NAACP v. New York Clearing House Ass'n

• Citation: 431 F. Supp. 405
• Decision Date: 13 May 1977
• Docket Number: No. 77 Civil 881.,77 Civil 881.
• Parties: NATIONAL ASSOCIATION FOR the ADVANCEMENT OF COLORED PEOPLE, National Organization for Women, National Organization for Women—New York State, Women Office Workers, Fight Back, Irene S. Lo Re, Jacqueline Edwards, and Jenny Green Lee, on behalf of themselves and all persons similarly situated, Plaintiffs, v. NEW YORK CLEARING HOUSE ASSOCIATION, Bank of New York, Bankers Trust Company, Chase Manhattan Bank, N.A., Chemical Bank, Citibank, N.A., Irving Trust Company, Manufacturers Hanover Trust Company, Marine Midland Bank, Morgan Guaranty Trust Company, National Bank of North America, and U.S. Trust Company, Defendants.
• Court: U.S. District Court — Southern District of New York

431 F. Supp. 405

NATIONAL ASSOCIATION FOR the ADVANCEMENT OF COLORED PEOPLE, National Organization for Women, National Organization for Women—New York State, Women Office Workers, Fight Back, Irene S. Lo Re, Jacqueline Edwards, and Jenny Green Lee, on behalf of themselves and all persons similarly situated, Plaintiffs, v. NEW YORK CLEARING HOUSE ASSOCIATION, Bank of New York, Bankers Trust Company, Chase Manhattan Bank, N.A., Chemical Bank, Citibank, N.A., Irving Trust Company, Manufacturers Hanover Trust Company, Marine Midland Bank, Morgan Guaranty Trust Company, National Bank of North America, and U.S. Trust Company, Defendants.

No. 77 Civil 881.

United States District Court, S. D. New York.

May 13, 1977.

Eugene J. Leff, Isabelle Katz Pinzler, Diana H. Greene, National Employment Law Project, Inc., Barbara A. Morris, Director, New York City, Michael D. Kaufman, Nancy LeBlanc, MFY Legal Services, Inc., New York City, Nathaniel R. Jones, William D. Wells, N.A.A.C.P., New York City, for plaintiffs.

Sullivan & Cromwell, New York City, for defendants, New York Clearing House Ass'n, Bank of New York and Marine Midland Bank; John Dickey, New York City, of counsel.

Milbank, Tweed, Hadley & McCloy, New York City, for defendant, Chase Manhattan Bank, N.A.

Nickerson, Kramer, Lowenstein, Nessen, Kamin & Soll, New York City, for defendant, Chemical Bank.

Shearman & Sterling, New York City, for defendant Citibank, N.A.

Winthrop, Stimson, Putnam & Roberts, New York City, for defendant, Irving Trust Co.

Simpson, Thacher & Bartlett, New York City, for defendant, Manufacturers Hanover Trust Co.

Davis, Polk & Wardwell, New York City, for defendant, Morgan Guaranty Trust Co.

Carter, Ledyard & Milburn, New York City, for defendant, U. S. Trust Co. of New York.

Donovan, Leisure, Newton & Irvine, New York City, for defendant, Bankers Trust Co.

Cole & Deitz, New York City, for defendant, National Bank of North America.

OPINION

EDWARD WEINFELD, District Judge.

In this action for declaratory and injunctive relief under the antitrust laws, the defendants move to dismiss the complaint for failure to state a claim upon which relief can be granted on the ground that the plaintiffs lack standing to bring this action. The plaintiffs are five organizations which allege that they are devoted to the elimination of discrimination against blacks, Hispanics and women, and three individual females.¹ They sue on behalf of a class of all women and minority group members against whom they allege the defendants have discriminated or will discriminate in employment.² The defendants are eleven leading commercial banks located in New York City and the New York Clearing House Association, an unincorporated association of which the defendants are members. The complaint alleges that New York City requires that all persons entering into non-construction contracts with the City adopt affirmative action programs to increase their hiring of women and minority group members, and that the defendants, in violation of Section 1 of the Sherman Act,³ have conspired with other unnamed persons to refuse to enter into, or to engage in negotiations for, any agreement with the City for specialized financial or data processing services, unless this affirmative action requirement is withdrawn or modified, or the banks exempted therefrom. The complaint further alleges that because few, if any, banks other than defendants can provide such services, the conspiracy has the effect of denying the City such services altogether, and of impairing the City's ability to administer efficiently certain of its governmental functions. Thus, the plaintiffs allege, the defendants, because of the essential nature of the services they provide, will, unless restrained, succeed in forcing the City to abandon its affirmative action program as applied to them. This conspiracy is alleged to restrain trade in that it will obstruct payment of interest to out of state holders of city obligations and hinder collection of parking fines from residents of states other than New York.

