Pace Industries, Inc. v. Three Phoenix Co.

• Decision Date: 24 March 1987
• Docket Number: No. 85-1754,85-1754
• Citation: 813 F.2d 234
• Parties: , 1987-1 Trade Cases 67,494 PACE INDUSTRIES, INC., an Arizona Corp., Plaintiff-Appellant, v. THREE PHOENIX CO., an Arizona corp., Wabash Computer Corp., a Delaware corp., Donald E. Oglesby, husband, and Beverly Oglesby, wife, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 234

813 F.2d 234

55 USLW 2537, 1987-1 Trade Cases 67,494

PACE INDUSTRIES, INC., an Arizona Corp., Plaintiff-Appellant, v. THREE PHOENIX CO., an Arizona corp., Wabash Computer Corp. a Delaware corp., Donald E. Oglesby, husband, and Beverly Oglesby, wife, Defendants-Appellees.

No. 85-1754.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 12, 1986.

Decided March 24, 1987.

Brian K. Stanley, Phoenix, Ariz., for plaintiff-appellant.

Andrew S. Gordon, Robert C. Houser, Casceil C. Medlin, Phoenix, Ariz., for defendants-appellees.

Appeal from the United States District Court for the District of Arizona.

Before BROWNING, TANG and BEEZER, Circuit Judges.

TANG, Circuit Judge:

Pace Industries, Inc. ("Pace") appeals from a grant of summary judgment for Three Phoenix Co. ("Three Phoenix"), Donald Oglesby ("Oglesby") and Beverly Oglesby, and Wabash Computer Corporation ("Wabash") on Pace's antitrust action for treble damages under 15 U.S.C. Sec. 15. The district court held that the action was barred by the four-year statute of limitations. We affirm.

FACTS

Appellee Wabash manufactured and sold two lines of disc testing equipment: single disc testers and multiple disc testers. In 1973, Wabash sold its single disc tester line to appellee Three Phoenix, and its multiple disc tester line to Pace. The contract of sale between Wabash and Pace contained a covenant wherein Pace agreed not to compete with Three Phoenix in the manufacture and sale of single disc testing equipment. Three Phoenix was not a signatory to the Wabash/Pace Contract, but is a third party beneficiary.

Appellee Donald Oglesby founded Three Phoenix in 1973 and was its original president. Before the founding of Three Phoenix, Oglesby was the Vice President and General Manager of Wabash.

In 1978, Pace prepared to market single disc testing equipment. Single disc testing equipment is a machine designed for testing the quality of a single disc surface or the two surfaces of a single disc. Three Phoenix filed a state court injunction and accounting action to enforce the restrictive covenant in the Wabash/Pace contract as a third-party beneficiary. In its defense, Pace filed a motion to dismiss, and argued that the restrictive covenant was unenforceable because it violates federal and state antitrust laws. Pace prevailed in superior court. Three Phoenix then appealed the decision to the Arizona Court of Appeals which reversed in 1981. Three Phoenix Co. v. Pace Industries, 135 Ariz. 126, 659 P.2d 1271 (1981), vacated, 135 Ariz. 113, 659 P.2d 1258 (1983) (en banc). The Arizona Court of Appeals in turn was reversed in 1983 by the Arizona Supreme Court which ruled that the restrictive covenant constituted a per se violation of the Sherman Act. Three Phoenix Co. v. Pace Industries, Inc., 135 Ariz. 113, 659 P.2d 1258 (1983) (en banc).

Wabash was not a party to the state court suit. Three Phoenix acted to enforce its own rights, and the Arizona Supreme Court ruled "Wabash retained no interest capable of being protected by the covenant with Pace." Id., 135 Ariz. at 118, 659 P.2d at 1263.

On May 3, 1983, four months after the Arizona Supreme Court decision, Pace filed this treble damages action under 15 U.S.C. Sec. 15 in United States District Court. Pace alleged Sherman Act and Arizona Antitrust Act violations by the defendants contracting, combining and conspiring to prevent it from entering the single disc testing equipment market as a manufacturer and/or distributor of such equipment. Wabash and Three Phoenix moved for summary judgment, asserting that Pace's claim was barred by the applicable four-year statute of limitations. They also argued that they had committed no act subsequent to the filing of the Three Phoenix v. Pace state court enforcement suit which could give rise to a cause of action for purposes of the "last overt act" rule. Pace asserted various exceptions to the statute of limitations.

The court granted defendants' motion for summary judgment on April 2, 1984, and again upon rehearing on March 7, 1985. In both instances, the district court held that the limitations period for Pace's antitrust claim had begun in 1978 and expired in 1982. Pace timely appealed on March 8, 1985.

DISCUSSION

"The granting of a summary judgment is reviewable de novo." Haluapo v. Akashi Kaiun, K.K., 748 F.2d 1363, 1364 (9th Cir.1984). The sole issue on appeal is whether Pace's antitrust action in federal court was barred by the applicable four year statute of limitations.

