I. INTRODUCTION 1
II. THE FACTS 2
III. A DISMISSAL UNDER RULE 12(B)(6) IS ERROR UNLESS IT APPEARS BEYOND DOUBT THAT PLAINTIFF CAN PROVE NO SET OF FACTS IN SUPPORT OF ITS CLAIM THAT WOULD ENTITLE PLAINTIFF TO RELIEF. 9
IV. THE JRTCA FAILS TO CONCEDE THAT IT COMPELS FROM ITS AFFILIATES AN APPEARANCE OF UNITARY POLICY BY THREATENING THEM WITH THE SAME BOYCOTT THAT IT INSISTS THAT THEY IMPOSE ON OTHERS. WHERE THE UNITARY POLICY ON WHICH THE SINGLE-ENTITY RULE IS CLAIMED IS ITSELF A COERCED COMBINATION IN RESTRAINT OF TRADE, THERE CAN BE NO SINGLE ENTITY RULE APPLIED. 10
V. THE JRTCA'S CONFLICTING ORGANIZATION CAUSES CLASSIC ANTITRUST INJURY IN THE FORM OF REDUCED OUTPUT AND PRICES FOR JACK RUSSELL TERRIERS. 13
VI. CONCLUSION 18
Associated General Contractors of California, Inc. v.
California State Council of Carpenters,
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
Cahill v. Liberty Mutual Insurance Co.,
City of Mt. Pleasant v. Assoc. Electric Co-Op, Inc.,
Conley v. Gibson,
Glen Holly Entertainment, Inc. v. Tektronix, Inc.,
Knutson v. Daily Review, Inc.
Los Angeles Memorial Coliseum Comm. v. National Football
N.C.A.A. v. Board of Regents of the University of Oklahoma,
Northwest Wholesale Stationers, Inc. v. Pacific Stationery
and Printing Co.,
Official Airline Guides, Inc. v. FTC,
Seabury Management, Inc. v. Prof. Golfers Assoc. of America,
Timken Roller Bearing Co. v. United States,
Thomsen v. Western Electric Co.,
Volvo North America Corp. v. Men's Inter. Professional
Williams v. I.B. Fischer Nevada,
FEDERAL STATUTES AND RULES
28 U.S.C. section 2201 14
Federal Rule of Civil Procedure 12(b)(6) 2, 3, 9, 10, 13
California Business and Professions Code sections 16726, et seq. 14
Malcolm A. Misuraca, Esq.Malcolm A. Misuraca Law Offices595
Market Street, Suite 1330San Francisco, CA 94105Tel: (415) 546-6430Fax:
(415) 546-6589 Victoria E. Brieant, Esq.Coudert Brothers4 Embarcadero
Center, Suite 3300Tel: (415) 986-1300Fax: (415) 986-0320
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
Case No. C98-20932 JWTHE JACK RUSSELL TERRIERNETWORK OF
NORTHERN CALIFORNIA'S CORRECTED BRIEF IN OPPOSITION TO DEFENDANTS'MOTION
TO DISMISS, ORALTERNATIVELY, MOTION FORJUDGMENT ON THE PLEADINGS ASTO
PLAINTIFF'S THIRD AMENDEDCOMPLAINTDate: January 29, 2001Time: 9:00 a.m.Dept.
It is collaboration to restrain trade that defines a violation of section 1. That the JRTCA coerces this collaboration from its affiliates and its members on pain of boycotting them, as well, is a basis to scrutinize its conduct under section 1, not to immunize it. Coercion cannot qualify conduct for the single-entity rule, any more than labeling a conspiracy a "joint venture" does.
The JRTCA argues that collaboration among the JRTCA, its mother club the JRTCGB, and its affiliated American Jack Russell clubs is so effective that it should be assumed that only a unitary relationship among them could create and maintain it. This argument is exploded by the recent settlement between the JRTNNC and the Great Britain club, the JRTCGB, the supposed ultimate source of authority and enforcement of the rule at issue here. The JRTCGB has struck from its constitution, bylaws, and affiliate agreements this "conflicting organization rule" that has been the raison d'etre and asserted justification for the JRTCA's group boycott in the United States. The JRTCA has claimed that the unitary relationship among all terrier clubs that is the basis for its argument for "a single entity" was founded and has been imposed and sustained by the GB. Yet with the GB's conflicting organization rule now disestablished, the JRTCA continues on down the road like the Energizer Bunny.
