In re Multidistrict Vehicle Air Pollution MDL No. 31

• Decision Date: 04 June 1973
• Docket Number: No. 71-1241.,71-1241.
• Parties: In re MULTIDISTRICT VEHICLE AIR POLLUTION M.D.L. NO. 31. STATE of CALIFORNIA et al., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants. Robert MORGAN, Appellee, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants. CITY OF PHILADELPHIA et al., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants. STATE of NEW YORK, Appellee, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants. CITY OF NEW YORK et al., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants. CITY AND COUNTY OF DENVER, Appellees, v. AMERICAN MOTORS CORPORATION et al., Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

481 F.2d 122 (1973)

In re MULTIDISTRICT VEHICLE AIR POLLUTION M.D.L. NO. 31.

STATE of CALIFORNIA et al., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants.

Robert MORGAN, Appellee, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants.

CITY OF PHILADELPHIA et al., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants.

STATE of NEW YORK, Appellee, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants.

CITY OF NEW YORK et al., Appellees, v. AUTOMOBILE MANUFACTURERS ASSOCIATION, INC., et al., Appellants.

CITY AND COUNTY OF DENVER, Appellees, v. AMERICAN MOTORS CORPORATION et al., Appellants.

No. 71-1241.

United States Court of Appeals, Ninth Circuit.

June 4, 1973.

Robert L. Stern (argued), of Mayer, Brown & Platt, Chicago, Ill., Lloyd N. Cutler (argued), of Wilmer, Cutler & Pickering, Washington, D. C., Walter J. Williams, Detroit, Mich., Forrest A. Hainline, Jr., of Cross, Wrock, Miller & Vieson, Ross L. Malone, Robert A. Nitschke, of General Motors, Detroit, Mich., Richard C. Warmer, of O'Melveny & Myers, Julian O. Von Kalinowski, of Gibson, Dunn, & Crutcher, G. William Shea, Philip K. Verleger, Jack D. Fudge, David A. Destino, of McCutchen, Black, Verleger & Shea, Carl J. Schuck, of Overton, Lyman & Prince, Marcus Mattson, of Lawler, Felix & Hall, Carla H. Hills, Atty., of Munger, Tolles, Hills & Rickershauser, Harvey M. Grossman, of Pacht, Ross, Warne, Bernhard & Sears, Los Angeles, Cal., Kirkland, Ellis, Hodson, Chaffetz & Masters, Chicago, Ill., Alan N. Halkett, of Latham & Watkins, Los Angeles, Cal., John H. Schafer, III, of Covington & Burling, Washington, D. C., for appellants.

David Berger (argued), Philadelphia, Pa., George C. Mantzoros, Asst. Atty. Gen. (argued), New York City, David I. Shapiro (argued), of Dickstein, Shapiro & Galligan, Washington, D. C., Evelle J. Younger, Atty. Gen., Los Angeles, Cal., Ronald Bloomfield, Atty. Gen., New York City, Anthony C. Joseph, Herbert Davis, Ellen Friedman, Deputy Attys. Gen., Los Angeles, Cal., Edward G. Bauer, Jr., City Sol., Philadelphia, Pa., Max P. Zall, City Atty., Denver, Colo., J. Lee Rankin, Corp. Counsel for the City of New York, Norman Redlich, First Asst. Corp. Counsel, New York City, Harold E. Kohn, Bruce W. Kauffman, Edward F. Mannino, John M. Elliott, of Dilworth, Paxson, Kalish, Levy & Coleman, Herbert B. Newberg, H. Laddie Montague, Jr., Philadelphia, Pa., Perry Goldberg, Chicago, Ill., Leo T. Zuckerman, Denver, Colo., Jerome S. Wagshal, of Dickstein, Shapiro & Galligan, George Kauffman, Washington, D. C., for appellees.

Before HAMLIN, BROWNING and ELY, Circuit Judges.

OPINION

ELY, Circuit Judge:

This certified interlocutory appeal under 28 U.S.C. § 1292(b) arises from pretrial proceedings in Multidistrict Air Pollution Control Litigation (C.D.Cal. M.D.L. 31), which is a consolidation of numerous actions¹ under 28 U.S.C. § 1407. In re Motor Vehicle Air Pollution Control Equipment, 311 F. Supp. 1349 (Jud. Panel Mult. Lit. 1970.) Since this appeal is from denial of motions to dismiss, factual allegations are cast most favorably to the appellees. See Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99, 2 L.Ed.2d 80 (1957).

As early as 1953, the nation's automobile manufacturers and their trade association allegedly conspired to eliminate competition among themselves in the research, development, manufacture, installation and patenting of automotive air pollution control devices. Appellees urge that this horizontal antitrust conspiracy was motivated: (1) by appellants' conviction that antipollution devices are externalities, whose development would increase price without concomitant spur to consumer interest; (2) by the apprehension that the first competitor to perfect such a device would garner exclusive contracts with governmental purchasers; and (3) by the fear that technological realization of the devices would prompt laws compelling their use.²

Appellees argue that this conspiracy inflicted financial losses that would not have occurred but for the conspiracy-induced absence of antipollution equipment. Governmental entity appellees claim losses resulting from diminution in value of, and expenditures in connection with, government property and interests. Crop farmer appellees assert direct damage to crop yields. Variously proceeding in their individual capacities, as parens patriae and as class representatives, all appellees seek treble damages and equitable relief under sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26.

