The Serpa Corp v. McWane Inc., No. 99-1256

• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Writing for the Court: Before Torruella, Chief Judge, Lynch and Lipez; TORRUELLA
• Citation: 199 F.3d 6
• Parties: (1st Cir. 1999) THE SERPA CORPORATION, Plaintiff, Appellant, v. MCWANE, INC., ANACO, f/k/a ANAHEIM FOUNDRY COMPANY AND TYLER PIPE INDUSTRIES, Defendants, Appellees. . Heard
• Docket Number: No. 99-1256
• Decision Date: 08 October 1999

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199 F.3d 6 (1st Cir. 1999) THE SERPA CORPORATION, Plaintiff, Appellant,
v.
MCWANE, INC., ANACO, f/k/a ANAHEIM FOUNDRY COMPANY AND TYLER PIPE INDUSTRIES, Defendants, Appellees. No. 99-1256. United States Court of Appeals, for the First Circuit. Heard Oct. 8, 1999.
Decided December 8, 1999.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Nancy J. Gertner, U.S. District Judge.

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Copyrighted Material Omitted

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Mitchell A. Kramer, with whom Kramer & Friedman was on brief, for appellant.

Margaret A. Lange, with whom Lawrence G. Green, and Perkins, Smith & Cohen, LLP were on brief, for appellees.

Before Torruella, Chief Judge, Lynch and Lipez, Circuit Judges.

TORRUELLA, Chief Judge.

Plaintiff The Serpa Corporation brings this suit against defendant corporations McWane, Inc., Anaco, and Tyler Pipe Industries, alleging violations of the federal antitrust laws and various state law causes of action. The district court dismissed plaintiff's antitrust claims on June 10, 1998, and granted summary judgment for defendants on the remaining state law claims on January 12, 1999. This appeal followed. After carefully examining the record and the law, we affirm.

BACKGROUND

The Serpa Corporation is a distributor of plumbing supplies. Between 1976 and 1996, Serpa was the exclusive sales representative in New England for certain plumbing supply products manufactured by defendant Anaco.

Anaco manufactures cast iron soil pipes ("CISPs") and stainless steel no-hub joints known as fittings and couplings. CISPs, fittings, and couplings are used to transport human waste from buildings to sewer lines. Because the products are manufactured in accordance with industry standards, they are virtually identical across

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companies. Historically, the products were sold through exclusive sales representatives, like Serpa, who sold the products to plumbing supply wholesalers on the basis of price. In this case, Serpa sold couplings and fittings manufactured by Anaco and used its position as a regional sales representative to offer price discounts to wholesalers within guidelines set by Anaco.

Serpa's complaint alleges that between November 1995 and August 1996, defendant McWane acquired both Tyler and Anaco. Prior to being acquired by McWane, Tyler was a competitor of Anaco's. Plaintiff further alleges that the acquisitions of Tyler and Anaco gave McWane control of more than eighty-five percent (85%) of the couplings and fittings market in New England.

After acquiring Anaco, McWane placed the marketing of Anaco products under the direction of Tyler and subsequently terminated Serpa as a sales representative for Anaco products. The November 19, 1996 termination letter stated that Anaco would pay Serpa a duplicate commission for all orders received and invoiced for one month, rather than have Serpa serve as a "lame duck" sales representative for that time.

Serpa filed this suit on July 7, 1997, alleging that defendants' consolidation lessened competition and constituted an attempt to monopolize the New England market for CISPs, fittings, and couplings in violation of the federal antitrust statutes. Serpa also alleged state law causes of action for breach of contract, interference with advantageous business relations, breach of the implied covenant of good faith and fair dealing, and violation of the Massachusetts Consumer Protection Act, M.G.L.A. c. 93A.

The district court dismissed plaintiff's antitrust claims on June 10, 1998, and granted summary judgment for defendants on the remaining state law claims on January 12, 1999.

DISCUSSION

I. Plaintiff's Antitrust Claims

Plaintiff argues that the district court erred in dismissing its antitrust claims for lack of standing. We review a dismissal for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) de novo, accepting all well-pleaded facts as true and drawing all reasonable inferences in favor of the party dismissed. See Carreiro v. Rhodes Gill and Co., Ltd., 68 F.3d 1443, 1446 (1st Cir. 1995); Washington Legal Found. v. Massachusetts Bar Found., 993 F.2d 962, 971 (1st Cir.1993). We do not, however, accept a plaintiff's unsupported conclusions or interpretations of law. Id. For the reasons stated below, we affirm the ruling of the district court.

