Reiter v. Sonotone Corporation

PETITIONER:Reiter
RESPONDENT:Sonotone Corporation
LOCATION:Harrah High School

DOCKET NO.: 78-690
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 442 US 330 (1979)
ARGUED: Apr 25, 1979
DECIDED: Jun 11, 1979

ADVOCATES:
Elliot S. Kaplan – for respondents
John H. Shenefield – for the United States, as amicus curiae
John E. Thomas – for petitioner
Julian R. Wilheim – for respondents
Warren Spannaus – for the States of Alabama et al., amicus curiae

Facts of the case

Question

Audio Transcription for Oral Argument – April 25, 1979 in Reiter v. Sonotone Corporation

Warren E. Burger:

We’ll hear arguments first this morning in Reiter against Sonotone Corporation.

Mr. Thomas, you may proceed whenever you’re ready.

John E. Thomas:

Mr. Chief Justice, may it please this Honorable Court.

My name is John Thomas.

I’m a sole practitioner from Saint Paul, Minnesota.

I have seated 10 minutes of my argument time to the federal government, so I have 20 minutes.

I intend to try and to keep possibly five for rebuttal, and what I would like to do is first of all, the issue this morning that we’re faced with is, whether or not consumers in the United States may recover overcharges paid for price fixed good as injury occurred under Section 4 of the Clayton Act in their property.

I will quickly outline my argument points if I may please.

Warren E. Burger:

Mr. Thomas —

John E. Thomas:

Yes.

Warren E. Burger:

You may find it more convenient to elevate the lectern —

John E. Thomas:

Oh, I’m —

Warren E. Burger:

Just with the crank, each of the other way.

John E. Thomas:

The outline of my argument points this morning would be first of all, I’d like to classify the Eighth Circuit opinion as it may as one of policy contrary to the warnings of this Court in antitrust decisions.

Secondly, we look at the statute language exactly what it does say which I say is in the disjunctive.

Then, I would like to go to the opinions of this Court starting with Mr. Justice Holmes in Chattanooga Foundry through Mr. Justice Marshall and Hawaii versus Standard Oil, and in through each one of the Justices here what they said in Pfizer versus Government of India.

Lastly, I would then like to describe if I may for the Court, what I see the result of the Eighth Circuit’s opinion being which is — severely added complication to the antitrust laws, the destruction of the parens patriae legislation, both for the states and the private opt out provision in that legislation, and finally, the elevation of foreign governments to a preferred position over American citizens.

First of all policy, I think if we look at the Eighth Circuit opinion, it concludes we think it sensible as a matter of policy.

To me, this is indirect conflict with this Court’s warning in U.S. v. Cooper Corporation where this Court said it is not for the courts to indulge in the business of policy making in the field of antitrust legislation.

This Court has said many times Saint Paul Fire and Marine case and Blue Shield of Texas, so forth that the starting point in any case involving a statute language is the statute language itself.

Let’s look at that, Section 4 of the Clayton Act reads, any person who shall be injured in his business or property by reason of anything forbidden in the antitrust law shall recover, is the business or property —

William H. Rehnquist:

Mr. Thomas, if you — why didn’t the Congress simply say any person injured rather than injured in his business or property?

John E. Thomas:

Well, Your Honor, that Senator Hoar’s Section 7 amendment I guess to Senator Sherman’s initial proposal, and at that time, Senator which I believe did basically read that way.

Senator Hoar said there is no change.

It was well understood.

His amendment has change to business or property.

So I would say that it reads the same way.

The dictionary, Black’s Law Dictionary of course says or is in the disjunctive and Mr. Justice Rehnquist, I will touch back on that a little more directly, I’m coming to it.

Legal scholars, all of them who have touch on this, who have considered this question, all of them, through Professor Sullivan, Professor Bork, all of them say that it’s in the disjunctive business or property and the consumers has standing to recover from money paid for price-fixed goods.

Professor Sullivan says that Mr. Justice Holmes noted it was in the disjunctive.

John E. Thomas:

Judge Wyzanski in referring to this Court said that Congress and the courts have frequently shown their regard to Sherman Act as an economic charter of freedom of hardly less than constitutional dimensions.

It deserves ungrudging and as sometime said liberal reading to accomplish its purposes.

Now, this Court in Pfizer versus India where Mr. Justice Stewart wrote the majority opinion with Justices Brennan, White, Marshall, and Stevens said this, the petitioner’s argued that the antitrust laws were intended to protect only American consumers, and those Justices who here this morning said concluded clearly therefore, Congress did not intend to make the treble-damage remedy, and I’m going to hammer on that term remedy, available only to consumers in our country.

That was what the majority said.

The dissent lead by or written by Mr. Chief Justice Burger with Justices Powell and Rehnquist said this, as this Court observed last term, the legislative history, the treble-damage remedy which does exist quoting form Brunswick now indicates that it was conceived of primarily as a remedy for the people of the United States as individuals, especially consumers.

And then, this is the language of that three judges.

It said, what we so recently saw as primarily a remedy for American consumers is now extended all nations of the world, and that was the cause for the dissent.

Mr. Justice Powell who wrote a separate dissent noted this all important case of Georgia v. Evans where the State of Georgia by the asphalt for its roads was a consumer?

And Mr. Justice Powell apparently saw no direct legislative history but he said this, in Georgia v. Evans, a clear policy to protect the states of the union was reflected and the antitrust laws and in the legislative history.

The court could perceive no reason for believing that Congress wanted to deprive a state such to consumer here as purchaser of commodity shipped in interstate commerce of the civil remedy, there is that term remedy again, of treble-damages which is available to other purchasers who suffer through violation of the Act.

Those are the words of all the Justices here, those three.

Now, remedy, come back to that term remedy, legislative history, we can go right back to Senator Hoar where he in 1890, he raised this question.

He said to Senator Sherman, he inquired and he said — he asked Sherman if the purpose was to give private citizens a civil remedy in the courts.

Senator Sherman replied, certainly, the second section gives a private remedy to every person injured.

Now, this Court in U.S. v. Cooper Corporation cited and relied on that and said in U.S. v. Cooper, private purchaser is given a remedy under the antitrust laws.

In footnote 10 of the Brunswick Corporation versus Pueblo Bowl-O-Mat, this Court again is considered what legislative history there is and concluded, it is a remedy, a specially for consumers and it is opening the door of justice to every man.

And that’s why we’re here this morning.

The result of the Eighth Circuit is this as I see it, and that’s why I ask this Court in — to reverse.

Defendants defined property, they say this.

This Court should now hold the property is this they say, “a commercial pursuit or interest unconnected with one’s business or primary livelihood.”

Well, we’ve heard Judge Wyzanski say what this Court had said over the years that the Sherman Act is of constitutional proportions.

This type of definition belongs in the Internal Revenue Code.

As we all know from that code, this is the type of thing you get there where we would fight over.

Is it connected?

Is it unconnected with one’s business?

What is the primary livelihood?

Their definition would turn the antitrust as a private antitrust practitioner.

It would turn it into a three-ring circus, and I used to be a tax lawyer many years ago.

John Paul Stevens:

Mr. Thomas, do you suggest that the words business or property are used in the disjunctive?

Do you suggest they have different meanings?

John E. Thomas:

Yes, Your Honor in my brief I believe or and I know it was repeated in the amicus.

I’m not sure if it’s in the — my petition on my brief, but the labor exemption under the Sherman Act defined, that’s the only place where we see property and business defined separately.

