The opinion of the court was delivered by: Prentice H. Marshall, District Judge.
In this multidistrict litigation, plaintiff Tennessee Valley
Authority ("TVA") seeks damages from defendants Gulf Oil
Corporation and Gulf Minerals Canada, Ltd. ("Gulf ") under
§ 1 of the Sherman Act, 15 U.S.C. § 1 (1976), which prohibits
"[e]very contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade. . . ."*fn1
TVA alleges that Gulf was a member of an international uranium
cartel which conspired to set the price of uranium at
artificially high levels. Because TVA is a consumer of uranium,
it has allegedly been forced to pay higher prices for uranium
because of the existence of the cartel. TVA brings this action
pursuant to § 4 of the Clayton Act, which permits "[a]ny person
who shall be injured in his business or property by reason of
anything forbidden in the antitrust laws" to sue for treble
damages. 15 U.S.C. § 15 (1976).
TVA maintains that it was the victim of an unlawful boycott
in which members of the cartel refused to bid at TVA's
invitation on contracts for the sale of uranium to TVA at
anything other than artificially high, cartel-set prices in
November, 1973, forcing TVA to purchase its uranium through
negotiated contracts, develop its own source of supply, and
incur other substantial expenses, all of which it asserts are
Gulf has moved for partial summary judgment, arguing that
TVA's claims for damages caused by purchases at higher than
competitive prices from nondefendants or entities not alleged
to be members of the cartel are barred by the rule of
Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52
L.Ed.2d 707 (1977). In order to rule on the motion, we must
first examine the holding in Illinois Brick.
Illinois Brick finds its roots in the decision of the Supreme
Court in Hawaii v. Standard Oil Co., 405 U.S. 251, 92 S.Ct.
885, 31 L.Ed.2d 184 (1972). There, the state of Hawaii sued
under § 4 of the Clayton Act to recover damages to its general
economy caused by antitrust violations. The Court held that the
damages were not recoverable. The measure of damages in such a
case would be impossibly speculative, posing insurmountable
problems of proof. Moreover, allowing recovery would create an
unacceptable risk of duplicative recoveries if both the state
and individual antitrust plaintiffs were permitted to sue.
Five years later, the Court decided Illinois Brick. There the
plaintiffs claimed that the antitrust defendants had charged
higher than competitive prices to middlemen, who had passed on
those cost increases to plaintiffs, who were the ultimate
consumers. Relying on Hawaii v. Standard Oil Co., the Court
refused to permit such claims by indirect purchasers. The Court
began by noting that, in Hanover Shoe, Inc. v. United Shoe
Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231
(1968), the Court had held those who sell goods at artificially
high prices in violation of the antitrust laws cannot defend an
action brought by a direct purchaser on the ground that the
direct purchaser passed on the overcharge to its customers. The
Court had rejected this defense first because it was unwilling
to complicate suits under § 4 with the difficulties inherent
in attempting to trace the effects of an overcharge on the
purchaser's prices, sales, costs and profits, and second
because it was unwilling to permit antitrust defendants to
retain the fruits of their illegality since indirect purchasers
might be less likely to sue for damages caused by overcharges.
Illinois Brick Co. v. Illinois, 431 U.S. 720, 724-25, 97 S.Ct.
2061, 2064, 52 L.Ed.2d 707 (1977). The Court then noted that
consistency required that the Court either abandon Hanover
Shoe, or permit antitrust defendants to use its rationale as a
defense to suits brought by indirect purchasers, since the same
difficulties are present whenever a "pass-on" theory is used,
be it by the plaintiff or the defendant. See 431 U.S. at
729-37, 97 S.Ct. at 2066-70. The Court concluded that it would
follow Hanover Shoe and not permit actions by indirect
purchasers, in light of the risk of duplicative recovery
created if both direct and indirect purchasers could sue, see
id. at 737-41, 97 S.Ct. at 2070-72, and the difficulties of
tracing overcharges through various levels in the distribution
chain, see id. at 741-47, 97 S.Ct. at 2072-75.
Thus, Illinois Brick represents an attempt to avoid the type
of antitrust claim likely to lead to unfair or unworkable
results. Where there is no danger of those results, the
rationale of Illinois Brick is plainly inapplicable. To
evaluate claims in light of Illinois Brick, it is essential to
examine the claim to determine whether it creates a risk of
duplicative recovery or the problems associated with tracing
the effects of an overcharge through the distribution chain.
