Weinberg v. Federated Dept. Stores, Inc.

• Decision Date: 11 January 1977
• Docket Number: C-76-869SW,C-76-1363SW and C-76-1429SW.,C-76-1110SW,No. C-76-867SW,C-76-867SW
• Court: U.S. District Court — Northern District of California
• Parties: Donna Jean WEINBERG et al., Plaintiffs, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants. Eleanor EISENBERG et al., Plaintiffs, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants. Marilyn MOITIE, Plaintiff, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants. Sandra G. MUSSER, Plaintiff, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants. June MORGAN, Plaintiff, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants.

426 F. Supp. 880

Donna Jean WEINBERG et al., Plaintiffs, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants.

Eleanor EISENBERG et al., Plaintiffs, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants.

Marilyn MOITIE, Plaintiff, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants.

Sandra G. MUSSER, Plaintiff, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants.

June MORGAN, Plaintiff, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants.

Nos. C-76-867SW, C-76-869SW, C-76-1110SW, C-76-1363SW and C-76-1429SW.

United States District Court, N. D. California.

January 11, 1977.

John W. Keker, Kipperman, Shawn & Keker, San Francisco, Cal., Baltaxe, Rutkin, Kaplan & Klein, Beverly Hills, Cal., Jerrold N. Offstein, Frederick P. Furth, Gary J. Near, Harvey Freed, San Francisco, Cal., for plaintiffs.

Steinhart, Goldberg, Feigenbaum & Ladar, San Francisco, Cal., Solinger & Gordon, New York City, McKenna & Fitting, Morrison & Foerster, San Francisco, Cal., Covington & Burling, Washington, D.C., for defendants.

MEMORANDUM ORDER

SPENCER WILLIAMS, District Judge.

The defendants in these actions are Federated Department Stores, Inc., d/b/a I. Magnin & Co., and Saks & Company, d/b/a Saks Fifth Avenue. They are engaged in the business of selling merchandise, including women's clothing, to the general public at retail prices through retail stores located in Northern California and elsewhere. The plaintiffs in all of these cases are individual members of the general public who allege that they purchased women's clothing at retail from one or both of the defendants. The plaintiffs allege representation of overlapping classes of retail purchasers.¹ These actions parallel an indictment and civil complaint filed in this court by the United States on April 28, 1976. (See United States v. Federated Department Stores, Inc., et al., Civil Number C-76-858-RHS, and CR-76-236-SAW.) The government antitrust action charged that I. Magnin and Saks had agreed to fix the retail prices of women's clothing sold by them to the general public in Northern California during the period from early 1963 until April 1974. The civil complaints in this action allege that the plaintiffs were the victims of prices artificially maintained at high levels in violation of the antitrust laws of the United States.

Section 4 of the Clayton Act, 15 U.S.C. § 15, which would provide plaintiffs with their remedy in damages, reads:

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 in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

To maintain this action, plaintiffs must, under the language of section 4, have suffered an injury to their business or property interest. The parties in this action have briefed defendants' motion to dismiss for lack of standing, focusing on the issue of the nature of plaintiffs' business or property interest which has been allegedly injured.

LEGISLATIVE HISTORY

The antitrust act which was passed in 1890 was meant to protect competition and to thwart the takeover of small businesses by the growing number of ruthless financiers who, at that time, were gaining control over the economy of the country. The Sherman Act of 1890 originally provided relief² for "any person . . . injured or damnified." See Cong.Rec. 1765 (1890). This language, changed in the version reported out of committee by the Judiciary Committee of the Senate, provided treble damages for injuries to a person's "business or property", and that version was enacted into law. See 21 Cong.Rec. 2901 (1890); Sherman Act of 1890, ch. 647, § 7, 26 Stat. 209. By adding the requirement that the injury must be to a person's business or property interest, Congress narrowed the field of those who could sue to recover for an injury caused by antitrust violations. In other words, a plaintiff must show more than a mere injury. As Senator Morgan stated,

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).