This is not the hallmark of the single entity-a paternal order, where one club decides for all-but of a fraternal order that elects a common policy of discrimination. The GB, the mother of all clubs, has changed the rules without apparent effect on the JRTCA. The JRTCA and its affiliates are joined not because they are one and undivided in ownership, revenue, or control, but because they implement the JRTCA's urge to restrain competition. If they do not go along, their competition is restrained, as well, and they are disaffiliated by the JRTCA, just as the JRTNNC has been disaffiliated for its refusal to engage in the group boycott of AKC-registered Jack Russell terriers and their owners.
The JRTNNC found this out when first it was disaffiliated
in 1999 for refusing to enforce the conflicting organization rule, then
systematically boycotted on orders of the JRTCA. If the JRTNNC had yielded
to that pressure and rejoined the faithful, the JRTCA would argue that
this proved that its regime qualifies under the single-entity rule.
We have been able to find no case in which coerced concerted action in restraint of trade qualified for exemption from section 1 under the single-entity analysis. Each case that finds a single entity is based on evidence of a voluntary and substantial existence as a unitary business apart from carrying on the conduct in question. Coercion is the antithesis of voluntary unity and control arising out of co-ownership. Coercion demonstrates that independent entities who wish to pursue separate interests, and that therefore do not qualify as a separate entity, must be being bullied or threatened into cooperation.
The Jack Russell is sponsored and followed by an international group of dog clubs. The Jack Russell Terrier Club of Great Britain, which we call "the GB," is the mother club, and traces its history back into the 19th century to Parson Jack Russell, who gave the breed his name. The GB maintained until quite recently a broad and interlocking set of rules and bylaws that imposed on all of its affiliates, including the JRTCA, the duty to carry out a boycott of competitors of the GB, the JRTCA, and their affiliates-competitors that were mainly identified as the great kennel clubs of the world, including the AKC in the United States.
The AKC is the great American all-breed kennel club. In 1998, over the bitter opposition of the JRTCA, the AKC began a registry of Jack Russell terriers to compete with the JRTCA registry. This resulted in a mad-hatter demand by the JRTCA for criminal investigations into the AKC, its practices, and even its senior officers. The JRTCA registry is a database of Jack Russell terriers similar to the GB registry in Great Britain. Their two registries are a substantial and essential facility in interstate and foreign commerce for the successful breeding, advertising, and sale of Jack Russells in interstate and foreign commerce.
A registry is essentially a database in which names,
provenance, and pedigree of terriers are maintained. A large and dominant
registry is a gateway or choke point for terriers traded in interstate
and foreign commerce, because much of the trade of terriers is done
on the basis of the dog's registry as an assurance of breed standard,
temperament, and other characteristics. Some dogs are bought and sold
sight-unseen on the basis of their pedigree and registry.
If the JRTCA dog registry is manipulated on other than neutral criteria of breed standard and pedigree, it will serve in the wrong hands as an efficient means to boycott dogs and owners on the ostensible grounds that they do not measure up, when they do. The JRTCA abuses its registry in precisely that way. It excludes AKC-registered or AKC-affiliated dogs even when they measure up to the JRTCA breed standard. The real reason for this discrimination is to punish their owners and breeders for affiliating with the AKC.
The JRTCA does not conceal the underlying workings of
the conflicting organization rule. The JRTCA describes its objective
The senior officials of the JRTCA have conceded in discovery that the competition among terriers at JRTCA-sanctioned dog trials is more than sufficient to enforce the JRTCA breed standard. There is by that admission no need to discriminate against their owners or breeders. Yet the JRTCA routinely discriminates in this way, especially through the blacklist in its magazine True Grit, which names owners and breeders who have gone AKC to be shunned by the masses.