Where these dangers are not present, Illinois Brick does not
operate as a bar to an antitrust claim. See Blue Shield of
Virginia v. McCready, ___ U.S. ___, 102 S.Ct. 2540, 2546, 73
L.Ed.2d 149 (1982); In re Mid-Atlantic Toyota Antitrust
Litigation, 516 F. Supp. 1287 (D.Md. 1981); McCarty Farms, Inc.
v. Burlington Northern, Inc., 91 F.R.D. 486, 490-91 (D.Mont.
1981); Zenith Radio Corp. v. Matsushita Electric Industrial
Co., 494 F. Supp. 1246, 1255-56 (E.D.Pa. 1980); In re Folding
Carton Antitrust Litigation, 88 F.R.D. 211, 218 (N.D.Ill.
1980); Dart Drug Corp. v. Corning Glass Works, 480 F. Supp. 1091,
1101 (D.Md. 1979); In re Uranium Antitrust Litigation,
473 F. Supp. 393, 403 (N.D.Ill. 1979).
Gulf acknowledges that the actual holding of Illinois Brick
is not applicable here, since TVA was a direct purchaser of
uranium, and the problems associated with the status of
indirect purchasers that the Court relied on in Illinois Brick
are not applicable here. However, Gulf asserts that claims
against nondefendants and nonmembers of the cartel pose the
same difficulties that concerned the Court in Illinois Brick,
and therefore should be barred under its rationale. In support
of its position, Gulf relies on Mid-West Paper Products Co. v.
Continental Group, Inc., 596 F.2d 573 (3d Cir. 1979). There,
the court held that an antitrust plaintiff may not recover
overcharges from members of a cartel incurred when the
plaintiff purchased goods from competitors of the cartel
members. In Mid-West, the plaintiff argued that the defendant
cartel members should be liable for the artificially high
prices charged by their competitors, since the existence of the
cartel created a "price umbrella" which enabled nonconspirators
to charge artificially high prices. Judge Adams, writing for a
court,*fn2 concluded that this theory posed the same problems
that were present in Illinois Brick. Specifically, he reasoned
that it would be practically impossible to determine the effect
of the cartel on the pricing policies of nonconspirators, given
the wide variety of factors which influence pricing policies.
See 596 F.2d at 584. Moreover, the court concluded that
Illinois Brick represents a judgment that the objectives of the
antitrust laws are fulfilled when the defendant is required to
disgorge the fruits of its illegalities. Once that occurs,
there is no need to go further and force antitrust defendants
to pay for overcharges of others such as nonconspirators. See
id. at 585-86. Finally, the court noted that permitting
recovery for nonconspirators' overcharges creates a risk of
ruinous recoveries, since it would create liability well in
excess of the antitrust defendants' ill-gotten gains. See id.
TVA's initial response to Gulf's Illinois Brick/Mid-West
Paper argument is to claim that its complaint alleges an
unlawful refusal to deal, rather than a simple case of price
fixing. TVA goes on to argue that Illinois Brick applies only
to price fixing cases, and not to boycott cases. Gulf joins the
issue by arguing that this is not a boycott case,*fn4 and from
there the parties proceed to engage in a semantic dispute over
whether TVA's claims should be characterized as relating to a
"boycott" or "price fixing."
In our judgment, the question of whether the complaint
alleges a "boycott" or "price fixing" is entirely irrelevant
to the issue at hand. Illinois Brick is not a case about
semantics. It addresses intensely practical concerns associated
with avoiding unfair or unworkable results in antitrust
litigation. If the underlying policy concerns which motivated
the result in Illinois Brick are applicable, then we believe
Illinois Brick should be applied, regardless of the label that
is attached to plaintiff's claims. See Reading Industries v.
