McMANUS, Chief Judge.
This matter is before the court on defendants' resisted motions seeking dismissal, summary judgment, or an order to arbitrate, all filed March 3, 1977.
Plaintiff Stifel, Nicolaus & Company, Inc. (Stifel) has brought this action against defendant Dain, Kalman & Quail, Inc. (DKQ) for alleged violations of §§ 1 and 2 of the Sherman Act
In the setting of facially non-frivolous claims of anti-trust violations arising out of the same set of facts allegedly constituting unfair competition the court is disinclined to order arbitration. The antitrust issues raised by the pleadings and contested by motions to dismiss and for summary judgment are inappropriate for commercial arbitration but should be decided by this court. See e. g., Gutor International A. G. v. Raymond Packer Co., Inc., 493 F.2d 938, 948 n. 17 (1st Cir. 1974); Cobb v. Lewis, 488 F.2d 41, 47 (5th Cir. 1974); American Safety Eqpt. Corp. v. J. P. Maguire & Co., 391 F.2d 821, 828 (2d Cir. 1968). See also Helfenbein v. International Industries, Inc., 438 F.2d 1068, 1070 (8th Cir. 1971).
The standards for dismissal and summary judgment set the backdrop against which
Motions to dismiss are contraindicated unless it appears to a certainty that plaintiff is entitled to no relief under any set of facts which would be proved in support of the claim. See, e. g., Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972); Haines v. Kerner, 404 U.S. 519, 521, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Motions for summary judgment are unavailing unless there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Rule 56(c) FRCP; see Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). In the case of either motion the court is required to construe the facts in the light most favorable to the party opposing the motion. Compare Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) with Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969) and Park View Heights Corp. v. City of Black Jack, 467 F.2d 1208, 1212 n. 3 (8th Cir. 1972). The only perceived difference is the measure of factual scrutiny; in a motion to dismiss all well pleaded facts are taken as true, in a motion for summary judgment the opposing party is only given the benefit of all reasonable inferences to be drawn from those facts. Id. In either case it is apparent that the burden on DKQ is particularly heavy.
Motion to Dismiss Count I
The following facts are taken as true in accordance with the forementioned standards. Plaintiff corporation was at all times material a brokerage firm providing investment services in the Middle West region with offices situated in Cedar Rapids, Iowa and Iowa City, Iowa. Defendant Dain, Kalman & Quail, Inc. (DKQ) was at all times material a brokerage firm with an office located in Cedar Rapids, and was a competitor of plaintiff and a dominant factor in the brokerage and investment services business in that locality. Defendant Fischer was chairman of the board and chief executive officer of DKQ and its holding company, defendant Inter-Regional Financial Group, Inc. Defendants Stamp, Brawner and Jackson were registered representatives and employees of plaintiff Stifel.
Commencing prior to August 25, 1975, the defendants conspired together to lessen and eliminate competition of plaintiff company in the brokerage business in the Cedar Rapids-Iowa City area. To effectuate said conspiracy, Brawner and Jackson precipitously terminated their employment with plaintiff and immediately commenced employment with DKQ. Prior to leaving Stifel, Brawner and Jackson together with the other defendants induced and enticed all of plaintiff's employees, from manager to secretary, to leave plaintiff's employ and become employees of DKQ. The departure of the complete staff effectively closed down plaintiff's offices in Cedar Rapids and Iowa City. Brawner, Jackson and Stamp began to solicit future patronage for DKQ while still employed by plaintiff. The three former employees of plaintiff also delivered to DKQ copies of certain confidential business records belonging to plaintiff.
Plaintiff maintains that these facts establish a conspiracy among the defendants to eliminate plaintiff as a competitor and that such conduct constitutes unfair competition and an unreasonable restraint of trade, and thus is violative of § 1 of the Sherman Act. The court, initially persuaded that the complaint sufficiently alleged the essential elements of an antitrust claim under § 1 to withstand a motion to dismiss, tentatively
The court in the previous order canvassed the essential elements of a viable treble damage action under § 1. Because most of these elements are not implicated in the decision to grant defendants' motion to dismiss, it is necessary only to allude to them.
