Petitioners, dealers who had operated "Midas Muffler Shops,"
brought this antitrust action for treble damages against respondent
Midas, Inc., its parent corporation (International), two other
subsidiaries, and corporate officers and agents, charging an
illegal conspiracy in violation of § 1 of the Sherman Act, and
violations of § 3 of the Clayton Act and § 2 as amended by the
Robinson-Patman Act. Petitioners attacked provisions of the sales
agreements which they had made with Midas including those which
barred petitioners from purchasing from other sources, prevented
them from selling outside designated territories, tied muffler
sales to other Midas-line products, and required petitioners to
sell at fixed retail prices. The District Court entered summary
judgment for respondents. The Court of Appeals reversed the
judgment on the Robinson-Patman claim but affirmed the District
Court's ruling that petitioners' other claims were barred by the
doctrine of
in pari delicto, noting that petitioners, with
full knowledge of the restrictions, had enthusiastically sought and
enormously profited from the Midas franchises, and had sought
additional franchises. The court also held that petitioners'
Sherman Act claim was barred because Midas and International were
part of a single business entity, and therefore entitled to
cooperate without creating an illegal conspiracy.
Held:
1. There is nothing in the language of the antitrust laws
indicating a congressional intent that the doctrine of
in pari
delicto should constitute a defense to a private antitrust
action, and such application of the doctrine would undermine the
important function performed by the private antitrust action in
enforcing the antitrust laws. Pp.
392 U. S.
138-140.
2. The record refutes respondents' argument that petitioners
actively participated in formulating the restrictive plan and
encouraged its continuation. Pp.
392 U. S.
140-141.
3. Common ownership does not relieve separate corporate entities
of the obligations which the antitrust laws impose, and, in any
Page 392 U. S. 135
event, each petitioner can charge a combination between Midas
and himself or other acquiescing franchisees. Pp.
392 U. S.
141-142.
376 F.2d 692, reversed and remanded.
MR. JUSTICE BLACK delivered the opinion of the Court.
The principal question presented is whether the plaintiffs in
this private antitrust action were barred from recovery by a
doctrine known by the Latin phrase
in pari delicto, which
literally means "of equal fault." The plaintiffs, petitioners here,
were all dealers who had operated "Midas Muffler Shops" under sales
agreements granted by respondent Midas, Inc. Their complaint
charged that Midas had entered into a conspiracy with the other
named defendants -- its parent corporation International Parts
Corp., two other subsidiaries, and six individual defendants who
were officers or agents of the corporations -- to restrain and
substantially lessen competition in violation of l of the Sherman
Act [
Footnote 1] and § 3 of the
Clayton Act. [
Footnote 2] They
also charged that the defendants had violated § 2(a) of the Clayton
Act, as amended by the Robinson-Patman Act, [
Footnote 3] by granting discriminations in prices
and services to some of their customers without offering the same
advantages to the plaintiffs. The District Court entered summary
judgment for respondents with respect to all of petitioners'
Page 392 U. S. 136
claims. On appeal, the Court of Appeals reversed the judgment
for respondents on the Robinson-Patman claim but, over Judge
Cummings' dissent, affirmed the District Court's ruling that the
other claims were barred by the doctrine of
in pari
delicto. The court also held that petitioners' Sherman Act
claim was barred because Midas and International, while functioning
as separate corporations, had a common ownership, and therefore
could cooperate without creating an illegal conspiracy. [
Footnote 4] 376 F.2d 692 (1967).
Because these rulings by the Court of Appeals seemed to threaten
the effectiveness of the private action as a vital means for
enforcing the antitrust policy of the United States, we granted
certiorari. 389 U.S. 1034 (1968). For reasons to be stated, we
reverse.
The economic arrangements that led to this lawsuit have a long
history. Respondent International Parts has been in the business of
manufacturing automobile mufflers and other exhaust system parts
since 1938. In 1955, the owners of International initiated a
detailed plan for promoting the sale of mufflers by extensively
advertising the "Midas" trade name and establishing a nationwide
chain of dealers who would specialize in selling exhaust system
equipment. Each prospective dealer was offered a sales agreement
prepared by Midas, Inc., a wholly owned subsidiary of
International. The agreement
Page 392 U. S. 137
obligated the dealer to purchase all his mufflers from Midas, to
honor the Midas guarantee on mufflers sold by any dealer, and to
sell the mufflers at resale prices fixed by Midas and at locations
specified in the agreement. The dealers were also obligated to
purchase all their exhaust system parts from Midas, to carry the
complete line of Midas products, and in general to refrain from
dealing with any of Midas' competitors. In return, Midas promised
to underwrite the cost of the muffler guarantee and gave the dealer
permission to use the registered trademark "Midas" and the service
mark "Midas Muffler Shops." The dealer was also granted the
exclusive right to sell "Midas" products within his defined
territory. He was not required to pay a franchise fee or to
purchase or lease substantial capital equipment from Midas, and the
agreement was cancelable by either party on 30 days' notice.
