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United States District Court, Northern District of Illinois, E.D

April 1, 1983


The opinion of the court was delivered by: Shadur, District Judge.


Car Carriers, Inc. ("Car Carriers"), its affiliate Clark Transport Company, Inc. ("Clark"), their controlling shareholder James P. Byrne, and four other related entities*fn1 bring a six-count Complaint against Ford Motor Company ("Ford") and Nu-Car Carriers, Inc. -("Nu-Car"). Count I charges a conspiracy in violation of Sherman Act § 1 ("Section 1"), 15 U.S.C. § 1. All other counts assert pendent state law claims. Both Ford and Nu-Car have moved to dismiss (1) Count I for failure to state a cognizable antitrust claim and (2) Counts II-VI for lack of pendent jurisdiction. For the reasons stated in this memorandum opinion and order, their motions are granted.

Allegations of the Complaint*fn2

From 1968 until late October 1981 Car Carriers and Clark hauled all new Ford automobiles from Ford's assembly plants and railheads in Chicago. Though Clark may have provided haulaway transportation for other automobile producers as well, Car Carriers served only Ford. As to their Chicago traffic*fn3 both carriers operated under carrier authority issued by both the Interstate and Illinois Commerce Commissions. Their rates were therefore subject to the approval of those governmental bodies. Ford also "dictated and controlled" the tariffs by threatening either to oppose any disfavored rate applications or to take punitive action, such as termination. Complaint ¶ 19(d).

Some time during the mid-1970s Ford and some of its other carriers, including Nu-Car, E & L Transport Company ("E & L Transport"), Motor Convoy, Inc. ("Motor Convoy"), Auto Convoy Co. ("Auto Convoy") and Associated Transport, Inc. ("Associated"),*fn4 embarked on a campaign to terminate Car Carriers, Clark and some other carriers then serving Ford*fn5 and to force them to sell their businesses at cut-rate prices. That predatory scheme had five operative elements:

    1. Ford induced each target carrier to invest
  heavily in new tractor-trailer rigs, real estate
  and new terminal facilities "with the promise of
  additional transportation traffic and complete
  agreement with increased tariff rates necessary
  to pay for" those acquisitions. Complaint ¶¶ 19(b)
  and (c).

    2. Ford then precluded those carriers from
  obtaining rate increases sufficient to operate
  their expanded businesses profitably. Complaint
  ¶¶ 19(d) and (e).

    3. With the cooperation of the non-target
  carriers, Ford "[i]nterfered with and prevented
  target haulaway carriers and their affiliates
  from selling their businesses and assets as going
  business concerns or prevented target haulaway
  carriers from consolidation or merger with other
  carriers." Complaint ¶ 19(h).

    4. Ford then terminated its relationship with
  the disfavored carriers, assigning their traffic
  to the co-conspirator carriers.

    5. At that point the favored carriers were in
  the position of acquiring the assets of the
  target carriers at distress prices. Complaint
  ¶ 19(i).

Though Car Carriers' demise generally tracked this scenario, some elaboration of its victimization is instructive. At the inception of the conspiracy in 1975, Ford directed Byrne to sell Car Carriers to someone who would not seek tariff rates as high as those sought by Car Carriers. Byrne then attempted to sell Car Carriers to co-conspirator E & L Transport. After they had executed a letter of intent, Ford induced E & L Transport to renege on the deal by threatening to withhold Car Carriers' Chicago traffic from E & L Transport.

In 1977 and 1978 Ford ordered Car Carriers to purchase 80 new tractor-trailer rigs for $6 million, promising sufficient rate hikes to recover that investment. Though Car Carriers acceded to the demand, Ford thereupon stymied Car Carriers' efforts to obtain regulatory approval for the tariff increases.

In late 1979 Car Carriers attempted to bolster its financial posture by acquiring ATI, another target carrier. Ford not only blocked that consolidation initiative but also terminated ATI. Initially Ford divided ATI's business among Nu-Car, E & L Transport, Car Carriers and Clark. But within three months Ford transferred Car Carriers' share to E & L Transport.

In the summer of 1981 Ford solicited bid proposals from Car Carriers and other Ford Carriers for its Chicago haulaway business, all of which had been allocated to either Car Carriers or Clark. Ford awarded the business to Nu-Car "on the basis of a sham and knowingly predatory bid." Complaint ¶ 20(h).

Needless to say, plaintiffs' haulaway operations were then in shambles. Cut off from Ford, plaintiffs were unable to use their newly-purchased tractors and rigs and their terminal facility adjacent to Ford's Chicago plant. To minimize their staggering losses, plaintiffs attempted to sell the facility and other assets to Nu-Car at sub-market prices. Negotiations were scuttled when Nu-Car at Ford's behest "insisted on `walk-away' and other onerous provisions . . . as well as unacceptable covenants and releases of claims of plaintiffs against Nu-Car, Ford and Associated Transport." Complaint ¶ 20(i). Instead, Nu-Car built its own terminal facility next to Ford's plant on land supplied by Ford.

