J. TRUETT PAYNE CO., INC. v. CHRYSLER MOTORS CORP.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.
Argued January 21, 1981.
Decided May 18, 1981.
Petitioner, a former automobile dealer, brought suit against respondent automobile manufacturer in Federal District Court, alleging that respondent's "sales incentive" programs over a certain period violated the price-discrimination prohibition of 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act. Under its programs, respondent paid a bonus to its dealers if they exceeded their quotas - set by respondent for each dealer - of cars to be sold at retail or purchased from respondent. Petitioner alleged that respondent set petitioner's quotas higher than those of its competitors; that to the extent it failed to meet its quotas, and to the extent its competitors met their lower quotas, petitioner received fewer bonuses; and that the net effect was that it paid more for its automobiles than did its competitors. Petitioner contended that the amount of the price discrimination - the amount of the price difference multiplied by the number of petitioner's purchases - was $81,248, and that when petitioner went out of business, the going-concern value of the business ranged between $50,000 and $170,000. Respondent maintained that the sales incentive programs were nondiscriminatory, and that they did not injure petitioner or adversely affect competition. The jury returned a verdict awarding petitioner $111,247.48 in damages, which the District Court trebled. The Court of Appeals reversed, holding that it was unnecessary to consider whether a violation of 2 (a) had been proved, since petitioner had failed to introduce substantial evidence of injury attributable to the programs, much less substantial evidence of the amount of such injury, as was required in order to recover treble damages under 4 of the Clayton Act.
REHNQUIST, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, WHITE, and STEVENS, JJ., joined. POWELL, J., filed an opinion dissenting in part, in which BRENNAN, MARSHALL, and BLACKMUN, JJ., joined, post, p. 569.
C. Lee Reeves argued the cause and filed briefs for petitioner.
J. Ross Forman III argued the cause and filed a brief for respondent. *
[ Footnote * ] Robert H. Whaley filed a brief for Ricky Hasbrouck et al. as amici curiae urging reversal.
Briefs of amici curiae were filed by Thomas E. Deacy, Jr., E. Houston [451 U.S. 557, 559] Harsha, and Alan I. Becker, for Cessna Aircraft Co., and by John T. Cusack and Gordon B. Nash, Jr., for Vanco Beverage, Inc. [451 U.S. 557, 559]
JUSTICE REHNQUIST delivered the opinion of the Court.
The question presented in this case is the appropriate measure of damages in a suit brought under 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act. 1
Petitioner, for several decades a Chrysler-Plymouth dealer in Birmingham, Ala., went out of business in 1974. It subsequently brought suit against respondent in the United States District Court for the Northern District of Alabama, alleging that from January 1970 to May 1974 respondent's various "sales incentive" programs violated 2 (a). Under one type of program, respondent assigned to each participating dealer a sales objective and paid to the dealer a bonus on each car sold in excess of that objective. Under another type of program, respondent required each dealer to purchase from it a certain quota of automobiles before it would pay a bonus on the sale of automobiles sold at retail. The amount of the [451 U.S. 557, 560] bonus depended on the number of retail sales (or wholesale purchases) made in excess of the dealer's objective, and could amount to several hundred dollars. Respondent set petitioner's objectives higher than those of its competitors, requiring it to sell (or purchase) more automobiles to obtain a bonus than its competitors. To the extent petitioner failed to meet those objectives and to the extent its competitors met their lower objectives, petitioner received fewer bonuses. The net effect of all this, according to petitioner, was that it paid more money for its automobiles than did its competitors. It contended that the amount of the price discrimination - the amount of the price difference multiplied by the number of petitioner's purchases - was $81,248. It also claimed that the going-concern value of the business as of May 1974 ranged between $50,000 and $170,000.
Respondent maintained that the sales incentive programs were nondiscriminatory, and that they did not injure petitioner or adversely affect competition. The District Court denied respondent's motion for a directed verdict. The jury returned a verdict against respondent and awarded petitioner $111,247.48 in damages, which the District Court trebled.
