Palmer v. Roosevelt Lake Log Owners Ass'n, Inc.

• Decision Date: 27 July 1981
• Docket Number: No. 79-4307,79-4307
• Citation: Palmer v. Roosevelt Lake Log Owners Ass'n, Inc., 651 F.2d 1289 (9th Cir. 1981)
• Parties: 1981-2 Trade Cases 64,191 Ervin C. PALMER and Gloria M. Palmer, husband and wife, and Tim Palmer, Plaintiffs-Appellants, v. ROOSEVELT LAKE LOG OWNERS ASSOCIATION, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1289

651 F.2d 1289

1981-2 Trade Cases 64,191

Ervin C. PALMER and Gloria M. Palmer, husband and wife, and Tim Palmer, Plaintiffs-Appellants, v. ROOSEVELT LAKE LOG OWNERS ASSOCIATION, INC., et al Defendants-Appellees.

No. 79-4307.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 8, 1981.

Decided July 27, 1981.

David L. Broom, Hamblen, Gilbert & Brooke, P. C., Spokane, Wash., for plaintiffs-appellants.

Ramer B. Holtan, Jr., Perkins, Coie, Stone, Olsen & Williams, Seattle, Wash., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Washington.

Before WRIGHT, FARRIS and NORRIS, Circuit Judges.

NORRIS, Circuit Judge:

This appeal raises the question whether an alleged restraint placed on log salvaging on Roosevelt Lake ¹ in the state of Washington has a sufficient connection to interstate commerce to satisfy the jurisdictional requirements of the Sherman Act.

I.

The plaintiffs-appellants, Ervin and Gloria Palmer and their son, Tim, brought this private antitrust suit against defendants-appellees, the Roosevelt Lake Log Owners Association, various member companies of the Association, and a navigation company engaged by the Association to retrieve stray logs on Roosevelt Lake. The plaintiffs ran a small family business consisting of retrieving stray logs that were allegedly lost and abandoned on Roosevelt Lake while being transported by the timber companies to local lumber mills. The Roosevelt Lake Log Owners Association is an association of timber companies with logging interests on Roosevelt Lake.

The plaintiffs' complaint asserts that the defendants sought to restrain trade in the "gathering, transporting, storing and sale" of abandoned logs on Roosevelt Lake in violation of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, and corresponding Washington statutes, Wash.Rev. Code §§ 19.86.030; 19.86.040. The alleged unlawful conduct included having "threatened, warned and advised" the Palmers not to gather or sell abandoned logs on the lake and having "warned, requested and advised" lumber mills not to purchase logs from the Palmers.

The defendants moved to dismiss the complaint on the ground there was an insufficient nexus to interstate commerce to support Sherman Act jurisdiction. ² In support of jurisdiction, Ervin Palmer testified on deposition that in 1976 the appellants retrieved approximately 100,000 board feet of abandoned logs which were sold for $7,000 to the Harvey Creek Lumber Company, a local Washington lumber mill. The owner of the Harvey Creek Lumber Company testified by affidavit that the logs purchased from the Palmers were cut into railroad ties and sold to Burlington Northern and Union Pacific Railroads. He also testified that the ties sold to Burlington Northern were to be used near Paradise, Montana, and that it was his understanding that the ties sold to Union Pacific were, in part, used outside the state of Washington. Other affidavits submitted by appellants indicate that between 50% and 90% of all Washington timber is used outside of the state. In addition, Ervin Palmer estimated that millions of board feet of logs have been abandoned on Roosevelt Lake and are available to be salvaged. He also testified that the Palmers could have retrieved approximately 500,000 board feet per year from Roosevelt Lake, had it not been for defendants' unlawful conduct.

Defendants' memorandum in support of the motion to dismiss argued that the plaintiffs' evidence was insufficient to establish that the lumber or lumber products manufactured from the logs gathered by the Palmers were, in fact, ever placed in interstate commerce. Defendants also argued that salvageable logs on Roosevelt Lake comprise such a small proportion of all logs harvested in the state of Washington that any restraint involving such logs, or involving the lumber manufactured from such logs, could not have a substantial effect on interstate commerce.

The district court granted defendants' motion to dismiss ³ and the Palmers appeal. We note jurisdiction under 28 U.S.C. § 1291.

II.

