Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 77-C-728 -- Joel M. Flaum, Judge.
Before Fairchild, Chief Judge, Castle, Senior Circuit Judge, and Wood, Circuit Judge.
Fontana Aviation, Inc., plaintiff, appeals the granting of the defendants', Cessna Aircraft Company and Cessna Finance Corporation, motion for summary judgment in Fontana's antitrust action alleging violation of the Sherman Act, 15 U.S.C. §§ 1, 2 (1976), and seeking treble damages and injunctive relief pursuant to the provisions of the Clayton Act, 15 U.S.C. §§ 15, 26 (1976). Judge Flaum, understanding Fontana's claim to be only for the recovery of damages arising from Cessna's pricing policy, held that damages were not recoverable under Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977).
The parties need to be identified and their relationships considered. Fontana was a Michigan corporation, now no longer in business, which had its principal place of business at a Michigan airport. It was in the business of selling new and used general aviation aircraft, including Cessna aircraft, but more importantly, so far as this case is concerned, was also in the business of selling and performing custom installations of avionics equipment manufactured by other than Cessna Aircraft Company (Cessna).*fn1 Cessna, a Kansas corporation, with its principal place of business in Wichita, Kansas, is one of the larger domestic manufacturers of general aviation aircraft. Through its Aircraft Radio and Control Division (ARC), Cessna manufactures and sells its own line of avionics. Cessna Finance Corporation (CFC), also located in Wichita, Kansas, a wholly-owned subsidiary of Cessna, is in the business of providing financing for distributors, dealers and purchasers of Cessna products. Except for jet aircraft sold directly to consumers, Cessna's other aircraft and products are sold in the market by independent retail dealers. Although Fontana was a Cessna dealer, it did not purchase directly from Cessna, but from Aviation Activities, Inc., an independent Cessna distributor. Aviation Activities, Inc., however, was alleged to be a co-conspirator although not named as a defendant.
Procedurally, Judge Flaum granted Cessna's and CFC's motion for summary judgment on tie-in claims but denied it on the cognizability of the product market. However, Judge Flaum relying on Illinois Brick also granted summary judgment on Fontana's damage claims on the basis that Fontana had purchased its Cessna aircraft not directly from Cessna, but from Aviation Activities, Inc. As that holding left Fontana only its claims for injunctive relief which would afford little practical satisfaction as it had liquidated, Fontana filed an amended complaint omitting requests for injunctive relief so that in the event of a similar ruling on the damage claim, the ruling would be appealable. Judge Flaum reaffirmed his view on the damage claims and again disposed of the matter by summary judgment under the rationale of Illinois Brick.
In its amended complaint, Fontana alleges in Count I that Cessna, CFC and Aviation Activities, Inc. conspired to unreasonably restrain trade in the business of selling and installing non-Cessna avionics equipment in Cessna aircraft in violation of Section 1 of the Sherman Act, and in Count II of unreasonably restraining trade by monopolizing and attempting to monopolize the selling and installation of avionics equipment in Cessna aircraft in violation of Sections 1 and 2 of the Sherman Act. Fontana alleges the purpose and intent of the alleged conspiracy was to put it and similar Cessna dealers out of business so as to enhance Cessna's own avionics business. Fontana alleges that before Cessna changed its policies in the avionics field a substantial percentage of Cessna multi-engine aircraft was sold by Cessna without factory-installed avionics. This permitted the purchaser to freely select his own brand of avionics for custom field installation by those particular Cessna dealers who had that capability. Fontana prospered as a specialist in avionics installation, which distinguished Fontana from many other Cessna dealers who lacked that proficiency. Fontana further alleges that the "multi-faceted conspiracy" contained various elements which we shall examine briefly.
Fontana complains of a change in pricing policy instituted by Cessna in 1974. Cessna at that time began offering certain of its aircraft with factory-installed avionics at a special package price which was less than the price if the aircraft and avionics were separately purchased. In 1975 the list price of unequipped aircraft went up and the price of factory-installed avionics went down, amounting to both overcharges and undercharges according to Fontana. Also in 1975 CFC changed its financing policy and declined to finance other than Cessna avionics. All other brand avionics, however, after installation would become subject to Cessna's lien on the aircraft. A number of other claimed misdeeds are charged to be a part of the "multi-faceted conspiracy" including a national advertising campaign disparaging the custom installation of non-Cessna avionics; introduction of a dealer rebate program; introduction of a line of Cessna aircraft which could be purchased only with factory-installed Cessna avionics; the pressuring of Cessna dealers not to engage in sales outside their own areas; the informing of Cessna dealers that they could not sell Cessna aircraft and also be in the business of installing non-Cessna avionics; and, the temporary withdrawal of trade-in financing for used aircraft received by Fontana in the course of its business. Those activities are claimed by Fontana to have been conspiratorially calculated to cause it competitive injury.
Cessna and CFC explain that their pricing policy and other changes were only to enhance their own competitive position in the avionics markets. Cessna points as justification for its commercial behavior to Fontana's own allegation that Cessna avionics were inferior and overpriced. It is Cessna's position that in the trial court Fontana focused only on the pricing policy and that the other allegations were either shown to be nonexistent or to be ordinary and lawful pro-competitive business reaction and behavior. Cessna and CFC claim that any damages suffered by Fontana were due only to the loss of Fontana's temporary enjoyment of a substantial competitive advantage over other Cessna dealers on which Fontana had no justification to rely. Cessna explains that there was no tying of the sale of Cessna avionics to the purchase of Cessna aircraft as both continued to be available separately. The purchase of one product was not conditioned on the purchase of the other. The trial judge rejected any tying theory based only on economic incentives. Lupia v. Stella D'Oro Biscuit Co., 586 F.2d 1163, 1173 (7th Cir. 1978), cert. denied, 440 U.S. 982, 99 S. Ct. 1791, 60 L. Ed. 2d 242 (1979). As to financing, Cessna and CFC deny any obligation to finance a competitor's avionics, but in any event it is claimed financing was available from others. Cessna and CFC further claim there was no disparaging advertising chargeable to them; that a rebate program also questioned provided only for discounts on financial purchases for prompt payment; and that the line of Cessna aircraft available exclusively with Cessna avionics was not introduced in the market until after Fontana had liquidated. Cessna and CFC dispute any territorial restrictions and the purported withdrawal of financing for used aircraft.
