JAMES HUNTER, III, Circuit Judge:
Plaintiff mortgagors appeal from the dismissal of their civil antitrust suit against their mortgagee, First Federal Savings and Loan Association ("First Federal"), the mortgagee's law firm, Johnstone & O'Dwyer, and the directors of First Federal. Plaintiffs brought a class action alleging a conspiracy resulting in: 1) illegal tie-in of legal services in violation of the Sherman Act § 1, 15 U.S.C. § 1,
In October 1972, the Mortensens contracted to buy a house in Westfield, New Jersey, and applied to First Federal for the mortgage. When a home buyer applies to First Federal for a first mortgage, a condition of the loan is that the applicant pay First Federal's attorney for the related legal services of examining and certifying title, drafting and recording the mortgage, and closing title in the buyer. Mechanically, the fee for these services is deducted from the amount of the loan. The applicant is not precluded from hiring his or her additional attorney, but will remain responsible in any event for First Federal's attorney's fees.
First Federal refers these legal services to defendant Johnstone & O'Dwyer, a New Jersey law firm.
Some of those lending institutions follow what is called an "open attorneys" plan, under which the mortgage applicant is permitted by the lender to choose his or her own counsel for the title examination and closing. In that case, the applicant pays the selected counsel directly, and the lender plays no role in the provision or payment of those particular legal services. The lender charges a fee to review the title. Other lending institutions, among them First Federal, prefer to rely on their own general counsel for these matters, and follow what is referred to as a "closed attorneys" plan.
First Federal has always relied on Johnstone & O'Dwyer to perform these legal services, expressing confidence in their work. Johnstone & O'Dwyer is paid on a case-by-case basis and receives no annual retainer from First Federal. On its part, First Federal receives no "kickback" from its referrals to Johnstone & O'Dwyer. In every case, the mortgage applicant is the one who pays for Johnstone & O'Dwyer's legal services. Plaintiffs claim that in the four-year period preceding this suit, Johnstone & O'Dwyer (and Guardian, the controlled title company) may have received some $1,000,000 in legal fees from First Federal's mortgage-related legal services.
According to First Federal, the legal services are rendered to and for First Federal, not the home buyer. Appellants contend just the reverse: the legal services are rendered to and for the mortgage applicants (as they would be in an "open attorneys" plan) and they are consequently being forced to buy the legal services selected by First Federal. The trial court adopted the latter contention for the purpose of deciding the jurisdictional issue.
First Federal is prohibited, by 12 C.F.R. §§ 545.6-6 from giving mortgages on homes outside New Jersey unless the out-of-state properties are within 100 miles of First Federal's home office. The home office is in Westfield, New Jersey. Although some parts of New York state are within 100 miles of Westfield, of its 3,462 mortgage loans still open as of December 7, 1973, not one was secured by out-of-state real property.
Although its home mortgage activity is thus virtually confined to New Jersey, there are apparently several interstate contacts: 1) First Federal is a federally character institution, and, as such, governed by federal regulations; 2) substantial funds used by First Federal for its loans come from the FHLBB as loans to First Federal;
In addition to First Federal's interstate contacts, the Mortensens point to out-of-state competitors for both the mortgage transaction and the title certificate, and to potential deterrent of out-of-state customers considering homes in New Jersey. Appellants contend in particular that New York banks compete for mortgage loans in First Federal's territory. Assuming that buyers consider title insurance an adequate substitute for title examinations by attorneys, there would of course be out-of-state competition for a significant part of the allegedly tied service.
Mortensens instituted this action in December, 1973. Discovery proceedings commenced; in December, 1974, plaintiffs moved for class action certification, and in January, 1975 moved to amend their complaint in order to add Johnstone & O'Dwyer's title company, Guardian Abstract Company. In February, 1975, defendants responded with motions to dismiss plaintiffs' complaint pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction; to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted; to stay the proceedings pending exhaustion of administrative remedies; and, in the alternative, to grant summary judgment under Fed.R.Civ.P. 56 in favor of defendants.