Count I

Count I really asserts a conspiracy encompassing two distinct conspiracies:

    1. to exclude target carriers from the "market"
  for haulaway transportation of Ford cars and

    2. to refuse to purchase, except at distress
  prices, the assets of the target carriers upon
  their termination.

However, neither of those aspects of the alleged overall conspiracy passes Rule 12(b)(6) muster.

More than one road leads to that destination. But the shortest one, the one that requires least discussion, is plaintiffs' lack of "antitrust standing" to recover treble damages under Clayton Act § 4, 15 U.S.C. § 15. And such standing is a threshold requirement that must be met, regardless of whether the substantive antitrust claim is grounded on a per se or rule of reason theory.

"Antitrust standing" concepts require a plaintiff to suffer the type of harm the antitrust laws were designed to recompense: "treble-damages recoveries should be linked to the pro-competition policy of the antitrust laws." Blue Shield of Virginia v. McCready, ___ U.S. ___, ___, 102 S.Ct. 2540, 2550, 73 L.Ed.2d 149 (1982). Accord, Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1979) (emphasis in original):

  Plaintiffs must prove antitrust injury, which is to
  say injury of the type the antitrust laws were
  intended to prevent and that flows from that which
  makes defendants' acts unlawful. The injury should
  reflect the anticompetitive effect either of the
  violation or of anticompetitive acts made possible
  by the violation.

Here the Complaint's allegations, coupled with plaintiffs' concessions in their responsive memorandum, foreclose any possibility of anticompetitive harm from either component of the putative conspiracy.

1. Conspiracy To Terminate Plaintiffs

Plaintiffs have really conceded the supposed conspiracy to squeeze them out was motivated solely by Ford's desire to replace high-priced suppliers (plaintiffs) with a low-priced one (Nu-Car):

    1. Complaint ¶¶ 19(d) and (e) acknowledge Ford's
  resistance to the increased tariff rates proposed
  by plaintiffs.

    2. Complaint ¶ 20(h) admits Ford diverted its
  Chicago traffic from plaintiffs to Nu-Car on the
  basis of the latter's lower (and allegedly
  "predatory"*fn6) bid.

    3. In embellishing on the assertion of
  Complaint ¶ 20(a) that Ford had ordered Byrne to
  sell Car Carriers, plaintiffs' Mem. 5 ascribes a
  procompetitive motive to Ford: Ford desired the
  sale of "Car Carriers to someone `more
  suitable' . . ., because Car Carriers had requested
  Ford approval of what Ford considered unduly high
  tariff rates."

All this is of course a prototype of procompetitive rather than anticompetitive activity.

Indeed the conspiracy's procompetitive potential is a necessary consequence of the very structure of the allegedly restrained haulaway "market." According to the Complaint Ford not only is the sole consumer in the relevant "market" but also has sufficient economic power to dictate the terms (both price and quantity) of its dealings with all its carriers — targets and co-conspirators alike.*fn7 What plaintiffs really depict is Ford (the moving force in the conspiracy) acting in its own economic interest and terminating plaintiffs in order to lower its own transportation costs — a procompetitive benefit capable of being passed on via lower prices to the ultimate purchasers of Ford cars (the market in which Ford competes with all other car manufacturers). Accordingly plaintiffs' own assertions demonstrate conclusively their termination is not the type of anticompetitive injury the antitrust laws were intended to forestall.*fn8

2. Conspiracy To Boycott Plaintiff's Assets

Count I's other alleged conspiracy — a collective refusal to purchase plaintiffs' assets except at distress prices — must also be dismissed for lack of "antitrust standing." Plaintiffs' asserted injury unquestionably flowed from the procompetitive aspects of the claimed boycott.*fn9 By allegedly precluding plaintiffs from selling their business to existing Ford carriers, this joint refusal to deal preserved plaintiffs as a potential rival (or forced them to sell to a new entrant), and thereby intensified competitive pressures in the relevant market.

Indeed in the relevant antitrust sense of examining the effect on competition and not on competitors (plaintiffs),*fn10 a purchaser from plaintiffs at distress prices would (because of its own lower costs) be better able to compete with the remaining haulaway carriers for Ford's business.*fn11 Cf. Havoco, 626 F.2d at 558-59 (victim of alleged conspiracy remained a market force as a potential competitor).

Thus neither conspiracy alleged in Count I states an antitrust claim that can survive defendants' motion to dismiss. Accordingly the entire count must be dismissed.

Counts II-VI

This Court has jurisdiction over plaintiffs' state law counts only under the concept of pendent jurisdiction, for complete diversity between the parties is lacking. Because Count I has been dismissed, the remaining counts are no longer pendent to any federal claim and must fall as well. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966).


Ford's and Nu-Car's motions to dismiss are granted. Because Count I could not possibly be repleaded to withstand Rule 12(b)(6) onslaught,*fn12 this entire action is dismissed — Count I with prejudice and the other counts without prejudice.

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