When the JRTCA speaks of the "intermingling of qualified terriers with unqualified AKC-terriers," it is not a foreign breed standard that the JRTCA argues is threatening the dog and is therefore disqualifying. It is the dogs' registration with the AKC. The AKC is the JRTCA's registry competitor for registration fees and for the years of fees that come thereafter from registering the descendants and their descendants of registered terriers. It is the entry of terriers into AKC dog trials that is threatening to the JRTCA's and its affiliates' revenues, not because dogs will "intermingle" and somehow exchange genetic information, but because AKC dog trials divert revenue from the JRTCA and its affiliates. It is the simple fact of this case that terriers thrive on competition, but the JRTCA does not.
The JRTCA breed standard is not threatened by terriers
that do not meet it. They will be instantly weeded out for failing the
breed standard in the "conformation ring" at JRTCA dog trials,
where they are tested explicitly on the breed standard. They will be
discovered in the failed efforts of their owners to register them in
the JRTCA, if their photographs and vet tests reveal them to be unqualified.
What makes the JRTCA see red is not bad dogs, but independent-minded
owners and breeders who are a threat to the JRTCA's dominance, if not
to its breed standard.
Persons applying for membership in the JRTCA (or renewing current membership) and members of their immediate family must not be a member of a conflicting organization as defined by the JRTCA and must not register their JRTs with any conflicting organization or kennel club.
This bylaw by itself demonstrates that it is not the intermingling of "unqualified terriers" and their alleged failure to meet the JRTCA breed standard that is at issue, but the affiliation of their owners with the AKC and its registry, which compete with the JRTCA for membership dollars and registry fees. Part of the coercion that the JRTCA employs to impose its policies on its affiliate clubs is to require that they boycott the AKC and related kennel clubs and their members, or be disenfranchised.
If a terrier is registered with the JRTCA, but its owner seeks the record of its registry in order to register the dog with the AKC or of some other kennel club, the JRTCA will deny or refuse to confirm that the dog is registered with the JRTCA. This is not because the dog does not meet the breed standard; its prior registry with the JRTCA proves that it does.
The JRTCA sanctions dog trials around the United States. Sometimes more than a thousand Jack Russell terriers appear at these trials to be judged for their conformity to the JRTCA breed standard. They are advertised, bought, and sold at these trials. They are looked over for breeding agreements. They win awards for excellence and meeting the breed standard that proclaim their merit and the merit of their puppies. The JRTCA demands that those who show at their dog trials be members of the JRTCA, which one cannot be without agreeing to boycott the AKC and other kennel clubs. The JRTCA concedes that conformation testing at its dog trials is adequate to prove that a dog does or does not meet the JRTCA breed standard-which means that it is unnecessary to discriminate against dogs for their owners or their owners' affiliations.
The JRTCA and its affiliates dominate the commerce in dog trials for Jack Russells in interstate commerce. The JRTCA sanctions these trials, but each club puts them on and derives its revenue from them. These trials are a permanent moving marketplace. In a year's time they constitute a national, interstate, and even an international market in the dogs for their sale or breeding. Dogs that win prizes in one trial for their conformity to the JRTCA breed standard are advertised and marketed at later trials. They gain momentum in sales, advertising, breeding potential, and notoriety. To be denied a chance to compete means that a dog drops further and further behind in the competition, even if it is a premier specimen of the breed.
The JRTCA extends its control and dominance over the market by control and manipulation of judges and judging. Only JRTCA judges may judge a JRTCA-sanctioned trial. These judges are ruled by the JRTCA not on even-handed breed standards, but on a program to eliminate or disqualify certain competitors from judging and awards. If a JRTCA judge strays from the rules, he or she risks loss of a judging certificate. If a candidate for a JRTCA judging certificate strays, the certificate will be denied.
Dogs are not judged on their merit, but on who owns them-cynics call this "judging up the leash." As a result, even dogs that are champions and premier examples of the JRTCA breed standard are excluded from the market. When a dog is thus judged down or refused judging, the JRTCA thereby boycotts this dog and its owner, not because it is a "bad dog," but often because it is an excellent dog that wears the wrong colors.
If a JRTCA affiliate attempts to hold a non-sanctioned terrier trial, the JRTCA will interfere with its judging to destroy its ability to compete. Judges will be called and told that it is not wise to judge these trials. They will be induced to break their contracts with the affiliate, sometimes at the last moment. If the JRTCA believes it has even apocryphal evidence that a JRTCA member or an affiliate is not a good soldier, it will expel the member or affiliate, without notice, without hearing, and without grounds except "damaging the image of the JRTCA."
