patman Act violations to a primary line price discrimination claim in which injury to competition is said to result from geographical price discrimination.
Having thus succeeded in narrowing the scope of the lawsuit, Ragu moved for summary judgment on the remaining claims. The trial court granted the motion. The court found that the introductory discounts were de minimis. With respect to the promotional allowances, the court found that some allowances had been offered in the test markets that had not been offered elsewhere but decided, apparently, that the allowances were not price reductions and thus could not constitute price discrimination. The court concluded that the plaintiff had failed to make a sufficient showing of a violation of the Robinson-Patman Act or of either section 1 or 2 of the Sherman Act. The court dismissed the antitrust portion of
Hunt's complaint with prejudice and then dismissed the pendent claim of unfair competition for lack of jurisdiction.
The following issues are presented with respect to the dismissal of portions of Hunt's complaint:
1. Is an allegation of a 65 per cent market share, without more, a sufficient pleading of market power in a section 2 monopolization claim?
2. Must a plaintiff plead facts demonstrating a "dangerous probability of success" to sustain an attempted monopolization claim?
3. Could Hunt, within the context of the complaint, prove any state of facts that would render the non-price related activities in violation of the Sherman Act?
With respect to the grant of summary judgment, the only issue is whether Hunt's affidavits, taken with its pleadings, placed in issue facts which, if established to the satisfaction of the trier of fact, would constitute price discrimination proscribed by either the Robinson-Patman Act or the Sherman Act.
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires only that the plaintiff make " 'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957). Dismissal of a complaint under rule 12(b)(6) for failure to state a claim is proper only if it is clear that the plaintiff could prove no set of facts within the framework of the complaint that would entitle him to relief. Id. at 45-48, 78 S.Ct. at 101-103; California Dump Truck Owners Ass'n v. Associated General Contractors of America, San Diego Chapter, Inc., 562 F.2d 607 (9th Cir. 1977). There is no special rule requiring more factual specificity in antitrust pleadings. Franchise Realty Interstate Corp. v. San Francisco Local Joint Executive Board of Culinary Workers, 542 F.2d 1076, 1082 (9th Cir. 1976), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d...
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