Only by drawing a line at a business or property interest could the proliferation of lawsuits feared by the Congress be prevented. And the meaning of that phrase is the sole issue presented in this motion to dismiss. If the plaintiffs were injured in their business or property they have standing to sue for treble damages. If not, they don't.³

A review of the Congressional Record permits some illumination on congressional intent, but much room for disagreement persists. However, numerous references do indicate that in 1890 Congress was well aware of the fact that the new law would afford no remedy for the average consumer. See 21 Cong.Rec. 2569 (1890) (Sen. Sherman); Id. at 2610 (Sen. Morgan); Id. at 2615 (Sen. Coke); Id. at 3150 (Sen. George).

Senator Sherman, the author of the original bill, stated to the Senate that,

In the case of a single individual whose bread has been advanced in price or whose small expenditures have been somewhat increased, there is no remedy for him. The remedy is only for those who are largely enough interested to sue . . .. 21 Cong.Rec. 2569 (1890).

The Clayton Act additions, in 1914, strengthened the remedy for the small businessmen for whom litigation was difficult under the original act. Clayton provided not only the treble damage remedy of the Sherman Act, but permitted the person injured to seek injunctive relief and, as well, to introduce judgments obtained by the government as conclusive evidence of antitrust violations. See 51 Cong.Rec. 9270 (1914). In outlining the major portions of the Clayton Act to fellow members of the House of Representatives, Representative Webb of the House Judiciary Committee claimed that the purpose of the Clayton Act, specifically section 4 (then section 5), was to give

any person who may be injured in his business, by reason of anything forbidden in the antitrust laws, the right to . . recover threefold the damages sustained . . .. 51 Cong.Rec. 9073 (1914).

More specifically, Representative Carlin asserted,

We went further in our effort to help the individual. We said, "When you have been damaged in your business by a combination operating in restraint of trade we are going to put you no longer to the expense of gathering the testimony and of combatting the wealth of the world in order to recover your damages. 51 Cong.Rec. 9270 (1914) (emphasis added).

That the business or property language was meant to encompass injuries to businesses rather than to individuals is also evident from the preoccupation of members of congress with providing remedies for the injured businessman. For example, Representative Taggart told the House,

A great many suits have been brought against trusts by the United States and many trusts have been dissolved. Some few have been punished, but the people whose business they destroyed have been practically without 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, . .. 51 Cong.Rec. 9198 (1914) (emphasis added).

And the Senate was equally preoccupied with the need to enlist the injured businessmen in the attack on antitrust violations. Senator Reed noted:

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 . . . evil practices. 51 Cong.Rec. 12939 (1914).

JUDICIAL CONSTRUCTION

The courts that have addressed the question directly have uniformly interpreted congressional intent as requiring a commercial nexus. The ninth circuit has adopted a measured approach.

Courts have impressed a standing doctrine so as to confine the availability of section 4 relief only to those individuals whose protection is the fundamental purpose of the antitrust laws. Cf. Barlow v. Collins, 397 U.S. 159 90 S.Ct. 832, 25 L.Ed.2d 192 (1970); Association of Data Processing v. Camp, 397 U.S. 150 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Mount Clemens Industries, Inc. v. Bell, 464 F.2d 339, 341-344 (9th Cir. 1972). Unfortunately, no "bright line" has yet emerged to divine this group, and courts have formulated varied definitions. In re Multidistrict Vehicle Air Pollution, 481 F.2d 122, 125 (9th Cir.), cert. denied, 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973), reh. denied, 414 U.S. 1148, 94 S.Ct. 905, 39 L.Ed.2d 104 (1974).

The Vehicle Air Pollution court then criticized the lower court's expansive reading of section 4's coverage. The language of section 4, and the judicial constructions of standing thereunder had, the circuit asserted, keyed on the phrases business or property and by reason of as indicating twin requisites for standing.⁴

The first of these twin requisites for standing, the phrase business or property, is "a term definitively limited to interests in commercial ventures or enterprises". Vehicle Air Pollution, supra, 481 F.2d at 126. The state of California, suing for individual injury to itself, as a class representative and also in parens patriae was held to lack standing since none of its claims alleged any injury to commercial ventures or enterprises. Id. The contrasting claims of farmers whose crop yield was diminished because of the failure to develop adequate pollution control devices were sufficient to allege injury to a commercial interest. These...