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RICHARD HOFFMAN CORP. v. INTEGRATED BUILDING SYSTEMS

February 15, 1984

RICHARD HOFFMAN CORPORATION, PLAINTIFF,
v.
INTEGRATED BUILDING SYSTEMS, INC., AND VILLAGE OF GLENDALE HEIGHTS, A MUNICIPAL CORPORATION, DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

Plaintiff Richard Hoffman Corporation ("Hoffman") sued Integrated Building Systems, Inc. ("Integrated") and the Village of Glendale Heights ("Village") for violations of the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., the Illinois Antitrust Act, Ill.Rev.Stat. ch. 38 § 60-3, and for breach of the duty of good faith. Presently before the Court are Integrated's motion to dismiss and the Village's motion to dismiss. For reasons set forth below, Integrated's motion is denied; the Village's motion is granted.

Motions to dismiss for failure to state a claim should not be granted unless it appears beyond doubt that a plaintiff can prove no set of facts in support of its claim entitling it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). In antitrust cases, caution with respect to motions to dismiss is particularly important, since proof of a violation may well rest largely with the alleged conspirators. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976). Using these standards, we consider the parties' arguments.

Interstate Commerce Nexus

The Village claims that Hoffman has failed to plead sufficient allegations to satisfy the jurisdictional requirements of a Sherman Act claim. The Sherman Act prohibits "[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce among the several states. . . ." 15 U.S.C. § 1. This language defines both the conduct proscribed by the statute and its jurisdictional reach. Crane v. Intermountain Health Care, Inc., 637 F.2d 715, 720 (10th Cir. 1980). We are therefore called upon to decide whether the Village's conduct had a sufficient relationship with interstate commerce to subject it to regulation. The interstate commerce requirement is satisfied by showing that the challenged activity occurred in interstate commerce or if the activity is wholly local in nature, by a showing that interstate commerce was substantially affected. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 743, 96 S.Ct. 1848, 1851, 48 L.Ed.2d 338 (1976).

Hoffman's complaint declares that "the materials used in the construction of the recreational center (Sports Hub) and to be used in the construction and remodeling of the Village of Glendale Heights recreational center were, and will be, provided for by interstate commerce." In response to the Village's motion, Hoffman filed an affidavit listing materials required by project specifications which are manufactured in states other than Illinois to support its assertion that there is a sufficient interstate commerce nexus for jurisdictional purposes. The Village emphasizes that its activities are intrastate, that operation of the recreation building is a purely local matter, that Integrated is an Illinois corporation and that the construction contract will be carried out in Illinois.

In McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980), the Supreme Court addressed the pleading requirements to establish an interstate commerce nexus:

  [t]o establish the jurisdictional element of a Sherman
  Act violation it would be sufficient for petitioners
  to demonstrate a substantial effect on interstate
  commerce generated by respondents' brokerage
  activity. Petitioners need not make the more
  particularized showing of an effect on interstate
  commerce caused by the alleged conspiracy to fix
  commission rates, or by those other aspects of
  respondents' activity that are alleged to be
  unlawful. The validity of this approach is confirmed
  by an examination of the case law. If establishing
  jurisdiction required a showing that the unlawful
  conduct

  itself had an effect on interstate commerce,
  jurisdiction would be defeated by a demonstration that
  the alleged restraint failed to have its intended
  anticompetitive effect. This is not the rule of our
  cases. See American Tobacco Co. v. United States,
  328 U.S. 781, 811, 66 S.Ct. 1125, 1139, 90 L.Ed. 1575
  (1946); United States v. Socony-Vacuum Oil Co.,
  310 U.S. 150, 225, n. 59, 60 S.Ct. 811, 846, 84 L.Ed.
  1129 (1940).

Id. at 242-43, 100 S.Ct. at 509. The Ninth Circuit has interpreted McLain to mean that the alleged antitrust violations need not affect interstate commerce, as long as defendants' business activities, independent of the violations, affect interstate commerce. Western Waste Services Systems v. Universal Waste Control, 616 F.2d 1094; 1097 (9th Cir. 1980), cert. denied, 449 U.S. 869, 101 S.Gt. 205, 66 L.Ed.2d 88 (1980). Other circuits have adopted a narrower reading of McLain. E.g., Cordova & Simonpietri Insurance Agency, Inc. v. Chase Manhattan Bank, 649 F.2d 36 (1st Cir. 1981). The Seventh Circuit, however, recently declined to choose between the different interpretations of McClain. Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272, 1282 (7th Cir. 1983).

In any event, jurisdiction must be determined on a case-by-case basis, examining the relevant economic facts presented by a particular case. Heille v. City of St. Paul, Minnesota, 671 F.2d 1134, 1136 (8th Cir. 1982). In affirming the district court's holding that a plaintiff failed to demonstrate an interstate commerce nexus, the court in Heille noted that neither party purchased nor sold a service or product in interstate commerce. Id. at 1137. The present case is clearly distinguishable, since Hoffman asserts that specifications for the recreation building call for products manufactured outside of Illinois. There can be no doubt that the allegations involving interstate commerce in Hoffman's complaint are perfunctory. But in refusing to adopt a particular view of McLain, the Seventh Circuit clearly cautioned against the dismissal of antitrust cases:

  [d]ismissals in antitrust cases should not be granted
  lightly. An action should not be dismissed unless it
  appears beyond doubt that the plaintiff can prove no
  set of facts in support of his claim which will
  entitle him to relief. In antitrust cases, dismissals
  prior to giving the plaintiff an opportunity for
  discovery should be granted very sparingly. The impact
  the defendants' activities may have upon interstate
  commerce is a question of fact not normally
  susceptible of determination without scrutiny of the
  proof that may be offered.

Bunker Ramo, 713 F.2d at 1282 (citations omitted). Therefore, we cannot conclude at the present stage of this litigation that Hoffman will be unable to prove any set of facts in support of its claim entitling it ...


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