The Court of Appeals for the Fifth Circuit reversed with instructions to dismiss the complaint. 607 F.2d 1133 (1979). It found that in order to recover treble damages under 4 of the Clayton Act, a plaintiff must prove (1) a violation of the antitrust laws, (2) cognizable injury attributable to the violation, and (3) at least the approximate amount of damage. It found it unnecessary to consider whether petitioner proved that respondent's incentive programs violated 2 (a) because, in its view, petitioner had "failed to introduce substantial evidence of injury attributable to the programs, much less substantial evidence of the amount of such injury." Id., at 1135. Rejecting petitioner's theory of "automatic damages." under which mere proof of discrimination establishes the fact and amount of injury, the court held that injury must be proved by more than mere "[c]onclusory statements [451 U.S. 557, 561] by the plaintiff, without evidentiary support." Id., at 1136-1137. The court concluded that the District Court erred in refusing respondent's motion for a directed verdict and in denying its motion for judgment notwithstanding the verdict. We granted certiorari, 449 U.S. 819 (1980), to review the decision of the Court of Appeals.
Petitioner first contends that once it has proved a price discrimination in violation of 2 (a) it is entitled at a minimum to so-called "automatic damages" in the amount of the price discrimination. Petitioner concedes that in order to recover damages it must establish cognizable injury attributable to an antitrust violation and some approximation of damage. Brief for Petitioner 9. It insists, however, that the jury should be permitted to infer the requisite injury and damage from a showing of a substantial price discrimination. Petitioner notes that this Court has consistently permitted such injury to be inferred in injunctive actions brought to enforce 2 (a), e. g., FTC v. Morton Salt Co., 334 U.S. 37 (1948), and argues that private suits for damages under 4 should be treated no differently. We disagree. 2
By its terms 2 (a) is a prophylactic statute which is violated merely upon a showing that "the effect of such discrimination may be substantially to lessen competition." [451 U.S. 557, 562] (Emphasis supplied.) As our cases have recognized, the statute does not "require that the discriminations must in fact have harmed competition." Corn Products Refining Co. v. FTC, 324 U.S. 726, 742 (1945); FTC v. Morton Salt Co., supra, at 46 ("the statute does not require the Commission to find that injury has actually resulted"). Section 4 of the Clayton Act, in contrast, is essentially a remedial statute. It provides treble damages to "[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . ." (Emphasis supplied.) To recover treble damages, then, a plaintiff must make some showing of actual injury attributable to something the antitrust laws were designed to prevent. Perkins v. Standard Oil Co., 395 U.S. 642, 648 (1969) (plaintiff "must, of course, be able to show a causal connection between the price discrimination in violation of the Act and the injury suffered"). It must prove more than a violation of 2 (a), since such proof establishes only that injury may result.
Our decision here is virtually governed by our reasoning in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). There we rejected the contention that the mere violation of 7 of the Clayton Act, which prohibits mergers which may substantially lessen competition, gives rise to a damages claim under 4. We explained that "to recover damages [under 4] respondents must prove more than that the petitioner violated 7, since such proof establishes only that injury may result." Id., at 486. Likewise in this case, proof of a violation does not mean that a disfavored purchaser has been actually "injured" within the meaning of 4.
The legislative history buttresses this view. Both the Patman bill, H. R. 8442, 2 (d), 74th Cong., 1st Sess. (1935), as introduced in the House, and the Robinson bill, S. 3154, 2 (d), 74th Cong., 2d Sess. (1935), as introduced in the Senate, provided that a plaintiff's damages for a violation of 2 (a) shall be presumed to be the amount of the price discrimination. The provision, however, encountered such [451 U.S. 557, 563] strong opposition in both Houses that the House Committee eliminated it from its bill, H. R. Rep. No. 2287, 74th Cong., 2d Sess., 16 (1936), and the Senate Committee modified the provision to authorize presumptive damages in the amount of the discrimination only when plaintiff shows the "fact of damage." S. Rep. No. 1502, 74th Cong., 2d Sess., 8 (1936). The Conference Committee eliminated even that compromise, and 2 (a) was passed in its present form. Congress thus has rejected the very concept which petitioner seeks to have the Court judicially legislate. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 199 -201 (1974). 3
Petitioner next contends that even though it may not be entitled to "automatic damages" upon a showing of a violation of 2 (a), it produced enough evidence of actual injury to survive a motion for a directed verdict. That evidence consisted primarily of the testimony of petitioner's owner, Mr. Payne, and an expert witness, a professor of economics. Payne testified that the price discrimination was one of the causes of the dealership going out of business. In support of that contention, he testified that his salesmen told him that the dealership lost sales to its competitors, and that its market share of retail Chrysler-Plymouth sales in the Birmingham area was 24% in 1970, 27% in 1971, 23% in 1972, and 25% in 1973. Payne contended that it was proper to infer that the 4% drop in 1972 was a result of the incentive programs. [451 U.S. 557, 564] He also testified that the discrimination caused him to "force" business so that he could meet his assigned quotas. That is, his desire to make a sale induced him to "overallow" on trade-ins, thus reducing his profits on his used car operation. App. 51-52. Payne adduced evidence showing that his average gross profit on used car sales was below that of his competitors, though that same evidence revealed that his average gross profit on new sales was higher. Id., at 269.