Property basically equals dominion over something.

Business really equals what your time is spent on in a game.

John Paul Stevens:

Well, this is property could — isn’t property always a business?

John E. Thomas:

Excuse me?

John Paul Stevens:

Could you ever be injured in your business without also being injured in your property?

John E. Thomas:

Yes, I would say it does have to be a commercial transaction in our market place, in our free enterprise competitive society, where it’s just general distraction to trees for example, from pollution, no.

As FedEx recreation type of activity —

John Paul Stevens:

You mean if conspiracy somehow rather by slowing down scientific progress is — cause damage to a lot of trees, that wouldn’t be injury to property?

John E. Thomas:

Yes, but not —

John Paul Stevens:

Not on business, I see.

John E. Thomas:

Right, exactly.

John Paul Stevens:

But what if you’re a lumber company, would that be an injury to your business then?

John E. Thomas:

Then, we get into the target area question Your Honor which Judge Larson did describe and did find here.

If it’s caused by Oil Company’s fixing the price of gasoline driving down the highway —

John Paul Stevens:

Well, maybe it isn’t that important, but I just didn’t quite understand how one could have an injury to his business that was not also an injury to property?

John E. Thomas:

Oh, an injury to business, not an injury to property?

John Paul Stevens:

Yes, there was not also under your theory clearly also an injury to property and so I wonder how significant the disjunctive is?

John E. Thomas:

Oh.

Well, Your Honor, I guess what you’re saying is that if it affects you on the balance sheet, it is money and that it causes a decrease.

I was thinking of that yesterday Your Honor again.

And generally, I guess everything goes to the bottom line in our business society, and that is a tough one.

So long as you’re in business, I guess that would be a property damage.

William H. Rehnquist:

Mr. Thomas, suppose that it in the course of an antitrust conspiracy, someone like your client who was not in business is slandered.

Do you think that that would be an injury to her property?

John E. Thomas:

No, absolutely not.

You have to be in business.

There are many antitrust cases that do hold that in fact, they have one file on myself a business slander is compensable under the antitrust laws, but not for a individual consumer, no.

They would have to be in —

William H. Rehnquist:

In business.

John E. Thomas:

— business pursuit, yes Your Honor.

The result as I see it — oh, and that’s a trilogy of cases decided by Judge Williams out in California and if you read those, you’ll see one in particular.

This is the further complication that will come up.

He anguished, he felt he might be creating a Frankenstein monster here because he said, suppose a woman goes and buys two dresses.

One, to use in putting on an opera for profit, second one, to go out anniversary dinner with her husband.

The first one subject to compensation under the antitrust law, second one, apparently not.

And he was in anguished over that and saying in effect what am I doing?

Help me out Ninth Circuit, help me out Supreme Court, and Judge Nickerson said in the Theophil case in New York he said, he hoped this Court would hold.

The Ninth Circuit has reserved opinion.

The Eighth Circuit has destroyed the parens patriae legislation because its derivative for the states as to the actions of consumers.

They’re representing consumers.

Secondly, here’s an interesting point.

The parens patriae legislation has an opt out provision, an opt out provision for private parties.

Now, that would be if this Court doesn’t reverse the Eighth Circuit that would be like a pilot announcing at 30,000, “This plane is in trouble ladies and gentlemen.

You all of course are free to bailout, but obviously we have no parachutes.”

And you see what I’m saying?

The opt out provision is opting out into nothing under the parens patriae.

If unless there’s a private right of action for that person.

Foreign governments as we now stand, combining this decision by the Eighth Circuit with the decision in Pfizer versus Government of India, foreign Governments are now preferred over American citizens, and that foreign governments buy price-fixed goods from defendants, supplied them to their citizens.

Let’s say its antibiotics, let’s say its hearing aids.

Trun around, an American citizens buy those same prize-fixed goods from the defendants.

The foreign governemnts can come in and has standing before this court because the Eighth Circuit in their opinion to get around Mr. Justice Holmes and Chattanooga Foundry.

The Eighth Circuit said that that was a business injury, arguably a business injury.

And you better believe that foreign governments will be in here arguing obviously that in every instance, it’s a business injury for them, supplying water, supplying hearing aids, supplying antibiotics.

But what about American citizens?

Surely, they may come before this Court.

And that was when — the only the Eighth Circuit really got around Mr. Justice Holmes.

I see no way of getting around.

He really saw this and defined it.

John E. Thomas:

And I would please ask, these are my main points that I wish to touch on, to hit on, and I’m keenly interested if the Court has any particular area.

John Paul Stevens:

The only question I have Mr. Thomas, do you think Illinois Brick case has anything to do with this case?

John E. Thomas:

Wow!

The question here this morning Your Honor, no.

I’m the counsel in Beckers, you may or may not know that, the case that was just denied cert, but it has nothing here.

But of course, the first thing I’m going to be hit with when we go back is in Illinois Brick motion and I think that this Court, if it saw fit in his wisdom, there’s a footnote.

That is to me is purely a question of law that could be decided in that “pass-on” is not in this case.

It’s a retail price fixing question.

And therefore as a matter of law, Illinois Brick does not apply.

But the defendants have said in the footnote in their brief that they’re going to bring an Illinois Brick motion as soon as we get back down, anticipating reversal by this Court.

So yes, it does Your Honor, but not here this morning directly.

Is there any other area that anybody would —

Warren E. Burger:

Probably, no questions at this stage —

John E. Thomas:

Thank you very much.

Warren E. Burger:

Mr. Shenefield.

John H. Shenefield:

Mr. Chief Justice, may it please the Court.

In deciding as it did that the consumer has insufficient standing, that it has not been injured in its property.

The Eighth Circuit at least as to the retail trades in this country, created an antitrust exemption, except for the Government.

$1.3 trillion of commerce, nearly 50% of the gross national product of this country would be removed from the effects of private treble-damage actions.

And that fact remains in spite of the thrust of the legislative history, in spite of a clear meaning of the language in my view, in spite of the language used by this Court in many recently decided cases, and in spite of the obvious policy purposes of the treble-damage remedy.

For commerce at the retail level, the Court of Appeals simply deprives antitrust enforcement altogether of the benefit and assistance of private policing and the private attorneys general.

And in so doing, the Court of Appeals I think does violence to the twin policy purposes that this Court has ascribed to private antitrust enforcement, compensation and deterrence.

Compensation, because the only victims of the antitrust violation at the retail level are unable to sue.

Deterrence, because the violations and the violators of the antitrust laws simply do not have to be concerned about the threat of private suits.

Indeed, it could be argued that antitrust violations would be encouraged by this ruling if it were made — if it were generalized because a violator rather than having to anticipate that he would be deprived of the fruits of the illegality, in fact could count on garnering storing up retentions of the fruits of antitrust violation.

Now, analysis begins with the language of the statute.

Injury alone Mr. Justice Rehnquist would not be enough.

That is the standard under Section 16 of the Clayton Act for anticipatory injunctive relief.

But the legislative history makes clear I believe that in formulating a remedy and requiring a proof of standing in order to achieve right of damages, there had to have been some kind of injury to business or property, that is injury to a commercial interest, not in business (Voice Overlap).

William H. Rehnquist:

Business or property exclude that would not have been excluded if it simply uses the word injury.

John H. Shenefield:

Physical injury?

Injury to reputation?