Petitioners' complaint challenged as illegal restraints of trade
numerous provisions of the agreements, such as the terms barring
them from purchasing from other sources of supply, preventing them
from selling outside the designated territory, tying the sale of
mufflers to the sale of other products in the Midas line, and
requiring them to sell at fixed retail prices. Petitioners alleged
that they had often requested Midas to eliminate these
restrictions, but that Midas had refused, and had threatened to
terminate their agreements if they failed to comply. Finally they
alleged that one of the plaintiffs had had his agreement canceled
by Midas for purchasing exhaust parts from a Midas competitor, and
that the other plaintiff dealers had themselves canceled their
agreements. All the plaintiffs claimed treble damages for the
monetary loss they had suffered from having to abide by the
restrictive provisions.
The Court of Appeals, agreeing with the District Court, held the
suit barred because petitioners were
in pari
Page 392 U. S. 138
delicto. The court noted that each of the petitioners
had enthusiastically sought to acquire a Midas franchise with full
knowledge of these provisions, and had "solemnly subscribed" to the
agreement containing the restrictive terms. Petitioners had all
made enormous profits as Midas dealers, had eagerly sought to
acquire additional franchises, and had voluntarily entered into
additional franchise agreements, all while fully aware of the
restrictions they now challenge. Under these circumstances, the
Court of Appeals concluded, "[i]t would be difficult to visualize a
case more appropriate for the application of the
pari
delicto doctrine." 376 F.2d at 699.
We find ourselves in complete disagreement with the Court of
Appeals. There is nothing in the language of the antitrust acts
which indicates that Congress wanted to make the common law
in
pari delicto doctrine a defense to treble damage actions, and
the facts of this case suggest no basis for applying such a
doctrine even if it did exist. Although
in pari delicto
literally means "of equal fault," the doctrine has been applied,
correctly or incorrectly, in a wide variety of situations in which
a plaintiff seeking damages or equitable relief is himself involved
in some of the same sort of wrongdoing. We have often indicated the
inappropriateness of invoking broad common law barriers to relief
where a private suit serves important public purposes. It was for
this reason that we held in
Kiefer-Stewart Co. v. Seagram &
Sons, 340 U. S. 211
(1951), that a plaintiff in an antitrust suit could not be barred
from recovery by proof that he had engaged in an unrelated
conspiracy to commit some other antitrust violation. Similarly, in
Simpson v. Union Oil Co., 377 U. S.
13 (1964), we held that a dealer whose consignment
agreement was canceled for failure to adhere to a fixed resale
price could bring suit under the antitrust laws even though by
signing the agreement he had, to that extent,
Page 392 U. S. 139
become a participant in the illegal, competition-destroying
scheme. Both
Simpson and
Kiefer-Stewart were
premised on a recognition that the purposes of the antitrust laws
are best served by insuring that the private action will be an
ever-present threat to deter anyone contemplating business behavior
in violation of the antitrust laws. The plaintiff who reaps the
reward of treble damages may be no less morally reprehensible than
the defendant, but the law encourages his suit to further the
overriding public policy in favor of competition. A more fastidious
regard for the relative moral worth of the parties would only
result in seriously undermining the usefulness of the private
action as a bulwark of antitrust enforcement. And permitting the
plaintiff to recover a windfall gain does not encourage continued
violations by those in his position, since they remain fully
subject to civil and criminal penalties for their own illegal
conduct.
Kiefer-Stewart, supra.
In light of these considerations, we cannot accept the Court of
Appeals' idea that courts have power to undermine the antitrust
acts by denying recovery to injured parties merely because they
have participated to the extent of utilizing illegal arrangements
formulated and carried out by others. Although petitioners may be
subject to some criticism for having taken any part in respondents'
allegedly illegal scheme and for eagerly seeking more franchises
and more profits, their participation was not voluntary in any
meaningful sense. They sought the franchises enthusiastically, but
they did not actively seek each and every clause of the agreement.
Rather, many of the clauses were quite clearly detrimental to their
interests, and they alleged that they had continually objected to
them. Petitioners apparently accepted many of these restraints
solely because their acquiescence was necessary to obtain an
otherwise attractive business opportunity. The argument that
such
Page 392 U. S. 140
conduct by petitioners defeats their right to sue is completely
refuted by the following statement from
Simpson:
"The fact that a retailer can refuse to deal does not give the
supplier immunity if the arrangement is one of those schemes
condemned by the antitrust laws."
