transact business in Bucks County. Additionally, in response to defendants' motion to dismiss, plaintiff submitted an affidavit which states that financing for the project was obtained through an interstate sale of tax-free bonds, that many of plaintiff's subcontractors were from out-of-state, and that much of the supplies used to build the prison came through interstate commerce.
In view of the substantive defects in plaintiff's complaint and the fact that amendment would certainly enable plaintiff to establish a jurisdictional basis, I will decline to dismiss this case for lack of subject matter jurisdiction. Although defendants rightly criticize the skeletal jurisdictional allegations in the complaint, our court of appeals has recently emphasized that minimal assertions of the impact of antitrust violations on interstate commerce will suffice. Cardio-Medical Associates, Ltd. v. Crozier-Chester Medical Center, 721 F.2d 68 (3d Cir. 1983).
On the merits, defendants' position is that plaintiff has failed to plead the elements of an antitrust cause of action. Plaintiff's antitrust allegations are contained in Counts I and II of the complaint. Although Count I characterizes defendants' "conspiracy" to terminate him as a restraint of trade in violation of Sherman Act § 1, it remains unclear what type of restraint Count I alleges. Count II claims that defendants' agreement constituted both an unlawful restraint of trade and an unlawful tying arrangement under § 3 of the Clayton Act.
Possibly because of the vagueness of plaintiff's antitrust allegations, defendants, primarily in their initial brief, attacked the tying and "conspiracy" claims as separate antitrust offenses. I do not believe that plaintiff has asserted any "antitrust conspiracy" claim separate from his tying claim.
Rather, plaintiff's Reply Memorandum of Law provides a concise description: "The substance of Plaintiff's antitrust claims is that the Defendants imposed on him a tying arrangement or reciprocal dealing arrangement of the traditional kind."
With plaintiff's claims so defined, defendants' attacks boil down to the following arguments:
1. Plaintiff's claims under § 3 of the Clayton Act must be dismissed because the alleged tie does not involve goods or wares.
2. Plaintiff has not pleaded antitrust injury or damages for which the antitrust laws provide a remedy.
3. There is no tying arrangement here because there is neither a tying nor tied product.
4. There is no tying arrangement because the services of the soils engineer cannot be considered a separate product from the integrated construction project.
5. The complaint fails to allege market power in the tying product.
6. The services of the soils engineer were not tied to the construction contract because plaintiff had the opportunity to object to McClymont, but failed to do so.
7. There can be no tying arrangement since the seller has no economic interest in the seller of the tied product.
8. The complaint fails to allege a reciprocity arrangement since plaintiff did not acquire anything from the County (other than payment) in exchange for its services.
9. The County, Warren, Fonash, and Zettick are immune from liability under the Local Government Antitrust Act of 1984.
To resolve defendants' motion to dismiss the antitrust claims, I need not explore the intricacies of all of the arguments advanced by the defendants. I am persuaded that one basic defect pervades the complaint: Whether couched in terms of traditional "tying" analysis or refined according to the mold of a reciprocal dealing claim, plaintiff's complaint reveals on its face that plaintiff held, but failed to exercise, the power to avoid McClymont's employment as the soils testing engineer. Plaintiff cannot, therefore, establish an unlawful linkage between his own employment as general contractor and McClymont's employment as a subcontractor. Although some uncertainty exists as to the level of coercion or "forcing" necessary to show that the sale of one product or service was unlawfully conditioned upon the purchase or sale of another, it remains the plaintiff's burden to establish that such conditioning existed. See Ungar v. Dunkin' Donuts of America, Inc., 531 F.2d 1211 (3d Cir.), cert. denied, 429 U.S. 823, 50 L. Ed. 2d 84, 97 S. Ct. 74 (1976). Plaintiff's own complaint establishes that no such conditioning can be proved.
Beyond the absence of a tie between plaintiff's and McClymont's contracts, however, the complaint is subject to partial or complete dismissal on several other grounds. Primarily, defendants are correct in their argument that plaintiff may not seek relief under § 3 of the Clayton Act because that statute proscribes tying only in sales of "goods, wares, merchandise, machinery, supplies, or other commodities. . . ." 15 U.S.C. § 14.
Defendants are similarly correct in arguing that plaintiff has not pleaded the elements of a tying violation. Cf. Bogosian v. Gulf Oil Corporation, 561 F.2d 434, 449 (3d Cir. 1977), cert. denied, 434 U.S. 1086, 55 L. Ed. 2d 791, 98 S. Ct. 1280 (1978). No party sold goods or services only on the condition that the buyer purchase other goods or services. Plaintiff sold his services to the County. To plaintiff's sale was appended the allegedly coerced sale of McClymont's services to plaintiff and, ultimately, the County. Thus, there was no tying product sold by the County to plaintiff. Likewise, there was no tied product since it was not the County, but McClymont, that sold soils engineering services.