Injury of a non-commercial nature that did not implicate the parties commercial interest, and we strongly believe that a consumer who makes a purchase in the open market has a commercial interest.

Mr. Justice Stevens, you can injure business in my view without injuring property.

You can injure business by denying business opportunity, an exclusive dealing arrangement for instance in violation of the antitrust laws might not injure a plaintiff in his property, but could conceivably injure his business by denial of business opportunity.

John Paul Stevens:

Wouldn’t — if such a violation occurred make the business less valuable, and therefore hurt his property?

John H. Shenefield:

You would not have (Voice Overlap)

John Paul Stevens:

I don’t know if this is crucial, but it has —

John H. Shenefield:

I agree.

You would not have to prove it in my view in order to have standing to sue against the antitrust violation.

John Paul Stevens:

Well if you’re presumably pursuing under Section 4, you try to get some money, you have to prove actual damages in order to have something to treble?

John H. Shenefield:

You have to have a foregoing business opportunity that is calculable, that’s correct.

Byron R. White:

And I gather that you can be injured in your property without being injured in your business.

John H. Shenefield:

And I think that’s the essence —

Byron R. White:

That’s this case?

John H. Shenefield:

That’s this case and that’s the essence of this Court’s decision in the Chattanooga case in 1906, it’s the essence of the decision in Pfizer with the foreign government was not in any business as such.

Byron R. White:

And the property interest here is being deprived of too much money?

John H. Shenefield:

The property interest is in being overcharged, having money diminished as the result of violation of antitrust laws as the court described in the Chattanooga case.

The disjunctive in my view was put there with the purpose to offer alternative grounds for plaintiffs to reach the courthouse door.

This plaintiff reaches the courthouse door because she had her property diminished as the result of an overcharge.

Now, the legislative history I think, there are bits and pieces of it that the Court of Appeals has cited.

There are bits and pieces of it in both in all of the briefs.

I think the fairest thing to be said about the legislative history is that many of the legislators believe that the Sherman Act and the Clayton Act were enacted to assist to consumers in the fight as they put it against the monopoly profits of the trust of the day.

Many of course also were concerned about the small business competitors.

No one suggested in the debates that consumers were ousted, that consumers would be unable to apply to the court for remedy.

The sole debate in the legislature as nearly as anyone can tell, was about the degree of effectiveness of those remedies.

Whether or not they went far enough, but no one suggested that there was not an antitrust consumer remedy there.

William H. Rehnquist:

When you say consumer, you mean all of the purchaser?

John H. Shenefield:

I mean — in this case, an ultimate purchaser, a direct purchaser in this case, Illinois Brick is non-implicated in this case because you have a direct purchaser.

But a consumer it seems to me in common parlance most often means direct purchaser.

Potter Stewart:

The Illinois Brick issue was not here, is it?

John H. Shenefield:

That’s correct.

It’s not here because the Court of Appeals (Voice Overlap)

Potter Stewart:

There’s a difference of opinion as to its applicability as you know.

John H. Shenefield:

But there is — this plaintiff was a direct purchaser.

The rationale of Illinois Brick —

Potter Stewart:

The issue here is not an Illinois Brick —

John H. Shenefield:

That’s correct.

John Paul Stevens:

Given the understanding of the reach of the Commerce Clause in 1890 by the people who enacted the law, it’s really sort of unrealistic to talk about whether they actually thought about this particular kind of action, isn’t it?

That’s probably why they can discuss it very much.

John H. Shenefield:

Well —

John Paul Stevens:

Again, that may not be dispositive here, but —

John H. Shenefield:

They didn’t discuss class actions obviously, but there is language in the debates of discussing consumer actions, individual rights, the rights of individuals to recover.

Warren E. Burger:

Taking quid that if time for that to surface, hasn’t it?

John H. Shenefield:

It was not until Rule 23 and until the class action procedure was developed.

It simply wasn’t an effective remedy for an individual (Voice Overlap).

Potter Stewart:

For large purchasers?

John H. Shenefield:

For very large consumers, that correct.

Potter Stewart:

Municipalities or —

John H. Shenefield:

That’s correct.

Potter Stewart:

— foreign governments?

John H. Shenefield:

That’s correct.

But antitrust in general is regarded as having been designed to promote consumer welfare through the protection of a competitive process.

This Court described it as better products than lower prices in the Northern Pacific.

It’s simply cannot have been the purpose of Congress in formulating a treble-damage remedy.

In aid of consumer welfare, to deny that remedy to the very persons that the laws were denied were designed to protect in the first place.

In Chattanooga which is controlling in this case, the court held that the city there was a buyer of goods as is Reiter in this case.

Chattanooga paid more for those goods as a result of an antitrust violation, as did Reiter in this case.

Chattanooga’s property was diminished as a result of that overcharge.

And so to was Reiter’s property diminished in this case it is alleged.

John H. Shenefield:

The court held that Chattanooga therefore was injured in its property and could come into court under Section 4.

Does it really make sense to think of Chattanooga, a consumer, a city, that has standing to come into court entitled to recover?

Or even a foreign Government as a consumer entitled to recover?

And not admit U.S. citizens, American citizens to court as consumers entitled to recover?

There is nothing that rules that out in the Eighth Circuit opinion.

Indeed, its whole suggestion is that consumers simply do not have an adequate interest in prosecuting and suing antitrust violations to be permitted to come into court.

The legislative history, their language of the statute, the words of this Court, and above all the policy purposes of the private treble-damage remedy under the antitrust laws all argued strongly for permitting citizens to come into court as consumers.

John Paul Stevens:

Mr. Shenefield, it just ran through my mind that you said does it make any sense, did it make any sense for Congress to say in substance that if a citizen has a claim that worth over $10,000.00, he can raise it — raise the federal question federal court but he only has a $10.00 claim he may not?

Yet, they did just that.

John H. Shenefield:

I would hate to be examined on which aspects of the congressional letters has made sense and which did not.

John Paul Stevens:

But there is a difference I suppose, the practical difference between a suit by a city for a million dollar pipe purchase and a $10.00 purchase by an individual.

John H. Shenefield:

It seems to me that if you have no plaintiffs here, if you have a retail sale in which there was an antitrust violation and there is no plaintiff whatsoever, that you come inevitably to the conclusion that Congress simply could not have intended that kind of a situation.

Warren E. Burger:

Do you recall, Mr. Shenefield, the legislation that was introduced within recent years, two or three at most, it was called the toothpaste amendment that — because one of the illustrations was that all of the consumers of a particular brand of toothpaste could tack their claims, mass their claims at 75 cents per tube, and achieve federal jurisdiction under the same concept you’re presenting here today.

That was rejected by the Congress or at least it was not enacted here.

Are you familiar with that Mr. Shenefield?

John H. Shenefield:

I’m not, but the —

Warren E. Burger:

It was called the toothpaste amendment because that’s the way the debate in the Congress evolved.

John H. Shenefield:

The most recent congressional utterance on this subject specifically that we know about is the parens patriae amendments in 1976 where at least this Court found a new procedural device for achieving old and existing substantive rights was being created.

Warren E. Burger:

Do you see any difference, any basic difference between massing the claims or tucking the claims of consumers of toothpaste and doing so with reference to hearing aids or electric toothbrushes or whatnot?

