United Nat. Records, Inc. v. MCA, Inc.

• Decision Date: 09 November 1984
• Docket Number: No. 82 C 7589.,82 C 7589.
• Citation: 609 F. Supp. 33
• Parties: UNITED NATIONAL RECORDS, INC., et al., Plaintiffs, v. MCA, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

609 F. Supp. 33

UNITED NATIONAL RECORDS, INC., et al., Plaintiffs, v. MCA, INC., et al., Defendants.

No. 82 C 7589.

United States District Court, N.D. Illinois, E.D.

November 9, 1984.

COPYRIGHT MATERIAL OMITTED

ORDER

BUA, District Judge.

Before the Court are certain defendants' motions for partial summary judgment and defendant United Artists Corporation's motion for summary judgment. For the reasons stated below, certain defendants' motions for partial summary judgment are denied, and United Artists' motion for summary judgment is entered and continued pursuant to Fed.R.Civ.P. 56(f) pending completion of discovery.

I. Certain Defendants' Motions for Partial Summary Judgment

All defendants except United Artists Corporation move for partial summary judgment on plaintiffs' claims arising before December 13, 1978. Defendants argue that the applicable four-year statute of limitations, 15 U.S.C. § 15b, bars any pre-December 13, 1978 claims. Plaintiffs argue that the limitations period should be tolled due to defendants' fraudulent concealment of the cause of action and plaintiffs' failure to discover defendants' alleged wrongdoing despite the exercise of due diligence.

In this circuit, at least two types of fraudulent behavior toll a statutory limitations period. First, the "equitable tolling doctrine" will toll the limitations period if the defendant's wrongdoing is undiscovered and the plaintiff has diligently inquired into its circumstances. Tomera v. Galt, 511 F.2d 504, 510 (7th Cir.1975). Although the plaintiff need not allege specific acts of concealment on the part of the defendant, the plaintiff must establish due diligence in order to toll the limitations period under the equitable tolling doctrine. The second type of fraudulent behavior which tolls the limitations period is generally referred to as the "fraudulent concealment doctrine." See generally The Seventh Circuit's Reformation of the Equitable Tolling Doctrine, 1982 U.Ill.L.Rev. 565, 568 (1982). Under this doctrine, the plaintiff must allege that the defendant has taken "positive steps after commission of the fraud to keep it concealed." Id. Although the plaintiff need not establish due diligence, the plaintiff must specifically allege fraudulent action "subsequent to the initial wrong." Gieringer v. Silverman, 731 F.2d 1272, 1278 (7th Cir.1984). In this case, plaintiffs have raised triable issues of fact under either doctrine.

A. The Fraudulent Concealment Allegations

Plaintiffs allege that defendants, beginning at least as early as January 1, 1971, conspired and agreed to fix prices and impose industrywide conditions upon members of the class in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiffs further allege that defendants affirmatively and fraudulently concealed their wrongdoing and that class members were without knowledge of the cause of action despite the exercise of due diligence.

Under the fraudulent concealment doctrine, the statute of limitations is tolled until actual discovery of the underlying wrong when the concealment is accomplished by affirmative acts designed to prevent discovery of the facts comprising the cause of action. Tomera v. Galt, 511 F.2d 504, 510 (7th Cir.1975). The affirmative acts of concealment must occur after the original wrongdoing. Id. Generally, the mere denial of any wrongdoing on the part of a defendant is insufficient to constitute affirmative acts of concealment under this doctrine. E.g., Rutledge v. Boston Woven Hose & Rubber Co., 576 F.2d 248, 250 (9th Cir.1978). "Hiding" the wrongdoing, "throwing up a smokescreen" or "misrepresentation" concerning the facts constituting the wrong, on the other hand, are sufficient allegations to toll the limitations period. Trecker v. Scag, 679 F.2d 703, 708 (7th Cir.1982).