Jurisdiction under the Sherman Act extends not only to activities actually in interstate commerce, but also to activities wholly local in nature that substantially affect interstate commerce. McLain v. Real Estate Bd., 444 U.S. 232, 237, 241, 100 S.Ct. 502, 506-07, 508, 62 L.Ed.2d 441 (1980). "If it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze." United States v. Women's Sportswear Mfrs. Ass'n, 336 U.S. 460, 464, 69 S.Ct. 714, 716, 93 L.Ed. 805 (1949). The plaintiffs contend that the logs they retrieved were in the stream of interstate commerce and also argue that the defendants' unlawful activities substantially affected interstate commerce. Because we conclude that the defendants' activities substantially affected interstate commerce, we need not reach the question whether those activities were in interstate commerce.

In determining whether the activities in this case substantially affected interstate commerce, we are guided by the Supreme Court's recent decision in McLain v. Real Estate Bd., 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980). In McLain, real estate purchasers and sellers sued real estate brokers in the New Orleans area, alleging that the brokers had conspired to fix the price of their brokerage commissions in violation of section 1 of the Sherman Act. The Supreme Court held that the plaintiffs had established a sufficient connection to interstate commerce to withstand defendants' motion to dismiss for lack of jurisdiction. Chief Justice Burger, writing for a unanimous court, noted that to establish jurisdiction it would be sufficient to show that the defendants' brokerage activities, i. e., that part of the "(defendants') activities infected by the price-fixing conspiracy," had a substantial effect on interstate commerce. Id. at 242, 246, 100 S.Ct. at 509, 511. It was not necessary to establish that the defendants' particular unlawful conduct substantially affected commerce, for otherwise "jurisdiction would be defeated by a demonstration that the alleged restraint failed to have its intended anticompetitive effect." Id. at 243, 100 S.Ct. at 510.

The Court then set forth a two-part analysis for determining if the commerce requirement was satisfied. First, a relevant aspect of interstate commerce must be identified. Second, the defendants' activities must be shown " 'as a matter of practical economics' to have a not insubstantial effect on the interstate commerce involved." Id. at 246, 100 S.Ct. at 511 (citation omitted). The McLain court identified the relevant aspect of interstate commerce as the financing of residential property in New Orleans and the insuring of titles to such property. It reasoned that "(u)ltimately, whatever stimulates or retards the volume of residential sales, or has an impact on the purchase price, affects the demand for financing and title insurance, those two commercial activities that on this record are shown to have occurred in interstate commerce." It then concluded that defendants' brokerage activities affected the frequency and terms of residential sales transactions in New Orleans, and thus had a not insubstantial effect on the demand for financing and title insurance. Id. at 245-47, 100 S.Ct. at 510-511.

Applying this analysis to the facts of this case, we identify the relevant aspect of interstate commerce as the sale of Washington lumber and lumber products for use outside the state. The record shows that approximately 10% of the nation's softwood lumber is produced in the Inland Empire, an area comprising eastern Washington, Northern Idaho, and Western Montana, leaving no question that an appreciable amount of commerce is involved in the out-of-state sale of Washington lumber and lumber products. The only remaining question is whether the activities allegedly infected by the unlawful restraint in this case, the retrieval of salvaged logs on Roosevelt Lake and their sale to lumber mills have, as a matter of practical economics, a not unsubstantial effect on interstate commerce in Washington lumber and lumber products.

The record indicates that few whole logs harvested in Washington are exported directly out-of-state. Rather, the logs are most frequently sold to local lumber mills, where they are cut and processed before being sold for use outside the state. The alleged restraint in this case operates directly on the supply of logs available for sale to these lumber mills. As such, it "unreasonably burdens the free and uninterrupted flow" of Washington lumber and lumber products out-of-state. See Hospital Bldg. Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976). ⁴

The plaintiffs' complaint alleges that the defendants conspired to monopolize trade in the retrieval and sale of abandoned logs on Roosevelt Lake. The result of such a monopoly would be to reduce the number of suppliers of logs, salvaged or otherwise, to the mills. Such a restriction on the number of suppliers could, as a matter of practical economics, ultimately be expected to affect the price or volume of sales of Washington lumber and lumber products out-of-state. See Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948), explained in Rasmussen v. American Dairy Assoc., 472 F.2d 517, 525 (9th Cir. 1972), cert. denied, 412 U.S. 950, 93 S.Ct. 3014, 37 L.Ed.2d 1003 (1973); see generally L. Sullivan, Handbook of the Law of Antitrust, § 233 at 711 (1st ed. 1977).

The Ninth Circuit recently had an opportunity to consider a similar fact situation in Western Waste Service Systems v. Universal Waste Control, 616 F.2d 1094 (9th Cir.), cert. denied, 449 U.S. 869, 101 S.Ct. 205, 66 L.Ed.2d 88 (1980). There, the plaintiff brought an action under the Sherman Act against a local Phoenix waste...