MEMORANDUM OPINION GRANTING MOTION FOR A DIRECTED VERDICT AND DENYING MOTION FOR RECONSIDERATION AND A NEW TRIAL
FEIKENS, District Judge.
This action is brought by Overseas Motors, Inc. (Overseas) against Audi NSU Auto Union Aktiengesellschaft (ANAU), Volkswagenwerk Aktiengesellschaft (VWAG), Volkswagen of America (VWOA), and Import Motors Limited, Inc. (Import). Plaintiff alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (Count I); Section 7 of the Clayton Act, 15 U.S.C. § 18 (Count II); and Section 2 of the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1222 (Count III).
Overseas is a Michigan corporation. Prior to July of 1968 it operated a Detroit area dealership specializing in NSU trademarked automobiles. After that date its business expanded to include the importation and distribution of NSU cars in a ten (later eleven) state area.
ANAU, a German corporation, is the successor to NSU Motorenwerke Aktiengesellschaft (NSU), manufacturer of NSU automobiles, and Auto Union Gmbh (Auto Union), manufacturer of Audi automobiles. The two companies merged in 1969. Since that time ANAU has continued to produce both lines of cars.
VWAG is a German corporation engaged in the manufacture of Volkswagen automobiles. VWOA, a New Jersey corporation, is a wholly owned subsidiary of VWAG; its sole function is the importation and distribution of Volkswagen, Porsche and Audi cars in the United States.
Import, a Michigan corporation, distributes Volkswagen, Porsche and Audi cars in the midwestern United States. Although a part of the Volkswagen distribution network, it is independently owned and operated.
Between June 17 and July 1 of 1968 Overseas entered into an importer contract with NSU. It provided, inter alia, that plaintiff was to have the exclusive right to import and distribute NSU automobiles in a ten state area; that any extension of the contract was reserved; that plaintiff was to deal only in NSU products; that the contract might be terminated at the end of any calendar year after 1969 upon three months notice by any party; that the contract was to be governed by and interpreted in accordance with German law; and that disputes were to be submitted to a court of arbitration sitting in Zurich, Switzerland.
To obtain its automobiles Overseas was required to submit a "firm order" to NSU which was binding on Overseas but not on NSU. "Within the frame of the production available" NSU would respond with a "confirmed order" which was binding on both parties, subject apparently to Overseas providing an adequate letter of credit.
After entering into this agreement, Overseas began building and supplying a dealer network of modest proportions.
Shortly after the commencement of this action ANAU gave notice to Overseas of its intent to submit Overseas' grievances to arbitration, as provided for in the contract. Overseas objected to any such proceedings and moved this court for a stay of arbitration on the ground that only antitrust issues, which the arbitrators would not be competent to pass on, were involved. This motion was denied, and on November 24, 1972, ANAU filed a complaint with the court of arbitration in Zurich asking it to declare that ANAU had not breached its contract with Overseas and to determine the date upon which the contract had been or would be terminated. Overseas refused to participate. The court of arbitration proceeded, and in its decision of May 24, 1973, made findings of fact and law and handed down a judgment in favor of ANAU. An English translation of the arbitrators' opinion was completed on June 14 and made available to all parties. Trial in this case commenced on July 5.
Upon completion of opening statements, and prior to the offer of any testimony, defendants interposed an objection in limine to the admission of any evidence inconsistent with the findings and decision of the court of arbitration, based on the doctrine of collateral estoppel. Defendants subsequently extracted the following list of findings and conclusions from the arbitration opinion, and requested the court to limit the proofs and permissible inferences therefrom in this case in accordance with those findings and to so instruct the jury.
Inherent in the concept of law as a mechanism for settling disputes is the requirement that properly rendered judgments must effectively bind the parties thereto.
This essential principle is formally recognized in the broad, judicially created doctrine of res judicata.
There are five basic requirements for collateral estoppel:
The presence of several of these preconditions in this case is undisputed. The arbitration was properly commenced under the terms of the importer contract, and its outcome is determinative as to all contractual rights and liabilities.
There are other conditions, however, which plaintiff argues have not been met. It asserts that: (1) defendants waived the affirmative defense of an arbitration award or estoppel by failing to raise it in the pleadings; (2) the decision of the court of arbitration was in the nature of a default judgment, and the issues resolved by that panel were therefore not "fully litigated" as is required for estoppel; (3) in view of plaintiff's appeal from the decision of this court refusing to stay the arbitration, the award is not final; and (4) the matters considered by the arbitrators involved exclusively antitrust issues which the arbitration court was incompetent to adjudicate.
Waiver — Rule 8(c) of the Federal Rules of Civil Procedure requires affirmative defenses, including arbitration and award, estoppel, and res judicata, to be pleaded as such.
Although defendants argue that Rule 8(c) is inapplicable here because the estoppel is raised as a rule of evidence rather than an affirmative defense, that argument is not persuasive. This case is unusual in that the issues sought to be foreclosed are evidentiary or mediate rather than ultimate; plaintiff would be restricted in its proofs, but the restrictions would not be dispositive as a matter of law of any of the ultimate questions (antitrust issues) in this case.
First, the substance of the defense was in fact pleaded in paragraph 19 of ANAU's answer, raising the arbitration as a jurisdictional bar.