377 U.S. at
377 U. S. 16.
Moreover, even if petitioners actually favored and supported some
of the other restrictions, they cannot be blamed for seeking to
minimize the disadvantages of the agreement once they had been
forced to accept its more onerous terms as a condition of doing
business. The possible beneficial byproducts of a restriction from
a plaintiff's point of view can, of course, be taken into
consideration in computing damages, but, once it is shown that the
plaintiff did not aggressively support and further the monopolistic
scheme as a necessary part and parcel of it, his understandable
attempts to make the best of a bad situation should not be a ground
for completely denying him the right to recover which the antitrust
acts give him. We therefore hold that the doctrine of
in pari
delicto, with its complex scope, contents, and effects, is not
to be recognized as a defense to an antitrust action.
Respondents, however, seek to support the judgment below on a
considerably narrower ground. They picture petitioners as actively
supporting the entire restrictive program as such, participating in
its formulation and encouraging its continuation. We need not
decide, however, whether such truly complete involvement and
participation in a monopolistic scheme could ever be a basis,
wholly apart from the idea of
in pari delicto, for barring
a plaintiff's cause of action, for, in the present case, the
factual picture respondents attempt to paint is utterly refuted by
the record. One of the restrictions which petitioners most
strenuously challenge is the requirement that dealers purchase
their supplies exclusively from Midas. Another is the requirement
that dealers carry Midas' full line of parts. Neither of these
provisions could be in a dealer's self-interest, since they
obligate
Page 392 U. S. 141
him to buy from Midas regardless of whether more favorable
prices can be obtained from other sources of supply and regardless
of whether he needs certain parts at all. [
Footnote 5] In addition, the depositions refer to
numerous instances in which petitioners asked Midas for permission
to purchase from some other source of supply. The record shows that
these requests were repeatedly refused by Midas representatives,
who underscored the refusals by describing the very requests as
"heresy" and by commenting that dealers who bought from outside
sources of supply were "asking for trouble" or "were going to be
punished." A Midas official warned petitioner Pierce, who had been
buying some exhaust parts from other manufacturers, "Joe, this is
just like cheating on your wife; it is grounds for divorce."
These statements completely refute respondents' argument that
petitioners were active participants, and show, to the contrary,
that the illegal scheme was thrust upon them by Midas.
There remains for consideration only the Court of Appeals'
alternative holding that the Sherman Act claim should be dismissed
because respondents were all part of a single business entity, and
were therefore entitled to cooperate without creating an illegal
conspiracy. But since respondents Midas and International availed
themselves of the privilege of doing business through separate
corporations, the fact of common ownership could not
Page 392 U. S. 142
save them from any of the obligations that the law imposes on
separate entities.
See Timken Co. v. United States,
341 U. S. 593,
341 U. S. 598
(1951);
United States v. Yellow Cab Co., 332 U.
S. 218,
332 U. S. 227
(1947). In any event, each petitioner can clearly charge a
combination between Midas and himself, as of the day he unwillingly
complied with the restrictive franchise agreements,
Albrecht v.
Herald Co., 390 U. S. 145,
390 U. S. 150,
n. 6 (1968);
Simpson v. Union Oil Co., supra, or between
Midas and other franchise dealers, whose acquiescence in Midas'
firmly enforced restraints was induced by "the communicated danger
of termination,"
United States v. Arnold, Schwinn &
Co., 388 U. S. 365,
388 U. S. 372
(1967);
United States v. Parke, Davis & Co.,
362 U. S. 29
(1960). Although respondents object that these particular theories
of conspiracy now pressed by petitioners were not alleged with
sufficient specificity in their complaint, this suggestion is
completely without merit. Our modern rules provide for trying cases
to serve the ends of justice, and require that pleadings "be so
construed as to do substantial justice." Rule 8(f), Fed.Rules
Civ.Proc. The gist of petitioners' cause of action has been clear
from the outset, and respondents will in no way be prejudiced if
petitioners are permitted to rely on these alternative theories of
conspiracy.
It follows that the judgment of the Court of Appeals must be
reversed. The case is remanded to that court with directions to
reverse in full the judgment of the District Court and to remand
the case for trial.
It is so ordered.
[
Footnote 1]
26 Stat. 209, 15 U.S.C. § 1.
[
Footnote 2]
38 Stat.731, 15 U.S.C. § 14.
[
Footnote 3]
49 Stat. 1526, 15 U.S.C. § 13.
[
Footnote 4]
In their motion for summary judgment, respondents also argued
that the restraints were permissible as reasonable means to protect
their registered trade and service marks, but, because they had
failed to answer interrogatories pertinent to this defense, the
district judge ordered it stricken, without prejudice to renewal if
respondents promptly answered the relevant interrogatories. Because
of its disposition of the case, the Court of Appeals reached
neither the merits of this defense nor the question whether
respondents had ever properly renewed it. In the circumstances of
this case, we think the merits of this defense cannot be decided as
a summary judgment question, but must be resolved, along with all
the other issues, by a trial on the merits.
