Ricci v. Chicago Mercantile Exchange

• Decision Date: 17 June 1971
• Docket Number: No. 18222.,18222.
• Parties: Thomas RICCI, Plaintiff-Appellant, v. CHICAGO MERCANTILE EXCHANGE, an Illinois not-for-profit corporation, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

447 F.2d 713 (1971)

Thomas RICCI, Plaintiff-Appellant, v. CHICAGO MERCANTILE EXCHANGE, an Illinois not-for-profit corporation, et al., Defendants-Appellees.

No. 18222.

United States Court of Appeals, Seventh Circuit.

June 17, 1971.

Jerome H. Torshen, Fred J. Ginsburg, Harry H. Fortes, Lawrence H. Eiger, Chicago, Ill., for plaintiff-appellant.

Lee A. Freeman and Jerrold E. Salzman, Chicago, Ill., for defendant-appellee Chicago Mercantile Exchange.

Max Chill, Charles B. Bernstein, Chicago, Ill., for defendants-appellees Joseph E. Siegel and The Siegel Trading Co., Inc.; Herman Chill, Chicago, Ill., of counsel.

Before HASTINGS, Senior Circuit Judge, and KILEY and KERNER, Circuit Judges.

HASTINGS, Senior Circuit Judge.

Plaintiff Ricci brought this action under sections 4 and 16 of the Clayton Act, Title 15, U.S.C.A. §§ 15¹ and 26,² seeking injunctive relief and treble damages. The complaint charged defendants Chicago Mercantile Exchange, its president, Everette B. Harris, its vice-president, William Phelan, its board chairman, Leo Melamed, and Siegel Trading Company and its president, Joseph Siegel with violations of section 1 of the Sherman Act, Title 15, U.S.C.A. § 1³ and tortious interference with commercial relationships. Siegel Trading Company and Siegel⁴ moved to dismiss the complaint for failure to state a claim upon which relief could be granted and for want of jurisdiction. In a separate motion to dismiss, the Exchange defendants argued the complaint failed to state a cause of action under section 1 of the Sherman Act. From an order granting defendants' motions to dismiss, plaintiff appeals.

Count I of appellant's six-count complaint alleged, in substance, that he purchased a membership in the Chicago Mercantile Exchange and became duly qualified to trade in commodities and commodity futures pursuant to the rules of the Exchange and the Commodities Exchange Authority. On February 11, 1969, Siegel induced the Exchange and its officers to transfer appellant's membership to James F. Reich, without hearing or notice, utilizing a previously revoked blank authorization to transfer membership. Such action was allegedly in violation of the rules and regulations of the Exchange and the Commodity Exchange Act and was done in pursuance of an unlawful conspiracy with the intent and for the purpose of restraining appellant from conducting his lawful business.⁵ As a result of such transfer, appellant was excluded from trading on the Exchange from February 11, 1969 until March 4, 1969 when he purchased another membership for $45,000.

Counts III and V of the complaint are directed against the Exchange and the individual defendants and reallege the allegations of Count I with respect to violation of the Sherman Act. Counts II, IV and VI charge tortious interference with advantageous commercial relationships and, since all parties are residents of Illinois, will necessarily fall for want of jurisdiction if the Sherman Act allegations are not sustained.

The Exchange defendants claim that the trial court, in ruling on the motions to dismiss, admitted evidence other than that stated in the complaint and thereby converted them into motions for summary judgment. See, Fed.R.Civ.P. 12(b), 56. If this were true, it would allow this court to examine deposition testimony which appellees contend entirely disposes of the case. The short answer is that the transcript of the hearing on the motion to take depositions demonstrates that the court below was considering only the allegations in the complaint when it ruled on the motions to dismiss.

Since this is an appeal from an order granting Rule 12(b), Fed.R.Civ. P., motions to dismiss, we must accept appellant's foregoing allegations of fact as true. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 174-175, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965); Duzynski v. Nosal, 7 Cir., 324 F.2d 924 (1963).

I

Appellant first contends that, absent any justification to be derived from the Chicago Mercantile Exchange's status as a board of trade and a designated "contract market" under the Commodities Exchange Act, Title 7, U.S.C.A. § 1 et seq., the allegations of the complaint are sufficient to allege a group boycott, a per se violation of section 1 of the Sherman Act.

