Ostrofe v. H. S. Crocker Co., Inc.
| Decision Date | 08 March 1982 |
| Docket Number | No. 77-3985,77-3985 |
| Citation | 670 F.2d 1378 |
| Parties | 1982-1 Trade Cases 64,643 Frank J. OSTROFE, Plaintiff-Appellant, v. H. S. CROCKER COMPANY, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Darrell J. Salomon, San Francisco, Cal., argued, for plaintiff-appellant; Alioto & Alioto, San Francisco, Cal., on brief.
James T. Fousekis, Steinhart, Goldberg, Feigenbaum & Ladar, San Francisco, Cal., argued, for defendant-appellee.
Appeal from the United States District Court for the Northern District of California.
Before BROWNING, Chief Judge, and KENNEDY and SKOPIL, Circuit Judges.
The principal issue presented by this appeal is whether under the circumstances of this case a sales manager, forced to resign because he refused to participate in an alleged scheme by his employer and other manufacturers to fix prices, rig bids, and allocate markets, has standing to bring a private treble damages action against his employer under Section 4 of the Clayton Act. We hold that he does.
Frank J. Ostrofe, former marketing director of H. S. Crocker Company, Inc., filed a complaint against Crocker seeking damages for injuries resulting from a violation of the Sherman Act. The complaint alleged the following: Crocker and other unnamed manufacturers of paper lithograph labels combined and conspired to unreasonably restrain interstate trade and commerce in labels in violation of Section 1 of the Act. The conspiracy consisted of a continuing agreement and concert of action among the manufacturers to fix and maintain label prices, submit rigged bids, allocate customers and territories, and "boycott those persons, including plaintiff, who have interfered or threatened to interfere with their illegal plan." 1 The conspiracy was effectuated in part by coercing Ostrofe, as Crocker's sales manager, to rig bids, fix prices, and allocate markets. When Ostrofe refused to cooperate Crocker's co-conspirators complained to Crocker's executive officers who warned Ostrofe that if he did not participate in the illegal scheme he would be discharged and prevented from participating in the label industry in the future. Ostrofe was repeatedly told he would not receive promised financial compensation or a greater future share in Crocker's management or income unless he stopped interfering with the unlawful scheme. He was forced by these threats to resign his position with Crocker, and was boycotted from further employment in the labels industry.
Crocker moved to dismiss on the ground Ostrofe lacked "standing" to sue for damages under Section 4 of the Clayton Act. The district court granted the motion in part, holding Ostrofe could not attack the agreement to fix prices because he was not the "target" of that agreement. The court said,
The court noted, however, that the complaint also alleged an understanding among Crocker and the other label manufacturers to boycott Ostrofe and others who interfered with the price fixing activities, and held that Ostrofe had standing to challenge this "separate" conspiracy. The court therefore denied the motion to dismiss with respect to this claim "without prejudice, however, to a properly documented motion for summary judgment presenting the (boycott) issue."
Crocker filed a motion for summary judgment supported by depositions and affidavits negating the existence of any agreement among label manufacturers not to employ plaintiff. In opposition to the motion, Ostrofe offered affidavits supporting his allegations that other label manufacturers had complained to Crocker about Ostrofe's failure to implement the price-fixing agreement, that Crocker had threatened Ostrofe with reprisals if he did not participate in the price-fixing scheme, and that these threats had forced Ostrofe's resignation from Crocker. Crocker responded, in part, that Ostrofe's evidence related to activities that had allegedly occurred prior to Ostrofe's resignation, and therefore "do not relate to the claimed boycott but rather to the alleged price fixing conspiracy, as to which (Ostrofe) has no standing to complain."
While the motion for summary judgment was pending, Ostrofe moved to amend the complaint to specifically allege a unilateral refusal by Crocker to deal with Ostrofe. The proposed amendment alleged that the "conspiracy to fix prices ... and allocate markets has been effectuated in part by defendant (Crocker) terminating plaintiff as a national sales manager for paper labels when plaintiff failed to cooperate in the aforesaid conspiracy." The district court denied the motion to amend, stating,
The district court later granted the motion for summary judgment without opinion, and dismissed the action.
The district court erred in deciding Crocker's motions to dismiss and for summary judgment as if Ostrofe's claim consisted of two separate and unrelated lawsuits-one challenging a conspiracy to fix prices and allocate customers for paper lithograph labels, the other attacking an agreement to terminate and bar Ostrofe from employment in that industry.
It is axiomatic that the allegations of a complaint must "be read as a whole, and ... viewed broadly and liberally." Wright and Miller, 5 Fed.Practice and Procedure, 657. The same view must be taken of plaintiff's proof: '... " Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699, 82 S.Ct. 1404, 1410, 8 L.Ed.2d 777 (1962). 2
The fragmentation of Ostrofe's pleading and proof lead to erroneous rulings on the motions to dismiss, to amend the complaint, and for summary judgment.
The court treated the motion to dismiss for lack of standing as if the question presented were whether a price fixing conspiracy could be challenged by an employee whose discharge was an incidental effect and not the object of that conspiracy. But the complaint alleged that Ostrofe was discharged and barred from further employment pursuant to a boycott agreement entered into as a part and in furtherance of the price-fixing conspiracy.
As the district court recognized, the boycott aimed at Ostrofe was a violation of the Sherman Act in itself, and Ostrofe had standing under Section 4 to seek damages for the injuries it allegedly caused him. 3 The court cited no authority for denying Ostrofe the right, in pursuing his remedy, to establish the context of the larger conspiracy of which the boycott was allegedly a part and from which it drew its purpose. Persons injured by an agreed-upon refusal to deal employed as a part of a conspiracy to restrain or monopolize trade and commerce have been permitted to challenge the conspiracy as a whole even though their injuries did not result from the restraint on competition that was the principle object of the conspiracy. Radovich v. National Football League, 352 U.S. 445, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957); Kiefer-Stewart Co. v. E. Seagram & Sons, Inc., 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219 (1951). Solinger v. A. & M. Records, Inc., 586 F.2d 1304 (9th Cir. 1978); Nichols v. Spencer International Press, Inc., 371 F.2d 332 (7th Cir. 1967); Standard Oil Co. of Calif. v. Moore, 251 F.2d 188 (9th Cir. 1957). 4 Evidence of the underlying conspiracy is clearly probative of the existence of a boycott employed in furtherance of the conspiracy.
In Radovich plaintiff alleged that pursuant to an agreement among the defendants he was boycotted and blacklisted because he played for a professional football league competitive with defendant's league. The boycott was alleged to have been part of a conspiracy to monopolize professional football in the United States in violation of Sections 1 and 2 of the Sherman Act. The player boycott was employed as a means of destroying the rival league. Plaintiff was allowed to challenge the conspiracy to monopolize of which the boycott was a part. The present case is indistinguishable from Radovich.
It is a more difficult question whether Ostrofe also had standing to sue Crocker for damages under Section 4 on the theory of the case presented in Ostrofe's proposed amendment; that is, that Crocker unilaterally discharged Ostrofe as a means of effectuating the scheme to fix prices and allocate customers.
Parties injured by unilateral conduct in furtherance of an unlawful restraint of trade have been permitted to challenge the overall scheme. 5 But Crocker argues that it would extend liability too far to allow standing to sue for treble damages under Section 4 to persons injured only by a refusal to deal by a single conspirator in furtherance of a price-fixing conspiracy.
Section 4 limits standing in a private antitrust action for treble damages to a "person injured in his business or property by reason of...
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