Kennecott Copper Corp., 631 F.2d 10, 14 (2d Cir. 1980), cert.
denied, 452 U.S. 916, 101 S.Ct. 3051, 69 L.Ed.2d 420 (1981); In
re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1157-60
(5th Cir. 1979), cert. denied, 449 U.S. 905, 101 S.Ct. 280, 66
L.Ed.2d 137 (1980); Mid-West Paper Products Co. v. Continental
Group, Inc., 596 F.2d 573, 578, 582-83 (3d Cir. 1979); Callahan
v. Scott Paper Co., 541 F. Supp. 550 (E.D.Pa. 1982).*fn5
First, we turn to Gulf's claim that Illinois Brick precludes
recovery for overcharges paid to cartel members not named as
defendants. This claim is puzzling since Gulf seems to concede
that it is liable for overcharges paid to its co-conspirators
who are named as defendants. Indeed this is the case; nothing
in Illinois Brick precludes liability for overcharges directly
paid to members of a price-fixing conspiracy. See,
e.g., Blue Shield of Virginia v. McCready, ___ U.S. ___, 102
S.Ct. 2540, 2546, 2550-51, 73 L.Ed.2d 149 (1982); Reiter v.
Sonotone Corp., 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931
(1979); Illinois Brick Co. v. Illinois, 431 U.S. 720, 729, 97
S.Ct. 2061, 2066, 52 L.Ed.2d 707 (1977); Berkey Photo, Inc. v.
Eastman Kodak Co., 603 F.2d 263, 294 (2d Cir. 1979), cert.
denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980);
In re Sugar Industry Antitrust Litigation, 579 F.2d 13 (3d Cir.
1978); Chatham Brass Co. v. Honeywell, Inc., 512 F. Supp. 108,
116 (S.D.N.Y. 1981); Go-Tane Service Stations, Inc. v. Ashland
Oil Co., 508 F. Supp. 200 (N.D.Ill. 1981); In re Coordinated
Pretrial Proceedings in Petroleum Antitrust Litigation,
497 F. Supp. 218, 225-26 (C.D.Cal. 1980); Vermont International
Petroleum Co. v. Amerada Hess Corp., 492 F. Supp. 429, 438-39
(N.D.N.Y. 1980); Reiter v. Sonotone Corp., 486 F. Supp. 115,
119-20 (D.Minn. 1980); Dart Drug Co. v. Corning Glass Works,
480 F. Supp. 1091, 1101 (D.Md. 1979); Hecht Co. v. Southern
Union Co., 474 F. Supp. 1022, 1027-28 (D.N.M. 1979); Florida
Power Corp. v. Granlund, 78 F.R.D. 441, 443-44 (M.D.Fla. 1978);
Gas-A-Tron of Arizona v. Shell Oil Co., 1977-2 Trade Cas. (CCH)
¶ 61,789 (D.Ariz. 1977). Apparently, Gulf attaches some
significance to whether the overcharge was paid to a cartel
member who is not named as a defendant, arguing that Illinois
Brick permits recovery for overcharges paid to conspiring
defendants but not to conspiring nondefendants. However, Gulf
never explains why anything should turn on this distinction,
and cites no authority for the distinction. None of the
policies underlying Illinois Brick are affected by whether or
not the overcharge is paid to a named defendant or a
non-defendant co-conspirator. To the contrary, it has long been
the law that an antitrust defendant is jointly and severally
liable for the acts of its co-conspirators, see e.g., In re
Uranium Antitrust Litigation, 617 F.2d 1248, 1257 (7th Cir.
1980); see also Havoco of America, Ltd. v. Shell Oil Co.,
626 F.2d 549, 554 (7th Cir. 1980). Under this rule of law, Gulf is
liable for any act of its co-conspirators in furtherance of the
alleged price fixing conspiracy, whether or not that
co-conspirator is named as a defendant. See Ambook Enterprises
v. Time, Inc., 612 F.2d 604, 620 (2d Cir. 1979); National
Wrestling Alliance v. Myers, 325 F.2d 768, 775 (8th Cir. 1963);
Walker Distributing Co. v. Lucky Lager Brewing Co., 323 F.2d 1,
8 (9th Cir. 1963); Northwestern Oil Co. v. Socony-Vacuum Oil
Co., 138 F.2d 967, 970 (7th Cir. 1943), cert. denied,
321 U.S. 792, 64 S.Ct. 790, 88 L.Ed. 1081 (1944); City of Atlanta v.
Chattanooga Foundry & Pipeworks, 127 F. 23, 25 (6th Cir. 1903),
aff'd, 203 U.S. 390, 27 S.Ct. 65, 51 L.Ed. 241 (1906); Chatham
Brass Co. v. Honeywell, Inc., 512 F. Supp. 108, 116 (S.D.N.Y.
