LOAN STORE, INC. v. INDEPENDENT FOOD STAMPS ASSOC.
| Decision Date | 05 October 1987 |
| Docket Number | Civ. A. No. 87-1660-MA. |
| Citation | 671 F. Supp. 844 |
| Parties | The LOAN STORE, INC., Plaintiff, v. INDEPENDENT FOOD STAMPS ASSOCIATES, INC., et al., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Stephen W. Silverman, Springfield, Mass., for plaintiff.
Donald B. Gould and Mark W. Pearlstein, Goodwin, Procter & Hoar, Boston, Mass., for Independent Food Stamps Associates and Bradlees, Inc.
Plaintiff in this action, The Loan Store, Inc. ("Loan Store"), a Massachusetts corporation, brought this civil action on June 27, 1987 against the defendants Independent Food Stamps Associates, Inc. ("Independent"), Saratoga Drug, Inc. ("Saratoga"), both Massachusetts corporations, Bradlees, Inc. ("Bradlees"), a Connecticut corporation registered as a foreign corporation in the Commonwealth, and other, unnamed corporations, alleging violations of the federal antitrust laws, 15 U.S.C. §§ 1 and 2 (the Sherman Antitrust Act §§ 1 and 2) as well as violations of state law, seeking treble damages, costs, attorney's fees and injunctive relief. Jurisdiction is premised on 15 U.S.C. §§ 15 and 26 (the Clayton Antitrust Act §§ 4 and 16), 28 U.S.C. §§ 1331 and 1337, as well as on the doctrine of pendent jurisdiction.
The defendants have moved to dismiss the complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). That motion is presently before the Court.
According to the allegations made by Loan Store,1 it appears that sometime in early September, 1986, Loan Store began negotiating with the Massachusetts Executive Office of Human Services, Department of Public Welfare ("DPW"), the state agency responsible for implementing the United States Department of Agriculture's ("USDA") Food Stamp Program, to become a food stamp distributor. After bringing itself into compliance with DPW guidelines and requirements, Loan Store and DPW reached an agreement on November 3, 1986,2 and executed a contract and approved a draft of a letter whereby Loan Store would act as a food stamp issuing agent for a six-month trial period commencing in January, 1987. In early December, 1986, DPW cancelled the agreement in response to pressure brought to bear on DPW by the defendants. As the defendants' pleadings indicate, Independent acts as DPW's agent in distributing food stamps in Hampden County. Independent, however, does not distribute food stamps itself; instead, it contracts with subagents, providing them with food stamps for distribution. Bradlees and Saratoga are two such subagents. According to Loan Store's allegations, Independent, Saratoga, Bradlees and other, unnamed entities represented by Independent and involved in the distribution of food stamps represent a "dominant, substantial and significant share of the market for food stamp distribution" in Hampden County and Greater Springfield. Complaint, par. 13. Loan Store alleges that DPW repudiated its contract with Loan Store because the defendants threatened to cease distributing food stamps in Hampden County and Greater Springfield if Loan Store was authorized to act as an issuing agent. It is this purported action that Loan Store alleges constitutes a conspiracy or combination to restrain trade and establish a monopoly in the distribution of food stamps, implicating interstate commerce and thus triggering liability under §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. Loan Store also alleges that the defendants' actions constitute tortious interference with Loan Store's advantageous business and contractual relationship with DPW.
Common to both of these statutory provisions is the jurisdictional finding of an impact on the trade or commerce "among the several States" premised on and coextensive with the interstate commerce clause, Article I, Section 8 of the Constitution. See United States v. South-Eastern Underwriters Association, 322 U.S. 533, 558, 64 S.Ct. 1162, 1176, 88 L.Ed. 1440 (1944) () (footnote omitted); see also American Law Institute, Antitrust Developments (Second) at 24 (1984) () (citations omitted). Over the years since the passage of the antitrust laws, two separate tests have developed to determine whether interstate commerce is sufficiently implicated to trigger liability under the antitrust laws, and simultaneously, jurisdiction in federal court. The first is known as the "flow of commerce" test, "which involves activities within the flow of interstate commerce;" the second is the "affecting commerce" test, "which involves activities that, even though themselves wholly intrastate, nevertheless substantially affect the flow of interstate commerce." 1 J. Von Kalinowski, Antitrust Laws and Trade Regulation Section 4.031 (1986) (footnotes omitted). Loan Store premises its argument on the second prong,3 asserting that although occurring solely within the bounds of the Commonwealth, the actions of the defendants nevertheless affect interstate commerce to such an extent as to permit federal cognizance of the action.
