U.S. Wholesale Outlet & Distribution v. Innovation Ventures, LLC
| Docket Number | 21-55397 |
| Decision Date | 20 July 2023 |
| Parties | U.S. WHOLESALE OUTLET & DISTRIBUTION, INC.; TREPCO IMPORTS AND DISTRIBUTION, LTD.; L.A. INTERNATIONAL CORPORATION; CALIFORNIA WHOLESALE; YNY INTERNATIONAL, INC.; EASHOU, INC., DBA San Diego Cash and Carry; SANOOR, INC., DBA L.A. Top Distributor, Plaintiffs-Appellants, v. INNOVATION VENTURES, LLC; LIVING ESSENTIALS, LLC, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Argued and Submitted June 7, 2022 Seattle, Washington
Amended December 22, 2023
Appeal from the United States District Court for the Central District of California Consuelo B. Marshall, District Judge Presiding No. 2:18-cv-01077-CBM-E
Mark Poe (argued), Randolph Gaw, and Victor Meng, Gaw Poe LLP, San Francisco, California; Thomas C. Goldstein and Erica O Evans, Goldstein & Russell PC, Bethesda, Maryland; Eric F. Citron, Gupta Wessler PLLC, Washington, D.C.; for Plaintiffs-Appellants.
David C. Frederick (argued), Daniel G. Bird, and Collin R. White Kellogg Hansen Todd Figel & Frederick PLLC, Washington, D.C.; E. Powell Miller and Martha J. Olijnyk, The Miller Law Firm PC, Rochester, Michigan; Gerald E. Hawxhurst, Hawxhurst Harris LLP, Los Angeles, California; for Defendants-Appellees.
Before: Ronald Lee Gilman, [*] Sandra S. Ikuta, and Eric D. Miller, Circuit Judges.
SUMMARY [***]
Robinson-Patman Price Discrimination Act
The panel filed (1) an order amending its opinion, denying a petition for panel rehearing, and denying a petition for rehearing en banc; and (2) an amended opinion affirming in part and reversing in part the district court's judgment after a jury trial and a bench trial in favor of the defendants in an action brought under the Robinson-Patman Price Discrimination Act by U.S. Wholesale Outlet &Distribution, Inc., and other California wholesale businesses.
Parts I and II, authored by Judge Miller
Defendant Living Essentials, LLC, sold its 5-hour Energy drink to the Costco Wholesale Corporation and also to the plaintiff wholesalers, who alleged that Living Essentials offered them less favorable pricing, discounts, and reimbursements in violation of the Robinson-Patman Act. On summary judgment, the district court found that the wholesalers had proved the first three elements of their section 2(a) claim for secondary-line price discrimination. At a jury trial on the fourth element of section 2(a), whether there was a competitive injury, the jury found in favor of defendants. At a bench trial on the wholesalers' section 2(d) claim for injunctive relief, the court ruled in favor of defendants.
Affirming in part, the panel held that the district court did not abuse its discretion in finding that there was some factual foundation for instructing the jury that section 2(a) required the wholesalers to show, as part of their prima facie case, that Living Essentials made "reasonably contemporaneous" sales to them and to Costco at different prices.
The panel further held that the district court did not abuse its discretion in instructing the jury that the wholesalers had to prove that any difference in prices could not be justified as "functional discounts" to compensate Costco for marketing or promotional functions. The panel concluded that the functional discount doctrine was legally available to defendants regardless of whether the wholesalers and Living Essentials were at the same level in the distribution chain, and that there was some foundation in the evidence to support the jury instruction.
Part III, authored by Judge Ikuta
Section 2(d) of the Robinson-Patman Act provides that it is unlawful for a seller to pay anything of value to or for the benefit of a customer in connection with the sale of a product unless the payment is available on proportionally equal terms to all other customers competing in the distribution of this product. As to whether Costco and the wholesalers were in competition, it was undisputed that they both were customers of Living Essentials and purchased goods of the same grade and quality. The panel held that the district court did not clearly err in finding that the wholesalers' businesses were in geographic proximity to the Costco outlets that sold 5-hour Energy. The district court, however, committed both legal and factual errors in finding that Costco and the wholesalers operated at different functional levels and therefore competed for different customers of 5-hour Energy. The district court erred as a matter of law in concluding that when the jury found in favor of Living Essentials on the section 2(a) claim, it made an implicit factual finding that there was no competition between Costco and the wholesalers. And the record did not support the district court's finding that Costco and the wholesalers operated at different functional levels.
