Filed: May 25, 2004
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 5-25-2004 2660 Woodley Road v. ITT Sheraton Corp Precedential or Non-Precedential: Precedential Docket No. 02-1297 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "2660 Woodley Road v. ITT Sheraton Corp" (2004). 2004 Decisions. Paper 648. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/648 This decision is brought to you for free and op
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 5-25-2004 2660 Woodley Road v. ITT Sheraton Corp Precedential or Non-Precedential: Precedential Docket No. 02-1297 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "2660 Woodley Road v. ITT Sheraton Corp" (2004). 2004 Decisions. Paper 648. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/648 This decision is brought to you for free and ope..
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Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
5-25-2004
2660 Woodley Road v. ITT Sheraton Corp
Precedential or Non-Precedential: Precedential
Docket No. 02-1297
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
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"2660 Woodley Road v. ITT Sheraton Corp" (2004). 2004 Decisions. Paper 648.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/648
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PRECEDENTIAL WOODLEY ROAD ASSOCIATES,
INC.;
IN THE UNITED STATES COURT OF JOHN HANCOCK MUTUAL LIFE
APPEALS INSURANCE COMPANY;
FOR THE THIRD CIRCUIT *SUM ITOMO LIFE REALTY (N.Y.)
INC.
Nos. 02-1297/1418 Appellants No. 02-1418
v.
2660 WOODLEY ROAD JOINT
VENTURE; ITT SHERATON CORPORATION;
WOODLEY ROAD ASSOCIATES, SHERATON OPERATING
INC.; CORPORATION;
JOHN HANCOCK MUTUAL LIFE WASHINGTON SHERATON
INSURANCE COMPANY; CORPORATION**
*SUM ITOMO LIFE REALTY (N.Y.)
INC. (*Dismissed per the Clerk Order of
5/23/02)
v. (**Dismissed per the Court Order of
9/25/02)
ITT SHERATON CORPORATION;
SHERATON OPERATING
CORPORATION; On Appeal From the United States
WASHINGTON SHERATON District Court
CORPORATION** For the District of Delaware
(D.C. Civ. No. 97-cv-00450)
ITT Sheraton Corporation, Chief District Judge: Hon. Joseph J.
Sheraton Operating Corporation and Farnan, Jr.
Washington Sheraton Corporation,**
Appellant No. 02-1297 ARGUED: FEBRUARY 13, 2003
(*Dismissed per the Clerk Order of BEFORE:ALITO and McKEE,
5/23/02) Circuit Judges, and SCHWARZER,*
(**Dismissed per the Court Order of Senior District Judge
9/25/02)
*
Honorable William W. Schwarzer,
Senior United States District Judge,
2660 WOODLEY ROAD JOINT Northern District of California, sitting by
VENTURE; designation.
(Filed: May 25, 2004) We are asked to review the
propriety of damage awards, including an
ANDREW L. FREY (ARGUED) award for punitive damages, in an action
Mayer, Brown, Rowe & Maw for commercial bribery under § 2(c) of the
1675 Broadway Robinson-Patman Act, racketeering under
New York, NY 10019 the Racketeer Influenc ed Co rrupt
Organization Act (“RICO”), breach of
EVEN M. TAGER contract and related state law claims. We
ROBERT L. BRONSTON hold that the plaintiff can not maintain an
Mayer, Brown, Rowe & Maw action under § 2(c) of the Robinson-
1909 K Street, N.W. Patmam Act because it has not established
Washington, D.C. 20006 antitrust standing. We also hold that the
record does not support portions of other
Attorneys for Appellants/Cross-Appellees damage awards, including the award for
ITT Sheraton Corporation and Sheraton punitive damages, as explained more fully
Operating Corporation below. Accordingly, we will affirm in part
and reverse in part, and remand for further
THOMAS A. ARENA (ARGUED) proceedings consistent with this opinion.
WILLIAM E. WALLACE, III
I. FACTUAL AND PROCEDURAL
TIMOTHY P. WEI
BACKGROUND
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza John Hancock Life Insurance
Company, 2660 Woodley Road Joint
New York, NY 10005 Venture and Woodley Road Associates,
Inc. (collectively referred to as “Hancock”)
Attorneys for Appellees/Cross-Appellants together owned the Sheraton Washington
2660 Woodley Road Joint Venture; Hotel (the “Hotel”). In September 1979,
John Hancock Mutual Life Insurance Hancock entered into a Management
Company; Agreement under which Sheraton agreed
and Sumitomo Life Realty (N.Y.) Inc. to act as Hancock’s agent in managing the
Hotel’s operations. In return, Sheraton
received a percentage of the Hotel’s gross
revenue and a share of its net cash flow.