The Sherman Antitrust Act requires a person to sue within four years to enforce a cause of action claiming treble damages for antitrust injury. ¹ Pace alleges that the covenant in the 1973 contract prevented it from competing with Three Phoenix in the market for single disc testing equipment. The district court held that a federal cause of action accrued to Pace in 1978 when Three Phoenix filed suit in state court, but rejected Pace's contentions that the statute of limitations was tolled pending the outcome of the state court litigation.

Pace argues that the statute of limitations does not bar this action because: (a) the four-and-one-half-year state court action was a continuing antitrust violation (b) the publication of an article in the Phoenix Business Journal in 1981 was an overt act which restarted the statute of limitations; (c) the statute was tolled because Pace's damages were speculative and unascertainable in 1978; and (d) there was equitable tolling of the statute pending the outcome of the state court suit. We reject each of these contentions.

A. State Court Action: Continuing Violation or Last Overt Act?

A cause of action in antitrust accrues each time a plaintiff is injured by an act of the defendant and the statute of limitations runs from the commission of the act. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338, 91 S.Ct. 795, 806, 28 L.Ed.2d 77 (1971). A continuing violation is one in which the plaintiff's interests are repeatedly invaded and a cause of action arises each time the plaintiff is injured. Hennegan v. Pacifico Creative Service, Inc., 787 F.2d 1299 (9th Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 279, 93 L.Ed.2d 254 (1986); See also 8 Kalinowski, Antitrust Laws and Trade Regulation Sec. 103.02[b] (1986). However, even when a plaintiff alleges a continuing violation, an overt act by the defendant is required to restart the statute of limitations and the statute runs from the last overt act. Steiner v. 20th Century-Fox Film Corporation, 232 F.2d 190, 195 (9th Cir.1956).

Pace argues that each phase of the state court action from the filing of Three Phoenix's complaint through resolution of the final appeal constituted discrete overt acts which restarted the statute of limitations. Three Phoenix counters that the commencement of the lawsuit on September 14, 1978 constituted the last overt act upon which Pace could base a claim. We hold that where the alleged antitrust violation is the attempted enforcement of an illegal contract through judicial process, the initiation of judicial proceedings is the last overt act for purposes of the statute of limitations.

We have held that active enforcement of an illegal contract may, under certain circumstances, constitute an overt act which will restart the statute of limitations. Airweld, Inc. v. Airco, Inc., 742 F.2d 1184, 1190 (9th Cir.1984); Aurora Enterprises, Inc. v. National Broadcasting Co., 688 F.2d 689, 694 (9th Cir.1982); Twin City Sportservice, Inc. v. Charles O. Finley & Co., 512 F.2d 1264, 1270 (9th Cir.1975). However, "not every act by an antitrust defendant is sufficient to restart the statute of limitations." Aurora, 688 F.2d at 694.

Our contract enforcement cases have not reached the issue of whether each phase of an enforcement action is an overt act. In Sportservice, 512 F.2d 1264, we held that the illegal contract itself constituted a continuing violation of the Sherman Act because it inflicted continuing and accumulating injury. Id. at 1270. Sportservice brought suit to enforce an anti-competitive franchise agreement and Finley counterclaimed under antitrust laws for treble damages. Sportservice argued that the statute of limitations barred the 1968 counterclaim because the last damaging act was the extension of the contract in 1954. In holding that the contract was a continuing antitrust violation, we did not consider the issue of whether the enforcement suit constituted a continuing violation because Finley counterclaimed in the contract enforcement action and therefore the statute of limitations issue did not arise as to the conduct of the lawsuit. In Aurora, 688 F.2d 689, we reaffirmed our holding in Sportservice but held that the passive receipt of profits from an illegal contract by an antitrust defendant was not an overt act of enforcement and therefore, the statute of limitations barred the action. Since the alleged antitrust violator did not bring an enforcement suit we again did not consider whether legal action constitutes a continuing violation. The facts were similar in Airweld, 742 F.2d 1184. In that case the alleged violator not only did not bring an enforcement action but, we held, did not have a contract to enforce during the limitations period.

Most of our discussion of continuing violations and last overt acts arises in refusal to deal cases. In In re Multidistrict Vehicle Air Pollution, 591 F.2d 68 (9th Cir.), cert. denied, 444 U.S. 900, 100 S.Ct. 210, 62 L.Ed.2d 136 (1979) (hereafter "Air Pollution "), we held that the statute of limitations barred the action because the last overt act occurred six years before the plaintiff filed suit. In the 1960's AMF Corporation was frustrated in its attempt to gain entry into the air pollution control devices market. AMF filed suit in 1970 against several auto corporations which, in 1964, had refused to install AMF's product in 1966 and later model-year cars. AMF argued that the claim...