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WARNER MGMT. CONSULTANTS v. DATA GENERAL CORP.

August 16, 1982

WARNER MANAGEMENT CONSULTANTS, INC., AN ILLINOIS CORPORATION, PLAINTIFF,
v.
DATA GENERAL CORPORATION, A DELAWARE CORPORATION, AND CENTENNIAL SYSTEMS, INC., A MARYLAND CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Prentice H. Marshall, District Judge.

    MEMORANDUM OPINION

Plaintiff, Warner Management Consultants, Inc., ("Warner") was in the business of distributing computer systems and providing computer consulting services to those in the market for computers and computer-related services. The computer systems Warner provided its customers consisted of "hardware," the central processing unit and peripheral units, such as printers and card punches, and "software," the computer programs. First Amended Complaint ¶ 4. Warner was a "middleman;" it purchased computer systems and related services from various suppliers, and resold them to the ultimate consumers.

In late 1978, Warner learned that certain peripheral hardware, such as printers and card punches, could be purchased more cheaply from Data General's competitors than from Data General itself. Id. ¶ 19. In order to prepare the least expensive and hence most attractive package for its customers, Warner prepared bids based on the prices of non-Data General peripheral components to be matched with Data General central processing units. Warner's bids also factored in the cost of obtaining financing for the sale from a computer leasing company. Id. ¶¶ 21-22.*fn1 In particular, Warner bid on a contract for a series of computer packages for the United States government utilizing these cost factors and was told, based on the government's satisfaction with its initial bid, that Warner was eligible to submit a "best and final bid." Id. ¶¶ 20, 23.

The complaint alleges that at some point no later than early 1979 Data General decided to condition the sale of its hardware upon the agreement by the purchaser of the hardware (a) to obtain financing from defendant. Centennial Systems, Inc. ("Centennial"), a computer leasing company, (b) to purchase computer maintenance services from Data General and (c) to purchase certain peripheral hardware distributed by Data General, but not manufactured by Data General. Data General allegedly combined, conspired and contracted with Centennial to impose this scheme of conditional sales upon purchasers of its hardware. Id. ¶ 12. When Data General learned that Warner's bids did not include financing from Centennial and peripheral hardware and maintenance services purchased from Data General, it engaged in a course of conduct designed to compel Warner to purchase maintenance services and peripheral hardware from Data General and to obtain financing from Centennial.

Specifically, Data General refused to perform its contractual obligation to deliver central processing units to Warner, and Centennial refused to provide financing to Warner. See id. ¶¶ 24-27. Eventually, Warner capitulated and agreed to Data General's demands. Since the financing provided by Centennial and the maintenance services and peripheral hardware provided by Data General were more expensive than that which Warner could have obtained elsewhere, Warner's prices went up substantially. Once its prices went up, Warner found that it was no longer able to compete in the market for computer systems. It lost numerous contracts, including the lucrative government contract, and eventually was driven out of business. Warner then filed this lawsuit against Data General and Centennial. This court's jurisdiction rests on 28 U.S.C. § 1331, 1332, 1337 (1976 and Supp. IV 1980) and 15 U.S.C. § 15 (1976).

In count I of the complaint, Warner alleges that Data General and Centennial's scheme of conditional sales constitutes a tying arrangement, wherein the sale of hardware (the tying product) was tied to the purchase of credit, maintenance services and peripheral hardware (the tied products). The arrangement, Warner alleges, is per se unlawful under § 1 of the Sherman Act*fn2 and § 3 of the Clayton Act.*fn3 In count II, Warner alleges that tying arrangement, even if not per se unlawful, nevertheless is an unlawful restraint of trade under § 1. In count III, Warner alleges that the restraint of trade also violates the Illinois Antitrust Act, Ill.Rev.Stat. ch. 38, § 60-3 (1979). In count IV, plaintiff alleges that Data General's conduct in attempting to persuade Warner to accede to the tying arrangement included defamatory statements regarding Warner made to Warner's customers in an attempt to coerce Warner to agree to the tie. These statements, it is alleged, are actionable under the common law of commercial defamation. Count V alleges that, as part of its coercive scheme, Data General maliciously interfered with Warner's contractual relations with its customers. Finally, in count VI, Warner alleges that Data General breached its contract to deliver computer systems to Warner. Data General has moved to dismiss counts I, II and III on the ground that Warner lacks standing to raise antitrust claims since it never actually bought the tied or tying products from Data General. Centennial has also moved to dismiss the antitrust claims, which are the only claims involving Centennial, on standing grounds, and also on the ground that Centennial was not involved in the tying alleged in the complaint.