To state a claim upon which relief can be granted under § 1 of the Sherman Act "allegations adequate to show a violation and, in a private treble damage action, that plaintiff was damaged thereby are all that the law requires". Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 660, 81 S.Ct. 365, 367, 5 L.Ed.2d 358 (1961); Knuth v. Erie-Crawford Dairy Coop. Ass'n, 395 F.2d 420, 423 (3d Cir. 1968). Stifel clearly has satisfied the requirement that it show that it was damaged. The requisites of violation, therefore, need be addressed.
A sufficient nexus with interstate commerce to trigger application of the Act is perhaps the threshold consideration. The multistate character of the corporate parties, their regional competitive status, the subject matter of the alleged conspiracy, brokerage of securities and similar investments on local and national exchanges all indicate a sufficient connection between the activities complained of here and interstate commerce to invoke Sherman Act analysis. See United States v. Bensinger Co., 430 F.2d 584, 588-89 (8th Cir. 1970); Cook v. Ralston Purina Co., 366 F.Supp. 999, 1009-1010 (M.D.Ga.1973).
A conspiracy or combination in restraint of trade must be found. The interaction among defendants Stamp, Brawner, Jackson and DKQ at a time when the individual defendants were in the employ of Stifel constitutes conspiracy within the meaning § 1. See C. Albert Sauter Co., Inc. v. Richard S. Sauter Co., Inc., 368 F.Supp. 501, 510 (E.D.Pa.1973); Beacon Fruit & Produce Co. v. H. Harris & Co., 152 F.Supp. 702, 704-05 (D.Mass.1957).
The question remaining concerns whether plaintiff has averred such facts and circumstances as can be reasonably considered to imply a conspiracy "in restraint of trade or commerce". Although the proscription of conspiracies in restraint of trade or commerce is literally all-encompassing, "the courts have construed it as precluding only those contracts or combinations which `unreasonably' restrain competition. Northern Pac. Ry. v. United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958); see United States v. American Tobacco Co., 221 U.S. 106, 179, 31 S.Ct. 632, 55 L.Ed. 663 (1911); Standard Oil Co. v. United States, 221 U.S. 1, 59-68, 31 S.Ct. 502, 55 L.Ed. 619 (1911). The "rule of reason" requires that the restraint of trade affect market prices or otherwise deprive consumers of the advantages of free competition. Apex Hosiery Co. v. Leader, 310 U.S. 469, 500-501, 60 S.Ct. 982, 84 L.Ed. 1311 (1939).
There is, however, a rather amorphous category of activities and commercial practices in restraint of trade that are so inimical to competition or so frequently impede the free flow of commerce that they are presumed unreasonable. Commercial conduct held to be in the forbidden category as per se unreasonable include price fixing agreements, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940); United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700 (1927), group boycotts, Klor's, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959); Fashion Originators Guild of America v. F.T.C., 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941), and patent-related tying arrangements. International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20 (1947).
Establishing the applicability of a per se rule to the alleged anticompetitive conduct obviates the need to show any particular impact on interstate commerce since it is presumed as a matter of law. United
It is conceded that plaintiff has alleged no impact on interstate commerce in conformance with the rule of reason. Plaintiff does rely, however, on a line of cases, the Pick-Barth line of cases, that seemingly hold that a conspiracy to eliminate a competitor in interstate commerce or destroy that competitor's ability to compete is a per se violation of § 1 of the Sherman Act. Since the court considers that the validity of defendants' motion to dismiss Count I turns on the viability of the Pick-Barth per se rule, an in-depth examination of cases applying or rejecting the rule is indicated.