The panel vacated the district court's holding as to section 2(d) and reversed and remanded for the district court to consider whether Costco and the wholesalers purchased 5-hour Energy from Living Essentials within approximately the same period of time in light of the record, or whether the wholesalers otherwise proved competition.
Concurring in part and dissenting part, Judge Gilman wrote that he agreed with the majority that the district court did not abuse its discretion in giving the "functional discount" jury instruction, but he would reverse and remand for a new trial on the section 2(a) claim because the district court abused its discretion in giving the "reasonably contemporaneous" instruction. As to the section 2(d) claim, Judge Gilman agreed with the majority that the district court abused its discretion in finding that Costco and the wholesalers operated at different functional levels.
The Opinion filed on July 20, 2023, and published at 74 F.4th 960 (9th Cir. 2023), is amended by the opinion filed concurrently with this order. Further petitions for rehearing or rehearing en banc will not be allowed.
The panel has unanimously voted to deny appellants' petition for rehearing. Judge Ikuta and Judge Miller have voted to deny the petition for rehearing en banc, and Judge Gilman so recommends. The full court has been advised of the petition for rehearing en banc, and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35.
Appellants' petition for rehearing or rehearing en banc is DENIED.
The majority of the panel has voted to deny appellees' petition for rehearing. Judge Miller would grant the petition for rehearing. Judge Ikuta and Judge Miller have voted to deny the petition for rehearing en banc, and Judge Gilman so recommends. The full court has been advised of the petition for rehearing en banc, and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35.
Appellees' petition for rehearing and rehearing en banc is DENIED.
as to Parts I and II:
This appeal arises out of an action under the Robinson-Patman Price Discrimination Act, 15 U.S.C. §§ 13-13b, 21a. The jury returned a verdict for the defendants, and the district court denied the plaintiffs' requested injunctive relief. The plaintiffs challenge various jury instructions as well as the denial of injunctive relief. We affirm in part and vacate, reverse, and remand in part.
Living Essentials, LLC, produces 5-hour Energy, a caffeinated drink sold in 1.93-ounce bottles. Living Essentials sells 5-hour Energy to various purchasers, including wholesalers retailers, and individual consumers.
This case concerns Living Essentials' sales of 5-hour Energy to two sets of purchasers. One purchaser is the Costco Wholesale Corporation, which purchases 5-hour Energy for resale at its Costco Business Centers-stores geared toward "Costco business members," such as restaurants, small businesses, and other retailers, but open to any person with a Costco membership. The other purchasers, whom we will refer to as "the Wholesalers," are seven California wholesale businesses that buy 5-hour Energy for resale to convenience stores and grocery stores, among other retailers. The Wholesalers allege that Living Essentials has offered them less favorable pricing, discounts, and reimbursements than it has offered Costco.
During the time period at issue here, Living Essentials charged the Wholesalers a list price of $1.45 per bottle of "regular" and $1.60 per bottle of "extra-strength" 5-hour Energy, while Costco paid a list price of ten cents per bottle less: $1.35 and $1.50, respectively. Living Essentials also provided the Wholesalers and Costco with varying rebates, allowances, and discounts affecting the net price of each bottle. For example, the Wholesalers received a 7-cent per bottle "everyday discount," a 2 percent discount for prompt payment, and discounts for bottles sold from 5-hour Energy display racks. Meanwhile, Costco received a 1 percent prompt-pay discount; a spoilage discount to cover returned, damaged, and stolen goods; a 2 percent rebate on total sales for each year from 2015 to 2018; payments for displaying 5-hour Energy at the highly visible endcaps of aisles and fences of the store; and various advertising payments.
Living Essentials also participated in Costco's Instant Rebate Coupon (IRC) program. Under that program, Costco sent monthly mailers to its members with redeemable coupons for various products. About every other month, Costco would offer its members an IRC worth $3.60 to $7.20 per 24-pack of 5-hour...
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