On appeal, appellants challenge the District Court's rulings that appellees have standing to sue under sections 4 and 16 of the Clayton Act, that certain appellees may proceed as parens patriae, and that others may proceed as class representatives under Fed.R.Civ.P. 23.

I. STANDING UNDER SECTION 4

Appellees ground their claims for treble damages on section 4 of the Clayton Act, 15 U.S.C. § 15, which reads:

"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 amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit including a reasonable attorney\'s fee."

Read literally, this statute could afford relief to all persons whose injuries are causally related to an antitrust violation. Recognizing the nearly limitless possibilities of such an interpretation, however, the judiciary quickly brushed aside this construction.³ Instead, a measured approach has prevailed; courts have impressed a standing doctrine so as to confine the availability of section 4 relief only to those individuals whose protection is the fundamental purpose of the antitrust laws. Cf. Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970); Association of Data Processing v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Mount Clemens Industries, Inc. v. Bell, 464 F.2d 339, 341-344 (9th Cir. 1972). Unfortunately, no "bright line" has yet emerged to divine this group, and courts have formulated varied definitions.

In this case, however, the District Court declined to apply any of the extant definitions, choosing instead to expand⁴ the coverage of section 4:

"We are now concerned with the phrase `injured in his business or property by reason of anything forbidden in the antitrust laws\' in the light of the allegations of these complaints, rather than the traditional, legalistic approach defined by the cases cited by defendants in their motion to dismiss. Each of the plaintiffs allege injury to their respective business or property by reason of anti-trust violations of the defendants.

"Plaintiffs may fail in their proof, but until then, they should be given the benefit of employing `any available remedy to make good the wrong done.\'" footnote citing J. I. Case Co. v. Borak, 377 U.S. 426, 433, 84 S. Ct. 1555, 12 L.Ed.2d 423 (1964); Bell v. Hood, 327 U.S. 678, 684, 66 S.Ct. 773, 90 L.Ed. 939 (1946).

52 F.R.D. 398, 401 (C.D.Cal.1970). In the aftermath of the Supreme Court's recent decision in Hawaii v. Standard Oil Co., 405 U.S. 251, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972), however, we cannot so easily disregard the so-called "traditional, legalistic approach" of the cases.

Judicial constructions of standing under section 4 have keyed on the phrases "business or property" and "by reason of" as indicating twin requisites for standing. First, a plaintiff must allege injury to his "business or property", a term definitively limited to interests in commercial ventures or enterprises: "the words `business or property' . . . refer to commercial interests or enterprises." Hawaii, supra at 264, 92 S.Ct. at 892. See Control Data Corp. v. IBM, 306 F.Supp. 839, 845 (D.Minn.1969) (corporate plaintiff not in legal existence at time of antitrust violation is without commercial injury). Secondly, a plaintiff must allege that the injury suffered was occasioned "by reason of" an antitrust violation. Hawaii, supra at 263-264 n.14, 92 S.Ct. 885.

Applying the first predicate, since neither the government's individual claims, nor their class claims, nor their parens patriae claims allege any injury to commercial ventures or enterprises, the governmental entities cannot seek recovery under section 4 of the Clayton Act. In contrast, the farmers satisfy the first requisite, since a diminished crop yield, for example, would constitute injury to commercial interests.

Application of the second prong of the standing formulation is more difficult since "by reason of" has consistently eluded efforts at uniform definition or application. Compare, e. g., Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073 (9th Cir. 1970) with Fields Productions, Inc. v. United Artists Corp., 432 F.2d 1010 (2d Cir. 1970), aff'g, per curiam 318 F.Supp. 87 (S.D.N.Y.1969), cert. denied, 401 U.S. 949, 91 S.Ct. 932, 28 L.Ed.2d 232 (1971); and compare Steiner v. 20th Century-Fox Film Corp., 232 F.2d 190 (9th Cir. 1956) and Congress Building Corp. v. Loew's, Inc., 246 F.2d 587 (7th Cir. 1957) with Melrose Realty Co. v. Loew's, Inc., 234 F.2d 518 (3d Cir.), cert. denied, 352 U.S. 890, 77 S.Ct. 128, 1 L.Ed.2d 85 (1956) and Harrison v. Paramount Pictures, Inc., 115 F. Supp. 312 (E.D.Pa.1953), aff'd, 211 F.2d 405 (3 Cir.), cert. denied, 348 U.S. 828, 75 S.Ct. 45, 99 L.Ed. 653 (1954); and compare Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F.2d 383 (6th Cir. 1962), cert. denied, 372 U.S. 907, 83 S.Ct. 721, 9 L.Ed.2d 717 (1963) with South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414 (9th Cir.), cert. denied, 385 U.S. 934, 87 S.Ct. 295, 17 L.Ed.2d 215 (1966). The resulting confusion prompted speculation that the Supreme Court would disapprove judicial application of "by reason of" to limit potential antitrust claimants.⁵ In Hawai...