OPINION OF THE COURT
The suit arises from an arrangement
known as the “Sheraton Purchasing
Resource” program (the “SPR”) that was
initiated pursuant to the terms of the
Management Agreement. Pursuant to the
McKEE, Circuit Judge.
terms of the SPR program, Sheraton
2
negotiated large-volume discounts with profiting from providing Workers’
vendors seeking to supply Sheraton- Compensation insurance, permitting
managed hotels. Sheraton then required excessive numbers of complimentary
the vendors to add a surcharge to the price rooms, and breaching other unspecified
billed to the individual hotels for each contractual duties.
purchase. However, the surcharge was not
Hancock’s suit proceeded to trial
itemized, or even disclosed, on any bills or
where a jury found for Sheraton on
invoices that vendors sent to individual
Hancock’s RICO claim, but found for
hotels. Rather, the surcharge was remitted
Hancock on its Robinson-Patman Act
directly to Sheraton in the form of a
claim. The jury also found for Hancock on
“rebate.” The Management Agreement
several of its state law claims, including
provided that Sheraton was entitled to be
claims that Sheraton had breached the
reimbursed for the costs of providing these
Management Agreement with regard to
services. Sheraton claimed that these
purchasing services, and providing
rebates reimbursed it for the centralized
Workers Compensation insurance. The
purchasing services it provided under the
jury further found in favor in Hancock on
SPR program as well as associated
its breach of fiduciary duty claim. The
overhead costs.
jury concluded that Sheraton breached an
The Management Agreement implied duty of good faith and fair dealing,
between Sheraton and Hancock remained and that Sheraton was liable for its
in effect until 1993, when differences misrepresentations to Hancock. The jury
between the parties led to its termination. awarded damages of $750,000 on the
Thereafter, Hancock filed this lawsuit. In Robinson-Patman Act claim (subsequently
its complaint, Hancock alleged: violations trebled by the court), a total of
of § 2(c) of the Robinson-Patman Act, 15 $10,732,000 on the breach of contract
U.S.C. § 13(c); violations of RICO, 18 claims, $1,100,000 on the tort claims, and
U.S.C. § 1961; and state law claims of $37,500,000 in punitive damages. The
breach of contract, breach of fiduciary district court denied Sheraton’s motion for
duty, and breach of the implied duty of judgment as a matter of law but granted a
good faith and fair dealing; as well as remittitur thereby reducing the punitive
fraud, and intentional or negligent damages to $17,415,000. The district
misrepresentation. Hancock also claimed court then entered judgment in favor of
that Sheraton failed to properly act as its Hancock in the total amount of
agent in operating its reservation system, $31,497,000, but denied Hancock’s motion
failing to limit usable denials,1 improperly for attorneys’ fees and taxation of costs
without prejudice. Sheraton appealed
1
According to Sheraton, a usable denial
occurs when a potential guest is denied a a v a i la b l e . Sheraton’s Br. as
reservation when a room is actually appellant/cross-appellee, at 13.
3
from the judgment, and Hancock cross- purchase of goods, wares, or
appealed from the remittitur.2 For the merchandise, either to the
reasons that follow, we will affirm in part other party to such
and reverse in part. transaction or to an agent,
representative, or other
II. DISCUSSION
intermediary therein where
A. ROBINSON-PATMAN ACT such intermediary is acting
CLAIM in fact for or in behalf, or is
subject to the direct or
Hancock’s Antitrust Standing
indirect control, of any party
Sheraton renews its argument that to such transaction other
Hancock lacks antitrust standing to bring a than the person by whom
claim under § 2(c) of the Robinson- such compensation is so
Patman Act.3 We must address that issue granted or paid.
before addressing the merits of the appeal
or cross-appeal.
15 U.S.C. § 13(c). “Congress enacted
Section 2(c) of the Robinson-
section 2(c), the Act’s brokerage
Patman Act provides:
provision, primarily to curb one particular
It shall be unlawful for any abuse by large chain store buyers, namely
person engaged in the use of ‘dummy’ brokerage fees as a
commerce, in the course of means of securing price rebates.”
such commerce, to pay or Environmental Tectoni cs v . W.S .
grant, or to receive or Kirkpatrick, Inc., 847 F.2d 1052, 1066 (3d
accept, anything of value as Cir. 1988) (citation omitted). This concern
a commission, brokerage, or arose from large stores using their
other compensation, or any economic dominance to force sellers to
allowance or discount in pay a fee for doing business. “The large
lieu thereof, except for stores required the sellers to pay a
s e r v ic e s r e n d e r e d in ‘brokerage’ to persons employed by the
connection with the sale or buyers. These persons had rendered no
service, and would simply pay over the
2
commissions to their em ploye rs.”
We have jurisdiction under 28 U.S.C. Seaboard Supply Co. v. Congoleum Corp.,
§ 1291. 770 F.2d 367, 371 (3d Cir. 1985).
3
The Robinson-Patman Act of 1936 However, Hancock’s § 2(c) claim is
was enacted as an amendment to the not a dummy brokerage claim. Rather,
Clayton Act. Great Atlantic & Pacific Tea Hancock has fashioned its § 2(c) action as
Co. v. Federal Trade Commission, 106
F.2d 667, 669 (3d Cir. 1939).