Neither Payne nor petitioner's expert witness offered documentary evidence as to the effect of the discrimination on retail prices. Although Payne asserted that his salesmen and customers told him that the dealership was being undersold, id., at 35-37, 92, 95, he admitted he did not know if his competitors did in fact pass on their lower costs to their customers. Id., at 44, 57. Petitioner's expert witness took a somewhat different position. He believed that the discrimination would ultimately cause retail prices to be held at an artificially high level since petitioner's competitors would not reduce their retail prices as much as they would have done if petitioner received an equal bonus from respondent. Id., at 103, 135. He also testified that petitioner was harmed by the discrimination even if the favored purchasers did not lower their retail prices, since petitioner in that case would make less money per car. 4 Id., at 139. [451 U.S. 557, 565]
Even construed most favorably to petitioner, the evidence of injury is weak. Petitioner nevertheless asks us to consider the sufficiency of its evidence in light of our traditional rule excusing antitrust plaintiffs from an unduly rigorous standard of proving antitrust injury. In Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 -124 (1969), for example, the Court discussed at some length the fixing of damages in a case involving market exclusion. We accepted the proposition that damages could be awarded on the basis of plaintiff's estimate of sales it could have made absent the violation:
Applying the foregoing principles to this case is not without difficulty. In the first place, it is a close question whether petitioner's evidence would be sufficient to support a jury award even under our relaxed damages rules. In those cases where we have found sufficient evidence to permit a jury to infer antitrust injury and approximate the amount of damages, the evidence was more substantial than the evidence presented here. In Zenith, for example, plaintiff compared its sales in Canada, where it was subject to a violation, with its sales in the United States, where it was not. And in Bigelow, plaintiff adduced evidence not only comparing its profits with a competitor not subject to the violation but also comparing its profits during the time of the violation with the period immediately preceding the violation. 5 [451 U.S. 557, 568]
But a more fundamental difficulty confronts us in this case. The cases relied upon by petitioner all depend in greater or lesser part on the inequity of a wrongdoer defeating the recovery of damages against him by insisting upon a rigorous standard of proof. In this case, however, we cannot say with assurance that respondent is a "wrongdoer." Because the court below bypassed the issue of liability and went directly to the issue of damages, we simply do not have the benefit of its views as to whether respondent in fact violated 2 (a). Absent such a finding, we decline to apply to this case the lenient damages rules of our previous cases. Had the court below found a violation, we could more confidently consider the adequacy of petitioner's evidence.
Accordingly, we think the proper course is to remand the case so that the Court of Appeals may pass upon respondent's contention that the evidence adduced at trial was insufficient to support a finding of violation of the Robinson-Patman Act. We do not ordinarily address for the first time in this Court an issue which the Court of Appeals has not addressed, and we think this would be a poor case in which to depart from that practice. If the court determines on remand that respondent did violate the Act, the court should then consider the sufficiency of petitioner's evidence of injury in light of the cases discussed above. We, of course, intimate no views as to how that issue should be decided. We emphasize that even if there has been a violation of the Robinson-Patman Act, petitioner is not excused from its burden of proving antitrust injury and damages. It is simply that once a violation has been established, that burden is to some extent lightened. [451 U.S. 557, 569]
For the foregoing reasons, the judgment of the Court of Appeals is vacated, and the case is remanded for proceedings consistent with this opinion.
[ Footnote 2 ] The automatic-damages theory has split the lower courts. The leading case approving the theory is Fowler Manufacturing Co. v. Gorlick, 415 F.2d 1248 (CA9 1969), cert. denied, 396 U.S. 1012 (1970). See also Elizabeth Arden Sales Corp. v. Gus Blass Co., 150 F.2d 988 (CA8) (involving 2 (d) and 2 (e) of the Act), cert. denied, 326 U.S. 773 (1945); Grace v. E. J. Kozin Co., 538 F.2d 170 (CA7 1976) (involving 2 (c) of the Act). The leading case rejecting the theory is Enterprise Industries, Inc. v. Texas Co., 240 F.2d 457 (CA2), cert. denied, 353 U.S. 965 (1957). Accord, Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (CA3 1980); McCaskill v. Texaco, Inc., 351 F. Supp. 1332 (SD Ala. 1972), affirmance order, 486 F.2d 1400 (CA5 1973); Kidd v. Esso Standard Oil Co., 295 F.2d 497 (CA6 1961).