John H. Shenefield:

Well, whether or not there is a philosophical difference, in my view, there’s a clear legal difference because of the statute and the scheme of enforcement of antitrust laws, where the private remedy was designed to promote enforcement, to supplement enforcement, where it was more than simply a compensatory device, where the deterrent effect of enforcement —

Warren E. Burger:

Wouldn’t there be a deterrent effect if “X” millions of people are allowed to 10 cent per toothpaste rebate?

You could — have no difficulty with the jurisdictional aspect if you could mass them and — I have difficulty seeing the difference between what is being advanced here and — if your view prevailed, you wouldn’t need an amendment to the statute to mass with the toothpaste claims would you or toothbrush claims?

John H. Shenefield:

I don’t think I’m not familiar with the proposed amendment, but I don’t think that amendment could have been in the context of antitrust laws.

William H. Rehnquist:

Well, there’s no jurisdictional limitation —

John H. Shenefield:

That’s correct.

William H. Rehnquist:

— or minimum on any view private antitrust jurisdiction.

John H. Shenefield:

That’s correct.

But the parens patriae legislation assumed that there did exist a substantive right of recovery for consumers, and the parens patriae legislation — if the Eighth Circuit’s opinion is affirmed and it’s generalized, the parens patriae legislation is entirely vitiated because there will be no consumer right of recovery.

Thank you very much.

Warren E. Burger:

Very well.

Warren E. Burger:

Mr. Attorney General?

Warren Spannaus:

Thank you.

Mr. Chief Justice and may it please the Court.

The states are interested in this case because of the state’s increasing role in antitrust law enforcement.

The language of Section 4, the legislative history, and the overwhelming way to the case law supports non-business consumers standing.

But even more importantly, the existence of non-business consumers standing is important in the overall scheme of antitrust law enforcement.

Threat of treble-damages is a strong.

Indeed, the strongest threat against antitrust violations.

Denial of standing the private purchasers would certainly reduce the number of treble-damage actions.

This would defeat the two major purposes of Section 4 to deter violators and deprived them of the right of real — to keep their illegal profits and two, to compensate victims for their injuries.

This would of course the states recognized the importance of non-business consumer standings.

Criminal prosecutions and government civil actions certainly are not sufficient deterrent.

Public agencies do not have the ability to bring every possible action.

The Justice Department can only bring about 60 to a 100 cases a year, and states are severely and similarly restricted.

Excuse me.

The lower court exhibited a strong disliked towards private consumer actions saying that they were either coercive by nature or many time non-meritorious.

The states disagree with this and the Congress has disagreed.

Affirmance of the Eighth Circuit opinion would eliminate all nine business consumer actions.

Certainly, there are many cases when private parties can bring a lawsuit on their own and there are certainly many cases when the class would be small enough to be manageable.

For example, a conspiracy to fix real estate prices on residential homes and a particular area could give a small group of individuals enough economic incentive to bring an action on their own, or an individual who purchase a large quantity of goods over a — or a large quantity of a single item over long period of time.

For example, a life maintenance drug might have the incentive to bring an action on his own individually.

The remedy for a non-manageable class is a refusal to certify the classes and a remedy and the remedy for a non-meritorious action is either dismissal or summary judgment.

Next, we would like to discuss the parens issue that was raised here a few minutes ago.

Ideally, the parens patriae authority should not be an issue in this case.

However, we would hope that this Court would not rely on the parens issue as to the Eighth Circuit to deny private rights.

The parens issue was not meant to be a substitute for all private actions, it was meant to be a supplement and not a replacement.

Making parens exclusive remedy would certainly — was not the intention of Congress when they pass the Antitrust Improvement Act of 1976.

William H. Rehnquist:

Do you say parens, Mr. Warren Spannaus, you mean parens patriae?

Warren Spannaus:

Yes, sir, parens patriae, excuse me Mr. Justice Rehnquist.

William H. Rehnquist:

Its derivative, isn’t it?

William H. Rehnquist:

I mean if you were to hold that the consumers had no right here, it would rather significantly diminished the scope of the parens patriae.

Warren Spannaus:

Yes, Mr. Justice Rehnquist, that certainly could be — we would have some very difficult problems under Footnote 14 of the Illinois Brick case.

Although, we would still argue the attorneys general and the state would still argue that we had a substantive remedy created by the Act.

William H. Rehnquist:

That you as parens patriae say that State of Minnesota could recover for Mrs. Reiter’s lost, eventhough she could not herself?

Warren Spannaus:

We would argue that weight.

But the reason that we feel that this — that private actions are important is because first of all, the states don’t have the resources and the ability to bring all the possible meritorious actions that may exists.

And secondly, it could make the whole situation become very political if the Attorney General had to bring every conceivable action in the state, he might then be forced to bring some actions you wouldn’t normally bring because he felt that without merit, and it bring a merely to make sure that he wasn’t criticize at some future date for not bringing the action.

And so the other provision that — excuse me, that Congress granted was the opt out provision in the Bill itself.

Congress said that individuals who didn’t feel they wanted to participate in the action of the Attorney General and wanted to retain their own private right to sue could opt out of any specific action that their Attorney General might bring.

And Congress also provided for an opt out provision by the entire state.

Upon action of the legislature, the Attorney General can be prohibited from bringing any action whatsoever, and you could find the very serious and difficult position that a consumer in one state would have a remedy because his legislature did not opt out, and a situation in other state where his state did have an opt — did opt out and he have no recourse under the federal law.

And so, it’s clear I think in the legislative history that Congress was did not intend the attorneys generals to be the exclusive parties in this matters, and that private rights were intended to remain because of the two opt out provisions.

And as I said earlier, it’s — the attorneys general don’t have the resources to bring all the potential actions in their state.

Finally, this Court has expressed concern with the complexity of the treble-damage actions and stated recently that the already protracted treble-damage proceedings should be kept as simple as possible.

The states would like to suggest that this would — affirmance of the Eighth Circuit would merely make it more complex situation because in entirely new line of thinking would have to be device new body allotted to determine whether or not it was a business or a personal purchase, and whether or not the business purchase was used as intended for genuinely business purpose.

So, we would like to — we would respectfully hope that this court would reverse the Eighth Circuit, that the affirmance of the Eighth Circuit would frustrate the underlying principles of the antitrust laws, that would permit a price fixer to keep his ill-gotten gains and deprive the victim of his most effective remedy and have no means to be compensated, and it would eliminate a major deterrent to treble-damage actions, and so we would urge this Court to reverse the Eighth Circuit and reaffirm the existence of non-business consumer standing.

Warren E. Burger:

Your colleague referred to the Eighth Circuit opinion as being basically a policy decision, given the background in this whole area, is this not something Congress could correct very, very swiftly if the Eighth Circuit is wrong in the statute?

Warren Spannaus:

Well, Mr. Chief Justice, it —

Warren E. Burger:

Or if they thought that the Eighth Circuit was perhaps correct but they wanted to enlarge their remedies.

Warren Spannaus:

I think that it’s clear Mr. Chief Justice, I think it’s clear from the legislative history that Congress has always felt that this — that consumers did have the right to bring this actions.

However, if the Eighth Circuit were affirmed, there would be a lot of immediate activity to have this corrected, but I feel that that would certainly be unnecessary and in all due respect, sometime very time-consuming because Congress does not always act as swiftly as one might hold.

Warren E. Burger:

Well, were often — its often suggest that that we should — the court should take steps because the legislative process is will put on the slow side.

That’s not a reason for its decision, is it?

Warren Spannaus:

No sir, Mr. Chief Justice, it’s not.