A single hearing was held, in April, 1975, on the above motions. Plaintiffs' attorney opened with his arguments favoring class action certification according to Fed.R.Civ.P. 23. When the judge asked how many lending institutions accept customer-chosen attorneys for closing, plaintiffs' counsel responded "I felt we didn't have to make all our proof here . . .," and proceeded with his proof of class action status.
The defendants' attorney, a member of the Johnstone & O'Dwyer firm, asserted that all the relevant facts were then before the court and that, consequently, the matter was ripe for summary judgment. The "central" issue, according to defendants' attorney, was whether Johnstone & O'Dwyer performed any legal services for First Federal's borrowers; the answer strenuously urged was "no," that the services were rendered to First Federal and not to the customers. In addition, defendants' attorney argued that the fees charged by Johnstone & O'Dwyer were not unreasonable. On the merits of the tying claim, defendants' attorney discussed a recent case dealing with a nearly identical practice in Louisiana, in which the district court held that there was no illegal tie-in because there were not two
It was not until the close of the hearing, after the judge said he would take the case under advisement and would write an opinion, that jurisdiction may have been considered.
In August, 1975, the district court filed an opinion dismissing the Sherman Act claim for lack of subject matter jurisdiction, and granting leave to renew the FHLBB claim after exhaustion of the appropriate administrative remedies. In its consideration of subject matter jurisdiction, the court went through a two-step analysis: first, did defendants' conduct occur in interstate commerce, and, second, if it did not, did it nevertheless substantially affect interstate commerce.
In examining the conduct under the first prong, the court asserted that
Appendix at 285a-286a.
Finding real estate financing to be "essentially a local enterprise,"
As for whether or not these transactions substantially affect interstate commerce, the trial court understood the relevant inquiry to be "whether, considering the nature of the restraint alleged to exist and the circumstances surrounding it, the conduct of which plaintiffs complain will probably affect the flow of interstate goods or service," relying inter alia on our opinions in Doctors, Inc. v. Blue Cross of Greater
The trial court considered unpersuasive an argument that because Johnstone & O'Dwyer's fees were excessive, the flow of buyers from outside New Jersey would be impeded, as would be the flow of related goods and services. To support its finding that those effects are not likely to result here, the trial court relied on the following factors: 1) First Federal is a single lender with little or no market power in the area of credit; 2) plaintiffs do not allege that First Federal has the ability or intent to raise prices or eliminate competitors in any relevant credit market; 3) plaintiffs do not allege any conspiracy between First Federal and any other lender, distinguishing this from Stavrides v. Mellon Nat'l Bank & Trust Co., 353 F.Supp. 1072 (W.D.Pa.1973); Kinee v. Abraham Lincoln Federal Savings & Loan Ass'n, 365 F.Supp. 975 (E.D.Pa. 1973); and Beck v. Athens Building Loan & Savings Ass'n, 65 F.R.D. 691 (M.D.Pa.1974); 4) plaintiffs do not allege uniquely attractive credit offered by First Federal, see Fortner v. U. S. Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969); 5) any decreased competition in the tied products market would have a de minimis effect at most on the demand for credit and building supplies, and a purely local effect on competition in the legal services market; 6) no plaintiff is involved in an interstate mortgage transaction, distinguishing this from Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975); and 7) no competitor of Johnstone & O'Dwyer is alleged to be making interstate purchases whose flow will be disrupted by First Federal's activities, distinguishing this from our opinion in Doctors, Inc., supra. Because the trial court found defendant's activities to be neither in nor substantially affecting interstate commerce, it dismissed plaintiffs' Sherman Act claim for lack of federal subject matter jurisdiction.
As for the second federal claim, alleging violations of FHLBB regulations, the district court found this to be an area within the primary jurisdiction of the FHLBB. Accordingly, this claim was dismissed without prejudice to a right to renew the claim after consideration by the appropriate federal agency. The remaining pendent state claim was also dismissed by the trial court, relying on its discretion under United Mineworkers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).