On July 24, 1987, the defendants collectively moved to dismiss the action under Rule 12(b)(1) of the Federal Rules of Civil Procedure, arguing that the activities complained of by the plaintiff were wholly intrastate and did not implicate interstate commerce so as to confer upon this court jurisdiction to hear the antitrust complaint. Loan Store filed its opposition to defendants' motion to dismiss on August 10, 1987.
The Court's resolution of the subject matter jurisdiction issue thus turns on the extent to which defendants' admittedly intrastate activities can be said to affect interstate commerce. To establish jurisdiction under the effects test, the alleged conduct of a putative antitrust defendant must have a "substantial and adverse" affect on interstate commerce, Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 743, 96 S.Ct. 1848, 1851-52, 48 L.Ed.2d 338 (1976), "or what is apparently the same thing, a `not insubstantial effect'" on interstate commerce. Cardio-Medical Associates, Ltd. v. Crozier-Chester Medical Center, 721 F.2d 68, 71 (3rd Cir.1983), quoting McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 246, 100 S.Ct. 502, 511, 62 L.Ed.2d 441 (1979). This is not a rigorous test. As the Supreme Court indicated in McLain, an antitrust complaint should not be dismissed on jurisdictional grounds unless "`it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id., quoting Conley v. Gibson, 355 U.S. 41, 45-6, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). See also Hospital Building, 425 U.S. at 746, 96 S.Ct. at 1853 () (citation omitted). Despite the liberality of the test for jurisdiction, and because of the reasons which follow, I nevertheless find that the defendants' actions, as alleged by Loan Store, do not have the requisite effect to bring this action under the aegis of the federal antitrust laws, and therefore I grant the motion to dismiss.
In its complaint, Loan Store asserts that sometime in November or early December, 1986, the defendants, by threatening to boycott the distribution network in the western part of the Commonwealth in which they played a large role, jointly pressured DPW to break its agreement with Loan Store to act as a food stamp distributing agent for a brief trial period. Complaint, par. 12 and 13. Based on this information, it would thus appear that Loan Store's allegations may satisfy the requirement that a combination be shown to restrain trade or to monopolize a market in violation of sections 1 and 2 of the Sherman Act. See, e.g., Corey v. Cook, 641 F.2d 32, 36 & n. 4 (1st Cir.1981) (). Nevertheless, the antitrust laws do not and cannot apply to all such combinations. As noted above, the requirement that the alleged acts of the defendants affect interstate commerce may not be a rigorous one, yet, it is of constitutional dimension; for a federal court to constitutionally act in such cases, interstate commerce must be implicated in some substantial way. That has not been demonstrated here.
The showing necessary to establish the proper effect on interstate commerce was explored by the Supreme Court in McLain and by the First Circuit in Cordova & Simonpietri Insurance Agency, Inc. v. Chase Manhattan Bank, 649 F.2d 36 (1st Cir.1981), a case interpreting McLain. In McLain, the Court noted that the antitrust plaintiff must identify the link between interstate and intrastate activity, but need not spell it out in detail; plaintiffs need only demonstrate a substantial effect on interstate commerce, and not "the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy." 444 U.S. at 242, 100 S.Ct. at 509.4
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United States v. Vega-Martínez
...flowed in interstate commerce via the state of Pennsylvania's Medicaid program). But see Loan Store, Inc. v. Indep. Food Stamps Assocs., Inc., 671 F. Supp. 844, 848, 848 n.5 (D. Mass. 1987) (federal funding of the food-stamp program was "far too speculative" a basis for Sherman Act jurisdic......
- Loan Store, Inc. v. Independent Food Stamps Associates, Inc.