The JRTCA does not encourage or cajole, but coerces its affiliates into compliance with its rules. If an affiliate strays, it is instantly threatened with disaffiliation, and the JRTCA sets out to find collateral ways to intimidate and punish the affiliate. This includes advising the public that no such club exists. The JRTCA uses these tactics to cow opposition and to keep affiliates in line. As one example, two JRTNNC candidates for JRTCA judging certificates were denied their certificates, and one was told that his certificate "will be waiting for you as soon as you take your club back" from the JRTNNC board of directors.
The JRTCA published in True Grit an explicit blacklist of kennels, kennel owners, and owners of Jack Russells that are registered with the AKC and other kennel clubs. A renowned kennel, famous for producing champion Jack Russells, will be blacklisted simply because its owner's political views are out of favor. This blacklist was adopted in the past by the GB, in which a renowned Jack Russell kennel in Britain known as "Foxwarren" was boycotted by the JRTCGB and therefore by the JRTCA despite the excellence of its dogs. Foxwarren dogs have been exported by sale to the United States for many years. Under the settlement with the GB, this discrimination will no longer take place.
The board of the JRTCA is not democratic. It is elected every year from the manipulations of a captive nominating committee of loyalists and apparatchiks. Its most dominant member, David Ross, is now "Member for Life," despite his admission of the illegality of that election and the lack of provision in the JRTCA constitution for life tenure. The board members are themselves in many cases breeders and sellers of Jack Russells. They use their position to make alliances with affiliate clubs, favored breeders, and other organizations, which are aimed at boycotting the AKC and other club competition and at favoring themselves. They use the rules to maintain themselves in power and to jettison dissidents.
The JRTCA has conducted nothing less than a vendetta against the plaintiffs in this case. The two individual plaintiffs Fisher and Sprague have been blacklisted in True Grit. They have been expelled from JRTCA dog trials, as have other owners from "conflicting organizations." The JRTNNC was expelled from the JRTCA without notice or hearing; the JRTCA tells callers the JRTNNC does not exist. JRTNNC board members are boycotted and refused judge's credentials that they have otherwise qualified for. The JRTCA has written rules for affiliates that demand adherence to the boycott of kennel clubs and their owners and dogs and decreed that "any and all complaints resulting in legal matters will be resolved by JRTCA attorneys in the State of Maryland." There is no mediation or arbitration or any other due process afforded by the JRTCA.
The JRTCA has selected an awkward remedy in its motion to dismiss. It chooses Rule 12(b)(6), which tests the sufficiency of claims in the complaint, but has attempted to filter or de-emphasize allegations from the complaint and to ignore facts that it knows from discovery can be proved to support its allegations. This is error. A dismissal under Rule 12(b)(6) is inappropriate unless by construing the allegations most favorably to the plaintiff the court decides that there is no set of facts that can be produced in evidence on which the plaintiff would be entitled to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-338 (9th Cir. 1996).
Among the facts that the JRTCA has entirely eliminated
from its motion is the existence of the blacklist in True Grit. The
JRTCA likewise is silent about membership in the JRTCA, which is limited
to those who are not members of the AKC or another so-called conflicting
The JRTCA's affiliate agreement requires that each affiliate shall "solely recognize and fully support the JRTCA breed standard, to recognize the JRTCA Registry as the sole registry of Jack Russells in the U.S., and that the affiliate will not start or maintain any type of Jack Russell Terrier registry." Each affiliate must "uphold the JRTCA's policy on conflicting organizations; any events or other information concerning a conflicting organization will not be included in Affiliate newsletters or other publication, and representatives of conflicting organizations will not be used for Seminars or any other Affiliate purpose. The affiliate will not knowingly permit advertising by members of conflicting organizations or those who register their terriers with conflicting organizations or all-breed registries."
Each affiliate must "include in its membership application the disclaimer used by the JRTCA: Persons applying for membership (or renewing a current membership) and members of their immediate family must not be a member of a conflicting JRT organization as defined by the JRTCA, and must not register their JRTs with any conflicting organization or kennel club." Each member must agree that the affiliate's agreement will be "strictly enforced" and that violations may result in "disciplinary action or disaffiliation."
