EDMONDSON, Circuit Judge:
Plaintiffs, five Alabama farmers, have appealed a district court order dismissing an antitrust complaint for failure to join middlemen dealers as defendants pursuant to Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). We conclude that Illinois Brick has no application in a vertical conspiracy with no allegations of "pass-on." The district court decision is vacated, and the case is remanded.
Between 1989 and 1995, the defendant, American Cyanamid Company ("American Cyanamid"), maintained two similar rebate programs for its independent retail dealers nationwide. Under the programs, American Cyanamid entered into written contracts with its dealers whereby American Cyanamid would give the dealer a rebate on each sale of designated crop-protection products but only if the dealer sold the product at or above American Cyanamid's suggested resale price; the programs allegedly established a minimum resale price. Under these contracts, the specified resale price was equal to the wholesale prices paid by the dealer. American Cyanamid's dealers overwhelmingly responded by selling the product at or above the specified minimum resale price.
We review de novo a district court order dismissing a complaint for failure to state a claim, construing the allegations in the complaint as true and in the light most favorable to the plaintiff. See Harper v. Blockbuster Entertainment Corp., 139 F.3d 1385, 1387 (11th Cir.1998).
Plaintiffs' complaint alleges that American Cyanamid engaged in a vertical price-fixing conspiracy with the independent dealers in violation of section one of the Sherman Act and section four of the Clayton Act. Plaintiffs claim that the district court erred in applying Illinois Brick to bar this complaint from proceeding directly against American Cyanamid without joining the independent dealers.
Illinois Brick, so Plaintiffs' argument goes, does not apply to a vertical price-fixing scheme where (1) a plaintiff buys directly from a dealer who combined with a manufacturer to fix the prices and (2) no allegations are made of "pass-on." In other words, Plaintiffs claim they are not indirect purchasers at all under Illinois Brick, but are direct purchasers from a conspiring party.
American Cyanamid counters that the rule of Illinois Brick—that indirect purchasers cannot maintain a suit without joining the appropriate middlemen—is on point and that the present case falls within neither of its two enumerated exceptions.
We agree with the Plaintiffs. Illinois Brick has no application in this case.
Illinois Brick was an extension of the Court's earlier prohibition against the defensive use of passing on in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 491-94, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968).
Neither of the rationales applies to the very different case of vertical conspiracy with no allegations of passing on:
2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 264 (rev. ed.1995) (footnotes omitted).
This case presents no problems of double recovery because only one illegal act (the vertical conspiracy)
Second, the economic and legal complexities outlined in Illinois Brick are absent here as well. For the plaintiffs in a case like this one, proving what price would have existed in the absence of the unlawful agreement is difficult; but it is no more difficult than the proof necessary in any vertical conspiracy case. Furthermore, the task pales in comparison to the complexities contemplated in Illinois Brick:
The complexities Illinois Brick involved were legal ones as well. "[P]otential plaintiffs at each level in the distribution chain are in a position to assert conflicting claims to a common fund the amount of the alleged overcharge by contending that the entire overcharge was absorbed at that particular level in the chain." Id. at 737, 97 S.Ct. 2061. This creates the need for either statutory interpleader under 28 U.S.C. § 1335 or compulsory joinder under Rule 19(a). See id. at 738, 97 S.Ct. 2061. And such efforts would create as many problems as they would solve. See id. at 738-41, 97 S.Ct. 2061.
But here, we have no such legal complexities. In all likelihood, the full extent of this litigation will be a class-action suit by Plaintiffs against American Cyanamid. That is it. Plaintiffs do not want to join the dealers, and American Cyanamid will have no incentive to bring the dealers in because it cannot seek contribution. See Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) (holding no right of contribution under Clayton and Sherman Acts). Also, suits, if any, by the dealers against American Cyanamid (which seem unlikely)
Today's vacation of the district court's decision to dismiss makes no new law. The inapplicability of Illinois Brick to vertical conspiracies with no allegations of pass-on (what some have called the "vertical conspiracy exception") has long been recognized. See Shamrock Foods, 729 F.2d at 1211-13; Fontana Aviation, Inc. v. Cessna Aircraft Co., 617 F.2d 478, 480-82 (7th Cir.1980); Mid-Atlantic Toyota, 516 F.Supp. at 1294-96; Reiter v. Sonotone Corp., 486 F.Supp. 115, 119-21 (D.Minn.1980); Gas-A-Tron v. American Oil Co., 1977 WL 1519, at *2-3 (D.Ariz.1977); Areeda, supra, at 182 ("[O]ther courts have correctly seen that Illinois Brick has no bearing on [vertical price fixing.]"); Herbert Hovenkamp, Commentary, The Indirect-Purchaser Rule and Cost-Plus Sales, 103 Harv. L.Rev. 1717, 1719 (1990) ("Some courts ... have held that Illinois Brick will not bar an indirect-purchaser action if ... the dealer itself participated in the conspiracy.").
