absent APS's interference. Cloverleaf, 500 A.2d at 167.
In Count VII of the counterclaim, Hi-Tech charges APS with "piracy" of Hi-Tech's employees. APS contends that there is no piracy cause of action in Pennsylvania and, even so, that there is no factual basis for allegations that APS wrongfully induced employee to leave Hi-Tech. While there may be no tort in Pennsylvania named "piracy", it is well settled that to survive a motion to dismiss, the pleading need not correctly categorize legal theories giving rise to the claims, and the court is under a duty to examine the pleadings to determine if the allegations provide for relief under any theory. 5A C. Wright & A. Miller, Federal Practice and Procedure, § 1357, at 337 (1990). Pennsylvania recognizes the tort of interference with contractual relations between an employer and his employees. Accordingly, in Pennsylvania
the systematic inducing of employes to leave their present employment and take work with another is unlawful when the purpose of such enticement is to cripple and destroy an integral part of a competitive business organization rather than to obtain the services of particularly gifted or skilled employes. So also, when the inducement is made for the purpose of having the employes commit wrongs, such as disclosing their former employer's trade secret or enticing away his customers, the injured employer is entitled to protection
Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838, 847 (Pa. 1957).
Pennsylvania has adopted the Restatement (Second) of Torts §§ 766-768 as a framework for analyzing such claims. See Franklin Music v. American Broadcasting Companies, Inc., 616 F.2d 528, 542-43 (3d. Cir. 1979). Hi-Tech has sufficiently pled that APS's hiring of its employees was willfully calculated to cause damage to its business.
H. Sherman Act
The amended counterclaim charges that APS's actions as set forth in the amended counterclaim violated the Sherman Act, 15 U.S.C. § 1. APS argues that the amended counterclaim fails to state a claim under § 1 of the Sherman Act, because (1) the complaint does not to allege concerted action and (2) the complaint fails to allege anticompetitive effects. As to the first contention, Hi-Tech counters that it alleged concerted action between APS and IBM in shifting a major IBM service account from Hi-Tech to APS and in rigging IBM's bidding process. Hi-Tech is plainly correct.
The question whether Hi-Tech was required to plead anticompetitive effects is considerably more difficult. Acts that are very likely to interfere with competition are illegal per se and require no proof of anticompetitive effects to constitute a Sherman Act violation. Northern Pacific Railway Company v. United States, 356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1958). No such proof is required because the potential for harm inherent in these practices is so clear and so great. Bhan v. Nme Hospitals, 929 F.2d 1404, 1410 (3rd Cir. 1991), cert. denied., 112 S. Ct. 617, 116 L. Ed. 2d 639 (1991).
In the absence of allegations of acts that violate the Sherman Act per se, failure to sufficiently allege anticompetitive effects in a Sherman Act complaint is "fatal to the existence of a cause of action." Havoco of America, Ltd. v,. Shell Oil Co., 626 F.2d 549 554 (7th Cir. 1980). Specifically, plaintiff must allege the existence of "adverse, anti-competitive effects within relevant product and geographic markets" to state a cause of action under the rule-of- reason approach. Tunis Bros. Co., v. Ford Motor Co., 952 F.2d 715, 722 (3d. Cir. 1991), cert. denied, 120 L. Ed. 2d 903, 112 S. Ct. 3034 (1992). Such a showing is necessary because "an antitrust policy divorced from market considerations would lack any objective benchmarks." Continental T.V.,Inc. v. GTE Sylvania,Inc., 433 U.S. 36, 53, 53 L. Ed. 2d 568, 97 S. Ct. 2549 n.21 (1977). Additionally, to ensure that the Sherman Act does not interfere with practices that do not unreasonably restrain competition, there is a presumption in favor of a rule-of-reason standard. Business Electronics v. Sharp Electronics, 485 U.S. 717, 726, 99 L. Ed. 2d 808, 108 S. Ct. 1515 (1988).
Hi-Tech argues that it need not prove anticompetitive effects because it alleged a conspiracy to commit unfair competitive acts designed to destroy Hi-Tech's business. According to Hi-Tech, such acts constitute a per se violation of the Sherman Act.
Hi-Tech essentially attempts to turn a civil conspiracy claim into a per se Sherman Act violation. In doing so, it has some support. Hi-Tech relies on Albert Sauter Co. v. Richard Sauter Co., 368 F. Supp. 501 (E.D. Pa. 1973) and Erie Technological Products, Inc. vs. Centre Engineering,Inc., 52 F.R.D. 524 (M.D.Pa. 1971). These cases held that the Sherman Act is violated wherever there is proof of a conspiracy to engage in acts of unfair competition designed to eliminate the plaintiff as a competitor. In Sauter, two former employees of plaintiff were found to have conspired to leave plaintiff and eliminate it as a competitor by appropriating its key personnel, confidential information, customer lists, and reputation. Similarly, in Erie Technological, plaintiff's Sherman Act claim centered on defendants' alleged conspiracy to eliminate plaintiff from competition by enticing away its employees and trade secrets.