However, I think that Congress has already acted and through the reading of the language of the legislative history of the Sherman Act as we’ve talked about here earlier, and also the discussions that were back in 1973, 1974, and 1975 when the antitrust to prove an action to pass it, Congress already assumed that the consumer had — the consumer had this right, and consequently, they felt that there was a necessary to make it any more clear.

And I think that the courts if I may say, the Eighth Circuit has gone beyond what the Congress intended and they are the once who have acted in the policy and the legislative way rather than this Court doing the same thing if they reverse the Eighth Circuit.

Harry A. Blackmun:

General Spannaus, your brief is joined by 49 states?

Warren Spannaus:

Yes Mr. —

Harry A. Blackmun:

Is Pennsylvania — which is the missing one?

Warren Spannaus:

Mr. Justice Blackmun, the only state who was not participating is the State of Georgia.

Harry A. Blackmun:

Does that imply they’re on the other side of the case?

Warren Spannaus:

No, it’s not.

It’s — the Attorney General of Georgia, Mr. Arthur Bolton has not participated in the Antitrust Improvement Act of 1976 in using in any of the funds, and so he is also decided not to participate in the amici.

Harry A. Blackmun:

He is frequent litigator here, I wonder?

Warren Spannaus:

He is a fre —

John Paul Stevens:

Of course Georgia recovered once as a consumer, isn’t it?

Georgia case with — Georgia was the plaintiff?

Warren Spannaus:

That —

John Paul Stevens:

Maybe he doesn’t need the statute —

Warren Spannaus:

Mr. Justice Stevens, that’s probably the reason he figures he can do it on his own.

But the other 49 states have.

Thank you very much for allowing as to participate.

Warren E. Burger:

Mr. Wilheim.

Julian R. Wilheim:

Mr. Chief Justice and may it please the Court.

My name is Julian R. Wilheim, and I am one of the attorneys who will argue today for the respondents, the other one being Mr. Elliot S. Kaplan.

With the Court’s permission, I will try to devote my time primarily to the background of the legislation involved in this case and the legislative history that goes to the question here which is a very narrow one.

Accordingly, I will use 15 minutes or less in the process.

I would like initially to put into perspective what I haven’t heard yet this morning.

This is a case involving a very narrow issue.

It purports to be a class action but as yet, there has been no certification of the class.

So, we are talking essentially about a plaintiff named Mrs. Reiter.

The complaint in the case and the pleadings are in the appendix before the Court speaks on occasion as if there had been price fixing by these respondents, as if there had been a retail price maintenance program.

While it is true that in a motion to dismiss which essentially is what this motion was that raise for standing issue, the facts that are well pleaded are admitted for the purpose of the motion.

The motion did not admit either legal conclusion or facts that do not exist.

This is not a price fixing case, and the reason I wish to emphasize that is that in the opposing briefs, there is a concerted effort to post the case as a price fixing case.

And therefore, they indicate as if the respondents were doing something that is per se bad under the antitrust laws.

We have noted in a footnote in our brief in our position that with respect to Beltone Electronics Corporation which happens to be my client.

We have been in a very long Section 5 FTC case in which the administrative law judge has found flatly that Beltone does not fix prices.

Potter Stewart:

Well, Mr. Wilheim, is the thrust of your argument then that if this were a price fixing case that plaintiff would have standing?

Julian R. Wilheim:

No, sir.

Potter Stewart:

Then, what’s the point of it?

Julian R. Wilheim:

The point is I do not want this Court to have a psychological view that these are these bad things call price fixers as distinguished from other violations of the antitrust laws which for example would come under the Sylvania case under the rule of reason.

Potter Stewart:

But the merits of the case aren’t before us at all here are they?

Julian R. Wilheim:

No, the merits are not before you know, should they be at this moment.

But on the other hand, candid of the court should require the petitioners to point out not again and again and again and again as they do in their briefs that these are price fixers.

John Paul Stevens:

But Mr. Wilheim, if we should adopt the rule that you urge us to adopt, it would apply to price fixers.

So, I don’t know why that’s an unfair argument.

He’s saying we shouldn’t adopt the rule that will give him immunity about to price fixers.

Julian R. Wilheim:

True Justice Stevens, but what all I am saying at this point, —

John Paul Stevens:

You’re not one of that class?

Julian R. Wilheim:

— is that I don’t want the Court to get the impression that they are dealing with these bad fellows called price fixers.

John Paul Stevens:

Nevertheless, you’re the spokesman for those bad fellows on that issue we have to decide.

Julian R. Wilheim:

Which is not based on price fixing, it’s based on —

John Paul Stevens:

Yes, but you’re still the spokesman for the price fixers because the way we decide the case will depend — will determine how those people can act.

Julian R. Wilheim:

Inferentially, I presume that if you go to the white world that is true.

John Paul Stevens:

You better take the hard facts and meet them square-on.

Julian R. Wilheim:

Now, we’re dealing with the statute that is now 90 years old.

Judge Larson in the Reiter decision at the outside — at the outset of this case denying the motion to dismiss for lack of standing very amply pointed out at page 937 of his opinion that nobody knows what the word consumers meant when the Sherman Act was on the consideration.

Nobody knows what Congress was thinking about at the time with regard to retail consumers except if you read the history.

You find that there was great concern in the Congress, that they would be interfering with state’s rights and state’s jurisdiction if they dealt with the kind of retail consumer that we have today in our society.

In the context of the society at the time, we had come to the end of the first 100 years of the republic.

There had been a depression in the 70’s, there had been a depression in the 80’s, and there had come along in our economic society, this then new thing which we called trusts.

There were corporations and corporations where to some degree regulated by the states, but there where these trusts which were completely unregulated.

And there was this squabble going on between the Democratic Party and the Republican Party at the time over protective terrors, and people were clamoring for some halter on the trusts as they were called at the time.

President Grover Cleveland made a speech to the Congress in his third message on the state of the union that something had to be done about the trusts.

And in 1888, Senator Sherman in the 50th Congress introduced resolutions to the effect that something had to be done about the trusts.

We finally get to the 53rd Congress where we had his bill, Senate Bill 1, which was the forerunner of the Sherman Antitrust Act.

And if you read this legislative history carefully, the bill was finally sent to the Senate Judiciary Committee and it came out in a relatively few days with nothing left except its title, S1 and Senator Sherman’s name absolutely obliterated everything he had in his bills except his name and the title.

The Bill came out of the Senate Judiciary Committee, and for the first time, we had this phrase that we’re worrying with here today called business or property.

What does it mean?

Julian R. Wilheim:

The various members of the Senate Judiciary Committee talked about the small businessman, the small mechanic who is in business.

He talked about small farmers, and you can find in there references to problems such as the one I remember most specifically, if a small tobacco farmer had to go to the “trust” to buy baling cotton to bale his tobacco and he was overcharged, this was the kind of commercial enterprise we were talking about.

Nowhere do we find any definition of property such as we try to find in the dictionary, the Webster’s International on the bridged, Black’s Law Dictionary, I went back to Bouvier’s Law Dictionary of my law school days of many years ago, nothing that will give us a guideline.

All that you can sense out of this total legislative history on the Sherman Act was they were talking about business or property in the total commercial sense of property involved in business.

I heard today that they didn’t talk about the class actions.

Julian R. Wilheim:

They did.

There was reference to a class action.