The seminal case in the formation of the rule is Albert Pick-Barth Co. v. Mitchell Woodbury Corp., 57 F.2d 96 (1st Cir. 1932). There the defendant corporation dealing in china, glassware, kitchen utensils and equipment, and constituting the "largest and a dominating factor" in that business in the United States, conspired with trusted employees of plaintiff corporation, its largest competitor in a particular section of the country, to destroy plaintiff's business. This intended result was accomplished by unfair competition — inducing plaintiff's employees to leave their employ taking with them customer lists, cost records, and other vital documents, conspiring with plaintiff's employees to secretly solicit plaintiff's customers on behalf of defendant, and so on.
Despite the absence of a finding of an unreasonable restraint of trade,
The First Circuit reiterated the Pick-Barth rule in Atlantic Heel Co. v. Allied Heel Co., 284 F.2d 879 (1960), although certainly not unequivocally,
Perryton Wholesale, Inc. v. Pioneer Distributing Co. of Kan., 353 F.2d 618 (10th Cir. 1965) has usually been attributed to be the penultimate in the Pick-Barth line. The factual context was the now-familiar conspiracy to solicit and use plaintiff's employees to acquire plaintiff's business for the defendant. The Tenth Circuit without a specific finding of public injury, upheld the finding of the lower court that the conduct involved there — elimination of a competitor that was predominant in the market by subversion of its employees — amounted to a violation of § 1 of the Sherman Act. See Perryton, supra, at 622. Pick-Barth and Atlantic Heel were cited as direct authority.
The final unqualified application of Pick-Barth was C. Albert Sauter Co., Inc. v. Richard S. Sauter Co., Inc., 368 F.Supp. 501 (E.D.Pa.1973). The court there was in a posture of considering a number of post-trial motions after the jury had rendered a verdict for the plaintiff on its § 1 claim. The key factual finding most relevant to the context here was that the defendants solicited, hired, or frightened away plaintiff's key employees for the purpose of eliminating plaintiff as a competitor. Id. at 506. The court rejected defendants' attempt to distinguish Pick-Barth on the basis of relative market control, id. at 512, and employed the per se unreasonableness analysis.
Whitten undeniably is a re-evaluation of the Pick-Barth rule.
The Pick-Barth per se rule is, thus, arguably confined to those situations in which it is alleged that a conspiracy in restraint of trade involving a significant factor in the market utilized unfair means of competition with the intent not just to hurt a competing enterprise but to completely destroy or eliminate that competitor from the market. See Tower Tire & Auto CTR, Inc. v. Atlantic Richfield Co., 392 F.Supp. 1098, 1104-05 (S.D.Texas 1975).
This is the situation that the court now confronts. Plaintiff carefully alleges in the
The reluctance to apply a per se rule here is based on two principles: first, in the absence of egregious anti-competitive impact and in the absence of a Supreme Court pronouncement on the matter, per se rules are to be rarely invoked; second, the Sherman Act is not to serve as a remedy to all torts affecting interstate commerce nor is it to serve as a general purpose law prohibiting unfair trade practice.
This court joins other courts in viewing with trepidation a per se rule that is based on a hazy distinction between intent to harm and intent to destroy.
Motion to Dismiss or Motion for Summary Judgment on Count II
The court now considers whether the facts as stated by Stifel, and all reasonable inferences to be drawn from those facts under § 2 of the Sherman Act are sufficient to withstand either defendants' motion to dismiss or defendants' motion for summary judgment. The court has examined all briefs and affidavits accompanying the motions;
In Count II of its complaint plaintiff has alleged monopolization or attempted monopoly by DKQ.
Monopolization, as defined by antitrust case law, consists of two elements:
Stifel's monopolization claim fails in the first instance — possession of monopoly power by DKQ in the relevant market.
Monopoly power has long been defined as "the power to control market prices or exclude competition". See, e. g., United States v. Grinnell Corp., supra, at 571, 86 S.Ct. at 1704; United States v. Griffith, 334 U.S. 100, 105, 68 S.Ct. 941, 92 L.Ed. 1236 (1948); American Tobacco Co. v. United States, 328 U.S. 781, 811, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946). The existence of monopoly power may be inferred from a predominant share of the market, United States v. Grinnell Corp., supra, at 571, 86 S.Ct. 1698, but the size of the share depends on the relevant market.