4
a comm ercial bribery claim. 4 Surprisingly, the Supreme Court has never
decided a § 2(c) commercial bribery case.
However, in dicta in Federal Trade
4 Commission v. Henry Broch, Inc., 363
Sheraton insists that the SPR program
U.S. 166 (1960), the Court noted that §
was not commercial bribery because the
2(c) does encompass commercial bribery.
rebates simply served to compensate it for
Id. at 169 n.6 (“And although not
the costs it incurred in operating the
mentioned in the Committee Reports, the
program. Nevertheless, it accepts
debates on the bill show clearly that § 2(c)
Hancock’s characterization of the SPR
was intended to proscribe other practices
program as commercial bribery for
such as the ‘bribing’ of a seller’s broker by
purposes of this appeal.
the buyer.”) (citation omitted). 5 Similarly,
As a general principle, a critical
element of commercial bribery is the
breach of the duty of fidelity. For
example, the Model Penal Code provides: purportedly disinterested
adjudicator or referee.
Commercial Bribery and
Breach of Duty to Act (2) A person who holds
Disinterestedly. himself out to the public as
being engaged in the business
(1) A person commits a of making disinterested
misdemeanor if he solicits, selection, appraisal, or
accepts or agrees to accept any criticism of commodities or
benefit as consideration for services commits a
knowingly violati ng or misdemeanor if he solicits,
agreeing to violate a duty of accepts or agrees to accept any
fidelity to which he is subject benefit to influence his
as: selection, appraisal or
(a) partner, agent, or employee criticism.
of another; (3) A person commits a
(b) trustee, guardian, or other misdemeanor if he confers, or
fiduciary; offers or agrees to confer, any
(c) lawyer, physician, benefit the acceptance of
accountant, appraiser, or other which would be criminal
professional adviser or under this Section.
informant;
(d) officer, director, manager M ODEL P ENAL C ODE § 224.8. See United
or other participant in the States v Dischner, 960 F.2d 879 (9th Cir.
direction of the affairs of an 1992).
incorporated or unincorporated
5
association; or In Broch a manufacturer sold apple
(e) arbitrator or other concentrate at a price of $1.30 a gallon.
5
in dicta in California Motor Transport Although we once expressed skepticism
Co. v. Trucking Unlimited, 404 U.S. 508, about “whether Congress intended to
513 (1972), the Court again noted that sweep commercial bribery within the
“bribery of a public purchasing agent may ambit of § 2(c),” Seaboard Supply, 770
constitute a violation of § 2(c) of the F.2d at 371, we have since agreed that
Clayton Act, as amended by the Robinson- “commercial bribery is actionable under
Patman Act.” In addition, a number of 2(c).” Environmental Tectonics, 847 F.2d
courts of appeals have held that § 2(c) at 1066.
encompasses commercial br ib er y. 6
Nevertheless, although § 2(c) of the
Robinson-Patman Act defines certain
The manufacturer sold through a broker conduct as illegal, it does not create a
and paid the broker a commission of 5%. private right of action to sue for damages
One buyer would not pay more than $1.25 resulting from violations of the Act.
for the concentrate and the manufacturer Rather, the private right of action for a §
refused to lower his price unless the broker 2(c) Robinson-Patman Act claim, as for all
agreed to take a cut in his commission private plaintiff antitrust rights of action, is
from 5% to 3%. The broker agreed and provided by § 4 of the Clayton Act.
the sale was consummated at $1.25 with a Genesco, Inc. v. T. Kakuichi & Co., 815
lower commission. The Court viewed this F.2d 840, 853 (2d Cir. 1987). Section 4 of
transaction as identical to one in which the the Clayton Act provides:
broker received a commission of 5%, the Any person who shall be
normal commission, and then turned over injured in his business or
a part of the commission, i.e., 2%, to the property by reason of
buyer. That would have been illegal under anything forbidden in the
§ 2(c) as a payment in lieu of brokerage antitrust laws may sue
and, therefore, the Court found that the therefor in any district court
reduction in commission in Broch was also of the United States in the
a payment in lieu of brokerage. district in which th e
6 defendant resides or is
See, e.g., Harris v. Duty Free Shoppers
found or has an agent,
Ltd. Partnership, 940 F.2d 1272 (9th Cir.
without respect to the
1991); Stephen Jay Photography, Ltd. v.
amount in controversy, and
Olan Mills, 903 F.2d 988 (4th Cir. 1990);
shall recover threefold the
Larry R. George Sales Co. v. Cool Attic
damages by him sustained,
Corp., 587 F.2d 266 (5th Cir. 1979);
and the cost of suit,
Grace v. E.J. Kozin, 538 F.2d 170 (7th Cir.
