Reiter v. Sonotone Corp.
Decision Date | 11 August 1978 |
Docket Number | No. 77-1474,77-1474 |
Citation | 579 F.2d 1077 |
Parties | 1978-1 Trade Cases 62,098, 1978-2 Trade Cases 62,183 Kathleen R. REITER, Individually and as Representative of the class of all personal users of Hearing Aids located in the U. S., Appellee, v. SONOTONE CORPORATION, a New York Corporation, Beltone Electronics Corporation, an Illinois Corporation, Dahlberg Electronics, Inc., a Minn. Corporation, Textron, Inc., a Delaware Corporation, and Radioear Corporation, a Delaware Corporation, Appellants. |
Court | U.S. Court of Appeals — Eighth Circuit |
Julian R. Wilheim, Chicago, Ill. and Elliot S. Kaplan, Minneapolis, Minn., argued, for appellants.
John E. Thomas, St. Paul, Minn., argued and on brief, for appellee.
Before BRIGHT, WEBSTER, * and HENLEY, Circuit Judges.
Plaintiff-appellee, Kathleen R. Reiter, commenced this class action for treble damages on May 2, 1975, against defendants-appellants, hearing aid manufacturers, under section 4 of the Clayton Act, 15 U.S.C. § 15 (1976). In her complaint, she alleged that these manufacturers by combining and conspiring to violate the antitrust laws had controlled their dealers' sales practices, particularly the price at which hearing aids ultimately would be sold to consumers. 1 Reiter brought the action for relief under the antitrust laws on behalf of herself and "all persons in the United States or any sub part thereof who directly or indirectly purchased * * * hearing aids (at the allegedly unlawful prices)."
The manufacturers moved for dismissal or, alternatively, for summary judgment arguing, Inter alia, that as noncommercial consumers Kathleen Reiter and the class she sought to represent had not been injured in their "business or property" under section 4 of the Clayton Act. The district court, in a comprehensive memorandum opinion, 2 denied the manufacturers' motions but certified the issue of consumer standing as appropriate for interlocutory review under 28 U.S.C. § 1292(b) (1970); we authorized the interlocutory appeal.
In this appeal, we are presented the narrow question whether a consumer who purchases a hearing aid for personal use at a higher price because of a manufacturer's allegedly anticompetitive activity suffers injury to business or property under section 4 of the Clayton Act. Section 4 provides in pertinent part:
Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States * * * and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. (15 U.S.C. § 15 (1976).)
We hold that such consumers are not injured in their "business or property" for purposes of section 4 and reverse the district court. 3
I. Legislative History.
Section 4 of the Clayton Act was first codified in section 2 of the Sherman Act. The Sherman Act, promulgated in 1890, was a congressional reaction to the concentrations of economic power that emerged from the industrialism of the mid-nineteenth century. See Note, Standing to Sue for Treble Damages Under Section 4 of the Clayton Act, 64 Colum.L.Rev. 570, 570 (1964). Declaring monopolies and restraints of trade illegal, Congress sought "to free competition in business and commercial transactions * * *." Apex Hosiery Co. v. Leader, 310 U.S. 469, 493, 60 S.Ct. 982, 992, 84 L.Ed. 1311 (1939). The history of the Sherman Act, as evidenced in the legislative proceedings, 4 emphatically supports the conclusion that the Act was designed to prevent restraints of trade significantly affecting business competition. Id. at 493 n. 15, 60 S.Ct. 982. 5
The legislative history underlying the provision permitting private damage actions, while voluminous and in parts illuminating, is less explicit. Courts and commentators have been unable to agree on the precise congressional intent.
As originally introduced by Senator Sherman in the Senate Finance Committee, the bill in section 2 broadly authorized damage actions by "any person or corporation injured or damnified by (an unlawful) arrangement, contract, agreement, trust, or combination * * *." S.1, 51st Cong., 1st Sess. § 2 (1889). This original language was, however, completely revised by the Senate Judiciary Committee. The amended language, which became section 7, limited treble damages to any person injured in his business or property by an antitrust violation. 21 Cong.Rec. 2901 (1890).
Congress failed to indicate explicitly the rationale for limiting the injuries for which treble damage actions could be maintained. Senator Morgan, however, recognized the need to limit the breadth and scope of private actions.
This bill ought not to be a breeder of lawsuits. If there is any one duty we have got higher than another in respect of the general judiciary of the United States, it is to suppress litigation and have justice done without litigation as far as we can. (21 Cong.Rec. 3149 (1890) (remarks of Sen. Morgan).)