And the facts of the cases cited by American Cyanamid are materially different. In In re Beef, upon which American Cyanamid relies most heavily, the complaint alleged a horizontal conspiracy between 25 retail food chains. On appeal, the plaintiffs (cattlemen, ranchers and feeders) also said that the district court erred in not allowing them to amend their complaint to allege a vertical conspiracy between the retail chains and the middlemen (meat packers and slaughterhouses).
The district court's refusal to allow amendments—a decision that is reviewed only for abuse of discretion—was upheld on the basis of undue delay on the plaintiffs' part in moving to amend. "Absent any apparent justification for this delay, we cannot hold that the district court abused its discretion." In re Beef, 600 F.2d at 1162. We went on to say that the decision not allowing amendments was "supportable" on grounds of futility as well; in that paragraph, we observed that the proposed amendments did not fit the "control" exception to Illinois Brick. Then we added another paragraph in which we said that we did not "think" that the allegation of vertical conspiracy in In re Beef would get around Illinois Brick and its prohibition against double liability.
In context, the discussion of Illinois Brick looks like dicta, given that the standard of review was abuse of discretion and that the In re Beef court had already decided to affirm the denial of the amendments. But even supposing that the Illinois
Illinois Brick is not some formulaic "remoteness" doctrine wherein a plaintiff who proves he purchased from a conspiring party—any conspiring party—automatically escapes the Illinois Brick bar. Instead, Illinois Brick is a decision based on avoiding risks; and the same risks that were inherent in a garden-variety horizontal conspiracy case with pass-on apply to a case like In re Beef: the risks of (1) double liability; and (2) economic and legal complexity. The difference between In re Beef and the ordinary horizontal conspiracy is that In re Beef takes all the same risks of the typical horizontal conspiracy and compounds them by including another conspiracy (the vertical one) with a separate set of proofs and a separate set of problems.
Second, Austin v. Blue Cross & Blue Shield, 903 F.2d 1385 (11th Cir.1990), is not on point either. That case involved non-Blue Cross patients suing Blue Cross for overcharging by hospitals. The plaintiffs did not allege vertical price-fixing between Blue Cross and the hospitals for non-Blue Cross patients; Blue Cross was not even in the plaintiffs' chain of distribution. The plaintiffs only alleged that Blue Cross had a special deal with the hospitals for Blue Cross patients. Id. Because of what was, in effect, a lower rate charged to these patients, the hospitals—the plaintiffs alleged—shifted the costs on to their non-Blue Cross patients. Id.
The Austin opinion set out several explanations for the court's decision that the non-Blue Cross patients lacked standing to maintain the lawsuit. See id. at 1393. At least two of those reasons were independent of the others. See id. at 1389 (observing that, apart from Illinois Brick, "[b]oth causation and antitrust injury[, which were not proved,] are essential elements of antitrust standing."). The Illinois Brick reasoning was therefore likely not critical to the decision in the case. Moreover, "[t]here is, of course, an important difference between the holding in a case and the reasoning that supports that holding." Crawford-El v. Britton, 523 U.S. 574, 118 S.Ct. 1584, 1590, 140 L.Ed.2d 759 (1998).
But, even faithfully adhering to the Illinois Brick section of the Austin opinion, we cannot say that it contradicts today's decision. To the contrary, it too fits within the rule announced today: Illinois Brick does not apply to a single vertical conspiracy where the plaintiff has purchased directly from a conspiring party in the chain of distribution. We can accept that Illinois Brick prohibited the non-Blue Cross plaintiffs in Austin from suing Blue Cross directly when the claims are purely derivative through the hospitals' alleged "cost-shifting." Those facts are not the facts of this case, however: Plaintiffs' claims are not derivative or reliant on cost-shifting theories. The claims are directly against a conspiring party in the chain of distribution.
Moreover, In re Brand Name Prescription Drugs Antitrust Litigation, 123 F.3d 599 (7th Cir.1997), and Kansas v. Utili-Corp United, Inc., 497 U.S. 199, 110 S.Ct. 2807, 111 L.Ed.2d 169 (1990), do not bear on our decision. First, In re Brand Name is distinguishable for the same reasons as Austin and In re Beef. Second, that the Supreme Court refused to carve out another exception to the Illinois Brick doctrine in UtiliCorp—a case where the facts seemed ripe for an exception—is unremarkable. Plaintiffs here, unlike in UtiliCorp,
We conclude that Illinois Brick is inapplicable to the present case where the complaint alleges a vertical conspiracy with no pass-on. In such a case, Plaintiffs have standing to assert a claim against American Cyanamid directly under the antitrust laws. The district court decision to dismiss the complaint must be vacated. The case is remanded for further proceedings.
VACATED AND REMANDED.