Alternatively, even if this original pleading were insufficient to raise collateral estoppel as an affirmative defense, that issue has entered the case in other ways which fall within the exceptions to Rule 8(c). Although plaintiff did not mention the arbitration in its pleadings, it did interject it as an issue in this case in a very substantial way by its motion to stay the arbitration proceedings. The effect was no different than if it had appeared on the face of the complaint, and plaintiff cannot now exclude from the case a matter it has itself put in issue.
The restatement position is contrary — that a default judgment may not be used as a basis for collateral estoppel
The decision of the Zurich court of arbitration meets both preconditions for the use of a default judgment as collateral estoppel. It appears from an examination of the complaint and the arbitrators' opinion that the findings made therein do relate to matters raised in the complaint. They were formally put in issue and properly before the tribunal; decision on them was within the scope of that proceeding as defined by the complaint. Plaintiff also had a "full and fair opportunity to argue [its] version of the facts"
Finality — "[I]t is familiar law that only a final judgment is res judicata",
The arbitration award was not directly appealed nor has its operation been in any way impaired. The appeal from this court's refusal to stay the arbitration
Antitrust and Contract Issues — Claims arising under the antitrust laws are within the exclusive jurisdiction of the federal courts.
The far more difficult question now before the court is the extent to which issue preclusion through collateral estoppel must also be limited in antitrust suits in order to preserve a viable policy of pre-emption. It is one thing to conclude that because the arbitration was based on a different cause of action and performed a distinct and legitimate function it was a proper proceeding, which could not be stayed and which resulted in a valid, binding judgment. It is quite another to conclude that the arbitrators' decision must be given collateral as well as direct effect so as to predetermine in some measure the result of this separate antitrust suit.
This suit and the arbitration are based almost entirely upon the same series of events. In lesser measure they also involve identical questions as to the jural significance of those facts. Thus, as between these two actions, many of the preliminary determinations of fact and law upon which a judgment must ultimately be based concern identical issues.
It is this foreclosure factor which demands some restriction upon the application of collateral estoppel in antitrust cases. Determining exactly how much requires some means of comparing the degree of foreclosure involved in preclusion of various kinds of issues, an inquiry in which the judicially developed distinction between evidentiary, mediate and ultimate issues or data
Those facts which Judge Hand termed "mediate" may be further divided into those consisting of raw sensory data existing wholly independent of any legal standards (evidentiary facts), and those which represent applications of law to fact, but unlike ultimate facts, do not conclusively establish a legal right or liability under the law applicable to that case (mediate data).
For example, in the instant case a finding of the existence or non-existence of a conspiracy in restraint of trade would be an ultimate fact. Because plaintiff claims that a restraint of trade was accomplished through a breach of the importer contract, a finding of the existence or non-existence of such a breach would be a mediate datum. It is a conclusion based on law applied to fact, but because the antitrust laws do not make breach of contract the occasion for imposition of sanctions, it is not an ultimate issue in this action. In the arbitration, however, such a finding would represent an ultimate fact. Finally, a finding that ANAU shipped Overseas x number of cars in 1969 is intrinsically non-legal and would therefore be evidentiary.
Viewed from this perspective, there are two polar positions as to the proper scope of issue preclusion in antitrust cases (with the parties apparently, and perhaps predictably, situated at the furthest reaches of each). At one extreme, collateral estoppel could be permitted as to all but ultimate facts. This is clearly unacceptable. Evidentiary and mediate findings, although never reaching the level of absolute foreclosure because they can never be per se dispositive, may nevertheless so undermine the factual and legal foundations of an opponent's case that he is left without any means of proving his contentions. At the other extreme, because the foreclosure
A rational middle ground is suggested by the Ninth Circuit Court of Appeals in A. & E. Plastik Pak Co. v. Monsanto Co.:
In this suit Overseas is acting as a private attorney-general, litigating issues in which there is a public as well as a private interest.
It does not follow, however, that anything which affects this case, however remotely, is thereby transmuted into an antitrust issue and open to redetermination. The range of foreclosable issues need only be narrowed sufficiently to assure plaintiff here a reasonable opportunity to vindicate the public interest in enforcement of the antitrust laws. To go any further toward relieving plaintiff of the burden of the arbitration award would be to confer on it an undeserved benefit, unnecessary to protect the public's antitrust interests, and in direct contravention of the public interest in the finality of judgments which underlies the doctrine of collateral estoppel.
Conversely, where the prior decision is not intimately and inextricably bound up with the central issues in the antitrust case, but merely determines matters of fact and law which are incidental to the antitrust claim, the prior adjudication ought to be accorded effect as res judicata.
In the course of identifying the forecloseable issues in this case, three categories were established: (1) findings of the court of arbitration that for a variety of reasons other than the public interest in antitrust preemption, were considered inappropriate for estoppel; (2) findings too intimately connected with the central issues of this case to permit an estoppel; and (3) findings to which the doctrine of collateral estoppel can be applied without offense to the public interest.