The novel issue before us is the propriety of treating a motion to dismiss a Sherman Act claim for lack of subject matter jurisdiction in the same manner as other claims whose jurisdictional bases are not as intertwined with their merits. We hold that the trial court erred in its premature dismissal of plaintiff's claim, particularly because the nexus of interstate commerce necessary to sustain jurisdiction is inextricably related to the interstate effects plaintiffs will have to establish to succeed on the merits of this tying claim brought not under the Clayton Act § 3, 15 U.S.C. § 14, but under Sherman §§ 1 and 2.
Motions to dismiss on the pleadings, pursuant to Fed.R.Civ.P. 12, are often confused with each other: it is frequently unclear whether the trial court has dismissed under Rule 12(b)(1) or 12(b)(6), and even more importantly whether, if it was a 12(b)(6) proceeding, outside matters have been considered, thus converting the procedure into a Rule 56 summary judgment. See Fed.R.Civ.P. 12(b) (last sentence). The differences among these procedures are vital, however, especially when the claim subject to dismissal arises under the Sherman Act.
In § 1 of Sherman the jurisdictional basis and an element of the violation are both found in one phrase: "in restraint of trade or commerce among the several States." 15 U.S.C. § 1. That the same phrase is both an element of the offense and a vital prerequisite for federal court
The basic difference among the various 12(b) motions is, of course, that 12(b)(6) alone necessitates a ruling on the merits of the claim, the others deal with procedural defects. Because 12(b)(6) results in a determination on the merits at an early stage of plaintiff's case, the plaintiff is afforded the safeguard of having all its allegations taken as true and all inferences favorable to plaintiff will be drawn. The decision disposing the case is then purely on the legal sufficiency of plaintiff's case: even were plaintiff to prove all its allegations, he or she would be unable to prevail. In the interests of judicial economy it is not improper to dispose of the claim at that stage. If the court considers matters outside the pleadings before it in a 12(b)(6) motion, the above procedure will automatically be converted into a Rule 56 summary judgment procedure. Here there are further safeguards for the plaintiff: in addition to having all of plaintiff's allegations taken as true, with all their favorable inferences, the trial court cannot grant a summary judgment unless there is no genuine issue of material fact.
The procedure under a motion to dismiss for lack of subject matter jurisdiction is quite different. At the outset we must emphasize a crucial distinction, often overlooked, between 12(b)(1) motions that attack the complaint on its face and 12(b)(1) motions that attack the existence of subject matter jurisdiction in fact, quite apart from any pleadings. The facial attack does offer similar safeguards to the plaintiff: the court must consider the allegations of the complaint as true. The factual attack, however, differs greatly for here the trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction — its very power to hear the case — there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist.
The effect of the above procedure on Sherman Act claims is disturbing. If a court tests the sufficiency of interstate allegations under Fed.R.Civ.P. 12(b)(6) on the pleadings alone, the plaintiff need only have pleaded a sufficient nexus with interstate commerce, and will not be forced to prove those allegations at a pretrial stage. And if the court does go beyond the pleadings, it still must take plaintiff's allegations as true. In addition, the court cannot enter judgment if it appears that there is a material issue of disputed fact, but must await discovery and trial, during which plaintiff will have the opportunity to prove those material facts. But if this same nexus of interstate commerce is attacked as insufficient to provide jurisdiction in fact, rather than under rule 12(b)(6), the plaintiff must either prove the truth of the alleged nexus or stand by while the court evaluates those allegations in the same way a jury would evaluate that nexus as part of plaintiff's case on the merits, or as a court would in considering summary judgment.
This 12(b)(1) factual evaluation may occur at any stage of the proceedings,
Because this precise issue has not previously been before us, and because other Circuits have considered it, and with varied results, we think it worthwhile to outline briefly what other Circuits have been saying on the propriety of dismissing Sherman Act claims for lack of subject matter jurisdiction at a pretrial stage when relevant facts are in dispute, and relevant discovery has not been completed.