1976); Calnetic Corp. v. Volkswagen of
America, Inc.,
532 F.2d 674 (9th Cir.
1976); Rangen, Inc. v. Sterling Nelson & v. Kentucky-Tennessee Light & Power Co.,
Sons,
351 F.2d 851 (9th Cir. 1965); Fitch
136 F.2d 12 (6th Cir. 1943).
6
including a reasonable purchased through that program. Hancock
attorney’s fee. also argues that the increased cost put it at
a competitive disadvantage with regard to
hotels owned by Sheraton.
15 U.S.C. § 15(a). However, in order to
However, we do not think that
recover treble damages under § 4(a) of the
paying inflated purchasing prices to
Clayton Act, a private plaintiff must do
vendors, without more, is “an injury of the
more than simply show “an injury causally
type the antitrust laws were intended to
linked to” a violation of the antitrust laws.
prevent . . . that flows from that which
Brunswick Corp. v. Pueblo Bowl-O-M at,
makes the defendants’ acts unlawful.”
Inc., 429 U.S. 477, 489 (1977). A plaintiff
Brunswick, 429 U.S. at 489. Rather,
must also prove “antitrust injury, which is
Hancock’s injury was caused by a breach
to say injury of the type the antitrust laws
of contract and the corruption of the
were intended to prevent and that flows
principal-agent relationship. We agree
from that which makes defendants’ acts
that, in an appropriate case, a breach of
unlawful.” Id. Thus, the Court pronounced
contract or a breach of fiduciary duty
in J. Truett Payne Co. v. Chrysler Motors
could result in the kind of injury “the
Corp., 451 U.S. 557, 568 (1981), “even if
antitrust laws were intended to prevent.”
there has been a violation of the Robinson-
However, we do not believe that Hancock
Patman Act, [a plaintiff] is not excused
has established such an injury here. The
from its burden of proving antitrust injury
absence of such injury is fatal to
and damages.”
Hancock’s attempt to establish antitrust
As noted above, the Supreme Court standing.7
has not yet defined “antitrust injury,” for
purposes of a § 2(c) Robinson-Patman 7
claim. However, Hancock argues that it As noted above, Sheraton manages the
suffered antitrust injury as a result of Hotel under contract with Hancock.
Sheraton’s commercial bribery scheme, However, Sheraton also manages hotels
i.e., the SPR program. Hancock refers to that it actually owns. Hancock also alleges
this program as a “kickback” and claims that the rebate scheme put it at a
that Sheraton inflated Hancock’s competitive disadvantage to Sheraton-
purchasing costs by adding SPR owned hotels because. According to
surcharges and then collecting the Hancock, “the rebate scheme impacted the
increased costs in the form of the rebates it Hotel differently than it did Sheraton-
collected from Hancock’s vendors. owned hotels: The rebate program
According to Hancock, it suffered antitrust increased the costs of the goods and
injury because it could only purchase services [Hancock] purchased on behalf
goods from vendors participating in of the Hotel, whereas the rebate scheme
Sheraton’s SPR program, and it had to pay did not impose a real cost on Sheraton-
these artificially inflated prices for goods owned hotels, which simply ‘paid’ the
kickback to their corporate parent.”
7
“Antitrust standing and its It is now settled that a § 2(c)
terminological cousin, antitrust injury, are plaintiff does not have to prove
often confused.” Triple M Roofing Corp. competitive injury to establish a § 2(c)
v. Tremco, Inc., 753 F.2d 242, 247 (2d Cir. violation. In Federal Trade Commission
1985). “Lack of standing and antitrust v. Simplicity Pattern Co.,
360 U.S. 55, 65
injury ofte n have been invoked (1959), the Supreme Court noted, inter
interchangeably against a plaintiff even alia, that § 2(c) of the Robinson-Patman
though each concept involves a distinct Act makes the business practices described
element of the § 4 action.” Greater therein unlawful. Therefore, “the
Rockford Energy and Technology Co. v. proscriptions [of § 2(c)] are absolute. .
Shell Oil Co.,
998 F.2d 391, 395 (7th Cir. .[and § 2(c) does not] require[], as proof of
1993). Part of this confusion may result a prima facie violation, a showing that the
from the ease with which antitrust injury illicit practice has had an injurious or
and competitive injury can be conflated destructive effect on competition.”
Id.
into a single inquiry. 8 Accordingly, “the presence of an anti-
competitive effect is not necessary to
prove a violation of section 2(c).”
Seaboard Supply Co. v. Congoleum Corp.,
Hancock’s Br. at 23.
770 F.2d 367, 371 n.3 (3d Cir. 1985). The
However, Sheraton argues that
anti-competitive effect is the presumed
Hancock produced no evidence that
result of the illegal conduct.