Miscellaneous Nonbinding Determinations — Finding number 3 merely confirms a previous decision of this court. In any event, both 3 and 4 are matters of law as to which there can technically be no estoppel. Numbers 11, 18, 26, 27 and 30 concern rights and liabilities under the contract which are irrelevant to the issues in this case. Several others are adequately covered by other findings. Number 24 is merely a confusing summation of numbers 21, 22 and 34. Number 28 is irrelevant except to the extent it is subsumed under number 29, and numbers 16, 31 and 35 are relevant only insofar as they are included in finding number 12. Numbers 19 and 21 are too imprecise and ambiguous. Finally, numbers 20 and 34 relate to matters not clearly put in issue, at least during plaintiff's case, and thus are not appropriate for presentation to the trier of fact at this stage of the case.
Issues to Which a Public Interest Attaches — Findings dealing with orders, production, letters of credit and emission standards tread too near a central issue of plaintiff's case — the "pinching off" of its supply of cars and the reasons for it. Whether the diminished supply was (or at least could be) part of a conspiracy to restrain trade or monopolize is an issue central to the antitrust case. Findings number 9, 10, 14, 22, 32 and 33 all come too close to foreclosing that issue from any serious dispute.
In a similar fashion defendants seek through finding number 13, and to a lesser extent number 14, to exclude the Ro-80 model NSU automobile from the ambit of the importer contract and effectively from this case. Plaintiff relies heavily on ANAU's use of the Ro-80 as a "carrot on a stick", employed as a means of manipulating Overseas and effecting the defendants' conspiracy to restrain trade. It is also an important though undeveloped element of the charge of bad faith dealing under Count III. The trier of fact ought not to be limited by the implications of finding number 13 that Overseas could have no right or interest in the Ro-80, even though a very narrow construction of it might arguably be acceptable. Finding number 8, stating simply that "ANAU has performed its obligations under the Importer Contract", may be characterized as the ultimate finding of the court of arbitration. It is far too broad and the issue far too important to permit foreclosure.
Binding Determinations — The remainder of the proposed findings —
Procedure — After approximately five weeks of trial, it appeared that the plaintiff's remaining proof consisted of some fifteen depositions and several hundred exhibits. Colloquy in chambers at that time developed the certainty that defendants' counsel would present and argue a motion for a directed verdict at the close of plaintiff's proofs. The court then suggested and counsel agreed that the jury should be given a short recess while the court read the remaining depositions and studied the exhibits not yet offered by plaintiff. Counsel agreed to an arrangement by which these materials could be considered along with the evidence already presented to the jury in determining defendants' motion. It should be noted that while counsel for defendants agreed to the procedure, they did not necessarily agree to the ultimate admissibility of either the deposition testimony or the exhibits. Equally important, while the court notified counsel for the defendants that for the purpose of the motion it would consider all of the testimony offered by the plaintiff, including testimony concerning settlement discussions (a portion of which had been excluded by the court during trial), it did so without prejudice to the defendants' right to continue their objections to any evidence they considered inadmissible in the event the motion for directed verdict was denied.
Standards for Directing a Verdict
Of course it is a well-established rule that the court must view the evidence in the light most favorable to the party against whom the motion is made.
The Complaint — In the catalog of grievances which constitutes Count I of
The Evidence — To assist in its review of the evidence, the court asked plaintiff's counsel to summarize in a memorandum the testimony and exhibits which plaintiff contended supported its prima facie case. Careful attention has been given to these materials.
Of course the eleven findings of the court of arbitration form a core of established and uncontrovertable fact. No inference may be drawn which is inconsistent with them. Within these limitations, and viewed in a light most favorable to plaintiff, the evidence permissibly supports the following findings:
1. In the months of January through August, 1969, plaintiff ordered approximately 2,140 cars and received 200. The merger of NSU and Auto Union was completed on August 21, 1969, the date on which plaintiff claims the "pinching off" was begun. In the remainder of 1969 plaintiff ordered 550 cars and received 70. In 1970 approximately 208 cars were received out of a total of 2,065 ordered. In 1971 and 1972 the orders totaled 1,570 and 1,727 respectively; no cars were received.
It is important to note that plaintiff has not demonstrated that the failure of ANAU to confirm Overseas' orders was unjustified under the contract. Although the court of arbitration determined that ANAU did not breach the contract by its non-deliveries, those findings were not accepted as binding on this court, and the issue remained open, susceptible of proof by plaintiff. It was accepted, however, that the importer contract by itself did not constitute an order for the delivery of specific cars and parts nor did it create an obligation on the part of ANAU to deliver all cars plaintiff ordered.
2. Plaintiff has argued at length that the Ro-80 was an "NSU automobile" within the meaning of the importer contract and despite contrary evidence a jury could reasonably so conclude. Both NSU and ANAU presented the Ro-80 as a revolutionary vehicle with tremendous sales potential, particularly in view of its wankel engine. A flood of evidence was offered to show the enthusiasm of NSU, ANAU and Overseas for the Ro-80. Plaintiff exerted its best efforts to promote this and other NSU vehicles and to create a market for them in this country, and assisted NSU in a series of emissions tests designed to qualify its cars (particularly the Ro-80) for importation in the United States. From all of this one might conclude, as plaintiff urges, that it was encouraged to believe that it would be heavily involved in distribution of the Ro-80 in this country. This "carrot on a stick" was held out to plaintiff by both NSU and ANAU throughout their relationship, even after serious problems had developed between Overseas and ANAU. It is admitted that the Ro-80 has never been marketed in the United States. However, there is little evidence to show why this was not done. Plaintiff has on occasion alleged that ANAU sought to license the wankel engine to domestic automakers in preference to importing the Ro-80, but this assertion is totally without support.