There was even reference to setting up a dual jurisdiction between the federal and the state courts for class action, and then Congress turned tail and said forget it, because we’re worried.

We think our only basis for enacting this kind of antitrust legislation is the Commerce Clause.

Now, we hear 90 days later — 90 years later about the consumer, and I think Mr. Chief Justice is correct.

The answer relies not in this Court, it’s a different society.

It’s a different world.

It’s a different economic picture.

If the consumer needs a protection that we’re trying to engraft on this ancient statute, this unequated statute in that sense, the remedy lies in the Congress.

William H. Rehnquist:

Of course, the insurance industry heard about it 55 years later in southeastern underwriters.

Julian R. Wilheim:

Yes, they did.

Yes they did Mr. Justice Rehnquist.

But, we’re talking about a retail consumer for personal use of articles of where if you will.

In this case —

John Paul Stevens:

What do you do about all the language in the cases and debates and all about the purpose to protect consumers as the ultimate objective of this legislation?

Julian R. Wilheim:

I think in many instances, nobody has found out what we’re talking about.

The cases are there Mr. Justice Stevens, but the word consumer as we know it today has never been defined.

In one of the briefs and I think it’s the Government brief for example, there’s a citation to the text written by Areeda and Turner, and I checked it out and I’m amazed to find that in that reference, these office have a heading in black letters called consumers and non-commercial plaintiffs.

I really would like to know what he’s talking about because when you read the next half a dozen pages, it says unclear as a mist.

But why did he, this notable text writing used the word consumers and non-commercial plaintiffs?

He must have had something in mind.

John Paul Stevens:

Suppose they had Mrs. Reiter in?

She seems to fit that class.

Julian R. Wilheim:

Consumers and non-commercial plaintiffs.

Are they two different kinds of people, or is it one?

Julian R. Wilheim:

If consumers meant in 1890 what I think it matters from reading the extensive legislative history, then non-commercial plaintiffs used today or Mrs. Reiter, and while she is a consumer in our modern society obviously, she was not that consumer about which the Congress was talking in 1890.

When we turn to the 1914 Clayton Act legislative history, there is no help to be found.

They simply reiterated what was Section 7 of the Sherman Act.

Now, I’ve heard some talks here today about parens patriae and about direct purchasers.

This plaintiff was not based on the pleadings and could not have been a direct purchaser.

She bought from a retail hearing aid dealer, she did not buy from these manufactures, and I don’t know where Illinois Brick is coming into the picture if and when we ever go back to the lower court.

With regard to parens patriae, I went through the legislative history of the 1976 statute very carefully because in the Government’s brief, they say it’s a procedural device.

They point to Footnote 14 in the Illinois Brick case.

In the state’s brief, we find that the states are saying it created a new cause of action, a substantive right.

And if by chance you have to interpret the 1976 parens patriae provisions, they would prefer to have it treated as a substantive provision.

Well, the legislative history of the 1976 Act is quite something to read.

A bill — there were three bills in the House, there was one bill in the Senate, the bills went back and forth, There came a time when they were worried about losing the Bill because of a filibuster by Senator Allen of Alabama at the end of that particular session.

There was never a conference.

There was a legislative name such as I have never read in my lifetime where a motion was made by Senator Byrd, then the majority whipped.

Senator Philip Hart handled it, and the upshot was two sections which were not concerned with here, the first two sections of that Act where the House’s version.

The third section which is parens patriae was the version of the Senate.

It was the Senate’s Bill.

And if you read what the sponsor of the bill said, Senator Hart and his analysis of the bill as they it, he says very specifically, we created a new cause of action.

In that respect with due deference to the court, Footnote 14 in the Illinois Brick case which says it’s a procedural device and which says only the House Report on the Bill is just plain incorrect because Senator Hart’s remarks has sponsored the Bill of the intention, the intention to create “a new cause of action.”

And the Senate Report, are to the contrary, and I would say they governed it.

And so, you have a new cause of action and I do not believe that an adverse rulings such as that of the Eighth Circuit will obviate the parens patriae provision or take the heart out of it.

I think that is all that needs to be said on the legislative history, and that I can sit down.

Warren E. Burger:

Your timing is very good Mr. Wilheim.

Julian R. Wilheim:

Thank you, sir.

Warren E. Burger:

Mr. Kaplan.

Elliot S. Kaplan:

Mr. Chief Justice, may it please the Court.

Mr. Wilheim has stated for you in some reform the legislative history which unequivocally demonstrates that a consumer who purchases for non-commercial purposes does not have standing under Section 4 of the Clayton Act.

I like to take just a moment to dwell on the term consumer.

That term has been used throughout the briefs and throughout the morning’s argument.

Anyone who makes a purchase, who consumes goods, is a consumer.

Elliot S. Kaplan:

General Motors is a consumer.

My client Textron is a consumer.

Mrs. Reiter is also a consumer.

The courts and the Congress never talked about consumers who purchase for non-business or commercial purposes.

Today in our present day society, the word consumer is taken on some new meaning.

When we talked about consumer, we think of the myriad people out there, the masses of people.

The Congress in 1890 and the courts prior to the Judge Larson didn’t think of consumer as that group of people.

Potter Stewart:

Well generally, it doesn’t mean retail purchasers in common parlance today?

Elliot S. Kaplan:

That maybe, Your Honor.

However, that is not necessary the definition of the —

Potter Stewart:

What is it?

What is the definition?

Elliot S. Kaplan:

Consumer is anyone who buys and consumes goods —

Potter Stewart:

Any purchasers (Voice Overlap)

Elliot S. Kaplan:

That’s correct.

Presumably —

Potter Stewart:

Every purchasers are consumer, either for his own use or in the — for use of the purchase product in the manufacturer of other products or whatever, he consumes it, and —

Elliot S. Kaplan:

That is correct Mr. Justice Stewart.

Certainly —

Potter Stewart:

— whether it’s a bar of soap or thousand tons of steel.

Elliot S. Kaplan:

That is right.

However, the Congress and the courts have limited the term consumer throughout the debates in the Congress into interpretation.

And I direct this Court’s attention to its opinion, the opinion that Mr. Justice Marshall in the case of Hawaii versus Standard Oil.

The case has not yet been mentioned this morning, which we suggest is controlling in the case — in this case.

As the court may recall, the issue in Hawaii was whether or not Hawaii could maintain an action on behalf of its citizens was not rather could maintain action on behalf of its citizens, but rather whether the injury was compensable under Section 4.

The critical question was whether the injury asserted by Hawaii in its parens patriae account is an injury to its business or property.

That was the critical question that this Court addressed in Hawaii v. Standard Oil.

Potter Stewart:

In that case, Hawaii was not suing as a purchaser, was it?

Elliot S. Kaplan:

It was, but that was not the issue before the Court.

Potter Stewart:

That’s the point.

Potter Stewart:

That’s not what was dealt with in the (Voice Overlap).

Elliot S. Kaplan:

That’s right.

It was suing its parens patriae capacity for injuries the general economy of Hawaii.

And that was the issue (Voice Overlap)

Potter Stewart:

And through its citizenry generally.

Elliot S. Kaplan:

And this Court as a threshold question had to determine, what is business or property is an injury to the general economy of the State of Hawaii, an injury to business or property.

This Court to Mr. Justice Marshall said like the courts — like the lower courts that it consider the meaning of the words business or property, we conclude that they refer to commercial interest or enterprises.

