In re Western Liquid Asphalt Cases

• Citation: 350 F. Supp. 1369
• Decision Date: 30 November 1972
• Docket Number: Master File No. 50173 RES Civ.
• Parties: In re Coordinated Pretrial Proceedings in WESTERN LIQUID ASPHALT CASES.
• Court: U.S. District Court — Northern District of California

350 F. Supp. 1369

In re Coordinated Pretrial Proceedings in WESTERN LIQUID ASPHALT CASES.

Master File No. 50173 RES Civ.

United States District Court, N. D. California.

November 30, 1972.

Michael I. Spiegel, San Francisco, Cal., Liason counsel for plaintiffs.

Richard J. MacLaury, Pillsbury, Madison & Sutro, San Francisco, Cal., Liason counsel for defendants.

OPINION AND ORDER^*

RUSSELL E. SMITH, District Judge.

Plaintiffs, various states and municipalities, bring this action under the Sherman Act charging the defendant oil companies with conspiracies to fix the prices of liquid asphalt in violation of the Sherman Act (15 U.S.C. § 1). Plaintiffs make direct purchases of liquid asphalt for use in paving projects carried on by such plaintiffs with their own employees and, by letting public projects by means of competitive bidding, indirectly purchase asphalt in the form of the finished projects. Damages are sought on account of both the direct and indirect purchases.

Defendants, by motion for partial summary judgment, seek an adjudication that plaintiffs may not recover damages based upon the indirect purchases. In the case of an indirect sale the asphalt moves from the defendant supplier to a private contractor who mixes the asphalt with aggregate and applies the resultant asphaltic concrete to the surface to be paved. On any one project there may be one or more contractors (depending upon the number of subcontractors involved) between the initial supplier and the public authority involved. The plaintiff will be able to prove that in some jobs the contractor who was the successful bidder aggregated all of the fixed costs of items such as asphalt, pipe, guard rail, estimated the cost of labor and equipment use, and then added percentages for overhead and profit, totaled the whole, and thus arrived at the bid price. In short, plaintiffs can in some instances prove that the increased cost (assuming, of course, proof that a conspiracy did result in an increased cost) of asphalt was in fact borne by the plaintiffs.

Defendants take the position that except in the case of cost-plus contracts the initial supplier of the asphalt is the one damaged and that plaintiffs may not recover even if they can show that the increased prices were in fact passed on. Plaintiffs contend that the costs are always passed on and that once it is shown that the cost to a plaintiff's contractor was increased by a conspiracy the plaintiff may recover.

Were I confronted with the facts here (assuming a conspiracy-controlled market) and the law—"Any person who shall be injured . . . by reason of anything forbidden . . . shall recover. . . ." (15 U.S.C. § 15)—I would, if not otherwise controlled, conclude, first, that one who purchased for resale in the same or a different form and passed the excess price along is not injured, and, second, that the ultimate consumer of an article the price of which is increased by antitrust activity is injured.

But I am controlled. My first conclusion is not now permissible in view of Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968), and my second conclusion may not be.

In Hanover the courts had before them a corporation which supplied 75% to 95% of all of the shoe manufacturing machinery used in the United States. It did so on a leasing basis which permitted each manufacturer of shoes closely to approximate the costs of every other manufacturer using the same machinery. United States v. United Shoe Machinery Corp., 110 F.Supp. 295 (D.Mass.1953). In short, the shoe machinery market was a controlled market in which a uniformly high price was maintained. With this background, however, the district judge who tried Hanover (Hanover Shoe, Inc. v. United Shoe Machinery Corp., 185 F. Supp. 826 (M.D.Pa.1960)) refused an offer to prove that the overcharges were in fact passed on and that plaintiff did not actually suffer a money loss. In other words, the district court refused to equate a money loss with recoverable damages. This result is based upon the proposition that the law considers immediate and not remote consequences.

The Third Circuit affirmed on the basis of the opinion below. Hanover Shoe, Inc. v. United Shoe Machinery Corp., 281 F.2d 481 (3d Cir. 1960). The Supreme Court affirming did not by the affirmance alone decide that a remote purchaser could not recover because that fact issue was not before it. It is necessary, therefore, to determine whether the rule which the Supreme Court announced in reaching its result would forbid recovery by the remote purchaser. The matter is not free from doubt, but I conclude that it did.

In its opinion in Hanover the Supreme Court did not express any disapproval of the rule announced by the district court. On the contrary it quoted with apparent approval from that portion of the district court opinion expressing the remote consequences rule. Hanover Shoe, Inc. v. United Shoe Machinery Corp., supra, 392 U.S. at 488, n. 6, 88 S.Ct. 2224. This plus the fact of affirmance on the "pass-on" issue leads me to believe that the Court approved the rule announced by the district court.

Additionally the Supreme Court in Hanover relied upon the decision in Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U.S. 531, 38 S.Ct. 186, 62 L.Ed. 451 (1918). It is cited and partially quoted in two footnotes. Hanover Shoe, Inc. v. United Shoe Machinery Corp., supra, 392 U.S. at 488, n. 6, and 490, n. 8, 88 S.Ct. 2224. In Darnell-Taenzer Justice Holmes speaking for the Court said 245 U.S. at pp. 533-534, 38 S.Ct. at p. 186.

The general tendency of the law, in regard to damages at least, is not to go beyond the first step. As it does not attribute remote consequences to a defendant so it holds him liable if proximately the plaintiff has suffered a loss. The plaintiffs suffered losses to the amount of the verdict when they paid. Their claim accrued at once in the theory of the law and it does not inquire into later events.

And again at p. 534, 38 S.Ct. at p. 186:

If it be said that the whole transaction is one from a business point of view, it is enough to reply that the unity in this case is not sufficient to entitle the purchaser to recover, any more than the ultimate consumer who in turn paid an increased price. He has no privity with the carrier. State v. Central Vermont Ry. Co., 81 Vt. 459, 71 A. 193. See Nicola, Stone & Myers Co. v. Louisville & Nashville R. R. Co., 14 I.C.C. 199, 207-209. Baker Manufacturing Co. v. Chicago & North Western Ry. Co., 21 I.C.C. 605. The carrier ought not to be allowed to retain his illegal profit, and the only one who can take it from him is the one that alone was in relation with him, and from whom the carrier took the sum. New York, New Haven & Hartford R.R. Co. v. Ballou & Wright, 8 Cir., 242 F. 862. Behind the technical mode of statement is the consideration well emphasized by the Interstate Commerce Commission, of the endlessness and futility of the effort to follow every transaction to its ultimate result. 13 I.C.C. 680. Probably in the end the public pays the damages in most cases of compensated torts.

Clearly the stated rule of Darnell-Taenzer is that an immediate purchaser may recover and that a remote purchaser may not even though the former suffers no money loss and the latter does, and it is this rule which I believe the Supreme Court to have adopted and applied to antitrust actions in Hanover.

I next inquire whether for some reason the rule which I believe the Supreme Court to have adopted should not, in light of its opinion, apply here. On a balancing of the whole opinion in Hanover I find none.

If a defendant is required to pay damages to one who has suffered no money loss because of some policy of the law which forbids the court to inquire into after events, then as a matter of basic fairness that defendant should be permitted to assert that same policy when the remote purchaser sues him. In this case the plaintiffs Pioneer Construction Company, Inc. (Civil No. 49808), Cascade Construction Company, Inc. (Civil No. 49638), Page Paving Company (Civil No. 50307), and Copp Paving Company, Inc. (Civil No. C-71-608) seek damages by reason of purchases of liquid asphalt. If the law, as it does, requires that they be paid triple the amount of any overcharges...