Relying on Scanlon v. Anheuser Busch, Inc., 9 Cir., 388 F.2d 918 (1968), cert. denied, 391 U.S. 916, 88 S.Ct. 1810, 20 L.Ed.2d 654 (1968) and Ace Beer Distributors, Inc. v. Kohn, Inc., 6 Cir., 318 F.2d 283 (1963), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963), the Siegel defendants argue that the facts alleged merely amount to the substitution of one competitor for another with no resulting public injury and are, therefore, not within the purview of the antitrust acts.

Scanlon, supra, and Ace Beer, supra, are inapplicable to the case at bar. Each concerned the cancellation of individual exclusive beer distributing contracts with the immediate substitution of other distributors. The relevant markets were competitive and the courts held that no unreasonable restraint of trade resulted from the refusals to deal since existing competition was not diminished and the cancellation was not an unusual business procedure. See, Ace Beer, supra at 287.

Appellant has alleged his exclusion from the Chicago Mercantile Exchange, a monopolistic market, was in violation of its own rules and regulations. Such exclusion is alleged to be a part of a conspiracy to intentionally injure his business. In Gamco, Inc. v. Providence Fruit & Produce Bldg., 1 Cir., 194 F.2d 484 (1952), cert. denied, 344 U.S. 817, 73 S.Ct. 11, 97 L.Ed. 636 (1952), the court was confronted with the exclusion of a trader from a produce building where the sales of fresh fruits and vegetables occurred. The board that managed the building refused to renew the trader's lease after its expiration. The court in finding violations of sections 1 and 2 of the Sherman Act said:

"The latent monopolist must justify the exclusion of a competitor from a market which he controls. Where, as here, a business group understandably susceptible to the temptations of exploiting its natural advantage against competitors prohibits one previously acceptable from hawking his wares beside them any longer at the very moment of his affiliation with a potentially lower priced outsider, they may be called upon for a necessary explanation. The conjunction of power and motive to exclude with an exclusion not immediately and patently justified by reasonable business requirements establishes a prima facie case of the purpose to monopolize." Id. at 488.

Accepting, as we must, appellant's allegations as to the reasons and manner in which he was excluded, there is no justification for the actions of the Exchange and the individual defendants. The transfer of his membership in violation of the rules of the Exchange and pursuant to a conspiracy to intentionally injure his business would constitute a group boycott, per se actionable under the Sherman Act.

The absence of an allegation of public injury is not fatal to the maintenance of an action where a per se violation is alleged. Radiant Burners, Inc. v. Peoples Gas, Light and Coke Co., 364 U.S. 656, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961); Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959); Switzer Brothers v. Locklin, 7 Cir., 297 F.2d 39 (1961).

Likewise, where the defendants enjoy the power to deny potential competitors access to the market, the absence of competitive change in the relevant market is not fatal to the cause of action. Gamco, Inc., supra 194 F.2d at 487.

Finally, this is not a case, as appellees contend, where appellant has used traditional antitrust language to transform an essentially state cause of action into a federal antitrust claim. Compare, Norville v. Globe Oil & Refining Co., 7 Cir., 303 F.2d 281 (1962); Parmelee Transportation Company v. Keeshin, 7 Cir., 292 F.2d 794 (1961).

In view of the foregoing, we conclude that, absent any justification from the Exchange's status as a board of trade and a designated "contract market," the complaint is sufficient to allege a group boycott, a per se violation of section 1 of the Sherman Act.

II

Relying primarily on Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), appellant asserts that no justification can be derived either from the Commodities Exchange Act or from the Exchange's status as a board of trade for the actions herein alleged. Consequently, he claims a cause of action under section 1 of the Sherman Act has been stated.

In Silver, supra, member firms of the New York Stock Exchange were ordered by the Exchange to terminate private telephone and tickertape connections to Silver's over-the-counter brokerage firms. The Court, observing that the concerted cut-off by the Exchange and its members had deprived Silver of an asset important to his ability to compete as a broker-dealer, said that such conduct would have been a per se violation of the Sherman Act "absent any justification derived from the policy of another statute or otherwise." Id. at 348-349, 83 S.Ct. at 1252. However, because of the existence of the mandate of self-regulation present in the Securities Exchange Act, the Court sought to "reconcile pursuit of the antitrust aim of eliminating restraints on competition with the effective operation of a public policy contemplating that securities exchanges will engage in self-regulation which may well have anticompetitive effects in general and in specific applications." Id. at 349, 83 S.Ct. at 1252.

The Court concluded that under the circumstances of the case, it did not have to complete the accommodation between the acts since the Exchange did not reach the threshold of justification under the statute and had plainly exceeded the scope of its authority to engage in self-regulation by not informing Silver of the charges underlying the decision to...