[
Footnote 5]
Respondents suggest that these requirements were beneficial to a
dealer because they helped him win customers who had confidence in
the "Midas" brand, and some dealers evidently did try to reap some
benefit from these requirements by advertising, "You get only
nationally advertised Midas products." It seems highly unlikely,
however, that benefits of this kind could do more than mitigate
very slightly the losses that a dealer would suffer when forced to
buy higher-priced Midas products, particularly since dealers would
have bought the higher-priced Midas products voluntarily if they
thought customer preferences for the brand would be sufficiently
strong to offset the higher price.
MR. JUSTICE WHITE, concurring.
I join the opinion and judgment of the Court with the following
observations.
As long ago as 1927, in
Eastman Kodak Co. of N.Y. v.
Southern Photo Materials Co., 273 U.
S. 359, the Court
Page 392 U. S. 143
recognized that participation in an unlawful course of conduct
would not bar recovery where the defendant's superior bargaining
power led to plaintiff's participation in the unlawful arrangement.
In
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,
Inc., 340 U. S. 211
(1951), where plaintiff was said to have participated in an illegal
scheme other than the one charged in his complaint, the Court made
it clear that a plaintiff's own delinquency under the antitrust
laws would not always bar his treble damage suit.
See also
Bales v. Kansas City Star Co., 336 F.2d 439, 444 (C.A. 8th
Cir.1964);
Jewel Tea Co. v. Local Unions, 274 F.2d 217,
223 (C.A. 7th Cir.),
cert. denied, 362 U.S. 936 (1960).
These cases are enough to warrant reversal in this case, once it is
concluded that the illegal arrangement in which petitioners
participated was thrust on them by respondents. This is the
conclusion reached by the Court, and I agree with it.
I also agree that the
in pari delicto defense, in its
historic formulation, is not a useful concept for sorting out those
situations in which the plaintiff might be barred because of his
own conduct from those in which he may have been a party to an
illegal venture but is still entitled to damages from other
participants. Judgments like these would be better made by hewing
closer to the aims and purposes of § 4 of the Clayton Act, 38 Stat.
731, 15 U.S.C. § 15, which gives treble damage recovery to the
private plaintiff injured by conduct which violates the antitrust
laws.
Under § 4, plaintiff must show not only that the defendant
violated the antitrust laws, but that his conduct caused the
damages alleged in the complaint. Normally, it would be enough with
respect to causation if the defendant "materially contributed" to
plaintiff's injury,
Continental Ore Co. v. Union Carbide Carbon
Corp., 370 U. S. 690,
370 U. S. 702
(1962); or "substantially
Page 392 U. S. 144
contributed, notwithstanding other factors contributed also,"
Momand v. Universal Film Exchanges, Inc., 172 F.2d 37, 43
(C.A. 1st Cir.1948),
cert. denied, 336 U.S. 967 (1949).
The plaintiff need not show that the illegality was a more
substantial cause than any other.
Haverhill Gazette Co. v.
Union Leader Corp., 333 F.2d 798, 805-806 (C.A. 1st Cir.),
cert. denied, 379 U.S. 931 (1964).
Under this rule, a third party proving an illegal undertaking
between two defendants may recover for all damages caused by the
combination. Those damages normally may be had from either or both
defendants without regard to their relative responsibility for
originating the combination or their different roles in
effectuating its ends. This is because neither defendant, if he
acted alone, could be charged with the violation; some degree of
participation by both is essential to create a combination within
the reach of § 1 of the Sherman Act. Either defendant is therefore
deemed to have been a material cause of the damages sufficient to
permit a third party to recover.
This may be the result required under § 4 when conspirators are
sued by an injured outsider. But what is the situation when one
party to the combination sues the other? Assume three situations:
first, A, a manufacturer, sells to B, a retailer. A, over B's
objection, insists on B's adhering to specified resale prices. B
agrees, since A's product is an important part of his business and
he can get it nowhere else. B suffers a decline in business because
of an inability to match or better the price for competing
products. B sues A. He is obviously in a position to prove that A
was a substantial cause of his injury.
Second, suppose that, when B maintains the suggested prices on
A's product, he simply sells more of C's competing product, which
he also handles. B is not hurt, but A is. A sues B.
Page 392 U. S. 145
Third, suppose that D and E, competitors, combine to fix higher
prices. D's best customer sets up his own source of supply to D's
great damage. D sues E, claiming that E was a substantial cause of
his injury.
It is arguable that, in each supposed situation, recovery should
be denied because the plaintiff was a party to the illegality, and
wrongdoers should be left where they are found. In terms of the
deterrent aims of the statute permitting injured plaintiffs to
recover treble damages, however, this undiscriminating approach
makes little sense. When those with market power and leverage
persuade, coerce, or influence others to cooperate in an illegal
combination to their damage, allowing recovery to the latter is
wholly consistent with the purpose of § 4, since it will deter
those most likely to be responsible for organizing forbidden
schemes. The principles of
Eastman Kodak Co. of N.Y. v.