In sum, although a jury could reasonably conclude that the Ro-80 was dangled before plaintiff as a "carrot on a stick", there is no evidentiary basis for concluding that the Ro-80 was ever improperly or in bad faith withheld from the United States market. At best plaintiff has shown unbusinesslike enthusiasm on the part of ANAU in vigorously promoting this car without any real assurance that it could deliver the Ro-80 to the United States in even a limited quantity.
3. Plaintiff is bound by the finding of the court of arbitration as well as the plain language of the importer contract to the effect that it was only entitled to NSU automobiles. By negative implication this excludes any right to import and distribute Audi automobiles in this country. Although plaintiff has attempted to prove that the merger of NSU and Auto Union effected a merger of their product lines as well, and thus that plaintiff had a right to sell the Audi, the evidence does not support such a conclusion.
4. There is evidence to the effect that VWAG was the sole owner of Auto
5. A jury might reasonably conclude that following the merger, ANAU intended and actively sought to transfer the distribution of NSU automobiles to the Volkswagen group, either by terminating the contracts of present NSU distributors or by including them within the VW organization (or both).
6. In April of 1971 ANAU informed plaintiff that because the United States market for NSU automobiles had not developed as expected, it intended to abandon it entirely. Accordingly, ANAU notified plaintiff that the importer contract would be terminated effective December 31, 1973, "since it will have lost its substance by then". The letter also offered plaintiff the opportunity to terminate sooner if it so desired.
Contract, Combination or Conspiracy — Section 1 of the Sherman Act is not concerned with individual conduct, no matter how anticompetitive. It requires some sort of deliberately coordinated or agreed upon behavior, though this need not take the form of an explicit, formalized agreement. It is enough that the plaintiff establish "a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement."
Because such understandings are seldom capable of proof by direct testimony, they may be inferred from the things actually done.
Establishing conspiracy as a permissible inference, like any empirical inquiry, is merely an exercise in inductive reasoning — inference based upon the cumulation of consistent data. It is true, as plaintiff points out, that the evidence should not be compartmentalized but should be viewed as a whole when making this determination.
Motive — One way of understanding and explaining any given course of conduct is by analyzing the actor's objectives. The Supreme Court's opinion in First Nat'l Bank v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968), upholding a summary judgment against the plaintiff, is an excellent example of the application of motive analysis to Section 1 cases. The relevant facts in that case are not unlike those involved here. The petitioner alleged that Cities Service had conspired with other oil companies to boycott his supply of Iranian oil in violation of Section 1 of the Sherman Act. However, he introduced no evidence of any collusion between the respondent and any other companies, but merely offered theories to explain the bare fact of the oil companies' refusal to deal with him.
In the instant case Overseas has been similarly unable to articulate a satisfactory motive for the alleged conspiracy. At one point plaintiff compiled a list of "benefits" which it suggested would be derived by the defendants from ANAU's refusal to deal, but they do not withstand even the most casual scrutiny.
Points 1 through 9
This leaves one further "benefit", which does perhaps raise a more realistic suggestion of motive:
There are, however, two fatal defects in plaintiff's contention. First, article 3, paragraph 4 of the importer contract explicitly provides that "[t]he right of NSU to grant licenses for the manufacture of contract goods and for the sale of such contract goods by the manufacturer within the sales territory remains unaffected . . . ." The only "rights" which plaintiff had in any such licensing arrangements were contained in the contractual assurance that "NSU will, however, duly consider the interests of the importer". And if this is not enough to neutralize number 10 as a possible motive, plaintiff's complete lack of support for its assertion clearly is.
It can only be concluded that, as in Cities Service, there is no evidence of a possible motive for the claimed conspiracy. Although this deficiency is not conclusive, it is extremely damaging to plaintiff's case.
Opportunity — Opportunity evidence may be arranged along a continuum of persuasiveness, from that which merely prevents a negative inference by demonstrating that communication and thus agreement were physically possible, to evidence of specific contacts and exchanges of information or suggestion which makes agreement in some measure more probable. Much of the evidence plaintiff has offered which it argues is probative of conspiracy is on the opportunity dimension, and most of this is clustered around the bottom ("mere possibility") range of such evidence. The following facts may be so characterized: (1) VWAG owns 99 percent of the stock of ANAU; (2) VWOA is a wholly-owned subsidiary of VWAG; (3) the president of VWAG is the president of the board of control of ANAU; (4) the present export manager of ANAU has at various times worked for both VW's and Auto Union; (5) Import is a member of the VW distribution network. This is in sharp contrast to cases in which exchanges of price information or other production data,
Consistency of Overt Acts — In nearly all cases in which a combination
Yet on this critical dimension plaintiff does not even have the usual parallel conduct to rely on. There are few, if any, overt acts by the defendants which give the appearance of possible coordination. Only ANAU was involved in the alleged "pinching off" of plaintiff's supply of cars. Import, and later VWOA, did refuse to grant plaintiff a Porsche-Audi franchise, but at least on the face of it
Plaintiff also argues that there is evidence which could be conceivably construed as suggesting agreement — that discussed previously under the heading of Settlement Evidence.