Hi-Tech alleges a similar scenario of appropriation of trade secrets and employees by APS. Oddly, however, Hi-Tech apparently bases its Sherman Act claim on a conspiracy between APS and IBM, by referring mostly to the collusion with IBM in the relevant portions of its counterclaim and its brief opposing the Motion to Dismiss. The counterclaim provides no indication that the alleged theft of secrets and employees from Hi-Tech could conceivably be part of the agreements between APS and IBM. Therefore, for purposes of its Sherman Act counterclaim, Hi-Tech does not allege a Sauter -style conspiracy among the counterclaim defendants
and/or with other former employees of Hi-Tech. Rather, the counterclaim alleges an agreement between a single, competing supplier and a single customer to deprive the defendant of that customer's business. Regardless of whether such an agreement is an actionable wrong under state tort law, it surely differs from a conspiracy between a new competitor and the employees of the competing firm to drive the old firm completely out of business. Horizontal competitors have facially obvious incentives to injure one another; however, it is less manifest that a customer in IBM's position has a motive to undermine the business of one of its suppliers. Indeed, the type of anticompetitive intent on which a Sherman Act § 1 claim can be founded is more difficult to establish than the intent to injure a party which supports a tort recovery. See Franklin Music v. American Broadcasting Companies, 616 F.2d 528, 556 (3d Circuit. 1979) (Sloviter, J., concurring). Agreements are per se illegal under the Sherman Act only when their nature is "so plainly anticompetitive that no further study of the industry is needed to establish their illegality . . . " National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 55 L. Ed. 2d 637, 98 S. Ct. 1355 (1978). Agreements between a customer and a supplier are less inherently suspect than agreements between a competitor and the employees of its competition.
Similarly, the economic impact of one customer switching suppliers is less certain than a concerted effort on the part of a competitor's employees or former employees to drive it out of business, and the Court has noted its reluctance "to extend per se analysis to restraints imposed in the context of business relationships where the economic impact of certain practices is not immediately obvious." FTC v. Indiana Federation of Dentists, 476 U.S. 447, 458-59, 90 L. Ed. 2d 445, 106 S. Ct. 2009 (1986). Per se rules are appropriate only for conduct "'that would always or almost always tend to restrict competition and decrease output.'" Business Electronics, 485 U.S. at 723, 108 S. Ct. at 1519 (citations omitted). The redirection of IBM's business does not have the obvious anticompetitive effects expected of a per se Sherman Act violation.
Moreover, Sauter is not, at least for the proposition that Hi-Tech intends to draw from it, the law of this Circuit.
In Franklin Music v. American Broadcasting Companies, 616 F.2d 528 (3d Cir. 1979), the jury found that there was a civil conspiracy to injure the plaintiff. In reviewing the verdict, the trial court decided that the intentional commission of the state tort of conspiracy did not constitute a per se violation of the Sherman Act and applied a rule-of-reason test. Although the record showed that plaintiff had ultimately been driven out of business, the trial court concluded that plaintiff had failed to introduce evidence of any impact on its competition with others and directed a verdict on plaintiff's Sherman Act claim in favor of the defendants. Plaintiff argued that the conspiracy verdict was sufficient to send the antitrust claim to the jury, but the Third Circuit disagreed. In affirming the directed verdict, the court held that "a civil conspiracy for a purpose unlawful under Pennsylvania law must be accompanied by proof of an effect upon competition in a defined market in order to make out a prima facie violation of section 1 of the Sherman Act." 616 F.2d at 528 (emphasis added). Therefore, under the law of the Third Circuit, plaintiff must show an anticompetitive effect beyond injury to their particular business. See Chronister v. Atlantic Richfield Co., 653 F. Supp. 1576, 1581 (M.D.Pa. 1987). "Adverse impact [on competitive conditions] is simply not shown by a loss of profits or even by the total elimination of one competitor." Northeast Women's Center, Inc., v. McMonagle, 670 F. Supp. 1300, 1305 (E.D.Pa. 1987). The requirement of demonstrating that a conspiracy to harm actually created a public injury to competition is consistent with the view of the Supreme Court that the antitrust laws "do not purport to afford remedies for all torts committed by or against persons in interstate commerce." Hunt v. Crumboch, 325 U.S. 821, 826, 89 L. Ed. 1954, 65 S. Ct. 1545 (1945). As the Court has repeatedly emphasized, these laws were enacted for "the protection of competition not competitors." Brown Shoe Co. v. United States, 370 U.S. 294, 320, 8 L. Ed. 2d 510, 82 S. Ct. 1502 (1962) (emphases in original).
In a concurring opinion, Judge Sloviter harmonized the Franklin Market result with the Sauter line of cases by noting that-- despite confused language to the contrary-- these cases did not actually adopt a per se approach to conspiracies to impair plaintiff's ability to compete. Rather, according to Judge Sloviter, these cases held that anti-competitive motive satisfied the rule-of-reason test, at a time when, under that test, it was only necessary to show either anticompetitive effects or motive. 616 F.2d at 556-57. Judge Sloviter concluded with the following pertinent observations:
There are instances when the goal of the antitrust laws in the preservation of competition is inconsistent with the protection of other interests under state tort law. The per se classification would preclude the presentation of market conditions. It might deter formation of new small businesses composed of some former employees of a dominant company who seek to instill competition into a languid market.