A single entity for section 1 of the Sherman Act cannot exist as a result of the successful imposition on independent entities of a policy that is itself a violation of section 1. To argue otherwise would vitiate Section 1, in the same way that simply aggrandizing the label "joint venture," without more, does not permit a violation of section 1 by independent entities under the guise of a single entity. Los Angeles Memorial Coliseum Comm. v. National Football League, 726 F.2d 1381, 1387 (9th Cir. 1984); Timken Roller Bearing Co. v. United States, 341 U.S. 593, 598 (19951) (labeling conspiracy "joint venture" not self-fulfilling).
Invariably, where several entities are found to be a
single entity with no ability to conspire under section 1, they must
exhibit substantial collaboration and collective existence apart from
the policy at issue under section 1. See, Seabury Management, Inc. v.
Prof. Golfers Assoc. of America, Inc., 878 F.Supp. 771 (D.Md. 1994),
rev'd on other gnds., 52 F.3d 322 (4th Cir. 1995) (PGA had broad goals
and rules other than for discrimination against competition); Williams
v. I.B. Fischer Nevada, 794 F.Supp. 1026, 1032 (D.Nev. 1992), aff'd.,
999 F.2d 445 (9th Cir. 1993) (food franchise agreement); Thomsen v.
Western Electric Co., 680 F.2d 1263 (9th Cir. 1982) (internal employment
matters in Bell system). Even then, a violation may exist. "Clubs
are not separate business entities whose products have independent value."
Memorial Coliseum, 726 F.2d at 1388. Where single existence is denied,
there are substantial arguments that the entities -- considered apart
from the policy at issue -- had considerable separate and independent
In Seabury Management, Inc. v. Professional Golfers Assoc. of America, Inc., 878 F.Supp. 771 (D.Md. 1994), rev'd. on other gnds., 52 F.3d 322 (4th Cir. 1995), the PGA claimed it could not conspire with its own sections. The court agreed, because the PGA and its sections functioned as a single economic unit with the PGA possessing ultimate control over the actions of its individual sections. There was no suggestion that the PGA's control over its sections was to provide a means to violate the law. In Thomsen v. Western Electric Co. Inc., 680 F.2d 1263 (9th Cir. 1982), employees of Western Electric sued for discriminatory employment policies, but the district court found that ATT, Pacific Bell, and Western Electric were so closely affiliated with the Bell system that employment became a matter of internal management. The Ninth Circuit agreed, finding that under Knutson v. Daily Review, Inc., 548 F.2d 795, 803-03 (9th Cir. 1976), common ownership and discretion over policy, plus lack of intra-enterprise competition, equaled a separate entity for section 1 analysis. Thomsen, 680 F.2d at 1266.
In City of Mt. Pleasant v. Assoc. Electric Co-Op, Inc., 838 F.2d 268 (8th Cir. 1988), the court held that a single enterprise does not exist when any of the joint venture members has "pursued interests diverse from those of the cooperative itself." Id. at 276. By "diverse," the court meant "interests which tend to show that any two of the defendants are actual or potential competitors." Id. at 276. Section 1 requires entities "sufficiently independent of each other," a question of fact in each case.
In light of these cases and the procedural posture of a motion to dismiss, this Court cannot rule as a matter of law that that JRTCA, and its two California affiliates are a single entity under section 1 of the Sherman Act. Based on the complaint and the reasonable inferences that may be drawn from its allegations, as well as plaintiffs' offer to amend to add facts otherwise set forth in this brief, the JRTCA cannot demonstrate as a matter of law that there is substantial collaboration and collective existence among the JRTCA and the two California affiliates apart from carrying out the conflicting organization policy. Local affiliates compete with each other for trial revenue. For these reasons, the plaintiffs ask that the defendants' motion to dismiss be denied.
V. THE JRTCA'S CONFLICTING ORGANIZATION CAUSES CLASSIC ANTITRUST INJURY IN THE FORM OF REDUCED OUTPUT AND PRICES FOR JACK RUSSELL TERRIERS.