Assuming for the purpose of this motion that plaintiff's averment of the Cedar Rapids-Iowa City area as the relevant market is true, the uncontested affidavit of defendant Daryl Stamp, a registered representative in the brokerage and securities business in the area, establishes that DKQ's market share, based on the number of registered representatives in the area and on the ready availability of investment services from businesses in geographical proximity, is less than thirty per cent. Plaintiff offers no counter affidavit as to market share and has alleged no actual ability to exclude competition or control prices in the area of DKQ.
Plaintiff's attempted monopoly claim is also deficient. Stifel must show that DKQ possessed a "specific intent to monopolize and a dangerous probability of success
It is therefore
1. Defendants' motion to dismiss Count I granted.
2. Defendants' motion for summary judgment as to Count II granted.
3. Count III of plaintiff's complaint dismissed in the exercise of the court's discretion for lack of an underlying federal issue.
Frederick Chusid & Co. v. Marshall Leeman & Co., 326 F.Supp. 1043 (S.D.N.Y.1971) concerned unfair competitive practices between two competing businesses offering counseling services to business executives. The court refused to apply Pick-Barth, asserting that the enticement of plaintiff's employees, the pirating of trade secrets, and so on was visited upon plaintiff for the purpose of establishing a competitor and not eliminating a competitor. Id. at 1063.
In duPont Walston, Inc. v. E. F. Hutton & Co., 368 F.Supp. 306 (S.D.Fla.1973), the court avoided applying the Pick-Barth rule to a conspiracy effecting an en masse employee migration from plaintiff to defendant, stating: "In Pick-Barth, Atlantic Heel, Perryton and Sauter, each plaintiff alleged and proved a conspiracy to either destroy a competitor in interstate commerce by unfair trade practices, or by use of unfair trade practices to impair the plaintiff's ability to compete in interstate commerce. No such allegations are made in the case at bar." Id. at 308. Thus, in the absence of an allegation of public injury the court would not find defendant's actions to be a violation of the Sherman Act.
The Eighth Circuit has had occasion to consider Pick-Barth in passing. Metal Lubricants Co. v. Engineered Lubricants Co., 411 F.2d 426 (1969) affirmed the district court's determination that no conspiracy utilizing unfair means of competition had been established within the meaning of § 1 of the Sherman Act. The court, contrasted the rule establishing the right of employees to terminate their employment and enter into fair competition with "the law forbidding former employees conspiring to induce others to quit their employer for the express purpose of eliminating their former employer as a competitor. National Rejectors embodies the first rule, Perryton the second."
The most that can be said about the precedential value of Metal Lubricants with respect to application of the Pick-Barth rule is that Metal Lubricants in dicta recognized it but did not approve or apply it.
These points underscore the court's reluctance to apply a per se rule here. The formulation in Pick-Barth of a per se rule respecting two market giants does not apply to the instant case. The court considers the extension of the per se rule from the situation in Pick-Barth of "the largest and dominant factor" attempting to eliminate its "largest competitor" to the situation in Atlantic Heel where a consideration of intercorporate dimensions was "not . . . crucial to the court's analysis" to be, though not casual, unwarranted. The value of prior case experience and the availability of alternative remedies such as tort sanctions, two of the impressions delineated in Whitten, further support this court's approach.
The uncertain posture of Whitten is compounded by what appears to be retrenchment by the Tenth Circuit on Perryton. Thus, in Craig v. Sun Oil Co. of Penn., supra, at 223-24, the court stated: "We do not consider Perryton Whoesale, Inc. v. Pioneer Distributing Co. of Kansas, 353 F.2d 618 (10th Cir.) to be applicable to this case, as the court was there concerned with a particular type of business activity which is not present here. Reference is made in the Perryton opinion to existing competition, and it is not necessarily a per se case despite citation of the First Circuit cases. (emphasis supplied).