Cessna argues that Illinois Brick controls Fontana's case because only the first person upon whom an illegal price has been imposed suffers any legally cognizable antitrust injury. It is urged that Illinois Brick applies because in between Cessna and Fontana was Aviation Activities, Inc., a totally independent Cessna dealer with whom Fontana did its Cessna business. Illinois Brick prohibits any pass on theory of damages. Fontana, on the other hand, argues that Illinois Brick is not applicable because the theory of its case is that as an avionics competitor of Cessna it suffered competitive injury. Fontana does not claim to be a customer complaining about an overcharge. Further, Fontana claims that the trial court considered only one aspect of its conspiracy allegations, the pricing policy, and ignored the other charges, whereas the conspiracy as alleged consisted of a combination of things including not only pricing but other acts as well. Although Judge Flaum did not reach the issue, Cessna and CFC, relying on Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S. Ct. 690, 50 L. Ed. 2d 701 (1977), argue that Fontana is seeking damages for injury resulting only from increased, non-predatory competition to which it is not entitled.
Illinois Brick must be examined. Ultimate users of concrete blocks, the owners of buildings, brought suit against the manufacturers of the concrete blocks alleging a conspiracy to fix prices in violation of Section 1 of the Sherman Act and seeking treble damages under Section 4 of the Clayton Act. It was claimed by plaintiffs that the intermediaries in the chain of distribution, masonry contractors and general contractors, had passed on to them the increased fixed prices. The Court held that indirect purchasers, the plaintiff building owners, had no claim for Clayton Act Section 4 treble damages against the manufacturers under an expansion of the rationale of Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968). Hanover held that it was no defense for a manufacturer to show that the direct purchaser from it had passed on the overcharge to a subsequent consumer. Illinois Brick makes the rule work both ways.
Judge Flaum read Illinois Brick, 431 U.S. at 746, 97 S. Ct. at 2074, to preclude recovery by Fontana from Cessna and CFC regardless of whether or not the middleman, Aviation Activities, Inc., was also alleged to be a member of the conspiracy. We are not satisfied that the Illinois Brick rule directly applies in circumstances where the manufacturer and the intermediary are both alleged to be co-conspirators in a common illegal enterprise resulting in intended injury to the buyer.
At its present stage this case also appears, for another reason apart from the alleged co-conspiracy intermediary issue, not to fit within the Illinois Brick mold of an indirect purchaser suing the manufacturer for an overcharge. Although Fontana is an indirect customer of Cessna for unequipped aircraft, it claims to be a competitor, not a customer, of Cessna in the installation and sale of avionics in those aircraft. Cessna itself justifies its questioned policies as normal business adjustments to meet Fontana's competition. Fontana does not seek damages for an illegal indirect overcharge passed on to it as is prohibited by Illinois Brick, but sues on the basis of a combination of acts allegedly causing competitive injury which destroyed its avionics business.
It further appears to us, as Fontana claims on appeal, that the case was decided only on the basis of Cessna's pricing policy to the exclusion of Cessna's other activities all alleged to be aspects of Cessna's and CFC's "multi-faceted conspiracy." Standing separately some of the allegations may be of no antitrust concern, but if all of Cessna's alleged activities were combined and coordinated with the intent to destroy Fontana, its target, as a competitor, the allegations, whatever their merit, should be judged as a whole and not separately. Cessna and CFC argue that Fontana admitted away most of its allegations or otherwise that they were shown to be baseless. Judge Flaum in his order expressed his view that Fontana's allegations were purely cosmetic and that he understood Fontana to be seeking only damages arising from Cessna's pricing policy. Fontana argues that the trial court misconstrued and narrowly construed the amended complaint. In support Fontana points to passages from its memoranda filed in the trial court which espouse the same "multi-faceted conspiracy" theory as urged by Fontana in this court. However, as we examine this case we do not find Fontana to be without some responsibility for the impression the trial judge was given. There is likewise some support for Cessna's and CFC's argument that a few of the allegations were to some extent admitted away in the depositions. However, it seems to us that although some aspects of the allegations were weakened individually,*fn2 there may be some vitality left in them when considered as parts of the whole conspiracy as alleged. Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690, 82 S. Ct. 1404, 8 L. Ed. 2d 777 (1962); American Tobacco Co. v. United States, 147 F.2d 93 (6th Cir. 1944), aff'd, 328 U.S. 781, 66 S. Ct. 1125, 90 L. Ed. 1575 (1946).
In considering the applicability of summary judgment to this case under rule 56(c), Federal Rules of Civil Procedure, we are not prepared to hold that the record is sufficiently clear and developed for us to make a determination one way or the other as to the alleged conspiratorial motive and intent of Cessna and CFC to destroy Fontana. Those issues usually are not readily susceptible to summary judgment treatment. White Motor Co. v. United States, 372 U.S. 253, 259, 83 S. Ct. 696, 699, 9 L. Ed. ...