The boycott under the conflicting organization rule reduces the number of qualified terriers from the show ring, sales, and breeding stock and depresses the value of the boycotted dogs and their offspring. This is classic antitrust injury and cannot be diminished under Rule 12(b)(6). To assure that the plaintiff has antitrust standing, the court must "'evaluate the plaintiff's harm, the alleged wrongdoing by the defendants, and the relationship between them.'" American Ad. Management v. General Telephone Co., 190 F.3d 1051, 1054 (9th Cir. 1999) (quoting Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535 (1983)).
In American Ad., the Ninth Circuit set forth five factors to evaluate standing "(1) the nature of the plaintiff's alleged injury; that is whether it was the type the antitrust laws were intended to forestall; (2) the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages." Id., 190 F.3d at 1054. The first factor, antitrust injury, is particularly important, in determining whether a party has standing. Glen Holly Entertainment, Inc. v. Tektronix, Inc., 100 F. Supp. 2d 1073, 1076 (C.D. Cal. 1999).
The JRTCA argues that plaintiffs do not allege antitrust injury. First and foremost, the complaint seeks declaratory relief that the conflicting organization rule and the JRTCA's action in enforcing that rule violates section 1 of the Sherman Act, Section 43(a) of the Lanham Act, and California Business and Professions Code sections 16600, et seq. and sections 16726, et seq. TAC 80-104. The Declaratory Relief Act provides that "[I]n a case of actual controversy within its jurisdiction [a court] may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201.
The complaint demonstrates that there is an actual controversy between the JRTNNC and the JRTCA. The JRTNNC has effectively been disaffiliated from the JRTCA over its unwillingness to enforce the conflicting organization rule because of its belief that the conflicting organization rule violates the antitrust laws. TAC 62. Plaintiffs Fisher and Sprague were ejected from the JRTCA and blacklisted because they registered their JRTCA-registered Jack Russell Terriers with the AKC registry. TAC 67. The Ninth Circuit has held that a party who might not have standing for purposes of antitrust damages would, nonetheless, have standing to sue for declaratory relief about the challenged practices. United Food & Commercial Workers Local Union No. 127 v. Food Employers Council, Inc., 827 F.2d 519 (9th Cir. 1987) (unions had standing to challenged "most favored nations" clause of collective bargaining agreement which they argued violated antitrust laws). As the court in that case stated, No such reason has been suggested for refusing to allow a party to a contract to obtain a judicial determination whether an agreement to which he is a party does or does not violate the antitrust laws. Such a suit does not present the problems that led the Supreme Court to limit the persons who might sue for treble damages under the antitrust laws. It does not open the courts to an indefinite and limitless pool of potential litigants - the universe of potential plaintiffs is limited to the parties to the agreement. It does not create a potential for duplicative recoveries, or pose complex problems of ascertaining and apportioning damages; and there is no better person to bring suit to declare the rights and obligations of parties to a contract than one of the parties himself. Id. at 524-525 (citations omitted).
The fact that the JRTNNC seeks declaratory relief demonstrates that the fourth and fifth factors set forth in American Ad. are not a bar to its ability to bring this suit. Furthermore, the JRTNNC has demonstrated antitrust injury, that is "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). In other words it must show (1) unlawful conduct by defendants, (2) which caused their injury, (3) the injury flows from that which makes the defendants' conduct unlawful, and (4) the injury is of the type the antitrust laws were designed to prevent. American Ad., 190 F.3d at 1055. The Ninth Circuit also noted that the "plaintiff must have suffered its injury in the market where competition has being restrained." Id. at 1057.
The JRTNNC alleges each of these elements in its complaint. While the JRTCA continues to assert the defendants are akin to an individual distributor making an independent decision as to with whom they would deal, Def. Mem. at 12:10-12, as set forth above, defendants are not a single entity. Rather, the JRTCA and the affiliate clubs are independent entities that have chosen to band together to enforce the conflicting organization rule. The complaint thus alleges a prima facie antitrust violation of a horizontal group boycott.
