No. 91-10 M~Y ·~ a \S~! L ;; CLE!?J: ' - ·-- - - ;: -;"'- ;.,· __
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.- No. 91-10 M~Y ·~ a \S~! l ;; CLE!?J: ' - ·-- - - ;:_-;"'- ;.,· .. ..... __ INTHE Supreme Court of the United States October Term, 1991 SPECTRUM SPORTS, INC., et aL, Petitioners, vs. SHIRLEY MCQUILLAN, et al., Respondents. ON Warr OF CERTIORARI To THE UNITED STATES CoURT OF APPEALS FOR THE NINTH CIRCUIT BRIEF FOR PETITIONERS JAMES D. VAIL* JONATHAN L. STARK ScHNEIDER, SMELTZ, RANNEY & LAFOND 1525 National City Bank Building Cleveland, Ohio 44114 (216) 696-4200 Attorneys for Petitioners Counsel of Record THE GATES LEGAL PUBLISHING CO., CLEVELAND, OHIO-TEL. (216) 621-5647 J,.ibrary of <;:ongres.i !-awLibrq I . QUESTION PRESENTED Whether a manufacturer's distributor expressly absolved of violating section 1 of the Sherman Act can be found liable for attempting to monopolize without any evidence of market power or specific intent solely by virtue of a unique Ninth Circuit rule? ii. LIST OF PARTIES The P titioners are Spectrum Sports, Inc. and Kenneth B. Leighton. Respondents are Shirley McQuillan and Larry McQuillan [who sometimes did business as Sorboturf Enterprises The following individual and companies were co· defendants ~n the case below. They petitioned this Court for a writ of certiorari, were assigned Case No. 91-32, and are affecte1 by the outcome of this case: BTR, Inc., which, at all relevant times, owned, directly or }nciirectly, Hamilton-Kent Manufacturing Co., Inc. and Sorbothane, Inc. Hamiltl n-Kent Manufacturing Company, Inc. was purchased Jy a BTR, Inc. subsidiary in 1978. Sorbotf ane, Inc., an indirect, wholly-owned subsidiary. f f BTR, Inc., was formed in 1982 to take over Hamilton- · ent Manufacturing Co.'s Sorbothane business. Kenneth M. Leighton is Kenneth B. Leighton's father. HJ served as President of Hamilton-Kent Manufacturing Co. and then Sorbothane, Inc. at all relevant times. 111. TABLE OF CONTENTS QUESTION PRESENTED. 1 LIST OF PARTIES.................. .. .. ... ii OPINIONS BELOW . 1 JURISDICTION . 2 STATUTORY PROVISIONS INVOLVED . 3 STATEMENT OF THE CASE . 4 SUMMARY OF ARGUMENT. 11 ARGUMENT . 13 I. The Court Should Strike Down the Lessig Rule Because Inferring a Dangerous Probability of Success and Specific Intent from Conduct Improperly Punishes a Business for Conduct Which Does Not Actually or Potentially Harm Competition . 13 II. The Court Should Strike Down the Lessig Rule Because Its Elimination of the Dangerous Probability Element of an Attempt to Monopolize Claim Encourages Plaintiffs to Initiate Antitrust Actions Where Competition Is Not Jeopardized. .. ......... 20 III. The Court Should Strike Down the Lessig Rule Because It Fails to Recognize the Different Treatment of Unilateral Conduct and Concerted Action Inherent in the Antitrust Laws. 24 CONCLUSION. 28 iv. TABLE OF AUTHORITIES Cases A.~ 8i~~ ·t' .. ~~~~ 1:°:.~·. ~o~,. ~~~. ~ ~~~ ·1·3·0·2· ~~t~. ~~· 20 American ey Corp. v. Cole Nat'l Corp., 762 F.2d 1569 (1 ~!h Cir. 1985). 18 Aspen Sku~g Co. v. Aspen Righi.ands Skiing Corp., 472 U.S. [ 85 (1985) ..... .................... 16,22 Atlantic Rfhfield Co. v. U.S.A. Petroleum Co., 495 U.S. 328 (1990) . ............. ........ .... ... 20 1 2 B1:.t 1v9s~~~~ ~n::~~~~~~ .~~":~'. ~~~.~·. .~ ~~~. (~~~~ 18 CVD, Inc. lf· Raytheon Corp., 769 F.2d 842 (1st Cir. 1985), eek denied, 475 U.S. 1016 (1986). 17 Copperweld Corp. v. Independence Tube Corp., 467 u .s. 7 52 (1984) ............. .. ... .. 20,24,25.26 FMC Corp.i. Manitowoc Co., 654 F. Supp. 915 (N.D. Ill.), aff'd, 835 F.2d 1411 (Fed. Cir. 1987) . ...... 18 General In us. Corp. v. Hartz Mountain Corp., 810 F.2d 795 (8th Cir. 1987). 18 Harold Friedman, Inc. v. Kroger Co., 581 F.2d 1068 (3d Cir. 1978) . 18 Janich Bros. v. American Distilling Co., 570 F.2d 848 (9th Cir. 1977), cert. denied, 439 U.S. 829 (1978) ............. .. .............. 11,15 International Distribution Ctrs., Inc. v. Walsh Trucking Co., 812 F.2d 786 (2nd Cir.), cert. denied, 482 U.S. 915 (1987) .......... ... ........... 17,18 v. Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981), cert. denied, 455 U.S. 921 (1982) . 18 Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir.), cert. denied, 377 U.S. 993 (1964) ............. passim Lorain Journal Co. v. United States, 342 U.S. 143 (1951) ... ................. .. .. .. ... .. 13,17 Mobil Oil Corp. v. Blanton, 471 U.S. 1007 reh 'g. denied, 471 U.S. 1120 (1985). 26 Monsanto Co. u. Spray-Rite Sero. Co., 465 U.S. 752 (1984). 24 Multiflex, Inc. v. Samuel Moore & Co., 709 F.2d 980 (5th Cir. 1983), cert. denied, 465 U.S. 1100 (1984) . 