616 F.2d at 558.
Therefore, the question is whether, leaving aside their potential status as state torts and any broad allegations of a conspiracy to injure through anticompetitive acts, the bid rigging allegations independently constitute a per se violation of the Sherman Act. As a general matter, the Sherman Act does not require competitive bidding, National Soc. of Professional Eng'rs v. U.S.., 435 U.S. 679, 694-95, 55 L. Ed. 2d 637, 98 S. Ct. 1355 (1978), and a buyer can conspire with a new supplier to take the place of its present supplier. See Northwest Power Prods., Inc., v. Omark Indust., 576 F.2d 83, 86 (5th Cir. 1978). Therefore, the particular means of reallocating business must inherently restrain competition. Conspiracies between horizontal competitors to submit collusive, non-competitive bids to a third party are per se violations of the Sherman Act. E.g., United States v. Flom, 558 F.2d 1179, 1183 (5th Cir. 1977); United States v. Brighton Bldg. & Maintenance Co., 598 F.2d 1101, 1106 (7th Cir. 1979), cert. denied, 444 U.S. 840, 62 L. Ed. 2d 52, 100 S. Ct. 79, 100 S. Ct. 80 (1979). There, rigging makes it impossible for the biddee to get a fair, market price. Conversely, agreements to rig bids among persons who are not actual or potential competitors "is meaningless for Sherman Act purposes" because they have no market impact. United States v. Sargent Elec. Co., 785 F.2d 1123, 1127 (3d Cir. 1986), cert. denied, 479 U.S. 819, 107 S. Ct. 82, 93 L. Ed. 2d 36 (1986). In this case, no agreement between competitors has been alleged. Rather, Hi-Tech alleges essentially a vertical
sham bidding conspiracy between the biddee and one bidder.
"[A] vertical restraint is not illegal per se unless it includes some agreement on price levels." Business Electronics, 485 U.S. 717 at 735-6, 99 L. Ed. 2d 808, 108 S. Ct. 1515 .
Absent an agreement on resale price in the broader market-- which has not been alleged here-- collusion between vertically related parties has no obvious pernicious effect on competition. Accordingly, the Court has refused to apply a per se test to a vertical nonprice restraint under which a manufacturer terminated one dealer because of an exclusive territory agreement with another, see Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 53 L. Ed. 2d 568, 97 S. Ct. 2549 (1977), or to an agreement between a manufacturer and a dealer to terminate a "price cutter". See Business Electronics, 485 U.S. at 726-28. In both situations, the Court rejected the per se approach because of a necessity to inquire further into the market effects of such arrangements. Here, the mere fact that one prospective supplier may lose business because of vertical dealings between the buyer and another vendor does not itself establish a public injury to competition.
Even so far as the purported bid-rigging agreement between IBM and APS may be alleged to amount to price fixing, de facto price fixing effectuated by sham bidding does not constitute a per se Sherman Act violation in this Circuit. In Sitkin Smelting & Refining Co. v. FMC Corp., 575 F.2d 440 (3d Cir. 1978), cert. denied, 439 U.S. 866, 58 L. Ed. 2d 176, 99 S. Ct. 191 (1978), defendant owned a manufacturing facility that it decided to sell. Defendant's agent solicited a bid from plaintiffs and approximately fifty others. After plaintiffs' bid was rejected, they sued, alleging that one bidder had been previously selected to obtain the contract if it would match the highest bid submitted. The Third Circuit affirmed a judgment notwithstanding the verdict in favor of defendant on the antitrust claim. In doing so, the court concluded:
The mere existence of sham bidding . . . in our view does not create a presumptive violation of the Sherman Act. We do not find it so anticompetitive that the court routinely should allow a party to invoke the per se rule and thereby avoid the need to show its affect on commerce in each case.
575 F.2d at 447. In response to plaintiffs' claim that the bid rigging amounted to price fixing, the court explained, "the price fixing within the scope of the per se prohibition of § 1 . . . is an agreement to fix the price to be charged in transactions with third parties, not between the contracting parties themselves." Id. at 446. Further, the court observed that it was aware of no case in which a court has found a per se violation "on the basis of a concerted refusal to deal between a single seller and a single buyer." Id. at 447.
Therefore, because Hi-Tech has not alleged that the vertical agreements between IBM and APS restricted competition in the relevant market, it has failed to state a claim under the Sherman Act. Accordingly, Count VIII of the counterclaim is dismissed.
For the reasons discussed above, Advanced Power System's motion to dismiss the counterclaim will be granted in part and denied in part. An appropriate order follows.
Upon consideration of Plaintiff Advanced Power System's motion to dismiss, for the reasons given in the accompanying memorandum, it is hereby ORDERED and DIRECTED that:
(1) Plaintiff Advanced Power System's motion to dismiss Count VIII of the Third Amended Counterclaim for failure to state a claim is GRANTED, and Count VIII is DISMISSED without prejudice;
(2) In all other respects, Plaintiff Advanced Power System's motion to dismiss is DENIED.