Turning to the requirements set forth in American Ad., the JRTNNC alleges the classic antitrust injury in the sense that the JRTCA and its affiliates have entered into an unlawful horizontal agreement that cuts off the JRTNNC's "access to essential competitive inputs," namely listing in the JRTCA registry, the ability to advertise in JRTCA publications, and to participate in JRTCA sanctioned dog trials. See Northwest Wholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284, 294 (1985) (finding that such boycotts are often per se illegal). Contrary to defendants' assertions, the JRTNNC does not stand to benefit from the conflicting organization rule, and thus is in fact injured by the rule's enforcement. See American Ad., 190 F.3d at 1056. In American Ad., the plaintiff, American Ad. was an "Authorized Selling Representative" for advertising space in the yellow pages. When it received an order for advertising, it purchased it directly from the publisher of the yellow pages at a reduced price, thus providing American Ad with a commission, which it passed on to its customers. American Ad., 190 F.3d at 1053. In its complaint, American Ad. alleged a Section 1 violation claiming that the Yellow Pages Publishers Association and its members, including defendant GTE, agreed to eliminate commissions on certain types of accounts and restrict the definition of national accounts on which commissions were still paid. The court concluded American Ad. had demonstrated a direct injury because it would suffer from the elimination of commissions, which would in turn eliminate the practice of discounting to advertising customers. Id. at 1056. Cf. Volvo, 857 F.2d at 66-68 (finding that Volvo had standing to pursue antitrust claims and had adequately plead it suffered antitrust injury because there would be greater benefit if players were less restricted in their ability to compete in tournaments, and were not merely seeking to obtain a greater share of the results of the alleged conspiracy).
In this case, the JRTNNC does not, and will not, benefit
from the enforcement of the conflicting organization rule. In denying
the JRTNNC re-affiliation with the JRTCA, the defendants have reduced
the number of entrants in the JRTNNC trials, reducing the income available
to the club to meet its operating expenses, including its dog rescue
efforts and its education efforts. Furthermore, the "preferred
breed standard," which is presumably the defendants' rationale
for imposing the rule, would be served by allowing non-JRTCA registered
dogs to compete in JRTCA trials. As currently enforced, however, the
conflicting organization rule restricts the number of available Jack
Russell terriers that may compete in trials, and are available for sale
to JRTCA members or for breeding to JRTCA-owned dogs. The enforcement
of that rule distorts the market because the JRTCA will not provide
information to the public about Jack Russell terriers and their breeders
who are available for sale and breeding simply because they, or a member
of their family, has affiliated with the AKC or other registry. In addition,
this presents misinformation about the excellence or relative value
of the Jack Russell terriers excluded from such trials and the registry.
TAC 16, 28, 41, 46, 47-55.
Moreover, the JRTNNC is no longer protected in its choice of trial dates, resulting in fewer entrants at trials, making it less desirable for new members to join. This results in a reduction of the JRTNNC's operating funds for such programs as education and rescue of Jack Russells. This injury flows directly from that which makes the defendants' conduct unlawful, namely the agreement to enforce the conflicting organization rule.
Finally, the JRTNNC's injuries are of the type that the antitrust laws were designed to prevent. It participates in the same market as JRTCA in seeking entrants for JRTCA-sanctioned trials, and competes in that market, however competition in that market has been restricted by virtue of the conflicting organization rule, and under American Ad. and Volvo, supra, the JRTNNC would actually benefit more if the JRTCA's registry and trials were open to members of clubs with Jack Russell Terriers that belong to "conflicting organizations" since more revenue would be generated from entry fees.
The above discussion demonstrates that in addition to
demonstrating antitrust injury, plaintiffs have suffered a direct injury
because of the enforcement of the group boycott enforced through the
conflicting organization rule. In addition, contrary to the JRTCA's
defendants' assertions, the harm to the JRTNNC is not speculative. Rather,
the JRTNNC has specifically plead in the complaint that because of its
unwillingness to adopt the conflicting organization rule the JRTNNC
has been disaffiliated, TAC 63, and Ms. Sprague and Ms. Fisher are unable
to participate in JRTCA-sanctioned trials. See, e.g., TAC 33. Finally,
because this is an action for declaratory relief, there is no risk of
duplicative recovery or the need to apportion damages.
Dated: January 17, 2001 COUDERT BROTHERS
Attorneys for Plaintiff