Hancock was put at a competitive
disadvantage vis-a-vis Sheraton-owned However, the successful plaintiff
hotels because the evidence established must still prove more than a § 2(c)
that there are no Sheraton-owned hotels in violation and the accompanying anti-
the Washington, D.C. area where the Hotel competitive effect to prevail. The plaintiff
does business. Sheraton’s Br. at 26. must also establish the requisite antitrust
Absent any such competition, Sheraton injury, and this requires more than
argues, Hancock could not have been put establishing the anti-competitive effect
at a competitive disadvantage by the that is endemic in the violation. In other
surcharge and therefore could not have words, the mere fact that certain conduct
sustained a competitive injury because of
it.
our powers of reconciliation.” A
8
The difficulty in distinguishing these commentator subsequently noted that the
two interrelated concepts was summed up “court could hardly have been faulted, for
by the district court in Wilson v. Ringsby the confusion it noted has been endemic to
Truck Lines, Inc., 320 F. Supp. 699, 700 these cases since the creation of the treble-
(D. Colo. 1970). There the court candidly damages action.” Daniel Richman, Note,
noted, “[w]e must confess at the outset Antitrust Standing, Antitrust Injury, and
that we find antitrust standing cases more the Per Se Standard, 93 Yale L. J. 1309
than a little confusing and certainly beyond (1984).
8
has an anticompetitive effect does not their business to non-union contractors.9
mean that a given plaintiff has suffered an Plaintiffs alleged that the coercion resulted
antitrust injury, or that a given plaintiff is in less business for firms employing union
the appropriate party to seek recovery carpenters. The Court held that because
under the antitrust laws. Accordingly, the carpenters’ unions were “neither a
“[e]ven a plaintiff who can show antitrust consumer nor a competitor in the market in
injury may lack antitrust standing. . . .” which trade was constrained,” their
Barton & Pittinos, Inc., v. Smith Kline injuries were not the type of injury that the
Beechum Corp., 118 F.3d 178, 182 (3rd antitrust laws were designed to prevent.
Cir. 1997). The Supreme Court explained
Id. at 539. The carpenters’ unions may
this in Associated General Contractors of well have had a cause of action under
California, Inc. v. California State Council other statutes or common law, and a
of Carpenters,
459 U.S. 519 (1983). different plaintiff may have had a cause of
There, the Court said: action under the antitrust statues.
However, the carpenters’ unions had no
[a] literal reading of [§ 4 of
standing to sue under those laws. The
the Clayton Act] is broad
Court reached this conclusion even though
enough to encompass every
the Association’s cond uct had an
harm that can be attributed
anticompetitive effect. M oreover, firms
directly or indirectly to the
hiring union carpenters had clearly
consequences of an antitrust
suffered an anticompetitive injury because
violation. Some of our prior
the Association’s coercion made it more
cases have paraphrased the
difficult for those firms to win contracts.
statute in an e quall y
Yet, notwithstanding the anticompetitive
expansive way. But before
effect of the conduct in question, the Court
we hold that the statute is as
concluded that the plaintiff carpenters’
broad as its words suggest,
unions had not suffered a sufficient
we must consider whether
antitrust injury.
Congress intended such an
open-ended meaning. In arriving at that decision, the
Court read the antitrust statues in light of
their common law background and read a
Id. at 529-30 (footnote omitted). “proximate cause element into § 4
Associated General Contractors involved [Clayton Act] actions.” Greater Rockford
a number of carpenters’ unions that
Energy, 998 F.2d at 394. As a result of
a l l eg e d that A ssocia ted Ge nera l Associated General Contractors, § 4 of the
Contractors, a trade association made up of Clayton Act has been given a narrowed
general contractors, had coerced customers
and competing contractors to give some of 9
The Association’s customers included
landowners who needed construction
services.
9
reading. We have . the antitrust laws were intended to
[remedy]”). City of Pittsburgh v. West
synthesized the Court’s
Penn Power Comp., 147 F.3d 256, 264 (3d
analysis into the following
Cir. 1998). “The antitrust standing inquiry
formulation of the factors
is not a black-letter rule, but rather, [it] is
that are relevant in an
essentially a balancing test comprised of
antitrust standing challenge:
many constant and variable factors.” Id., at
(1) the causal connection 264-5 (internal quotation marks omitted).
b e t w e e n the antitru st
violation and the harm to the
Antitrust injury thus becomes but
plaintiff and the intent by
one element of the inquiry into antitrust
the defendant to cause that
standing. It is “a necessary but insufficient
harm, with neither factor
condition of antitrust standing.” Barton &
alone conferring standing;
Pittinos, 118 F.3d at 182 (citing Lower
(2) whether the plaintiff’s
Lake Erie Iron Ore Antitrust Litig., 998
alleged injury is of the type
F.2d at 1166). Therefore, as noted above,
for which the antitrust laws
“[e]ven a plaintiff who can show antitrust
were intended to provide
injury may lack antitrust standing, because
redress; (3) the directness of
the remaining [Associated General
the injury, which addressed
Contractors] factors may weigh against
the concerns that liberal
allowing him or her to sue under the
application of standing
antitrust laws.” 10 Id. (citing Cargill, Inc. v.