Admissibility of the Settlement Evidence — This evidence was excluded at trial on two grounds: (1) it concerned conduct and statements made in negotiations attempting to compromise a disputed claim, and (2) it included statements of alleged co-conspirators offered to prove the existence of the conspiracy without prior independent proof of its existence.
It is undisputed that the negotiations concerning the Porsche-Audi franchise represented an attempt by the parties to resolve certain differences existing between them. It is also undisputed that an offer to settle or compromise a disputed claim, along with direct suggestions or overtures of settlement, will not be received in evidence as an admission of liability on the part of the party making the offer.
There are two distinct rationales for this rule; its ambit will vary according to which prevails.
A second basis for excluding offers to compromise is the public policy favoring private resolution of disputes over resolution through litigation. This theory produces somewhat different results than the first, for according to this latter view, all acts and statements incidental
Although plaintiff urges strongly the necessity of culling out of the settlement evidence certain independent admissions of fact, this is an invitation which must be declined. This court agrees with the authors of the Proposed Federal Rules of Evidence that the policy rather than the relevancy theory is the better raison d'etre for the rule and thus a better guide as to its proper bounds.
The one remaining question is whether the allegation that the settlement negotiations and their ultimate failure were an integral part of the conspiracy dictates an exception to the normal rule of exclusion. It is generally recognized that offers in compromise are inadmissible only when offered to demonstrate some element of liability in the case at hand. They may be received for other purposes such as proof of costs, due diligence, explanation for delay, etc.
This case might arguably fall within such an exception were it not for the additional fact that plaintiff has had such a large hand in creating this settlement evidence. There is obviously nothing illegal about collaborating in order to meet the threat of a common lawsuit, and plaintiff's own proofs show that very early in this series of events it wrote to these defendants threatening an antitrust action and suggesting a Porsche-Audi dealership as one step in a possible settlement.
The settlement evidence is largely testimonial in nature. When this is offered for the purpose of proving the existence of the alleged conspiracy, it presents a distinct but equally pernicious danger of bootstrapping the plaintiff into a conspiracy case through the use of unexamined and uncorroborated hearsay. Thus it is a nearly universal rule of law that in order for the extrajudicial statements of one alleged conspirator to be admitted in evidence against another, the existence of the conspiracy and the defendant's participation in it must be shown by independent evidence.
The problem raised here is whether, assuming there is no other evidence of a conspiracy, the acts and declarations of each defendant individually considered may suffice to establish the conspiracy.
Assuming arguendo that the acts and declarations involved in the settlement negotiations would, if considered collectively, support an inference of conspiracy, the necessity of establishing the conspiracy separately and exclusively from each party's own acts and declarations precludes such an inference against any of the defendants. The facts simply do not support such an inference based on any one party's acts and declarations when considered along with the other, independent evidence in the case. The requisite proof of conspiracy therefore becomes a logical impossibility: a prima facie showing of conspiracy is factually possible only if the various party admissions can be connected up, i. e., admitted for use against all of the defendants; however, a precondition to such use is a prima facie showing of conspiracy. The existence of the conspiracy is a fact that must be proved by evidence the competency of which does not depend upon an assumption that the conspiracy exists, and for that reason the settlement evidence is necessarily inadmissible.
Restraint of Trade — Agreement is a necessary but not a sufficient condition for a Section 1 violation. Plaintiff must also prove that the agreement was "in restraint of trade or commerce", either by showing it was of a type which the law condemns as per se illegal, or by
Per Se Violations — Price Fixing — Plaintiff contends that ANAU, in concert with the other defendants, raised the price of its products to levels which made it impossible for Overseas to resell them at a profit, and that this represents illegal price fixing. Both horizontal price fixing
On the one hand, plaintiff's emphasis on the rapid rise in the prices charged by ANAU and the coercive effect of these increases on Overseas implies a theory of resale price maintenance. It is true that restriction of the dealer's pricing freedom is the essence of the offense
On the other hand, if plaintiff is primarily concerned with the possible participation of the other defendants in ANAU's pricing decisions, its problem is one of fact rather than law. Assuming arguendo that plaintiff has established some form of collusion among the defendants, there is absolutely no evidence to show that it involved an agreement to fix prices. Plaintiff has proved only that it was quoted sharply higher prices for NSU cars. While it now argues that this must have been part of the conspiracy, such a conclusion would be pure conjecture.
Group Boycott — It is undenied that several of the defendants have declined to do business with the plaintiff. Even if these actions represent a group refusal to deal, however, they are not "naked restraints of trade with no purpose except stifling of competition"
This observation indicates that the exclusive dealership is not an isolated exception from the strict per se approach, but that in all cases involving concerted refusals to deal some degree of anticompetitive effect or intent must be shown.
The Rule of Reason — The remainder of plaintiff's late-blooming attempts to fit within the per se rule are without merit.
This record contains absolutely no indication (other than the plaintiff's allegations) that the defendants were possessed of a "purpose to coerce the trade policy of third parties or to secure their removal from competition."