The Supreme Court has noted that the legislative history is not very instructive in explaining the purpose for limiting recovery to business or property injuries. See Hawaii v. Standard Oil Co., 405 U.S. 251, 261, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972). See also Comment, Mangano and Ultimate Consumer Standing: The Misuse of the Hanover Doctrine, 72 Colum.L.Rev. 394, 396 n. 15 (1972).
Despite its somewhat inconclusive explanation, however, we cannot ignore Congress' explicit rejection of the original Sherman bill's broad language in favor of the statute as enacted. While ordinary consumers arguably would have been included in if not encouraged by the bill as originally introduced, we think the statute as enacted was intended to limit the class of persons able to bring a private damage action. See 21 Cong.Rec. 3149 (1890) (remarks of Sen. Morgan).
Some members of Congress argued that the enacted provision containing the limiting language would be of little use to the average consumer. In fact, Senator George, recognizing that consumers would be virtually remediless with the statute as written, urged without success more effective remedies for consumers.
(T)he poor man, the consumer, the laborer, the farmer, the mechanic, the country merchant, all that large class of American citizens who constitute 90 per cent of our population and who are the real sufferers will have no opportunity of redress, and the bill, so far as they are concerned, will be a snare and a mere delusion. (21 Cong.Rec. 3150 (1890) (remarks of Sen. George).) 6
See id. at 3147-48, 1767-68; Id. at 2571 (remarks of Rep. Hiscock); Id. at 2564 (remarks of Sen. Reagan). We note this congressional concern with the statute's inability to aid the consumer. We cannot, however, amend the Act to include that which Congress neglected or intentionally excluded. Cf. Pfizer, Inc. v. Government of India, --- U.S. ----, 98 S.Ct. 584, 587, 54 L.Ed.2d 563 (1978) ( ).
In 1914, Congress enacted the Clayton Act. Section 7 of the Sherman Act became section 4 of the new statute and retained the "business or property" limitation. The Senate Report accompanying the Clayton Act indicates that Congress, by its enactment, did not intend to amend the Sherman Act. The report comments:
This section, which gives any person injured by a violation of the antitrust acts the right to sue in the Federal courts for threefold the damages by him sustained * * * is not proposed to be amended in any particular. (S.Rep.No.698, 63rd Cong., 2d Sess. 45 (1914).)
Congress' principal concern in enacting the Clayton Act, as articulated in its comments accompanying the statute, was to provide a remedy to persons suffering a business injury as a result of combinations operating in restraint of trade. See 51 Cong.Rec. 9270 (1914) (remarks of Rep. Carlin). During the House debates, Representative Webb, a member of the Judiciary Committee, who explained the various statutory provisions, described section 4 (then section 5) as providing a treble damage cause of action to "any person * * * injured in his Business, by reason of anything forbidden in the antitrust laws * * *." 51 Cong.Rec. 9073 (1914) (remarks of Rep. Webb) (emphasis supplied). See also 51 Cong.Rec. 16,274 (1914) (remarks by Rep. Webb) (section 4 authorizes suits by a Business man).
Representative Taggart, a member of the House Finance Committee, emphasized the commercial nature of the injury for which Congress intended to provide relief.
A great many suits have been brought against trusts (that) have been dissolved. Some few have been punished, but the people whose business they destroyed have been practically without a remedy. When this bill becomes a law, the person who willfully destroys another person's business will do so at his peril.
The bill is framed for the purpose of liberating Business and not for the purpose of injuring or destroying any Business. Its great purpose is to protect small business from big business, and to compel all business to be conducted honestly. (51 Cong.Rec. 9198 (1914) (remarks of Rep. Taggart) (emphasis supplied).)
Senator Reed similarly identified business as the primary interest protected by the statute.
It follows that the Argus eyes of thousands of business men now being injured will be upon the powerful concerns, and the thousand arms of the courts will be employed to prevent their evil practices. (51 Cong.Rec. 12,939 (1914) (remarks of Sen. Reed).)
Moreover, in section 16 the Clayton Act permits injunctive relief to "(a)ny person * * * threatened (with) loss or damage by a violation of the antitrust laws * * *." 15 U.S.C. § 26 (1976). This rather broad provision does not contain section 4's business or property limitation. 7 We think Congress, in considering this carefully drafted statute, contemplated the modes of...
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