States can only sue when they seek damages for injuries to its their commercial interest.

It couldn’t be more clearly, and as articulated by Mr. Justice Marshall in Hawaii v. Standard Oil.

There are many other lower courts decisions.

They’ve also filed the same language.

The Ninth Circuit decision in the air pollution case is an accord with the decision in Hawaii versus Standard Oil.

Potter Stewart:

But that was a state and almost by definition of the state.

The state for example doesn’t by a pair of shoes to wear.

Elliot S. Kaplan:

However, Mr. Justice Stewart —

Potter Stewart:

If it buys shoes, it buys it in its commercial capacity for —

Elliot S. Kaplan:

The states always has standards —

Potter Stewart:

— its people in prisons or whatever.

Elliot S. Kaplan:

That’s correct.

The states are always buying in a business or commercial sense when they are buying in their proprietary capacity.

Potter Stewart:

Yes, they never buy a dress to wear.

Elliot S. Kaplan:

They may buy a dress for nurses who work for a state hospital.

Potter Stewart:

Precisely.

Elliot S. Kaplan:

That is correct.

Now, Mr. Thomas point out that Judge Williams in the famous California trilogy of case was concerned about this.

The dress it’s worn by the nurse and the one the she wears to a party in the evening.

That may be a problem, but that can be handled very easily.

All that need be done is when a plaintiff brings on action, it pleads that the purpose was for business or commercial use.

If the Congress believes that that is the wrong result, the Congress can change that.

That is a problem of Congress is making, none of our making.

Elliot S. Kaplan:

It is (Voice Overlap)

William H. Rehnquist:

Mr. Kaplan, what if Mrs. Reiter here had alleged he need the hearing aid to adequately perform as a lawyer.

She was in the business of a lawyer — of being a lawyer.

Elliot S. Kaplan:

Mr. Justice Rehnquist, if Mrs. Reiter had alleged that she purchased the hearing aid in order to carry out her profession or her chosen occupation, she would be buying it as a tool for her business or profession, which would then be protected under Section 4 of the Clayton Act.

She would then have a cause of action for damages under Section 4.

If she did not make that allegation, she would not have standing under Section 4.

William H. Rehnquist:

Though it’s really just unemployed consumers kind of bit of —

Elliot S. Kaplan:

That is not the distinct.

It is a person who is purchasing or strictly personal use.

If Mrs. Reiter has just decided that she is going to wear a hearing aid just because she wants to hear the television a bit better and she may have been overcharged with that — of overcharged, she doesn’t have standing.

That was not the intent of Section 4.

There has been discussion by our worthy opposition this morning that how can we allow a foreign government to sue but yet, we can’t allow consumers of this country?

That’s a very interesting question.

And obviously, this Court was not unanimous in deciding that a foreign government had standing.

However, Mr. Justice Stewart in writing the majority opinion in the Pfizer case said expressly that there was no legislative history that he could find.

And therefore, he looked to other areas of the law and found that foreign governments have traditionally been held to be persons who could sue in the courts in United States.

In the instant case, we have a clear mandate from the Congress, and that mandate has been revealed to you this morning by Mr. Wilheim.

The court in Illinois Brick recognized that not every person injured by the antitrust laws is going to have a remedy.

The court said in the Illinois Brick decision, if I can find it, not every injury traceable to antitrust violation is cognizable under Section 4 of the Clayton Act.

This Court further limited the right to bring treble-damage actions to those persons who purchased directly from alleged violators and refuse to permit indirect purchasers to demonstrate a pass on the allege price overcharges.

This Court therefore expressly acknowledged that the decision were deniably recovery to some who may had been injured by antitrust violations by recognized the practical limits upon the sanction on a private right of action.

The court was mindful that there are people who will be injured.

Just as we suggest, Mrs. Reiter might be injured by alleged overcharged that came about because with antitrust violation, but there are many others who will have standing to bring the action that will serve as a deterrent to antitrust violators.

I might point out to this Court that the respondents are in no — I’m sorry, Your Honor.

Thurgood Marshall:

(Inaudible) I thought all antitrust was to protect the consumer.

Elliot S. Kaplan:

Mr. Justice Marshall, there is no question.

But that antitrust laws —

Thurgood Marshall:

I don’t — I have yet to find anybody sells being anything protecting me —

Elliot S. Kaplan:

In response to the question (Voice Overlap) Mr. Justice Marshall, the concern of the antitrust laws is to protect the consumer welfare.

That is a term that is used throughout the briefs.

Elliot S. Kaplan:

Professor Bork has been cited on many occasions — let me explain that term.

When we’re talking about consumer welfare, the Congress and the courts had not been talking about compensating a consumer.

We are talking about permitting the consumer to purchase goods in a free and open competitive society.

That is the ultimate test that every court must apply in determining whether or not, there has been a substantive violation to antitrust laws.

Whether or not the action will permit the consumer to buy in that open competitive society, the issue is not whether the consumer can be compensated.

And that is an important distinction that we have today, the distinction —

Thurgood Marshall:

I’m not protected if I’m overcharged?

Elliot S. Kaplan:

You are protected Mr. Justice Marshall —

Thurgood Marshall:

I mean I just don’t know how well of I am.

Elliot S. Kaplan:

Let me tell you how well (Voice Overlap) let me tell you how well of you are.

Thurgood Marshall:

Yes, that’s — I’ll be interested in that.

Elliot S. Kaplan:

There are several ways that you are going to be protected.

Number one in 1976, the Congress permitted your attorney to collect attorney’s fees if he brings an act of injunction.

Thurgood Marshall:

Well, who pays for the attorney?

Do I have to go get the attorney?

Elliot S. Kaplan:

You have to go to an attorney sir and if he collects for you in the injunction action, he will now be entitled to cover (Voice Overlap); that’s right.

John Paul Stevens:

Still an injunction that Mrs. Reiter is going to get.

Elliot S. Kaplan:

She will get an injunction stopping this practice —

John Paul Stevens:

Well, that’s she’s already got the hearing aid.

She already paid for it?(Voice Overlap)

Elliot S. Kaplan:

The other remedies Mr. Justice Stevens are that the parens patriae action is available to her.

John Paul Stevens:

And so, she cannot go to the Attorney General and convince him to bring a parens patriae?

Let’s say she rather go to the lawyer on the corner and say all I want is about $9.00 on this thing, they overcharged me.

Elliot S. Kaplan:

Well —

John Paul Stevens:

Does she have to go through all of these to get her $9.00?

Elliot S. Kaplan:

Let me just address that question if I may Mr. Justice Stevens.

Let’s talk about Mrs. Reiter and going to that corner lawyer because I think that may be the very cornerstone of this case.

Mrs. Reiter has a minuscule claim.

If she is been over —

Thurgood Marshall:

Minuscule to whom?

Elliot S. Kaplan:

Minuscule in terms of total dollars —

Thurgood Marshall:

To whom?

I’m talking about to her.

The person you are protected is the consumer —

Elliot S. Kaplan:

Mrs. Reiter —

Thurgood Marshall:

— somebody — it might not be — that might be whether she eats the next day or not.

Elliot S. Kaplan:

It may have a direct impact upon her economic situation.

There’s no question about that Mr. Justice Marshall, but it is a minuscule claim in terms of the size of claims that the federal courts have traditionally heard.

As Mr. Chief Justice Burger talked about the toothpaste amendment earlier, she has a relatively small claim in terms of the size of most claims are filed.