The Fifth Circuit has treated this issue on several occasions. In McBeath v. Inter-America Citizens for Decency Committee, 374 F.2d 359 (5th Cir.), cert. denied, 389 U.S. 896, 88 S.Ct. 216, 19 L.Ed.2d 214 (1967), the district court granted a motion to dismiss a Sherman Act claim for lack of subject matter jurisdiction. On appeal, the dismissal was reversed as premature because "where the factual and jurisdictional issues are completely intermeshed the jurisdictional issues should be referred to the merits, for it is impossible to decide the one without the other." Id., at 363. In particular, the requisite effect on interstate commerce was "so inextricably connected with the merits of the case itself" that it was error for the court to dismiss without allowing the plaintiff a full opportunity to prove his case on the merits. Id.
On the other hand, the Fifth Circuit did affirm a Fed.R.Civ.P. 12(b)(1) dismissal of a Sherman Act claim in Rosemound Sand & Gravel v. Lambert Sand & Gravel, 469 F.2d 416 (5th Cir.1972). But there, the court emphasized, plaintiff did have ample opportunity to argue his jurisdictional position. Despite the opportunity, plaintiff had only the barest conclusory allegations in his complaint, with little to buttress them. Again, in Battle v. Liberty National Life Insurance Co., 493 F.2d 39 (5th Cir.1974), cert. denied, 419 U.S. 1110, 95 S.Ct. 784, 42 L.Ed.2d 807 (1975), the court returned to disapproval of Sherman Act dismissals, for lack of sufficient interstate effects, at early stages of the proceedings.
The Seventh Circuit reversed a dismissal for lack of subject matter jurisdiction in A. Cherney Disposal Co. v. Chicago & Suburban Refuse Disposal Association, 484 F.2d 751 (7th Cir.1973), cert. denied, 414 U.S. 1131, 94 S.Ct. 870, 38 L.Ed.2d 755 (1974). After stating the proper test for establishing sufficient impact on interstate commerce to support jurisdiction, the court concluded:
Id. at 759. The court warned that there should not be a dismissal in those circumstances "unless the relation of the subject to interstate commerce and its effect upon it are clearly nonexistent." Id. See also United States v. Finis P. Ernest, Inc., 509 F.2d 1256, 1258 (7th Cir.), cert. denied sub nom. Modern Asphalt Paving & Construction Co. v. United States, 423 U.S. 874, 96 S.Ct. 142, 46 L.Ed.2d 105 (1975), cert. denied, 423 U.S. 893, 96 S.Ct. 191, 46 L.Ed.2d 124 (1975) (separate appeals).
We turn last to the Ninth Circuit opinions in Rasmussen v. American Dairy Association, 472 F.2d 517 (9th Cir. 1972), cert. denied, 412 U.S. 950, 93 S.Ct. 3014, 37 L.Ed.2d 1003 (1973); and Gough v. Rossmoor Corp., 487 F.2d 373 (9th Cir. 1973). In Rasmussen, the trial court dismissed the complaint, after a summary judgment hearing, for lack of subject matter jurisdiction. This ruling was reversed on appeal, with the court stressing that it was dealing only with the jurisdictional issue. The Rasmussen court bifurcated the import of "restraint of trade or commerce among the several States" into 1) the restraint, quite apart from any interstate nexus, and 2) the effect interstate of that restraint. The first part — the analysis on the merits — is centered on commonly understood undesirable restraints; the second — a constitutional requirement — is to ensure that Congress, and derivatively the federal courts, has power to act against that restraint.
We have spent some time describing these various approaches by other circuits to show that substantial confusion has been understandably generated by the difficulties of separating out the jurisdictional nexus from factual issues that go to the merits of the claim. It seems that Fed.R.Civ.P. 12(b)(1) factual (as opposed to merely facial) motions to dismiss for lack of jurisdiction cannot satisfactorily be treated the usual way, when a Sherman Act claim is involved.