Yet plaintiff has also failed to introduce any evidence as to the market impact of the alleged conspiracy. That the antitrust laws are designed to protect competition, not individual competitors,
Neither agreement nor restraint of trade may be inferred from the evidence, and plaintiff therefore has no case under Section 1 of the Sherman Act. Insofar as plaintiff may still maintain a claim under Section 2 of the Act, it is wholly without support.
Count III — 15 U.S.C. § 1222 authorizes an automobile dealer to sue a manufacturer for his failure to act in good faith in complying with or terminating a franchise agreement. It may be assumed that the importer contract was such a franchise. However, only ANAU and anyone acting for and under the control of ANAU can be held liable for any bad faith conduct relating to its performance or termination.
As to ANAU, plaintiff has not demonstrated the necessary lack of good faith. Under the Act "good faith" is narrowly defined:
Here there is insufficient proof of coercion on which to go to the jury. There is no showing that ANAU ever engaged in conduct which could reasonably be considered a threat — "a wrongful demand which will result in sanctions if not complied with."
The conduct must be such as would threaten a reasonable man in the dealer's position. Here there is absolutely no evidence which would link the "pinching off" to ANAU's desire to terminate the contract in the mind of the average man. This is especially true in view of the ease with which the contract could by its own terms have been legally terminated by ANAU. Any number of alternative explanations may be made of the sudden decline in the number of cars received by plaintiff, with no basis in the evidence for choosing rationally between them. Therefore the proof under Count III is also deficient.
The overwhelming reality which emerges from the many weeks of testimony and the hundreds of exhibits in this case is the total failure of the plaintiff to even address many of the central questions raised by the law it has invoked, and its complete lack of concrete evidence as to those elements with which it has concerned itself. As to Counts I and II, plaintiff has fundamentally misconceived the nature of its cause of action.
The antitrust laws are simply not a high-powered version of the laws relating to breach of contract, to be used whenever one is possessed of a particularly passionate grievance growing out of a business relationship. In Count III
In sum, a directed verdict is necessitated by the complete failure of proof on all counts. Plaintiff's motion for a new trial raised no new arguments or evidence and has been treated as a motion for reconsideration of prior rulings. It must also be denied for the reasons stated above.
An appropriate order may be submitted.
Although it is only the doctrine of collateral estoppel which is at issue here, materials dealing with other aspects of res judicata will often be cited in support of propositions common to both branches of preclusion by judgment. Where the relevant principles are identical, the cases have been cited interchangeably, without specific explanation.
The classic discussion of this "very old law" [Irving National Bank v. Law, 10 F.2d 721, 724 (2d Cir. 1926)] is Mr. Justice Field's opinion in Cromwell v. County of Sac, 94 U.S. 351, 24 L.Ed. 195 (1877).
This is to be distinguished from the doctrine of privity, which imposes essentially the same requirement in order for a party to be bound by a prior judgment. See id., ¶ 0.411.
There are even cases holding that the defense may be raised by the court on its own motion. W. E. Hedger Transp. Corp. v. Ira S. Bushey & Sons, 186 F.2d 236 (2d Cir. 1951); Wilson v. United States, 166 F.2d 527 (8th Cir. 1948).
This willingness to forego the comfortable assurances of accuracy generated by a full dress trial is justified by the defaulting party's willful failure to make an adversary input into the prior proceedings. The law cannot force a party to make the best case possible or even any case at all; it only permits him to do so, prompted by his own self-interest. The only logical alternative would be to accept a prior judgment as binding only if both sides had supported their positions at some minimal level of competence, for mere appearance is hardly a guarantee of effective advocacy. Such searching and highly subjective reviews of prior performances by counsel are probably impossible and certainly unacceptable even if possible. "If an issue is raised and the party who has the burden fails in his proof and the issue is decided against him, he is just as much bound by collateral estoppel as though he had presented a barrel of testimony." United States v. Silliman, 167 F.2d 607, 617 (3d Cir. 1948), cert. denied, 335 U.S. 825, 69 S.Ct. 48, 93 L.Ed. 379. The party who defaults ought therefore to be given no greater protection from preclusion than one who simply fails in his proof. In both instances he is entitled to a full and fair opportunity to litigate, and having received that, ought then to be precluded from rearguing the issues decided in his absence, whether the absence was formal or merely effective.
The doctrine "is no mere technicality" [Tillman v. National City Bank of New York, 118 F.2d 631, 634 (2d Cir. 1941), cert. denied, 314 U.S. 650, 62 S.Ct. 96, 86 L.Ed. 521] but rather "a principle of universal jurisprudence". St. Louis Typographical Union No. 8 v. Herald Co., 402 F.2d 553, 555 (8th Cir. 1968).
This conclusion is not inconsistent with exclusive federal court jurisdiction over antitrust cases.
Areas of federal pre-emption such as the antitrust laws are a prime example: Claim preclusion is no problem in such cases for no other tribunal would have jurisdiction to enter a valid judgment on a pre-empted cause of action. See, e. g., Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370 (1940). Issue preclusion, however, would normally be unaffected by the fact that the second cause of action was not within the first court's jurisdiction as long as the issues resolved were properly before it. But this brings the policy of finality into conflict with an equally strong policy of pre-emption, which could be effectively, even though not formally, vitiated by strict application of collateral estoppel. See Lyons v. Westinghouse Elec. Corp., 222 F.2d 184, 186 (2d Cir. 1955):
The court's task therefore is to effect an appropriate compromise by weighing the conflicting interests and accommodating them according to their relative importance. But see Becher v. Contoure Laboratories, Inc., 279 U.S. 388, 49 S.Ct. 356, 73 L.Ed. 752 (1929). The Becher case involved the validity of a patent, a matter over which the federal courts have exclusive jurisdiction. There a prior state court decision was raised as a defense, and it was held to be effective as an estoppel even though the effect was to invalidate the patent.
