Nationwide Auto Appraiser Serv., Inc. v. ASSOCIATION OF C. & S. COMPANIES, 8558.

• Decision Date: 01 September 1967
• Docket Number: No. 8558.,8558.
• Citation: 382 F.2d 925
• Parties: NATIONWIDE AUTO APPRAISER SERVICE, INC., a dissolved corporation, Fred Hochgraefe, Dan R. Sheehan, and Charles Cothran, Liquidating Trustees of Nationwide Auto Appraiser Service, Inc., a dissolved corporation, Appellants, v. ASSOCIATION OF CASUALTY AND SURETY COMPANIES, an unincorporated association, American Mutual Insurance Alliance, a corporation, and National Association of Mutual Casualty Companies, a corporation, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

382 F.2d 925 (1967)

NATIONWIDE AUTO APPRAISER SERVICE, INC., a dissolved corporation, Fred Hochgraefe, Dan R. Sheehan, and Charles Cothran, Liquidating Trustees of Nationwide Auto Appraiser Service, Inc., a dissolved corporation, Appellants, v. ASSOCIATION OF CASUALTY AND SURETY COMPANIES, an unincorporated association, American Mutual Insurance Alliance, a corporation, and National Association of Mutual Casualty Companies, a corporation, Appellees.

No. 8558.

United States Court of Appeals Tenth Circuit.

September 1, 1967.

Richard L. Bohanon, Oklahoma City, Okl. (Barefoot, Moler, Bohanon & Barth, Oklahoma City, Okl., of counsel, with him on the brief), for appellants.

Richard B. McDermott, Tulsa, Okl. (Robert MacCrate, Hugh B. Cox, Henry P. Sailer, D. E. Hammer, Sullivan & Cromwell, New York City, Covington & Burling, Washington, D. C., and Boesche, McDermott & Eskridge, Tulsa, Okl., of counsel, with him on the brief), for appellees.

Before LEWIS, BREITENSTEIN and SETH, Circuit Judges.

SETH, Circuit Judge.

The appellants, a dissolved Oklahoma corporation and its liquidating trustees, appeal entry of summary judgment dismissing their complaint seeking treble damages under section 4 of the Clayton Act, 15 U.S.C. § 15.

The appellant corporation, "Nationwide," was organized by the three appellant trustees to sell exclusive territorial franchises to independent businessmen engaged in appraising damage to automobiles. Appraisers securing a Nationwide franchise were permitted to use the Nationwide trade name, and Nationwide indicated that it would provide business advice to its franchise holders and would conduct extensive advertising of its trade name and appraisal services with insurance companies since a substantial percentage of the auto damage appraisal work is performed for such companies. The initial cost of a Nationwide franchise was $1,000, and the franchise holder was further obligated to pay five per cent of its gross receipts to Nationwide for the duration of the franchise. Nationwide itself did not perform damage appraisals. Before its dissolution, after operating about sixteen months, Nationwide had four franchised appraisers, one each in Wichita, Fort Smith, Tulsa, and Oklahoma City.

The appellees are associations whose members are insurance companies. Although the appellee associations provide consultation, advice, and service to their members, the associations do not write insurance, settle claims, or appraise auto damage. Nationwide's complaint alleges that the appellee associations influenced their members to "sponsor" a single appraiser in a particular locality and thereafter to refer all auto damage appraisals to the sponsored appraiser, excluding other appraisers in the same locality. Nationwide's complaint further alleges that the plan of sponsored appraisers unreasonably restrained competition in trade and commerce in violation of the Sherman Act, and that the appellee associations have thus conspired to restrain trade and commerce, resulting in the elimination of competition and the exclusion of Nationwide and its franchise holders from a substantial segment of the damage appraisal business. The appellees deny Nationwide's allegations but of course concede that the allegations of the complaint must be taken as true because appeal is taken from summary judgment.