[ Footnote 3 ] Relying on Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743, 757 (1947), petitioner argues that this Court has previously accepted the automatic-damages theory. In that case, the Court stated that if petitioner can show an illegal price discrimination under the Act, "it would establish its right to recover three times the discriminatory difference without proving more than the illegality of the prices." Ibid. But that statement is merely dictum, since the only issue before the Court was whether a violation of 2 (a) could be used as an affirmative defense to void a contract.
[ Footnote 4 ] Respondent suggests that petitioner's inability to show that his favored competitors lowered their retail sales price should defeat recovery. That argument assumes that evidence of a lower retail price is the sine qua non of antitrust injury, that the disfavored purchaser is simply not "injured" unless the favored purchaser has lowered his price. If the favored purchaser has lowered his retail price, for example, the disfavored purchaser will lose sales to the extent it does not match that lower price. Similarly, if the disfavored purchaser matches the lower price, it will lose profits. Because petitioner has not shown that the favored purchaser have lowered their retail price, petitioner is arguably foreclosed from showing that it lost either sales or profits. Justice Cardozo seemingly adopted [451 U.S. 557, 565] this position in ICC v. United States, 289 U.S. 385, 390 -391 (1933), a case involving rate discrimination under the Interstate Commerce Act:
[ Footnote 5 ] Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555 (1931), is similarly distinguishable. In upholding a jury verdict against respondents for a violation of 2 of the Sherman Act, the Court observed:
JUSTICE POWELL, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and JUSTICE BLACKMUN join, dissenting in part.
I concur in Part I of the Court's opinion, but simply would affirm the judgment of the Court of Appeals.
The Court of Appeals concluded that petitioner "failed to introduce substantial evidence of injury attributable to [respondent's program], much less substantial evidence of the amount of such injury." 607 F.2d 1133, 1135. In Part II of its opinion, the Court today reviews the evidence, vacates the judgment of the Court of Appeals, and remands the case for a resifting of the evidence and determination of whether respondent violated the Clayton Act as amended by the Robinson-Patman Act. The Court identifies no error of fact or law in the judgment of the Court of Appeals, but vacates that judgment only because the Court finds it "unclear" whether there is sufficient evidence. I find no basis for this Court undertaking to second-guess the Court of Appeals as to the sufficiency of evidence.
Even if there were some satisfactory reason for us to review the evidence in this relatively uncomplicated case, I think the Court of Appeals was plainly correct in finding petitioner's evidence insufficient to show a competitive injury of the kind that the antitrust laws were enacted to prevent. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 -489 (1977). Section 2 (a) is a prophylactic statute that makes unlawful price discrimination that "may . . . lessen competition." Thus, a court cannot infer from the fact of a violation that defendant's behavior has caused plaintiff any injury. A plaintiff must show, to recover damages for violation of 2 (a), that unlawful discrimination in price allowed a favored competitor to draw sales or profits [451 U.S. 557, 570] from him, the unfavored competitor. See Enterprise Industries, Inc. v. Texas Co., 240 F.2d 457, 458 (CA2), cert. denied, 353 U.S. 965 (1957). Petitioner's evidence, which the Court concedes to be "weak," ante, at 565, amounts to nothing more than a showing that its market share declined temporarily 4% in 1972. Petitioner presented no substantial evidence that respondent's incentive program caused its market share to shrink. Indeed, over the 4-year period of the challenged programs its market share increased 1%. Rather, petitioner relied on its president's conclusory testimony, which consisted in major part of hearsay statements from petitioner's automobile salesmen. Hypothetical analysis of the "predicted effects" of respondent's program by an economics professor also was relied upon by petitioner to prove the actual cause of injury. One hardly would expect this Court to reject a Court of Appeals judgment that evidence as flimsy as this was insufficient to go to the jury.
My concern with the Court's opinion, however, goes beyond its reviewing the evidence. I have understood that in a Robinson-Patman Act case the plaintiff has the burden of proving the fact of antitrust injury by a preponderance of the evidence. See Perkins v. Standard Oil Co., 395 U.S. 642, 648 (1969). Only when this fact has been proved may a court properly be lenient in the evidence it requires to prove the amount of damages. See Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931). It is not at all apparent that the Court adequately recognizes this distinction.
It seems to me that today's remand measurably increases the uncertainty inherent in the generalities of the Robinson-Patman Act. Accordingly, I dissent. [451 U.S. 557, 571]