In the face of the varied approaches taken by different circuits, we would hope to find illumination in Supreme Court pronouncements,
In Hospital, defendants responded to Sherman Act claims by moving to dismiss under Fed.R.Civ.P. 12(b)(1) and 12(b)(6). The same nexus was at issue in both motions: if the requisite effect on interstate commerce had not been alleged then the complaint should be dismissed for both lack of jurisdiction and failure to state a claim. Because the allegations in the complaint were not controverted, they were entitled to the same presumptive truthfulness in both motions. The district court dismissed the case; on appeal this was affirmed by the Fourth Circuit, as a dismissal under Fed.R.Civ.P. 12(b)(6).
Id. at 746-47, 96 S.Ct. at 1853-54 (emphasis added) (footnote omitted).
Subject matter jurisdiction in a Sherman Act claim is based on a finding either that the conduct in question is itself in interstate commerce or that whether or not the conduct is in interstate commerce it nevertheless substantially affects interstate commerce. The trial court applied both tests and found insufficient interstate factors to support jurisdiction. As in Kresge, supra, and Doctors, supra, we will consider only whether the alleged restraint "substantially affects" interstate commerce.
The obvious case to begin with is Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), since the conduct there was also legal services relating to home title closings. The legal practices involved were themselves performed wholly intrastate, but the Court nevertheless found jurisdiction. It did this by viewing the legal services as "an integral part" of the home mortgages. The mortgages were called interstate transactions because 1) roughly half of them were granted by out-of-state lenders, to finance the purchase of Virginia homes and 2) many of the loans were insured by out-of-state agencies.
In the case at hand, none of the mortgages were granted by out-of-state lenders although
We are also not unmindful of the Court's dicta in Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 194-95, 95 S.Ct. 392, 42 L.Ed.2d 378 (1974), to the effect that the intended jurisdictional reach of § 1 of Sherman is the "utmost extent" of Congress's power under the commerce clause. In fact, the Court in Hospital noted that although the Congress of 1890 took a narrow view of its power under the commerce clause, "[s]ubsequent decisions by this Court have permitted the reach of the Sherman Act to expand along with expanding notions of congressional power. See Gulf Oil [supra]." at 743, n. 2, 96 S.Ct. at 1852.
So we are faced with two considerations, both of which militate against early 12(b)(1) dismissals of Sherman Act claims: 1) the intertwined nature of the two sets of facts necessary for jurisdiction and the merits; and 2) an apparent increase in the jurisdictional reach of the Sherman Act, meaning that less substantial effects would be necessary to support jurisdiction.
The nexus between First Federal's alleged tie-in and interstate commerce is composed of, inter alia, the following factors: 1) First Federal is federally chartered and subject to federal regulation; 2) those regulations may prohibit the very activity complained of; 3) New York lenders compete for the mortgages, the alleged tying product; 4) out-of-state title companies may compete as a substitute for the title searches, the alleged tied product; 5) a considerable part of First Federal's loan funds is lent to First Federal from out-of-state; 6) many of the mortgages made by First Federal are insured by out-of-state institutions; 7) the alleged tie-in may place an unreasonable burden on the flow of home buyers, and related goods and services, into New Jersey; and 8) perhaps one-fourth of the mortgages are initiated by out-of-state mortgagors.
We think that the combination of these factors is sufficient to withstand a pretrial jurisdictional attack in this case. Many of
The second issue on appeal is whether the trial court was correct in ruling that the FHLBB regulations claim is within the primary jurisdiction of the FHLBB. On this issue we agree with the trial court.
The Mortensens assert violations of two regulations, 12 C.F.R. §§ 563.35(a)(3) and 571.7(b). Section 563.35(a) provides:
But defendants respond with § 563.35(c):
The section has recently been amended, and now reads:
Significant is an entirely new subsection "d" providing:
(effective Sept. 30, 1976). Because plaintiffs request class action certification, allege continuing violations, and request injunctive relief, the amended regulation will also apply, as of its effective date.
The issue is whether the alleged tie-in is prohibited under § 563.35(a)(3) or authorized under § 563.35(c). This in turn depends on whether the legal services at issue are rendered to and for the bank, First Federal, or are rendered to and for the customer plaintiffs.