Southern Photo Materials Co., supra, clearly permit recovery
by the less responsible, but injured, party. In the first
hypothetical case, therefore, B should recover from A in order to
deter A and others like him from imposing resale price maintenance
schemes on their customers.
In the second case, where manufacturer A, contrary to his
expectations, was injured and retailer B was not, there is no
reason, based on the deterrent purposes of § 4, to permit recovery
from B, even though his cooperation was essential to the
combination and even though, had a third party been injured, he
could have recovered from either A or B, or from both. A, the
moving force, should not be rewarded for his efforts to further an
unlawful price arrangement and, in effect, to take from B the
profits, trebled, that B made by selling the products of A's
competitor. B was unwilling to enter the illegal scheme, was
motivated principally by what he thought was economic necessity --
the need to avoid losing business by being unable to offer a
major
Page 392 U. S. 146
product line -- and would have been only marginally deterred by
the prospect of antitrust liability.
In the third case, where D and E are competitors, if D simply
proves the agreement and the resulting loss, should he recover from
E, absent some believable showing that E was the more responsible
for the illegal scheme? No doubt E was a substantial factor in the
combination, and hence in the injury; a judgment for damages might
deter him and others from violating the law. But D is equally
responsible for his own damages. To permit him a recovery may be a
counterdeterrent. By assuring him illegal profits if the agreement
in restraint of trade succeeds, and treble damages if it fails, it
may encourage what the Act was designed to prevent. In this
situation, it is doubtful that the ends of § 4 would be measurably
served by permitting D's recovery. If judge or jury finds the
parties equally responsible for the conduct which caused injury,
D's recovery under § 4 should be denied for failure of proof that E
was the more substantial cause of the injury
No simple formula can encompass the infinite variety of possible
situations. Generally speaking, however, I would deny recovery
where plaintiff and defendant bear substantially equal
responsibility for injury resulting to one of them but permit
recovery in favor of the one less responsible where one is more
responsible than the other. This rule would simply pose the issue
of causation in particularized form. There will be little mystery
as to what evidence would be relevant proof: facts as to the
relative responsibility for originating, negotiating, and
implementing the scheme; evidence as to who might reasonably have
been expected to benefit from the provision or conduct making the
scheme illegal under § 1; proof of whether one party attempted to
terminate the arrangement and encountered resistance or
countermeasures from the other; facts showing
Page 392 U. S. 147
who ultimately profited or suffered from the arrangement. As I
view the record in the case before us, the evidence is insufficient
to show that petitioners were as responsible as respondents, or
more so, for the admittedly illegal scheme. The evidence before us
does not suggest that petitioners were equal partners with
respondents with respect to the origin and implementation of this
scheme for distributing respondents' mufflers, or in terms of
benefits from the scheme. In such circumstances, summary judgment
for respondents was improper.
MR. JUSTICE FORTAS, concurring in the result.
I agree with the result in this case. Petitioners' right to
recover in their own interest and as "private attorneys general" to
enforce the antitrust laws cannot be denied on the basis of the
doctrine of
in pari delicto. Simpson v. Union Oil
Co., 377 U. S. 13
(1964).
The doctrine has, however, a significant if limited role in
private antitrust law. If the fault of the parties is reasonably
within the same scale -- if the "
delictum" is
approximately "
par" -- then the doctrine should bar
recovery. This might be the case, for example, if a manufacturer of
mufflers and a manufacturer of other parts had combined to
formulate and operate a collusive scheme. One coadventurer could
not sue the other for discriminatory or restrictive practices which
allegedly diminished its take from the enterprise.
But equality of position of this general nature is necessary
before
in pari delicto may apply to bar an antitrust
remedy. Unless the doctrine is so limited, the private remedy
provided by the antitrust laws is nullified to a significant
extent. The owner of a gas station may enter into an arrangement
with the distributor and may benefit from its restrictive
provisions. But this less than equal participation in the crime
must not bar him
Page 392 U. S. 148
from recovering in his own and the public interest if he can
show that he has suffered compensable harm. Our decision in
Simpson indicates this quite clearly. The antitrust laws
are intended to protect individuals "from combinations fashioned by
others and offered to [them] . . . as the only feasible method by
which [they] may do business."
Ring v. Spina, 148 F.2d
647, 653 (1945).
As the Court points out, it is possible that the franchisee may
be proved to be a collaborator, or coadventurer, or a true
particeps criminis with respect
to a particular
aspect of the plan -- for example, if he
originated and
insisted upon the inclusion of a territorial exclusivity
clause which was not in the franchise as drafted by the franchisor.
He could not recover damages based upon this, if, essentially, it
is his own act.