Plaintiff's complaint alleges that McWane's acquisition of Anaco and Tyler has had and will have the effect of substantially lessening competition or tending to create a monopoly in the New England market for CISPs, fittings, and couplings in violation of § 2 of the Sherman Act, 15 U.S.C. § 2, and § 7 of the Clayton Act, 15 U.S.C. § 18. Before reaching the merits of the federal antitrust claim, defendants moved the district court to dismiss on the grounds that the plaintiff lacks standing under § 4 of the Clayton Act.

Section 4 of the Clayton Act provides a private cause of action for violations of the federal antitrust laws. The statute states:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . . 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. Despite the broad language of § 4, the Supreme Court has held that § 4 of the Clayton Act does not "allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property." Blue Shield

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of Va. v. McCready, 457 U.S. 465, 477 (1982); see also Hawaii v. Standard Oil Co., 405 U.S. 251, 263 (1972) ("Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation."). Instead, the Court has created a comprehensive antitrust standing doctrine to determine which persons are entitled to bring suit under the federal antitrust statutes. See Associated General Contractors of Cal., Inc., v. California State Council of Carpenters, 459 U.S. 519, 529-35 (1983); Sullivan v. Tagliabue, 25 F.3d 43, 45 (1st Cir. 1994).

Standing is restricted in antitrust cases to avoid overdeterrence. By limiting the availability of private antitrust actions to certain parties, federal courts "ensure that suits inapposite to the goals of the antitrust laws are not litigated and that persons operating in the market do not restrict procompetitive behavior because of a fear of antitrust liability." Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1449 (11th Cir. 1991); see also Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 394 (7th Cir. 1993) ("Given the potential scope of antitrust violations and the availability of treble damages, an overbroad reading of § 4 could result in 'overdeterrence,' imposing ruinous costs on antitrust defendants, severely burdening the judicial system, and possibly chilling economically efficient behavior."). The result is that standing in an antitrust case is "not simply a search for an injury in fact; it involves an analysis of prudential considerations aimed at preserving the effective enforcement of the antitrust laws." Todorov, 921 F.2d at 1448 (citing Associated General, 459 U.S. at 535).

In Associated General, the Supreme Court set forth six factors that must be evaluated on a case-by-case basis to determine whether a plaintiff has standing to bring an antitrust action. See Sullivan, 25 F.3d at 46 (citing Associated General, 459 U.S. at 537-45). These factors are: (1) the causal connection between the alleged antitrust violation and harm to the plaintiff; (2) an improper motive; (3) the nature of the plaintiff's alleged injury and whether the injury was of a type that Congress sought to redress with the antitrust laws ("antitrust injury"); (4) the directness with which the alleged market restraint caused the asserted injury; (5) the speculative nature of the damages; and (6) the risk of duplicative recovery or complex apportionment of damages. See id.

Although courts must "consider the balance of factors in each case in an effort to guard against 'engraft[ing] artificial limitations on the § 4 remedy,'" Sullivan, 25 F.3d at 46 (quoting McCready, 457 U.S. at 472), we can dispose of this case on the antitrust injury factor since distributors, like Serpa, presumptively lack antitrust standing. Cf. SAS of Puerto Rico, Inc. v. Puerto Rico Tel. Co., 48 F.3d 39, 44-45 (1st Cir. 1995).

The Supreme Court has defined "antitrust injury" as an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). The harm "should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be 'the type of loss that the claimed violations . . . would be likely to cause.'" Id. (quoting Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 125 (1969)). Consequently, a proper plaintiff "must prove more than injury causally linked to an illegal presence in the market." Id.

Competitors and consumers in the market where trade is allegedly restrained are presumptively the proper plaintiffs to allege antitrust injury. See

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SAS, 48 F.3d at 44-45. ("[T]he presumptively 'proper' plaintiff is a customer who obtains services in the threatened market or a competitor who seeks to serve that market."). In contrast, a commercial intermediary, such as a distributor or sales representative, generally lacks standing because its antitrust injury is too remote. See, e.g., G.K.A. Beverage Corp., 55 F.3d at 767; SAS, 48 F.3d at 44; Fischer v. NWA, Inc., 883 F.2d 594, 600 (8th Cir. 1989); John Lenore & Co. v. Olympia Brewing Co., 550 F.2d 495, 500 (9th Cir. 1977); Universal Brands, Inc. v. Philip Morris, Inc., 546 F.2d 30, 33 (5th Cir. 1977). A leading antitrust treatise...