The appellee associations moved for summary judgment on the ground that Nationwide lacked standing to sue under section 4 of the Clayton Act because the undisputed facts disclosed that the alleged injury to Nationwide was indirect, secondary, and derivative. The motion was granted as the District Court concluded that Nationwide would be injured only indirectly by the effect of the alleged violations of the Act on its franchise holders who were the parties actually engaged in appraising auto damage. The trial court held that "the injury to such a corporation appellant by the inability of its franchise holders to secure appraisal assignments does not meet the direct injury requirement of Section 4 of the Clayton Act." The trial court thus held that Nationwide lacked standing to sue for treble damages and the court granted summary judgment for the appellee associations.

Nationwide does not suggest on appeal that the operative facts underlying the trial court's decision are in dispute. Nationwide's position is that the trial court erred by imposing a "direct injury" limitation on standing to sue under section 4 when the clear language of section 4 requires only that the plaintiff suffer injury to its "business or property."¹ Nationwide contends that sufficient injury to its "business or property" under section 4 is alleged in the complaint because the violations of the Sherman Act have excluded its four franchised appraisers from the damage appraisal business, thus reducing or eliminating income to Nationwide derived from its reservation of five per cent of the gross receipts of its franchised appraisers.

The facts as to the nature of the business of the parties were fully developed for the summary judgment proceedings, and the complaint contains clear and precise allegations as to the actions of defendants. The issue of law thereby presented was suitable for decision on summary judgment. The appellant on appeal does not complain that the case was unsuitable for such disposition.

The complaint describes the trade or commerce affected as being "* * * the automobile material damage appraisal business." The action is thus between a corporation as plaintiff which sold franchises to persons in such business and several trade associations as defendants whose members patronize those engaged in the business. The members of the defendant associations are independent business entities as are plaintiff's franchise holders. As mentioned above the wrongful acts asserted in the complaint consist of the influence by the defendant associations upon their members to secure auto damage appraisals from a single appraiser in each community.

The issue before us is whether the trial court was correct in its holding that the damages to plaintiffs as alleged in the complaint are not recoverable under the Clayton Act. This in turn depends upon whether the doctrine of "remoteness" or "directness of injury" or "derivative damages" should be here applied. If it is, as the trial court held, the plaintiff cannot prevail as a matter of law.

There are a relatively large number of decided cases dealing with this issue, and it is apparent that with a question of this nature any rules or standards must be in the most general terms. Each case contains a unique combination of facts, and cannot be fitted into narrow categories. The case law concerns most frequently the suppliers of materials or ingredients to the one in the business first affected by defendant's acts, to landlords and licensors of such persons affected, stockholders, creditors, and labor unions.

The plaintiff-appellant here points to general statements in a number of decisions, but relies mainly on South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414 (4th Cir.); Karseal Corp. v. Richfield Oil Corp., 221 F.2d 358 (9th Cir.); Hoopes v. Union Oil Co. of Calif., 374 F.2d 480 (9th Cir.), and Radovich v. National Football League, 352 U.S. 445, 77 S.Ct. 390, 1 L.Ed.2d 456.

The Radovich case contains an admonition that a court should not add requirements beyond the language of the Sherman Act to further burden the litigant; but the case did not concern the issue before us here, and the Supreme Court, as both parties observe, has not passed on the question.

The South Carolina Council of Milk Producers case, supra, does contain many elements which are similar to the case at bar. The action was there brought by a trade group made up of members in the milk producing business who sold raw milk to milk processors, and by two of its officers who were milk producers. The defendants purchased processed milk and sold it in retail stores or had a connection with such activities. The wrongful act allegations related to efforts by defendants to keep the milk prices down. The trial court there concluded on summary judgment that the damages to the association were too remote. The court of appeals reversed, and held that the action could be maintained because plaintiff alleged facts showing it was "* * * with the sector of the economy in which the violation threatened a breakdown of competitive conditions and that he...