principles might produce
Monfort of Colorado, Inc., 479 U.S. 104,
speculative claims; (4) the
110 n.5 (1986)).
existence of more direct
victims of the alleged
antitrust violations; and (5) 10
The antitrust injury requirement of the
the potential for duplicative antitrust standing inquiry is analogous to
recovery or co mp lex the minimum standing requirement of a
apportionment of damages. case or controversy within the meaning of
Article III, § 2 of the Constitution, while
the other Associated General Contractors
Barton & Pittinos, 118 F.3d at 181 (citing factors are analogous to the prudential
In re Lower Lake Erie Iron Ore Antitrust limitations on standing. Barton & Pittinos,
Litig.,
998 F.2d 1144, 1165-66 (3d
Cir. 118 F.3d at 182 n.4; City of Pittsburgh,
1993)). The traditional concept of
antitrust 147 F.3d at 264. [See Trump Hotels &
injury continues to be an important part of Casino Resorts, Inc. v. Mirage Resorts
antitrust standing under this formulation. It Incorp.,
140 F.3d 478, 484-85 (3d Cir.
is subsumed within the second factor of 1998), for a discussion of Article III
the 5 prong inquiry (i.e. “whether the standing and the prudential limitations on
plaintiff’s alleged injury is . . . the type . . standing.]
10
“The Associated General test has (4)13 because there are clearly “more direct
been regularly and consistently applied as victims” of Sheraton’s alleged commercial
the passageway through which antitrust bribery scheme. Vendors who may have
plaintiffs must advance.” City of been prevented from selling goods to
Pittsburgh, 147 F.3d at 264. Accordingly, Hancock because they refused to
even if we assume arguendo that Hancock participate in the SPR program of
suffered an antitrust injury because it paid surcharges and rebates are far more direct
inflated prices as a result of Sheraton’s victims of Sheraton’s scheme than
alleged commercial bribery, that would not Hancock. Moreover, their injury is much
necessarily establish Hancock’s antitrust closer to the kind of injury antitrust laws
standing. Hancock must still navigate address because the displaced vendors
through the course defined by Associated were unable to participate in the market
General. Yet, it can not successfully do c r e a te d b y th e S P R p r o g r a m .
that on this record because it can not Significantly, Hancock comes close to
circumnavigate the barrier posed by conceding as much in its complaint.
Associated General factors (1), (3), (4) or Hancock alleges:
(5). With regard to factors (1)11 and (3), 12
[v]endors unwilling to pay
we think it is important to remember that
kickbacks to Defendants
Sheraton contends that the surcharge and
were competitively harmed,
rebate aspects of the SPR program was not
and by m andating the
commercial bribery at all, but simply a
Hotel’s participation in
way for it to recoup the costs it incurred in
na tional a n d r e gional
administering the program. Even if
contracts negotiated by
Sheraton inflated the amount of those
[ She r a ton], Defendants
charges beyond that which was necessary
de nie d [ Ha n cock] t he
to recoup its costs, the propriety of
o p p o rtunity to o b t a in
Hancock maintaining an antitrust action is
advantageous prices and
still problematic for reasons we will
terms from non-
elaborate upon below.
participating vendo rs.
Even if we assume Hancock is Favored vendors not only
correct as to factors (1) and (3), it surely drew sales or profits from
can not survive an inquiry under factor non-favored vendors, but
the attendant reduction in
competition and higher costs
resulted in direct antitrust
11
“The causal connection between the injury to [Hancock].
antitrust violation and the harm to the
plaintiff and the intent by the defendant to
cause that harm[.]”
13
“The existence of more direct victims
12
“The directness of the injury. . . .” of the alleged antitrust violations[.]”
11
Complaint at ¶ 143. reversed because we concluded that the act
of state doctrine did not apply.16 In doing
Although Hancock does allege that
so, we noted the difficulty of precisely
it suffered an anticompetitive injury by
defining standing under § 2(c). 847 F.2d
being forced to pay higher prices as a
at 1066. We also noted that “it is generally
result of reduced competition, we think
agreed that a direct competitor of a
Hancock is in an analogous situation to the
company that obtains a contract through
carpenters’ unions in Associated General
commercial bribery has standing to press a
Contractors. There, customers suffered a
2(c) claim against the briber.” Id.
more direct and more appropriate antitrust
(citations omitted). Admittedly, we did not
injury even though the alleged antitrust
limit the class of potential § 2(c)
violation had an effect on the carpenters’
commercial bribery plaintiffs to disfavored
union. There is an analogous situation
competitors. However, we mentioned
here if we compare the injury of the
disfavored competitors having § 2(c)
excluded vendors to Hancock’s injury.