The parties are squarely at odds on this factual issue. That fact alone distinguishes this case from Forrest, supra note 12. In Forrest, the plaintiffs who challenged a practice similar to the one under consideration were attorneys, who claimed they were being unlawfully excluded from performing the mortgage-related legal services. There was no dispute about to whom the legal services were rendered: the parties stipulated that the legal services were performed for the benefit and sole interest of the lenders. Moreover, in Forrest, no issue was raised as to the applicability of any federal regulations.
In the case at hand, however, we have both a claim directly under the federal banking regulations, and antitrust claims involving the same conduct alleged to violate federal regulations. In such a case it is entirely appropriate to allow the federal agency responsible for those regulations to have the initial opportunity to characterize the conduct in question. See United States v. Philadelphia National Bank, 374 U.S. 321, 353, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963); K. Davis, Administrative Law of the Seventies § 1901 (1976).
The same disposition applies to the Mortensens' second claim under the banking regulations, that First Federal has violated 12 C.F.R. § 571.7(b) by allowing defendant Johnstone to act as a director of First Federal while he is also a partner in the law firm to which the bank refers all its mortgage related work. That section provides:
At oral argument a question was raised as to whether plaintiffs can maintain a private cause of action under 12 C.F.R. §§ 563.35(a), (c) and 571.7(b). See Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975); Goldman v. First Federal Savings and Loan Association of Wilmette, 518 F.2d 1247, 1250 n. 6 (7th Cir. 1975) (per Stevens, J.). Because this issue was neither raised in the district court nor
Appellants contend that even assuming their claims under the FHLBB regulations would normally fall within the primary jurisdiction of the FHLBB, we should make an exception here because those claims are integrally related to a federal antitrust claim. See K. Davis, Administrative Law of the Seventies § 19.06 (1976). Because the federal courts have been given exclusive jurisdiction of federal antitrust claims, the Mortensens argue, the federal court should not defer to administrative agencies on claims involving the same conduct attacked as violative of the antitrust laws.
This argument misconstrues the nature of primary jurisdiction. That the appropriate administrative agency is given the first opportunity to categorize the factual issue here involved does not mean that its characterization will be binding on the federal court when it does consider the federal antitrust claim.
For that purpose, the district court on remand should consider staying the antitrust action in this suit until plaintiffs have obtained an interpretation from the FHLBB of the relevant regulations, in light of Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d 525 (1973). The Ricci Court affirmed a ruling that the district court must stay an antitrust suit, pending the Commodity Exchange Commission's determination. Three reasons were given: 1) the district court would have to determine whether the Commodity Exchange Act or any of its provisions are incompatible with the maintenance of an antitrust action; 2) some facets of the dispute were within the jurisdiction of the Commodity Exchange Commission; and 3) adjudication of that dispute by the agency promised to be of material aid in resolving the immunity question. Id. at 302, 93 S.Ct. 573.
For the foregoing reasons, we 1) vacate the dismissal of plaintiffs' Sherman Act claim, 2) affirm the holding that the FHLBB claims are within the primary jurisdiction of that agency, and 3) remand with instructions to consider a stay of the antitrust action in light of Ricci, supra. An order to that effect will be entered.
Brief of Appellant at 16.
During oral argument appellants mentioned that "several" closings took place out-of-state.
Because a motion to dismiss for lack of subject matter jurisdiction attacks the power of a court to enter any ruling on the merits, the jurisdictional issue is generally decided prior to the entry of judgment on the merits. In Forrest the district court said it would consider two of the claims on the merits (one being the single product issue) and that a treatment of those issues on the merits would "moot the need" to treat the jurisdictional issue. 385 F.Supp. at 835. Thus Forrest provides no illumination on our jurisdictional issue.