Clearly, petitioners here are not coadventurers or partners in
the franchise arrangement as a whole, and they are not barred by
in pari delicto. On remand, as the Court orders, if
petitioners are chargeable with responsibility for a particular
clause of the agreement or restrictive covenant because it is, in
substance, their own act, they should not be allowed to recover for
injury they may have suffered because of it.
MR. JUSTICE MARSHALL, concurring in the result.
While I agree with the result and much of the reasoning in the
opinion of the Court in this case, I find myself unable to accept
what I take to be the holding that the doctrine of
in pari
delicto has no place in a treble damage antitrust action. Not
only is it unnecessary to pass on such a broad proposition on the
facts of this case, as the Court's opinion reveals, but the holding
itself is, in my opinion, incorrect.
I agree that the "complex scope, contents, and effects" of the
doctrine as it has grown up in the common law should not be applied
mechanically to private antitrust
Page 392 U. S. 149
actions under the relevant federal statutes. On the other hand,
I believe that a limited application of the basic principle behind
the doctrine of
in pari delicto is both proper and
desirable in the antitrust field. As the Court notes,
ante
at
392 U. S. 138,
the literal meaning of
in pari delicto is of equal fault.
I would hold that, where a defendant in a private antitrust suit
can show that the plaintiff actively participated in the formation
and implementation of an illegal scheme, and is substantially
equally at fault, the plaintiff should be barred from imposing
liability on the defendant.
Such an approach would still require reversal of the decision of
the Court of Appeals in this case. As this Court's opinion makes
perfectly clear, the mere fact that a party enters into an
agreement containing provisions that are violative of the antitrust
laws with the intent to make money by operating under the agreement
is not, in itself, sufficient to show that he is equally
responsible for the existence of the illegal provisions.
Simpson v. Union Oil Co., 377 U. S.
13 (1964). Furthermore, the Court is certainly correct
in concluding that the record is replete with evidence, relating to
the tying and exclusive dealing provisions of the franchise
agreement, which indicates, with sufficient probative force to
withstand respondents' motion for summary judgment, that the
petitioners did not actively seek out or support all the
anticompetitive restraints embodied in the franchise.
However, the inquiry should not stop here. The franchise
agreement also contains provisions requiring both resale price
maintenance and the observance of territorial restrictions on sales
by franchisees. Both of these sets of restrictions are ones which,
at least on their face, would ordinarily be expected to benefit the
franchisees more than Midas. Both restrict competition between
franchisees, not between Midas and other suppliers competing to
sell parts to Midas franchisees. If Midas can
Page 392 U. S. 150
make an adequate showing that those provisions were inserted
into the franchise agreement at the behest and for the benefit of
petitioners and their fellow franchisees, petitioners should, in my
opinion, be barred from contending that they were damaged by the
existence and enforcement of the provisions.
I agree with the Court that petitioners should not be barred
from recovering damages attributable to the enforcement of the
tying and exclusive dealing provisions against them on the sole
ground that they participated in the formulation of other
anticompetitive provisions in the agreement.
Cf. Moore v. Mead
Service Co., 340 U.S. 944 (1951),
vacating 184 F.2d
338 (C.A. 10th Cir.1950). However, if Midas could show, which it
has quite clearly not done at this stage of the litigation, that
petitioners actually participated in the formulation of the entire
agreement, trading off anticompetitive restraints on their own
freedom of action (such as the tying and exclusive dealing
provisions) for anticompetitive restraints intended for their
benefit (such as resale price maintenance or exclusive
territories), petitioners should be barred from seeking damages as
to the agreement as a whole.
It may be argued that the course I propose unduly complicates
private antitrust litigation. A holding that a party who
voluntarily enters into an agreement containing provisions that
violate the antitrust laws is barred from any recovery on that
agreement altogether (as the Court of Appeals has held here) or, at
the other extreme, is absolutely free to recover any damages that
he can show to stem from his operations under the agreement (as
this Court's opinion seems to hold) would presumably be
considerably easier to apply in most cases. It seems to me,
however, that neither holding would represent a satisfactory
resolution of the difficult problems concerning the administration
of the antitrust laws raised by
Page 392 U. S. 151
agreements such as the one involved in the present case. The
reasons for rejecting the approach taken by the Court of Appeals
are, as I have said, persuasively set forth in the opinion of the
Court. The reasons I see for rejecting the approach taken by this
Court are, perhaps, less related to the public interest in
eliminating all forms of anticompetitive business conduct and more
related to the equities as between the parties. The principle that
a wrongdoer shall not be permitted to profit through his own
wrongdoing is fundamental in our jurisprudence. The traditional
doctrine of
in pari delicto is itself firmly based on this
principle. I nevertheless agree, because of the strong public
interest in eliminating restraints on competition, that many of the
refinements of moral worth demanded of plaintiffs by such
traditional legal and equitable doctrines as
volenti non fit
injuria, unclean hands, and many of the variations of
in
pari delicto should not be applicable in the antitrust field.