commercial bribery standing after stating:
Unlike the Sherman Act, which “[I]n order to proceed with a claim, a
“protects competition, not competitors, . . plaintiff must be able to demonstrate that
. the Robinson-Patman Act extends its it is within the class of those injured in
protection to competitors.” Monahan’s their business or property, who, based on a
Marine, Inc. v. Boston Whaler, Inc., 866 variety of factors, are best suited to further
F.2d 525, 528 (1st Cir. 1989) (emphasis in the purposes of the statute by remedying
original). We think our discussion in the violation alleged.” Id. at 1066 (citing
Environmental Tectonics is therefore also
quite helpful to this analysis. There, a
company bribed foreign officials in order
when a United States court appears to sit
to receive a contract to supply aircraft
in judgment on a foreign state’s regulation
equipment to the foreign government’s air
of its internal affairs. Under the doctrine,
force, and a competitor brought a § 2(c)
the courts of this country will refrain from
commercial bribery claim.14 The district
judging the validity of a foreign state’s
court dismissed the action in its entirety on
governmental acts in regard to matters
the basis of the act of state doctrine.15 We
within that country’s borders. The party
moving for the doctrine’s application has
the burden of proving that dismissal is an
14
The suit involved several claims in appropriate response to the circumstances
addition to the § 2(c) commercial bribery presented in the case.” Environmental
claim. However, the other claims are not Tectonics, 847 F.2d at 1057-58 (citations
relevant to the issues here. omitted).
15 16
“The doctrine is the judiciary’s As noted, we also held that
institutional response to the foreign commercial bribery is actionable under §
relations tensions that can be generated 2(c). 847 F.2d at 1066.
12
Alberta Gas Chemicals, Ltd. v. E. I. Accordingly, we hold that Hancock
DuPont De Nemours and Co., 826 F.2d does not have antitrust standing to pursue
1235, 1240 (3d Cir. 1987)). Significantly, its § 2(c) Robinson-Patman Act claim. We
the portion of the Alberta Gas Chemicals will therefore vacate the award of
opinion we cited discusses both Brunswick $750,000 (subsequently trebled by the
and Associated General. district court) on that claim.
Moreover, even if we focus on B. BREACH OF THE AGENCY
Hancock’s allegation that it had to pay P R O V I S I O N O F T H E
inflated prices because it was forced to MANAGEMENT AGREEMENT
purchase only from “favored vendors,” and
ignore Hancock’s admission that
“[v]endors unwilling to pay kickbacks . . . Sufficiency of the Evidence.
were competitively harmed[,]” we would
Sheraton claims that there is
still conclude that Hancock can not
insufficient evidence to sustain the award
establish antitrust standing under the fifth
of $10,260,000 for breach of the agency
factor in the Barton & Pittings analysis.
provision of the Management Agreement.
That requires us to consider whether an
Sheraton maintains that there is no
award of antitrust damages would be
evidence of harm for that breach that is not
duplicative, and Hancock’s antitrust
also captured in the itemization of possible
recovery is inextricably intertwined with
d a m ages se t f orth in the ju ry
its awards on the breach of contract and
interrogatories on the verdict form. On
breach of fiduciary duty claims.
that form, the jury awarded $10,260,000
As noted above, Hancock asserted for breach of the agency provision, and
a number of state law claims arising from also separately awarded $250,000 for
the SPR program. The jury found that purchasing services and $222,000 for
Hancock suffered $250,000 in damages Workers’ Compensation. It awarded no
related to the purchasing services program damages for the other categories listed on
and it also awarded $1,100,00 for the verdict form: the frequent traveler
Sheraton’s breach of fiduciary duty. The program, the reservations system, “usable
actions supporting those awards constitute denials” practices, complimentary rooms
breach of contract and breach of fiduciary practices, or for any other contractual duty.
duty. Allowing a separate recovery under The relevant interrogatory asks jurors:
§ 2(c) creates insurmountable problems in “[w]hat damages, if any, do you award to
apportioning damages along with the real plaintiffs for a breach of the Management
possibility of cumulative damages.17 Contract concerning each of the following.
. . .”
Hancock responds by arguing that
17
Indeed, given the nature of
Hancock’s claimed damages, duplicative
recovery is not only possible, it is exceedingly probable if not inevitable.
13
the evidence of the breach of the agency First, the jury made no finding of
provision extended beyond the rebate wilful breach of contract and it was never
payments, and suggests several possible instructed on applying principles of
bases for the $10,260,000 award. We are disgorgement. Second, the jury verdict
not persuaded. For example, Hancock includes a specific finding for breach of
relies upon the Workers’ Compensation fiduciary duty and the jury listed an
program. However, as noted, the jury amount of $1,100,000 as damages for that
separately awarded $222,000 for that breach. Accordingly, we find no support
program. Hancock cites the level of for the award of $10,260,000, and will
usable denial practices and the frequent therefore vacate that award.
travelers program, which were itemized on
C. PUNITIVE DAMAGES
the verdict form. However, the jury
awarded no damages for them. Hancock Sheraton challenges the punitive
also cites an unexplained and unquantified damage award on several grounds. It
item that it refers to as a bogus relocation argues that the award was not supported by
expense. However, no such item was clear and convincing evidence, that the
listed on the verdict form. Lastly, relevant jury instructions were erroneous,
Hancock argues that Sheraton swept and that the award was excessive.
certain of its bank accounts and claims that
Sheraton argues on appeal that the
also supported an award of damages.