In commenting on these passages the Sixth Circuit Court of Appeals in Cream Top Creamery v. Dean Milk Co., 383 F.2d 358, 362-63 (6th Cir. 1967), concluded: "Thus if the first suit is brought in a State Court, this will not mean necessarily that facts there proven can be contested subsequently in a Federal Court action, notwithstanding the exclusive jurisdiction of the Federal Court."
Section 71 of the Restatement provides that:
The court went on to conclude that there should be no preclusion in that case, "where the putative estoppel includes the whole nexus of facts that makes up the wrong." 222 F.2d at 189.
Although its treatment is less explicit than Lyons, Plastik Pak (see note 72 and accompanying text, supra) seems to be the only other case to have suggested a standard for determining antitrust issues. Cf. Premier Elec. Constr. Co. v. Miller-Davis Co., 422 F.2d 1132, 1139 n. 7 (7th Cir. 1970); Engelhardt v. Bell & Howell Co., 327 F.2d 30, 35 (8th Cir. 1964). The other cases dealing with the relationship between arbitration and antitrust proceedings have been limited to what are in fact questions of claim preclusion rather than issue preclusion, though several do suggest that the federal pre-emption of antitrust claims involves a concomitant pre-emption of central antitrust issues. These cases generally hold that while antitrust claims are clearly within the federal courts' exclusive jurisdiction, and one party therefore cannot force the other to submit them to arbitration under a pre-existing arbitration clause, other (usually contract) claims arising out of the same transactions are not pre-empted and may be submitted to arbitration, at least where the underlying issues are reasonably separable. See Kelly v. Kosuga, 358 U.S. 516, 79 S.Ct. 429, 3 L.Ed. 2d 475 (1959); Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743, 67 S.Ct. 1015, 91 L.Ed. 1219 (1947); Buffler v. Electronic Computer Programming Institute, Inc., 466 F.2d 694, 700 (6th Cir. 1972); Helfenbein v. International Industries, Inc., 438 F.2d 1068, 1070 (8th Cir. 1971), cert. denied, 404 U.S. 872, 93 S.Ct. 63, 30 L.Ed.2d 115; Associated Milk Dealers, Inc. v. Milk Drivers Union, Local 753, 422 F.2d 546, 552 (7th Cir. 1970); American Safety Equipment Corp. v. J. P. Maguire & Co., 391 F.2d 821, 828 (2d Cir. 1968); Loevinger, supra note 66, at 1094. See also Coenan v. R. W. Pressprich & Co., 453 F.2d 1209 (2d Cir. 1972), cert. denied, 406 U.S. 949, 92 S.Ct. 2045, 32 L. Ed.2d 337.
Plastik Pak and Lyons, however, dealt with situations in which all of the issues were not so neatly divisible. Compare A. & E. Plastik Pak Co. v. Monsanto Co., 396 F.2d 710, 716 (9th Cir. 1968), with Buffler v. Electronic Computer Programming Institute, Inc., 466 F.2d 694, 700 (6th Cir. 1972). Both cases found that public policy precluded estoppel as to certain common issues; the major difference was the point at which they were identified. Whereas Lyons merely determined what effect would be given to a previous decision. Plastik Pak conducted that inquiry before the arbitration and held that the arbitrators could not even consider what would in the context of the antitrust case constitute a non-foreclosable "antitrust issue". Such a restriction upon the arbitration is unnecessary to preserve the court's exclusive antitrust jurisdiction, for a refusal to give estoppel effect to any findings touching on antitrust issues adequately protects the public interest in their independent determination. Indeed, assuming that the antitrust issues in question are also essential issues in the non-antitrust (and therefore properly arbitrable) claim, such a course would render the arbitrators powerless to decide even those claims as to which their jurisdiction is admitted. This may well be impermissible under the holding of Becher v. Contoure Laboratories, Inc., 279 U.S. 388, 49 S.Ct. 356, 73 L.Ed. 752 (1929), discussed supra at note 74.
In any event, given the premise of Plastik Pak that non-precludable antitrust issues ought not even to be submitted to arbitration in the first instance, the clear implication of allowing arbitration as to other, incidental issues is that the arbitrator's findings on those issues will be binding in the antitrust case. See also Helfenbein v. International Industries, Inc., 438 F.2d 1068, 1070 n. 2 (8th Cir. 1971); American Safety Equipment Corp. v. J. P. Maguire & Co.. 391 F.2d 821, 828 (2d Cir. 1968). The resulting test, whether applied before or after the arbitration, appears to be one of centrality.