The other Sherman Act case in our circuit implicating Fed.R.Civ.P. 12(b)(1) did not in fact turn on subject matter jurisdiction. In Winkleman v. New York Stock Exchange, 445 F.2d 786 (3d Cir.1971), the trial court granted a motion to dismiss the complaint. The only such motion by defendant was a 12(b)(1) lack of subject matter jurisdiction motion. It was apparent on appeal, however, that the district court had actually considered the motion as made under Rule 56. 445 F.2d at 788. Because plaintiffs were given no opportunity to argue or brief the motion to dismiss, we reversed. As stated by Judge Adams, in American Motors Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230 (3d Cir.1975): "One of the basic tenets of American jurisprudence is that procedural fairness requires that each party have notice of the issues involved and an opportunity to be heard at a meaningful time and in a meaningful manner." Id. at 1244. We do have some concern, in the present case, that appellants did not have this opportunity.
Our most recent Sherman case, Evans v. S. S. Kresge Company, 544 F.2d 1184 (3d Cir., filed Nov. 2, 1976), did involve a dismissal for want of subject matter jurisdiction, but one granted on a motion for summary judgment, since both parties agreed there were no issues of material fact. Thus, a stage in pretrial discovery and other proceedings had thus been reached where all the relevant facts were agreed upon.
Apart from Sherman Act claims, though, we have frequently had the opportunity to discuss the proper standards for dismissals under Rule 12(b)(1). For example, in dealing with dismissals for lack of diversity jurisdiction, we have said that if the plaintiff "fails to bring forth any factual material to support his claim of jurisdiction, then dismissal may properly be granted against him. However, it should clearly appear from the record that plaintiff has had an opportunity to present facts . . . that diversity was not manufactured." Groh v. Brooks, 421 F.2d 589, 594 (3d Cir.1970). See also Tanzymore v. Bethlehem Steel Corp., 457 F.2d 1320 (3d Cir.1972); Nelson v. Keefer, 451 F.2d 289 (3d Cir.1971). We have also discussed 12(b)(1) dismissals in nondiversity cases. In Local 336, American Federation of Musicians, AFL-CIO v. Bonatz, 475 F.2d 433 (3d Cir.1973), we reversed the dismissal of a complaint that requested enforcement of an arbitration award. There, during argument on a motion for summary judgment, the court raised sua sponte the issue of subject matter jurisdiction. Judge Gibbons wrote that while the trial court does have significant latitude in determining matters of its own jurisdiction,
Id. at 437. See also Lasher v. Shafer, 460 F.2d 343 (3d Cir.1972) (Civil Rights Act claim).
The hesitancy of some district courts to confront this tricky jurisdictional issue is also exemplified in the one case, also in the Fifth Circuit, that dealt with a claim on the merits quite similar to the one sub judice, Forrest v. Capital Buildings & Loan Association, 504 F.2d 891 (5th Cir.1974), cert. denied, 421 U.S. 978, 95 S.Ct. 1980, 44 L.Ed.2d 470 (1975). In Forrest, defendant did make a 12(b)(1) motion but the trial court skipped to a decision against plaintiff on the merits, saying the jurisdictional issue was therefore moot. 385 F.Supp. at 835, aff'd, 504 F.2d 891 (5th Cir.1974).
Thus the Ninth Circuit's approach to the interrelation of Sherman Act claims' merit and their jurisdictional prerequisite differs greatly from that in the other circuits discussed. The Fourth Circuit, in Hospital, supra, preferred to treat a Sherman motion to dismiss for lack of jurisdiction as a motion on the merits under Fed.R.Civ.P. 56. 511 F.2d at 680-81 ("better" to treat an insufficient plea of effect on interstate commerce as a failure to state a claim).
As early as McBeath, supra, the Fifth Circuit held that the factual issues on the merits in a Sherman Act claim are inseparable from the factual issues on the jurisdictional question. As a result, the court held that plaintiff should be given full trial opportunities to establish those facts, rather than having the trial court evaluate jurisdiction at a more usual early stage under Rule 12(b)(1).