1981); In re Coordinated Pretrial Proceedings in Petroleum
Products Antitrust Litigation, 497 F. Supp. 218, 225-26
(C.D.Cal. 1980); Reiter v. Sonotone Corp., 486 F. Supp. 115, 119
n. 3 (D.Minn. 1980); Evanston Motor Co. v. Mid-Southern Toyota
Distributors, Inc., 436 F. Supp. 1370, 1372 n. 1 (N.D.Ill.
1977); Wainwright v. Kraftco Corp., 58 F.R.D. 9, 11-12 (N.D.Ga.
1973); Washington v. American Pipe & Construction Co.,
280 F. Supp. 802, 804-05 (W.D.Wash. 1968); Rohlfing v. Cat's Paw
Rubber Co., 107 F. Supp. 549 (N.D.Ill. 1952); Martin v.
Chandler, 85 F. Supp. 131 (S.D.N.Y. 1949). Gulf has cited no
authority to the contrary.*fn6 We conclude that TVA may
maintain its claims for overcharges paid to nondefendant
Second, we turn to TVA's claims involving overcharges paid
to nondefendant nonconspirators. These are the types of claims
that were addressed by the Third Circuit in Mid-West Paper. If
we decide to follow Mid-West by concluding that the problems
posed by attempting to prove that the prices charged by
nonconspirators were inflated by the existence of the uranium
cartel are insurmountable, then these claims are barred.
Mid-West has received considerable attention from both courts
and commentators. A number of courts have found its reasoning
persuasive. See In re Coordinated Pretrial Proceedings in
Petroleum Products Antitrust Litigation, 497 F. Supp. 218,
227-28 (C.D.Cal. 1980); In re Folding Carton Antitrust
Litigation, 88 F.R.D. 211, 219-20 (N.D.Ill. 1980); Reading
Industries, Inc. v. Kennecutt Copper Corp., 477 F. Supp. 1150,
1158, 1160-61 (S.D.N.Y. 1979), aff'd, 631 F.2d 10 (2d Cir.
1980), cert. denied, 452 U.S. 916, 101 S.Ct. 3051, 69 L.Ed.2d
420 (1981);*fn8 Liang v. Hunt, 477 F. Supp. 891, 896-97
(N.D.Ill. 1979). However, Mid-West has not received universal
acceptance; a number of courts have rejected its reasoning. See
In re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1166
n. 24 (5th Cir. 1979), cert. denied, 449 U.S. 905, 101 S.Ct.
280, 66 L.Ed.2d 137 (1980); In re Bristol Bay, Alaska, Salmon
Fisheries Antitrust Litigation, 530 F. Supp. 36 (W.D.Wash.
1981); Strax v. Commodity Exchange, Inc., 524 F. Supp. 936,
939-40 (S.D.N.Y. 1981); Pollock v. Citrus Associates of the New
York Cotton Exchange, 512 F. Supp. 711, 718-19 (S.D.N.Y. 1981);
Chatham Brass Co. v. Honeywell, Inc., 512 F. Supp. 108, 116
(S.D.N.Y. 1981); Illinois v. Ampress Brick Co., 67 F.R.D. 461,
468 (N.D.Ill. 1975), rev'd, 536 F.2d 1163 (7th Cir. 1976),
rev'd sub nom. Illinois Brick Co. v. Illinois, 431 U.S. 720, 97
S.Ct. 2061, 52 L.Ed.2d 707 (1977); Wall Products Co. v.
National Gypsum Co., 357 F. Supp. 832, 846 (N.D.Cal. 1973);
Washington v. American Pipe & Construction Co., 280 F. Supp. 802
(W.D.Wash. 1968). See also Mid-West Paper, 596 F.2d at 595-599
(Higginbotham, J., dissenting in part).*fn9 In light of this
split of authority, we must examine the question whether
Mid-West is a sound interpretation ofIllinois Brick.*fn10
As our earlier discussion of Illinois Brick indicates, a
major theme underlying that opinion is the unacceptable risk of
duplicative recovery created when both direct and indirect
purchasers are permitted to sue under the antitrust laws.
However, in this case, no risk of duplicative recovery exists.
If TVA cannot recover for the overcharges it has paid
nonconspirators, no one can. Far from eliminating a risk of
duplicative recovery, a denial of standing in this case,
assuming TVA can prove at trial that nonconspirators' prices
were affected by the existence of the cartel, "would also
result in the denial of ...