Plaintiffs point to several press releases and other statements issued by defendants to the media as affirmative acts of concealment during the 1970s. Plaintiffs argue that these statements were designed to conceal the original wrong, defendants' conspiracy to fix prices and imposed industrywide conditions. While many of defendants' statements are merely denial of price fixing allegations, several statements go beyond the mere denial of wrongdoing. In fact, several statements offer alternative explanations for the apparent parallel prices of records and tapes during the 1970s. For example, in 1977 an official of defendant Warner Brothers allegedly denied allegations of price fixing and further explained that recent parallel price increases were "merely a case of other companies following the lead of their competitors." Defendants' Exhibit B-97. Also in 1977, an official of defendant Capital allegedly explained that the recent price increases were due to the "pressures of inflation and shrinking margins." Defendants' Exhibit B-108. CBS allegedly explained that its price increases were due to "increased costs in many areas, including recording, raw materials, manufacturing, promotion, sales and distribution." Defendants' Exhibit B-19. Defendants RCA and Columbia allegedly offered similar explanations for their price increases. Defendants' Exhibits B-28, B-79. In 1978, defendant Capital allegedly stated that its pricing structure "is always determined in the context of competitive considerations." Defendants' Exhibit B-172. All of these statements, allegedly attributable to defendants, go beyond mere denial of wrongdoing. Each statement offers an alternative reason for the apparent parallel price increases throughout the 1970s. These statements, among others contained in Defendants' Exhibit B, create triable issues of fact as to whether defendants affirmatively concealed their alleged agreement to fix prices and impose industrywide conditions during the 1970s.

In addition to the various statements allegedly attributable to defendants in Defendants' Exhibit B, plaintiffs point to allegedly secret meetings between defendants and confidential memoranda issued by defendants urging secrecy as further evidence of defendants' fraudulent concealment. For example, plaintiffs allege that representatives of CBS and Warner (Atlantic) met secretly on March 25, 1974, for the purpose of concealing an alleged pricing agreement. See Exhibit C to plaintiffs' Surreply. In addition, plaintiffs point to two "confidential" memoranda and one "confidential" letter allegedly discussing defendants' future pricing plans. See Exhibits D, E and F to plaintiffs' Surreply. Such conduct generally is sufficient to create a question of fact regarding a fraudulent concealment claim. See generally R. Marcus, Fraudulent Concealment in Federal Court: Toward a More Disparate Standard, 71 Geo.L.Rev. 829, 859 (1983), and cases cited therein.

B. The Due Diligence Allegations

Under the equitable tolling doctrine, when the wrongdoing "has been concealed or is of such a nature as to conceal itself, the statute of limitations is tolled until the plaintiff has obtained knowledge of the fraud or in the exercise of due care should have obtained knowledge of the fraud." Sperry v. Barggren, 523 F.2d 708, 710 (7th Cir.1975) (citations omitted) (emphasis supplied). Although the plaintiff need not allege affirmative acts of concealment under this doctrine, the plaintiff must establish due diligence in inquiring into the circumstances surrounding the alleged wrongdoing. Tomera v. Galt, 511 F.2d 504, 510 (7th Cir.1975). Conspiracies to violate the antitrust laws are generally self-concealing. See, e.g., Greenshaw v. Lubbock County Beverage Assoc., 721 F.2d 1019, 1030 (5th Cir.1983).

Defendants argue that plaintiffs knew, or should have known, of their antitrust claims no later than 1978. Defendants point to several articles printed in trade publications which reported defendants' announced price changes. See Defendants' Exhibit B. Defendants, however, misconstrue the nature of the alleged wrongdoing. Defendants' price increases, and even their apparent parallel price increases, do not constitute violations of the antitrust laws. See, e.g., Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954); Quality Auto Body, Inc. v. Allstate Ins. Co., 660 F.2d 1195 (7th Cir.1981). Mere knowledge that defendants were raising prices throughout the 1970s does not mean the plaintiffs knew or should have known that defendants were allegedly agreeing to fix prices. King & King Enterprises v. Champlin Petroleum Co., 657 F.2d 1147, 1156 (10th Cir.1981).

Defendants also argue that the existence of prior antitrust litigation against defendants should have put all plaintiffs on notice of the existence of a horizontal price fixing conspiracy. Defendants point specifically to a suit brought in 1976 by Dean Stamatopoulos, owner of plaintiff GHII, Inc. Although the Stamatopoulos litigation included allegations of price fixing, Stamatopoulos' knowledge, in 1976, of the facts giving rise to his suit appear to be nothing more than assumptions based upon his observation of the parallel price structure of the industry. Stamatopoulos testified regarding the facts he knew in support of his 1976 lawsuit as follows:

After 21 years in the record business, I assumed something was going on fishy when everything was escalating at the same time. There was a definite pattern. Price raises, introduction of new midline products; it was too coincidental.

Stamatopoulos Dep. p. 201, reprinted at Defendants' Exhibit F-77.

Class members cannot be charged with knowledge of a potential claim "unless they are aware of some evidence tending to support it." In re Beef Industry Anti-trust Litigation, 600 F.2d 1148, 1171 (5th Cir.1979) (emphasis supplied). The mere filing of a lawsuit "is not as a matter of law tantamount to actual or constructive known of their claim." Id. (emphasis in original). Defendants have failed to establish that class members should be charged with knowledge of the alleged price fixing...