18 Neumann v. Reinforced Earth Co., 786 F.2d 424 (D.C. Cir.), cert. denied, 479 U.S. 851 (1986). 18 Oreck Corp. v. Whirlpool Corp., 579 F.2d 126 (2nd Cir.) (en bane), cert. denied, 439 U.S. 946 (1978). 21 Swift & Co. u. United States, 196 U.S. 375 (1905) ...... .. .. .. .. .. .. .. .. .. ...... 11,13 United States v. Colgate & Co., 250 U.S. 300 (1919) . 21 United States u. Dairymen, Inc., 660 F.2d 192, 194 (6th Cir. 1981). 18 United States v. Griffith, 334 U.S. 100 (1948) . 13 Walker Process Equip., Inc. u. Food Mach. and Chem. Corp., 382 U.S. 172 (1965) . 14 White Bag Co. u. International Paper Co., 579 F.2d 1384 (4th Cir. 1974) . 18 VI. Federal Statutes Sherman AFt, 15 U.S.C. §1. ... .. ....... 4,17,21,24,25 Sherman Abt, 15 U.S.C. §2 . ... ... .. .. .. ...... passim RICO Act, 18 U.S.C. §1962 . 4 28 u.s.c. § 254(1) .... ... .... ; . 2 Other Authorities Areeda, ~illip and Donald F. Turner, Antitrust Law, (19 1 supp.) . ..... ... ....... .... .... .. 18,27 Handler, ilton & Richard M . Steur, Attempts to Monopolize and No-Fault Monopolization, 129 U. Pa. L. Rev. 125 (1985) .......... ........... 21,22 Hibner, Jr. Don T., Attempts to Monopolize: A Concept in Search of Analysis, 34 ABA Antitrust L.J. 165~f 967) .. .. ........... .......... 19 Kinter, Earj W., Federal Antitrust Law (1980). 27 51 Cong. Rec. 9073 (1914)...... ... .... .. 19 No. 91-10 IN THE Supreme Court of the United States October Term, 1991 SPECTRUM SPORTS, INC., et al., Petitioners, vs. SHIRLEY MCQUILLAN, et al., Respondents. ON WRIT OF CERTIORARI To THE UNITED STATES CoURT OF APPEALS FOR THE NINTH CIRCUIT BRIEF OF PETITIONERS OPINIONS BELOW The memorandum decision of the court of appeals is not reported and is found at page Al of the Appendix to the Petition for Writ of Certiorari. ("Pet. App."). The judgment of the district court is not reported and is found at Pet. App. A29. 2 JURISDICTION The memorandum decision of the court of appeals was entered J ly 3, 1990. Pet. App. Al. A petition for rehearing with a suggestion for rehearing en bane was denied on Apri 1, 1991. Pet. App. A32. The petition for a writ of certi rari was filed on June 28, 1991, and was granted on March 30, 1992. The jurisdiction of this Court rests up n 28 U.S.C. §1254(1). 3 STATUTORY PROVISIONS INVOLVED Section 2 of the Sherman Act, 15 U.S.C. §2, provides: Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court. 4 ST1TEMENT OF THE CASE This suit arises from the termination of Respondent::;' all ged right to distribute products made 1 from a shock a9sorbent material known as Sorbothane. At trial, a jury exonerated Petitioners on a price fixing claim brought u1der section 1 of the Sherman Act (J. A. 408), but awardE:jd damages to Respondents upon finding Petitioners violated section 2 of the Sherman Act. 1 J. A. 410. The trial c9urt trebled that damage award and also awarded attorneys' fees and costs. Pet. App. A31. On appeal, Petition~rs argued, among other things, that sufficient evideI1 ce did not exist for the jury to find Petitioners liab e for "attempting to monopolize" in violation of the herman Act because (a) tht re was no evidence of Petitioners' share of any relel ant market, (b) th; re was no evidence of Petitioners' specific int nt to monopolize, (c) th jury exonerated Petitioners from the claim of a er se violation of section 1, and (d) no evidence of clearly predatory conduct by Petitioners was produced. The Court of Appeals for the Ninth Circuit, nonetheless, affirmed the trial court's judgment based solely on the attempt to monopolize claim. It expressly declined to review the other issues presented. Pet. App. A28. The court of appeals subsequently denied Petitioners' petition for rehearing with a suggestion for rehearing en bane. 'The jury also exonerated Petitioners from claims for violation of the California antitrust statute (J. A. 411), fraud (J. A. 398), and violation of 18 U.S.C. §1962(a) (RICO) (J. A. 412), and found them liable for interference with prospective business advantage (J. A. 406), unfair competition (J. A. 405), and violation of 18 U.S.C. §§1962(b), (c) and (d) (RICO) (J. A. 413·15). 5 Sorbothane is a visco·elastic polymer2 primarily incorporated into products as a shock-absorbing material. Sorbothane entered the commercial market in the United States when BTR, Inc. ("BTR") obtained the right to manufacture and sell Sorbothane. BTR is a holding company which at all relevant times owned, directly or indirectly, Hamilton-Kent Manufacturing Company, Inc. ("H·K") and Sorbothane, Inc. The involvement of these companies and their employees with the Petitioners and Respondents is described below.