However, I cannot agree that the public interest requires that a
plaintiff who has actively sought to bring about illegal restraints
on competition for his own benefit be permitted to demand redress
-- in the form of treble damages -- from a partner who is no more
responsible for the existence of the illegality than the
plaintiff.
The possible added deterrence to violations of the antitrust
laws that would be produced by the Court's holding may well be
equaled, if not surpassed, by the new incentive it will create to
commit such violations, for a potential violator will have less to
lose if he can attempt to recover his losses from his partner
should the scheme not work out to his benefit.
The Court's opinion appears to seek to minimize the consequences
of doing away with the
in pari delicto defense by
suggesting that a defendant will be able to have the "beneficial
byproducts of a restriction" (
ante at
392 U. S. 140)
to the plaintiff taken into account in the computation
Page 392 U. S. 152
of damages. This, of course, is to some extent already true in
any antitrust case. Illegal conduct does not
per se result
in a money judgment for a plaintiff; injury must always be shown.
However, a defendant might also be permitted to show that the
plaintiff's financial rewards from some of the illegal provisions
of an agreement outweighed the harm suffered from other illegal
provisions, and, accordingly, on some sort of offset theory, the
plaintiff would recover nothing.
If such an offset approach on the issue of damages is envisioned
by the Court, it hardly seems an adequate means of preventing
unjust enrichment. First, that approach clearly permits damages to
be awarded when injury is shown to outweigh benefit regardless of
the nature of the plaintiff's participation in the scheme. Second,
it adds an unnecessarily speculative element to the factual inquiry
required in an antitrust case. While a trier of fact may have some
difficulty in allocating responsibility between the parties to an
agreement, the allocation can be made for the most part on the
basis of hard evidence as to the facts surrounding the making of
the agreement. The determination of damages in an antitrust suit,
however, almost invariably requires a certain amount of
speculation, no matter how informed.
Cf. Bigelow v. RKO
Pictures, Inc., 327 U. S. 251,
327 U. S.
264-266 (1946). Such speculation is ordinarily
unavoidable if damages are to be provable. Here there is no
necessity for permitting additional speculation as to offsetting
benefits in order to prevent unjust enrichment because the same
goal can be achieved by a factual evaluation of the parties'
respective fault.
For example, it is obviously much easier to determine in this
case whether petitioners actively participated in the formulation
and implementation of the various illegal provisions of the
franchise agreement than it is to decide whether the monetary
benefits that petitioners obtained
Page 392 U. S. 153
through the resale price maintenance and exclusive territorial
provisions surpassed the losses they suffered from the exclusive
dealing and tying arrangements. Since I regard a respective fault
approach as superior to a damage offset approach on principle, the
complications inherent in the latter inquiry merely reinforce my
conviction that the Court is being unwise in broadly rejecting the
doctrine of
in pari delicto.
MR. JUSTICE HARLAN, with whom MR. JUSTICE STEWART joins,
concurring in part and dissenting in part.
The variety of views this case has engendered seems to me to
stem from lack of agreement on a definition of the term "
in
pari delicto," as well as a disagreement, perhaps, on the
standards that should govern the use of the defense to which that
term is properly applied. I believe that the courts below misused
the term, but that, properly used, it refers to a defense that
should be permitted in antitrust cases. Consequently, I would
remand this case not for immediate trial, but for fresh
consideration of the motion for summary judgment upon proper
standards.
Plaintiffs who are truly
in pari delicto are those who
have themselves violated the law in cooperation with the defendant.
[
Footnote 2/1] If the law is the
Sherman Act, both are, in principle, liable equally to criminal
prosecution. For example, two manufacturers who agree on a price at
which they will sell are "of equal fault," as are a manufacturer
and a dealer who strike a bargain whereby each accepts an illegal
restriction that benefits the other.
Page 392 U. S. 154
When a person suffers losses as a result of activities the law
forbade him to engage in, I see no reason why the law should award
him treble damages from his fellow offenders. It seems to me a
bizarre way to "further the overriding public policy in favor of
competition,"
ante at
392 U. S. 139,
to pay violators three times their losses in doing what public
policy seeks to deter them from doing. Even if the threat of
intra-conspiracy treble damages had some deterrent effect, however,
I should not think it a too "fastidious regard for the relative
moral worth of the parties,"
ibid., to decline to sanction
a kind of antitrust enforcement that rests upon a principle of well
compensated dishonor among thieves.
There are, however, three situations quite distinct from that to
which I think the term
in pari delicto is properly
applied. The first is the "consent" situation in which the Latin
maxim "
volenti non fit injuria" is sometimes invoked.
Where X and Y conspire to fix prices at which they will sell, they
are
in pari delicto. If Z, knowing of the conspiracy,
nevertheless purchases from X, he is not
in pari delicto.