Private parties have been accorded the right to bring an action for damages under the antitrust laws by § 4 of the Clayton Act, which provides,

    Any person who shall be injured in his business or
  property by reason of anything forbidden in the
  antitrust laws may sue therefor in any district court
  of the United States in the district in which the
  defendant resides or is found or has an agent,
  without respect to the amount in controversy, and
  shall recover threefold the damages by him sustained,
  and the cost of the suit, including a reasonable
  attorney's fee.

15 U.S.C. § 15 (1976). The antitrust standing issues raised by the parties require a determination whether Warner qualifies as a person entitled to sue under § 4.*fn4

The law of antitrust standing is something less than a seamless web. In fact, as we have had occasion to observe previously, this area of the law is rife with "doctrinal confusion." In re Uranium Antitrust Litigation, 473 F. Supp. 393, 401 (N.D.Ill. 1979).*fn5 However, our analysis is aided by the Supreme Court's recent opinion in Blue Shield of Virginia v. McCready, ___ U.S. ___, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982), which clarifies somewhat the analysis required under the rubric of antitrust standing. The Court identified two types of limitations on the ability of private parties to sue under the antitrust laws which are embodied in the law of antitrust standing. A party seeking to recover damages must demonstrate first that it is an appropriate party to bring suit and second that it has suffered a direct injury of the type that antitrust laws were intended to recompense. See 102 S.Ct. at 2545-48.

The first limitation identified by the Court attempts to filter out claims which, if permitted, would lead to unfair or unworkable results. For example, this doctrine prevents indirect purchasers of goods from recovering higher prices which they have been forced to pay because of antitrust violations, since allowing the indirect purchasers a right of recovery in addition to the recovery already permitted direct purchasers under § 4 would create an intolerable risk of duplicative recoveries, see McCready, 102 S.Ct. at 2546; Illinois Brick Co. v. Illinois, 431 U.S. 720, 730-31, 97 S.Ct. 2061, 2066-2067, 52 L.Ed.2d 707; and because it would be difficult if not impossible to determine the amount of damages due to the difficulty of tracing the higher prices charged by the original seller through to the price paid by the indirect purchaser, see id. at 731-32, 741-45, 97 S.Ct. at 2067, 2072-2074. Similarly, a state cannot sue to recover damages to its economy caused by antitrust violations because of the difficulty of measuring those damages and the risk of double recovery such actions would create, see McCready, 102 S.Ct. at 2546; Reiter v. Sonotone Corp., 442 U.S. 330, 342, 99 S.Ct. 2326, 2332, 60 L.Ed.2d 931 (1979); Hawaii v. Standard Oil Co., 405 U.S. 251, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972).

Defendants argue that these considerations support a denial of standing to Warner, since Warner never purchased either the tied or the tying product. They argue that it would be unfair and unworkable to permit every person who "attempted" to purchase or "considered" purchasing a tied product to sue under the antitrust laws. However, the complaint alleges that Warner would have successfully bid on a number of contracts but for defendants' tying arrangement, and further alleges that this arrangement caused the lost orders, which in turn led to Warner's loss of profits and goodwill. Warner seeks to recover by proving damages resulting from specific orders it would have filled but for the tie. Warner does not seek to allow "any" person who considered buying a tying product to sue, but rather only a person who can prove, as Warner seeks to, that it would have bought defendants' products and then been able to resell them at a profit but for the tie. Warner's damages are not unworkably difficult to measure; they are limited to the specific contractual profits and goodwill lost as a result of the tie. Neither is there any risk of duplicative recovery. No one but Warner can recover damages for the contracts Warner can prove it would have obtained but for the tie. If other entities can prove that they would have purchased Data General products and then profitably resold them but for the tie, they too can recover, but that recovery in no way duplicates Warner's recovery for contracts lost because of the tie. A separate recovery for every contract lost to customers of Data General because of the tie is entirely appropriate. The absence of any risk of unfair or unworkable recoveries means that this element in the law of standing does not argue against entertaining Warner's claim. See McCready, 102 S.Ct. at 2546.

The second element of antitrust standing is that plaintiff must suffer a direct injury of the type the antitrust laws were meant to recompense. It is this area where most of the "doctrinal confusion" is found, and where this case becomes difficult. This element has two distinct components. The first is that plaintiff must be directly injured by those conditions within the market affected by defendants' conduct; and the second is that plaintiff's injury must be of a type that reflects the sort of injury the antitrust laws were designed to prohibit. See McCready, 102 S.Ct. at 2548-51; In re Industrial Gas Antitrust Litigation, 681 F.2d 514 (7th Cir. 1982); Lupia ...


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