Apparently recognizing the infirmities of his tying claim, plaintiff's memoranda of law have recast the antitrust claim as one for reciprocal dealing. Reciprocal dealing was recognized as an antitrust violation by the Supreme Court in Federal Trade Commission v. Consolidated Foods Corp., 380 U.S. 592, 594, 14 L. Ed. 2d 95, 85 S. Ct. 1220 (1965) ("'Reciprocity' . . . is one of the congeries of anticompetitive practices at which the antitrust laws are aimed.") The Court of Appeals for the Ninth Circuit has defined reciprocal dealing as "a dealing in which two parties face each other as both buyer and seller and one party agrees to buy the other party's goods on condition that the second party buys other goods from it." Betaseed, Inc. v. U and I Incorporated, 681 F.2d 1203, 1216 (9th Cir. 1982). With the exception that reciprocal dealing does not require the seller of the dominant product to act as seller in both markets, tying and reciprocal dealing are similar phenomena, and are judged according to the same legal standards. Betaseed, Inc., 681 F.2d at 1216-1217; Spartan Grain & Mill Company v. Ayers, 581 F.2d 419, 425 (5th Cir. 1978), cert. denied, 444 U.S. 831, 62 L. Ed. 2d 39, 100 S. Ct. 59 (1979).
Plaintiff's reformulation of his antitrust claim as one for reciprocal dealing, however, does not enable him to avoid dismissal of Counts I and II. Like the tying claim, the reciprocity claim fails because plaintiff, by the allegations in his own complaint, cannot establish that his contract with Bucks County was conditioned upon his acceptance of McClymont as soils testing engineer. Moreover, as defendants point out, both the tying and the reciprocal dealing claims are subject to dismissal because the perpetrators of the alleged tie or reciprocity agreement -- the County and the Commissioners -- did not have an economic interest in the seller of the tied service, here McClymont. See Venzie Corporation v. United States Mineral Products Company, Inc., 521 F.2d 1309, 1317 (3d Cir. 1975); ABA Antitrust Section, Antitrust Law Developments, 75 (2d ed. 1984).
As noted at the outset, defendants raise a host of challenges to plaintiff's claim under the antitrust laws. While I find considerable merit in several of these arguments, I deem it inappropriate, in light of the conclusions stated in the foregoing discussion, to resolve these contentions in the absence of a specific need to reach those issues. Nevertheless, in accord with the views I expressed during oral argument in this case, I will add that I agree with defendants' basic contention that the transaction here in issue did not violate the antitrust laws' proscription of tying agreements or reciprocal dealing. The essence of the economic transaction alleged by plaintiff was that the County purchased the services of McClymont through a contract to which plaintiff was a party. It is undisputed that the County could have employed McClymont separately, and afforded plaintiff no power to object to the County's choice of a soils engineer. That the County chose to employ McClymont through its agreement with the contractor to whom it gave the right to object should make no difference. The antitrust laws forbid a seller with market power from using that power to restrain competition in a second market; they do not provide contractors the power to veto an owner's choice of subcontractors. In a similar vein, the damages plaintiff alleges he sustained through the County's refusal to discharge McClymont are not injuries fairly attributable to a violation of the antitrust laws. This is not a case in which injury was caused by a seller's use of market power in one market to restrain competition in another. At most, defendants' refusal to terminate McClymont constituted a breach of contract for which plaintiff may seek relief in state court.
Apart from the substantive deficiencies of the antitrust claims, defendants Bucks County, Commissioners Warren and Fonash, and Chairman Zettick claim in the alternative the immunity conferred by the Local Government Antitrust Act of 1984, 98 Stat. 2750-51. In relevant portion, § 3 of the Act provides that "No damages, interest on damages, costs, or attorney's fees may be recovered under § 4, 4A, or 4C of the Clayton Act . . . from any local government, or official or employee thereof acting in an official capacity." § 3(a), to be codified at 15 U.S.C. § 35.
Because this suit was filed eleven days before the Act became effective, I must decide whether the Act should be applied retroactively. Retroactive application is governed by § 3(b) of the Act. Section 3(b) states:
(b) Subsection (a) shall not apply to cases commenced before the effective date of this Act unless the defendant establishes and the court determines, in light of all the circumstances, including the stage of litigation and the availability of alternative relief under the Clayton Act, that it would be inequitable not to apply this subsection to a pending case. In consideration of this section, existence of a jury verdict, district court judgment, or any stage of litigation subsequent thereto, shall be deemed to be prima facie evidence that subsection (a) shall not apply. (Emphasis added.)
The joint statement of the Conference Committee provides some guidance on retroactive application:
The application to pending cases of the money damage protection afforded by section 3 will be based upon a case-by-case determination by the district court. The local government has the burden of proof to establish to the court's satisfaction that it would be inequitable not to apply this act to the pending case. The court is to consider all relevant circumstances. The statute mentions two of the factors that the court should consider -- stage of the litigation and the availability of alternative relief under the Clayton Act. Where a pending case is in an early stage of litigation and where injunctive relief can remedy the problem, the defendant local government may be able more easily to sustain its burden. Where a case is in more advanced stages of litigation or where injunctive relief is unavailable or incomplete, the burden would become more difficult. If a case has progressed to or beyond a jury verdict or district court judgment, a local government defendant would need compelling equities on its side to justify the application of this section to the pending case.