In support of their standing to bring this suit, the three individual plaintiffs claim that they were denied employment or advancement by certain of the banks on the basis of their sex and race, pursuant to "discriminatory employment practices which, upon information and belief, are prevalent among the defendant banks generally." They claim that if the City's affirmative action requirements are not enforced against defendants, their applications for employment or advancement "will not be reconsidered on the basis of merit alone," and that they and members of their class "will obtain fewer jobs, promotions, raises, transfers, and training and other employment opportunities." The plaintiff organizations claim that, if the affirmative action requirements are not enforced, their members will obtain fewer employment opportunities, and their own efforts to obtain equal employment opportunities for their members will be "frustrated and undermined."

The first question presented on this motion is whether the test of standing to sue for injunctive relief under the antitrust laws differs from that in suits for treble damages. Section 4 of the Clayton Act⁴ allows "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" to recover treble damages. Despite the broad language of this section,⁵ the courts have limited standing to sue for treble damages because of the speculative nature of claims of damage by remote victims of an antitrust violation, and because of concern that

if the flood-gates were opened to permit treble damage suits by every creditor, stockholder, employee, subcontractor, or supplier of goods and services that might be affected, the lure of a treble recovery, implemented by the availability of the class suit as facilitated by the amendment of Rule 23 F.R.C.P., would result in an over-kill, due to an enlargement of the private weapon to a caliber far exceeding that contemplated by Congress.⁶

Thus, in addition to the ordinary requirement of causation, a "rule of reason"⁷ is used to determine standing in antitrust treble damage actions. This rule has been succinctly stated as follows:

A plaintiff must allege a causative link to his injury which is "direct" rather than "incidental" or which indicates that his business or property was in the "target area" of the defendant's illegal act.⁸

Injunctive relief against antitrust violations is authorized, not by section 4, but by section 16 of the Clayton Act,⁹ which reads in relevant part:

Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity . . ..

The Supreme Court has recognized that section 16 is "notably different" from section 4, since the potential for unlimited multiple recoveries in treble damage actions does not exist in injunctive actions.¹⁰ Thus, several courts have held that the "target area" test of section 4 should not be applied so as to limit standing in injunctive actions brought under section 16.¹¹ These cases have held that to have standing to sue for injunctive relief a plaintiff need allege only that he is "threatened with loss or injury proximately resulting from the antitrust violation."¹² Plaintiffs vigorously urge the Court to adopt this test of standing in this case.

However, the Court of Appeals in this Circuit has consistently applied the "target area" test to determine standing to sue for injunctive relief under the antitrust laws.¹³ In Nassau County Association of Insurance Agents, Inc. v. Aetna Life and Casualty Co.,¹⁴ four associations of insurance agents sought treble damages and injunctive relief as a result of an alleged conspiracy directed against insurance agents by the defendants, who were insurance companies. Plaintiffs alleged that the defendants, in furtherance of the conspiracy, had terminated certain contracts with some agents who were members of plaintiffs, as a result of which plaintiffs had lost membership and dues income.¹⁵ On appeal from the District Court's dismissal for lack of standing,¹⁶ the plaintiffs argued at length that the "target area" test of section 4 did not apply to actions for injunctive relief.¹⁷ The Court of Appeals, after holding that the plaintiffs lacked standing to sue for treble damages because they neither had suffered any direct injury nor were in the target area of the alleged conspiracy, stated that "for the same reasons, plaintiffs also lack standing to sue for injunctive relief under § 16 of the Clayton Act . . .."¹⁸ In light of the issue explicitly presented and briefed by appellants,¹⁹ it is clear that the Court of Appeals intended the "target area" test applied under section 4 to apply to actions for injunctive relief as well. Moreover, in other cases involving both injunctive relief and treble damages, the Court of Appeals has described the "target area" rule as the test of standing to pursue "a private remedy" or of "Clayton Act standing," without differentiating between section 4 and section 16.²⁰ Thus, the standing rules developed in treble damage cases apply to the plaintiffs in this injunctive action.

In order to have standing to sue under the Clayton Act a plaintiff must show more than that he was injured as a result of an alleged antitrust violation, or even that his injury was foreseeable or intended.²¹ He must show that he is "within that area of the economy which is endangered by a breakdown in competitive conditions in a particular industry."²² In other words, the plaintiff must suffer direct injury as a result of the anti-competitive consequences of the defendants' acts. If not, then he cannot sue even if he has...