Western Waste Service Systems v. Universal Waste Control

• Decision Date: 04 March 1980
• Docket Number: No. 77-3131,77-3131
• Parties: 1980-1 Trade Cases 63,213 WESTERN WASTE SERVICE SYSTEMS, Plaintiff-Appellant, v. UNIVERSAL WASTE CONTROL and Waste Management, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1094

616 F.2d 1094

1980-1 Trade Cases 63,213

WESTERN WASTE SERVICE SYSTEMS, Plaintiff-Appellant, v. UNIVERSAL WASTE CONTROL and Waste Management, Inc.,

Defendants-Appellees.

No. 77-3131.

United States Court of Appeals, Ninth Circuit.

March 4, 1980.

Rehearing Denied April 28, 1980.

P. Richard Meyer, Meyer, Vucichevich & Cimala, Phoenix, Ariz., for plaintiff-appellant.

Joseph V. Giffin, Chicago, Ill., argued, for defendants-appellees; Paul G. Ulrich, Lewis & Roca, Phoenix, Ariz., Joseph V. Giffin, Chadwell, Kayser, Ruggles, McGee & Hastings, Chicago, Ill., on brief.

Appeal from the United States District Court for the District of Arizona.

Before KENNEDY and ANDERSON, Circuit Judges, and CLAIBORNE, ^* District Judge.

KENNEDY, Circuit Judge:

The narrow issue in this case is whether a garbage collection business in Phoenix, Arizona sufficiently affects interstate commerce to fall within the protection of section 1 of the Sherman Act. Finding this court's previous decision in Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969), to be controlling, the district court granted a pretrial motion to dismiss the action, holding "there is no sufficient nexus with interstate commerce to support Sherman Act jurisdiction." The plaintiff brought this appeal. We conclude that Sun Valley is distinguishable from the case before us, and that the standards announced in intervening Supreme Court opinions establish that there is jurisdiction here. We vacate the judgment of the trial court and remand the cause for further proceedings.

Appellant Western Waste Service Systems (Western Waste), the plaintiff below, is an Arizona corporation engaged in the waste disposal business in the Phoenix metropolitan and adjoining areas. Universal Waste Control (Universal) is a California corporation engaged in the waste disposal business in the same area. Universal is a wholly-owned subsidiary of defendant Waste Management, Inc., a Delaware corporation.

Western Waste brought suit against Universal and Waste Management, claiming that Universal had monopolized and attempted to monopolize the waste disposal business in Phoenix by providing waste disposal services at prices substantially below cost. Western Waste also charged that Universal conspired with other competitors to eliminate Western Waste from the waste disposal business. Universal moved to dismiss for lack of subject matter jurisdiction. After discovery was taken on this issue, the district court granted Universal's motion, holding that the garbage collection business was a local one which did not affect interstate commerce.

In this appeal and for purposes of Universal's motion, we must read the pleadings and evidence adduced in discovery in the light most favorable to Western Waste. ¹ The following facts must be taken as true in ruling on Universal's motion. Both Western Waste and Universal acquire a substantial amount of their garbage collection equipment from out of state. All trucks and truck bodies were manufactured outside of Arizona and most of the rubbish containers purchased were also manufactured outside of Arizona. Some of the waste material which is collected by Universal is paper which is hauled to paper brokers in Phoenix for shipment out of state. Scrap wood is also collected by Universal and shipped to recyclers. Approximately four tons of such wood were sent by Universal to recyclers from June 1, 1976 to May 31, 1977. The recyclers make this material into wood chips which are shipped out of state.

Both Western Waste and Universal are distributors of garbage compactors manufactured by out-of-state companies for sale or lease within Phoenix. In 1975, Western Waste became the Phoenix dealer of Blackwelder, a California manufacturer of compaction equipment. Blackwelder's compactor was new to the market and had unique features. Western Waste sent two of its employees to California for instruction in the selling and servicing of Blackwelder compaction equipment. In 1976 Universal used its market power and the power of its parent company to induce Blackwelder to terminate Western Waste's distributorship and choose Universal as its exclusive distributor. Subsequently, Universal advertised itself as Blackwelder's exclusive distributor in Phoenix.

The standards which we must apply to these facts are familiar. It is established that the reach of the Sherman Act is as inclusive as the constitutional limits of Congress' power to regulate interstate commerce. United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944); Thornhill Publishing Co. v. General Tel. & Elec. Corp., 594 F.2d 730 (9th Cir. 1979); Rasmussen v. American Dairy Ass'n, 472 F.2d 517 (9th Cir.), cert. denied, 412 U.S. 950, 93 S.Ct. 3014, 37 L.Ed.2d 1003 (1973). As judicial construction of the scope of the commerce clause has expanded, so has the reach of the Sherman Act. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 202, 95 S.Ct. 392, 402, 42 L.Ed.2d 378 (1974); Rasmussen, supra, 472 F.2d at 521. "(T)he conduct of the defendants is within the jurisdictional reach of the Sherman Act if Congress can prohibit that conduct under the commerce clause." Id.

Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies "in restraint of trade or commerce among the several States." 15 U.S.C. § 1 (1976). This phrase defines both the conduct proscribed by the statute and its jurisdictional reach. Gough v. Rossmoor Corp., 487 F.2d 373 (9th Cir. 1973). In resolving the jurisdictional issue, our task is to assume, without deciding, that the conduct complained of constitutes a violation of the Sherman Act and then to determine whether that conduct could be regulated under the commerce power. Rasmussen, supra, 472 F.2d at 522.

To establish Sherman Act jurisdiction, the district court required Western Waste to show that Universal's alleged antitrust violations had a substantial effect on interstate commerce. This test, however, was rejected by the Supreme Court this Term in McLain v. Real Estate Bd., --- U.S. ----, 100 S.Ct. 502, 62 L.Ed.2d 411 (1980). In McLain real estate purchasers brought suit against real estate brokers in the New Orleans area, claiming that the brokers had fixed their commissions in violation of the Sherman Act. The district court granted defendants' motion to dismiss for lack of subject matter jurisdiction, 432 F.Supp. 982 (E.D.La.1977), and the Fifth Circuit affirmed. 583 F.2d 1315 (5th Cir. 1978). In vacating the judgment, the Supreme Court unanimously held that the defendants' brokerage activities substantially affected interstate commerce so as to confer Sherman Act jurisdiction. The Court held that it was not necessary for the alleged antitrust violations complained of to have affected interstate commerce as long as defendants' business activities, independent of the violations, affected interstate commerce. The Court declared:

To establish the jurisdictional element of a Sherman Act violation it would be sufficient for petitioners to demonstrate a substantial effect on interstate commerce generated by respondents' brokerage activity. Petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix commission rates, or by those other aspects of respondents' activity that are alleged to be unlawful. The validity of this approach is confirmed by an examination of the case law. If establishing jurisdiction required a showing that the unlawful conduct itself had an effect on interstate commerce, jurisdiction would be defeated by a demonstration that the alleged restraint failed to have its intended anticompetitive effect. This is not the rule of our cases. See American Tobacco Co. v. United States, 328 U.S. 781, 811 (66 S.Ct. 1125, 1139, 90 L.Ed. 1575) (1946); United States v. Socony Vacuum Oil Co., 310 U.S. 150, 225, n.59 (60 S.Ct. 811, 846, 84 L.Ed. 1129) (1940). A violation may still be found in such circumstances because in a civil action under the Sherman Act, liability may be established by proof of either an unlawful purpose or an anticompetitive effect. United States v. United States Gypsum Co., 438 U.S. 422, 436 n.13 (98 S.Ct. 2864, 2864, 57 L.Ed.2d 854) (1978); see United States v. Container Corp., 393 U.S. 333, 337 (89 S.Ct. 510, 512, 21 L.Ed.2d 526) (1969); United States v. National Assn. of Real Estate Boards, 339 U.S. 485, 489 (70 S.Ct. 711, 714, 94 L.Ed. 1007) (1950); United States v. Socony Oil Co., supra, 310 U.S. 150 at 224-225 n.59 (60 S.Ct. (811), at 844-846, 84 L.Ed. 1129).

--- U.S. at ----, 100 S.Ct. at 509.

The standard announced by the Supreme Court must, of course, govern our decision in this case. Applying this test to the facts that we must accept as true for the purpose of Universal's motion, we conclude that the pleadings and evidence adduced by Western Waste at this stage of the proceedings provide more than a sufficient basis for Western Waste to proceed to trial to establish Sherman Act jurisdiction. We believe that the facts establish not only that Universal's rubbish collection business substantially affected interstate commerce, but also that the alleged antitrust violations substantially affected interstate commerce. ² Under McLain it is unnecessary to establish that the alleged antitrust violations substantially affected interstate commerce, but when, as here, this effect is alleged, it is a strong indicator that the defendant's business has an interstate impact.

Universal's acts directly impeded a line of interstate commerce. Before Universal's acts, Western Waste was engaged in the purchase of garbage compaction equipment from an out-of-state supplier. Universal used its market power to attempt to terminate this relationship. Shortly thereafter, Western's dealership was cancelled and Universal advertised that it was the supplier's exclusive distributor in Phoenix.

Universal spent...