An even more intriguing approach is one described, but not adopted, in Finis P. Ernest, Inc., supra, by the Seventh Circuit: where a per se violation (such as price-fixing) is alleged the court could skip the usual "in or affecting commerce" jurisdictional test. This view implicitly equates the interstate nexus required for jurisdiction with that required for success on the merits. For cases so holding within the Seventh Circuit see U. S. Dental Inst. v. American Ass'n of Orth., 396 F.Supp. 565 (N.D.Ill. 1975) (can determine jurisdiction better after all evidence is in; for 12(b)(1) court should assume jurisdiction exists unless effect on interstate commerce is clearly non-existent); Mar-Farr Corp. v. Copley Press, Inc., 64 F.R.D. 456 (N.D.Ill.1974) (should not grant 12(b)(1) when unsure of effect on interstate commerce). Because those effects need not be proven for success on the merits, the facile conclusion is that "[i]t may be anomalous to require proof of effects to satisfy jurisdiction in those cases where proof of effects is not necessary to establish the substantive offense." 509 F.2d at 1259 (emphasis added). Even a leading antitrust commentator poses that question. See P. Areeda, Antitrust Analysis, ¶ 183 at 122 (2d ed. 1974). This seems to ignore the constitutional requirement of jurisdiction entirely.
A dismissal of a Sherman Act complaint for failure to state a cause of action was reversed in United States v. Employing Plasterers, 347 U.S. 186, 74 S.Ct. 452, 98 L.Ed. 618 (1954). The trial court had found "no allegation of fact which showed that these powerful local restraints had a sufficiently adverse effect on the flow of plastering materials into Illinois." 347 U.S. at 188, 74 S.Ct. at 454. The Supreme Court disagreed:
Id. at 188-89, 74 S.Ct. at 454.
A grant of summary judgment for defendants was reversed in Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962), not only because the plaintiff should be viewed favorably in any summary judgment but also because
Id. at 472-73, 82 S.Ct. at 491.
When the trial court in a non-jury trial found defendant's interstate nexus insufficient on the merits, the Supreme Court reversed in a brief per curiam in Burke v. Ford, 389 U.S. 320, 88 S.Ct. 443, 19 L.Ed.2d 554 (1967), finding the requisite nexus because the intrastate territorial division "almost surely resulted in fewer sales to retailers — hence fewer purchases from out-of-state distillers . . .." Id. at 322, 88 S.Ct. at 444.
In the current leading tie-in case, Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969), the Court again reversed the grant of summary judgment for defendants. The Supreme Court explained that not only had the district court misunderstood the legal principles on the merits, it had also "misconceived the extent of its authority to evaluate the evidence in ruling on this motion for summary judgment." Id. at 499, 89 S.Ct. at 1257. The Court then quoted from Poller, supra, that summary procedures should be used sparingly in antitrust litigation.
Although it did not involve a tie-in claim, Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), did concern the interstate nexus sufficient to support jurisdiction. The trial court in Goldfarb conducted a hearing on the issue of liability during which it disposed of defendant's "defense" of insufficient effect on interstate commerce. The Supreme Court agreed, that the alleged intrastate restraint "may substantially affect commerce." Id. at 785, 95 S.Ct. 2004 (emphasis added).
See also Battle v. Liberty National Life Insurance Co., 493 F.2d 39 (5th Cir. 1974), cert. denied, 419 U.S. 1110, 95 S.Ct. 784, 42 L.Ed.2d 807 (1975); Brett v. First Federal Savings & Loan Ass'n, 461 F.2d 1155 (5th Cir. 1972). The district court relied on Spens v. Citizens Federal Savings & Loan Ass'n, 364 F.Supp. 1161 (N.D.Ill.1973), saying: "Facts identical with those under discussion, i.e., an allegedly unlawful tie-in involving credit imposed by a single institution without market power, compelled dismissal on jurisdictional grounds of a claim under § 1 of the Sherman Act [in Spens]." Appendix at 290a (emphasis added). But in Spens, although the court dismissed under Fed.R.Civ.P. 12 without specifying any section of Rule 12, it is apparent that the dismissal was granted under Rule 12(b)(6). The court said plaintiffs had failed to state a cause of action because they had alleged neither a conspiracy nor, under Fortner, any market power.