He has committed no offense: the most that can be said is that he
knowingly allowed an offense to be committed against him. I would
agree, for many of the reasons stated in the opinions of MR.
JUSTICE BLACK, MR. JUSTICE FORTAS, and MR. JUSTICE MARSHALL, that
there should be no defense in such a situation, where the plaintiff
has done nothing the law told him not to do.
A second situation distinguishable from true
in pari
delicto is illustrated by
Kiefer-Stewart Co. v. Seagram
& Sons, 340 U. S. 211,
relied on by the Court. It was there alleged in defense to a treble
damage action that the defendants' illegal actions were taken in
reprisal against altogether independent illegal actions by the
plaintiff. Here again, I accept the decision that this is no
defense. Our law frowns on vigilante justice. Since the plaintiff
is in part enforcing the public interest against the defendants'
violations, I would permit him to do so, and
Page 392 U. S. 155
leave punishment for any independent violation by him to proper
means of enforcement.
The third distinguishable situation may or may not be
illustrated by
Simpson v. Union Oil Co., 377 U. S.
13, and
Albrecht v. Herald Co., 390 U.
S. 145, two cases that I find it quite difficult to
understand. [
Footnote 2/2] In each
of them, the plaintiff had been offered a dealership, on terms that
he did not participate in formulating, and, in each case, he at
first "accepted" such a dealership. Since neither case stated
satisfactorily where the alleged combination in restraint of trade
was to be found, it is not clear whether the plaintiff's acceptance
of a dealership was itself a forbidden act. If it was not, then
these cases fall under the heading of "consent" cases. A person who
engaged in a lawful business on the terms offered should not be
prevented from suing merely by his knowledge that others violated
the law in contriving those terms. If, however, those plaintiffs
were doing something the law told them not to do, I suggest that
recovery in those cases can best be understood on the theory of a
"coercion" exception to the
in pari delicto doctrine. That
is, although a large business with the power to dictate terms and a
small business that can only accept them or cease doing business
may both, in principle, be liable to legal sanctions for the
contract that results from the offer and acceptance, it is
considered that the liability is not "
par," and that the
business accepting dictation is only minimally blameworthy.
In my view, the District Court and the Court of Appeals did not
apply the true
in pari delicto standard to this case. The
District Court said that
"each plaintiff voluntarily entered into the franchise agreement
. . . and accepted the benefits therefrom. They are . . .
[therefore?]
in pari delicto with defendants. . . .
[
Footnote 2/3]"
At another
Page 392 U. S. 156
point, the court said, "We have repeatedly held that a person
who freely assents to an act suffers
no legal injury' if harm
results therefrom." [Footnote 2/4]
Although the District Court made a passing distinction of the
"coercion" and "unclean hands" doctrines, it is not clear that it
meant to hold that the violation of the Sherman Act, if any, was
one for which plaintiffs were subject to public law sanctions along
with the defendants.
The Court of Appeals decision was similar. That court relied on
the District Court's language quoted above, adding that each of the
plaintiffs had made a substantial profit from selling auto parts, a
fact that might bear on the measure of any damages but which, apart
from illegal action on the part of the plaintiffs, should not
afford an absolute defense. [
Footnote
2/5]
It is by no means clear on this record, however, that the
plaintiffs may not be said to have been
in pari delicto in
the proper sense of that term. This question is rendered more
difficult by the complexity of the record history of plaintiffs'
activities, and by the formidable obscurity of the law of dealer
liability for vertical restraints, an obscurity fostered by
Simpson, supra, Albrecht, supra, and, above all, by
United States v. Parke, Davis & Co., 362 U. S.
29. Although I make no attempt to drain the bog at this
point, I am of the view that, before this case goes to trial, the
lower courts should be given another opportunity to consider the
in pari delicto defense. I would remand this case to
determine whether any agreement alleged to be in restraint of trade
was one for which the plaintiffs were substantially as much
responsible, and as much legally liable, as the defendants. I would
permit the lower courts to consider this question upon the existing
affidavits and such additional material as either side may wish to
adduce.
[
Footnote 2/1]
This is at least the traditional use of the term.
See, e.g.,
Williams v. Hedley, 8 East 378, 381-382, 103 Eng.Rep. 388,
389.
See generally Note,
In Pari Delicto and
Consent as Defenses in Private Antitrust Suits, 78 Harv.L.Rev.
1241, distinguishing the two defenses. The present case is as good
an illustration as any of the usefulness of maintaining distinct
terms for the distinct situations properly characterized by "
in
pari delicto," "consent," "unclean hands," and so forth.
[
Footnote 2/2]
See my dissenting opinion in
Albrecht, 390
U.S. at
390 U. S.
156.
[
Footnote 2/3]
1966 Trade Cases � 71,801, at 82,705.
[
Footnote 2/4]
Id. at 82,706.
[
Footnote 2/5]
See 376 F.2d 692, at 693, 695.