District of Columbia standard of proof on
However, the sweeping of accounts
Hancock’s punitive damages claim applies
occurred after termination of the agency
and that, under that standard, punitive
provision. Thus, none of those
damages can be awarded “only if it is
e x p l a n a ti o n s s u p p o rt s a w a r d i n g
shown by clear and convincing evidence
$10,260,000 for breach of the agency
that the tort committed by the defendant
provision. A lte rn ati ve ly, H a n c o c k
was aggravated by egregious conduct and
contends that the jury could have awarded
a state of mind that justifies punitive
damages on the theory that a fiduciary
damages.” Johanthan Woodner Co. v.
breach entitled Hancock to disgorgement
Breeden, 665 A.2d 929, 938 (D.C. 1995).
of the fees it paid to Sheraton over the life
Hancock argues otherwise and claims that
of the Management Agreement. Hancock
Delaware law governs the standard of
claims that the award of $10,260,000
proof and, under that standard, the
represents 15% of the $68,400,000
preponderance of evidence standard
Hancock paid. Citing the Restatement
applies to punitive damages. See Cloroben
(Second) of Agency, § 469, Hancock
Chem. Corp. v. Comegys, 464 A.2d 887,
suggests that Sheraton lost its right to
891 (Del. 1983).
compensation because it wilfully breached
its contractual obligations and that The district court instructed the jury
disgorgement is an appropriate remedy for that it must find the elements of punitive
fiduciary breach. We disagree. damages by a preponderance of the
evidence. Sheraton did not object to that
14
instruction. We have held that this type of determined that punitive damages should
error is fundamental error entitling a be one and one-half times the relevant
defendant to a new trial; it is not subject to compensatory damages. We adopt that
waiver. Beardshall v. Minuteman Press ratio for the purpose of calculating the
Int’l, Inc., 664 F.2d 23 (3d Cir. 1981). judgment on remand for several reasons.
However, Sheraton submitted proposed
We review a grant of remittitur for
jury instructions that did not include an
abuse of discretion. Gumbs v. Pueblo
instruction that entitlement to punitive
Int’l, 823 F.2d 768, 771 (3d Cir. 1987).
damages must be established by clear and
We also afford the district court’s
convincing evidence. Therefore, assuming
assessment of punitive damages a degree
that the instruction was wrong, it was
of deference since that court is familiar
tantamount to invited error. U.S. v. West
with the evidence. See Keenan v. City of
Indies Transport, Inc., 127 F.3d 299, 306
Philadelphia, 983 F.2d 456, 472 (3d Cir.
(3d Cir. 1997) (holding that error in
1992) . Moreover, although Hancock has
challenged jury instruction was invited,
cross-appealed from the grant of the
and thus did not provide basis for reversal,
remittitur, neither party has taken issue
when defendants failed to request
with the district court’s ratio.1 9
instruction that they asserted on appeal and
Accordingly we will reduce the punitive
their proposed instruction was remarkably
damage award to $2,025,000.
similar to that actually given).
IV. CONCLUSION
In ruling on Sheraton’s post-trial
motion, the district court determined the For the reasons stated above, we
amount of the punitive damages to be will vacate the award of $750,000 for
$11,610,000. That included the award of violation of the Robinson-Patman Act, as
$10,260,000 for breach of the agency subsequently trebled by the trial court to
agreement. Since we are vacating the $2,250,000; as well as the award of
award for breach of the agency agreement, $250,000 for purchasing services, and the
we must concomitantly reduce the punitive $10,260,000 award for breach of the
damage award so that it only reflects the agency agreement. We will affirm the
surviving damages – $250,000 for awards of $222,000 for W orkers’
purchasing activities, and $1,100,000 for Compensation; and $1,100,000 for breach
common law damages, or $1,350,000.18 In of fiduciary duty, breach of the implied
granting the remittitur, the district court
19
See State Farm Mut. Automobile Ins.
18
The district court noted that plaintiffs Co. v. Campbell, U.S.Sup.Ct. No. 01-1289
did not specify an amount for breach of (April 7, 2003) (stating that “in practice,
W orkers’ C ompensation in their few awards exceeding a single-digit ratio
computation of relevant compensatory between punitive and compensatory
damages, and it therefore did not include damages, to a significant degree, will
that amount in its calculation. satisfy due process.”).
15
duty of good faith and fair dealing, and
intentional or negligent misrepresentation.
We will reduce punitive damages to
$2,025,000, for reasons already stated. We
remand to the district court with direction
to enter judgment consistent with this
opinion and for further appropriate
proceedings.20
20
We have considered the remaining
contentions of the parties and conclude
that we can affirm the district court’s
rulings on those issues without further
discussion.
16