It is not certain how completely the documentary evidence supports these assertions. The exhibits cited in support of the figures given are not entirely consistent. See, e. g., exhibits 185 and 186, listing Overseas' firm order for the month of July as 285 and 295 respectively. See also the widely differing totals compiled by plaintiff in exhibit 191. The exhibits covering the number of cars delivered are of several kinds (invoices, confirmed order forms, "export control documents" listing frame and engine numbers, etc.). They appear in part to overlap, but to what extent is unclear. It should also be noted that many were not offered into evidence. The order confirmations actually admitted into evidence indicate that 275 (rather than 270) cars were shipped to Overseas in 1969, and 124 (rather than 208) were shipped in 1970. Nevertheless, except for one arithmetical error the plaintiff's totals have been accepted herein. This is not only to insure that the evidence is in fact viewed in a light most favorable to plaintiff, but also in recognition of the difficulty of extracting any clear and unimpeachable answers from this mass of documents. Plaintiff's assertions do appear to be within permissible bounds of inference based on the exhibits cited.
Although not referred to by plaintiff, it may be worth adding that in 1968 plaintiff ordered 327 cars and received 95 (PX 179, 360-62, 681-82).
Futhermore, the evidence which plaintiff cites in support of these word games it seeks to play simply does not support the inference that the product lines of NSU and Auto Union were in fact merged. The test is whether the NSU and Audi trademarks continued to be used for distinct kinds of cars. The pictures and advertising materials submitted by plaintiff clearly demonstrate that they were, even though together they were referred to (naturally and accurately enough) as Audi-NSU cars. PX 883, for example, is an advertising brochure which constantly distinguishes between "Audi and NSU cars" and "the two lines", even though it also speaks of them collectively as the "Audi-NSU line". It makes an irresistible comparison to note that because General Motors may advertise (as it does) several of its distinctive products together as GM cars does not entitle a dealer who has contracted for Chevrolets to obtain Oldsmobiles, simply because both are part of the overall GM product line.
Plaintiff also relies on exhibits picturing nameplates bearing the name ANAU which are attached to various parts of NSU automobiles (PX 884-85, 887-89). Plaintiff neglects to note that these plates are required by 49 C. F.R. § 567 (1973), and must contain certain specified information, including the name of the manufacturer. 49 C.F.R. § 567.4(g) (1) (1973).
Finally, plaintiff cites an amended version of the Guaranty Conditions accompanying the importer contract which refers to "Audi-NSU" products and states specifically that "[c]ontract goods shall mean Audi-NSU motor vehicles" (PX 44-45). It is absolutely clear on their faces, however, that the two exhibits are standard forms, intended to cover any dealer handling either or both of the ANAU product lines. The fact that ANAU's guarantee extends to both Audi and NSU vehicles on identical terms, and that these common conditions are expressed under the generic heading of "Audi-NSU Guaranty Conditions", in no way lessens the separate identities of the constituent Audi and NSU models being guaranteed; and based on this evidence no contrary inference may rationally be drawn.
Second, plaintiff claims that the pattern of the defendants' activity regarding the application indicates collusion.
2. By refusing to deal with Plaintiff, defendants were able to freeze out Plaintiff as an Importer and Distributor of Audi-NSU cars in the United States.
3. By refusing to deal with the Plaintiff the defendants were able to utilize their wholly owned subsidiary, VWOA and thru [sic] it their own franchisees-network in the U.S., to channel Audi-NSU cars.
4. By refusing to deal with the Plaintiff and with the other two Importers of NSU cars, the defendants were able to gain control and a monopoly of the dealer and distributor network of all three Importers in the U.S.
5. By refusing to deal with the Plaintiff and the other two importers, the defendants were able to `freeze-out' the Plaintiff and the other Importers, as importers and distributors of Audi-NSU cars in the United States.
6. By refusing to deal with Plaintiff, the defendants were able to force a termination of the Importer Contract, for practical purposes.
7. By refusing to deal with Plaintiff, the defendants were able to foreclose and terminate any and all rights the Plaintiff had in the sale, distribution and import of the Ro-80 Wankel powered car in the U.S.
8. By refusing to deal with Plaintiff, the defendants were able to foreclose and terminate any and all rights Plaintiff had in relation to the licensing and use of the wankel motor. The Importer Contract had the following clause (Exhibits 32-3, Article 3, par. (4)):
9. By refusing to deal with Plaintiff, defendants were able to monopolize the sale and distribution of Audi cars in the United States, through their wholly owned subsidiary VWoA and through VWoA's integrated or controled [sic] distributors in the United States." Plaintiff's Reply Brief, supra at 9-10.
The matter of licensing was never pursued any further. Without further explication, this ambiguous statement is insufficient to justify the proposed inference.
The same patterns of production, distribution, and use may be employed in delineating the geographic market. Id. at 336-37, 82 S.Ct. 1502, 8 L.Ed.2d 510. Compare United States v. Grinnel Corp., 384 U.S. 563, 570-76, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966). Admittedly the analysis need not be framed as a formal treatise, replete with the jargon of the economist [see United States v. Pabst Brewing Co., 384 U.S. 546, 86 S.Ct. 1665, 16 L.Ed.2d 765 (1966); United States v. Von's Grocery Co., 384 U.S. 270, 86 S.Ct. 1478, 16 L.Ed.2d 555 (1966)], but there must be some economic perspective from which the impact of the restraint can rationally be determined.