She has undertaken a very complex piece of litigation.

As Mr. Wilheim pointed out, this is not a simple price fixing case if there is such a thing as a simple price fixing case.

This case alleges a whole garden variety of vertical restrictions imposed upon dealers who then resold the good to Mrs. Reiter.

This is a complex case.

Who has the real interest in this case?

I respectfully submit to this Court that it’s not Mrs. Reiter.

It is not the consumers because they can be protected.

It is rather the plaintiff’s bar that has the real and direct interest in this litigation.

It is they who are concerned about what’s going to happen in this case.

They are not concerned with the burden that’s going to be placed upon the administration of justice and upon the courts of this county.

By having minuscule claims of consumers imposed upon it.

Bur for Rule 23, Mrs. Reiter wouldn’t be here.

She would not assert her claim.

It’s interesting that Judge Larson said that —

John Paul Stevens:

Suppose she bought an oriental rug or perhaps she bought a house and didn’t like the commission she was charged.

She wanted to complain about the fixing of broker’s commission.

They’re didn’t like the fee their lawyer was charging because there are minimum fee schedules.

There are a lot of individual consumer claims, it might have amount to enough money to precipitate litigation, and you’d rule all of those out too.

Elliot S. Kaplan:

That is correct Mr. Justice Stevens and I believe that we have to look at what is the intent and the object of the antitrust laws, is it just the compensating people, or is it to deter antitrust violations?

John Paul Stevens:

So what kind of deterrent would remain for a conspiracy among retail Oriental rug dealers if your view prevails?

What would be the deterrent?

Elliot S. Kaplan:

The parens patriae action, the thread of government action both in United States and —

John Paul Stevens:

How many of those have succeeded?

How many parens patriae actions where there in the last 80 years?

Elliot S. Kaplan:

I’m sorry Mr. Justice Stevens, I don’t have the number.

John Paul Stevens:

There are many out there?

Elliot S. Kaplan:

I don’t know.

Warren E. Burger:

Well, is there a difference Mr. Kaplan between merchandise which is fungible and merchandise which is not?

I suppose hearing aids like automobiles fall into certain categories, but oriental rugs — one oriental rug is unlike its any other oriental rug in the world, is it?

Elliot S. Kaplan:

Mr. Chief Justice Burger, it certainly is a one of a kind item.

I’m not sure that is valid distinction with one should be recoverable and the other not.

I think it’s important to understand that the respondents are not arguing before a congressional body today.

We’re not saying who should or who should not recover.

We are simply saying let us look at the congressional history.

Let us look at the cases.

Let us see what has happened.

That is the result.

If it is an unpopular result, that is one of Congresses making, that is for Congress to correct, not for the court to say is what the law intended in 1890.

William H. Rehnquist:

Well Mr. Kaplan, have you been reading the papers till last year for which you realizes this Court doesn’t have to reach on popular results.

What about the Chattanooga language of Justice Holmes?

Elliot S. Kaplan:

The opposition Mr. Justice Rehnquist is certainly relied upon Chattanooga as a controlling case.

Chattanooga was a case that involved statute limitations.

That was the issue in Chattanooga.

It involved the City of Atlanta purchasing pipe for its city sewer and water operation.

It bought in a proprietary capacity.

The issue of a non-commercial or non-business consumer was not before the court on Mr. Justice Holmes wrote that opinion.

The issue is not there.

That case is a very narrow case and it speaks only to the question the statute limitations and there happens to be some discussion about the fact that the City of Atlanta was injured in its business or property because it overpaid, and the worth of the property was overpriced because of the alleged price fixing conspiracy.

William H. Rehnquist:

We would at least have to divide — disavow what you considered to be dictated in the case, would you not?

Elliot S. Kaplan:

No because in that case, you did not have the non-consumer purchaser.

You had a state acting in a business or proprietary capacity, which is exactly what we say.

Elliot S. Kaplan:

The result should be in that case, and that is what the court set follow consistently since Chattanooga.

The issue of a non-consumer — excuse me, a non-business consumer was not before the court in Chattanooga.

William H. Rehnquist:

So, you read as a gloss on the language any injury to business or property that it must be suffered by a business consumer?

Elliot S. Kaplan:

No.

It must be an injury to your business or to your property.

The court might ask me why use both words if we’re talking about a business.

And I think that is a very valid question.

If the court will look at the Waldron decision in saying in our brief, Mr. Waldron was an individual who was involved as kind of an investment of buying and selling oil.

And because of some price fixing in the oil industry, he was injured in this investment.

It covered his property, a commercial property.

It was not his business.

So what the Congress it simply said injury in your business, Mr. Waldron would not have had standing to recover damages under Section 4.

Potter Stewart:

But it was his business, it wasn’t his principal business maybe.

Elliot S. Kaplan:

It was strictly an investment just as, Mr. Justice Stewart, if you or I bought a stock, it would not be our business or even an ancillary business of buying stocks, it’s an investment it strictly something that we do.

And it’s a commercial property right that we would have.

John Paul Stevens:

I wonder if you are really fully dealt with the Chattanooga case because as I recall the case, Mr. Justice Holmes first indicated that he did not have to rely on the fact that the city was in the business of supplying water.

Therefore, put the business aspect to one side, and therefore relied exclusively on the fact that there was an overcharge for property.

Elliot S. Kaplan:

And the property —

John Paul Stevens:

— which seems to me that take the commercial aspect out of the analysis.

Elliot S. Kaplan:

Well, I don’t think that you can divorce the property aspect Mr. Justice Stevens from the decision.

You must look at the entire —

John Paul Stevens:

But he specifically did as I remember it.

I may remember it incorrectly.

Elliot S. Kaplan:

I don’t believe Mr. Justice Stevens that he defined the term property in that decision.

And the only property involved in that case if we’re talking about the property was a commercial property.

That was the property in that case.

If all you had to do was to pay more money than something was worth because the price fixing conspiracy that Congress could have eliminated the words business or property.

Why are they are there?

They are there for specific reason because if the Congress wasn’t concern about commercial interest, it could have done with Section 4 exactly what it did was Section 16.

The Congress knew how to do it when they want to provide a remedy to everyone, and they did it in Section 16.

Elliot S. Kaplan:

In conclusion, I’d like to point out that the fact that current taking today in the minds of the American public might dictate a congressional result different from that was the Congress reached in 1890 and again in 1914 does not provide a justification for this Court to legislate.

If a new remedy is needed, then the Congress should provide for it.

And again, this was the approach taken by this Court just a year ago in the famous Illinois Brick decision.

This Court recognized that indirect purchasers may be injured as much or more than direct purchasers.

But nevertheless, the massive litigation in administrative burden on the courts caused this Court to conclude that treble-damage actions should be limited to direct purchasers.

Warren E. Burger:

Well, the rather considerations beside is that —

Elliot S. Kaplan:

Yes, there are.

Warren E. Burger:

— in Illinois Brick.

Elliot S. Kaplan:

There are certainly where Mr. Chief Justice.

However, the court recognized that not everybody is going to have a remedy for compensation, and that is an important distinction; the right to compensation versus the deterrent effect.

The deterrent effect will be there because it almost every consumer case, I’m using the word quite loosely, in every case brought by a non-business consumer I think the court would find that there has been a companion case brought by a business consumer.

Thurgood Marshall:

And this is just the one you’re talking about this defendant, the Beltone?

Elliot S. Kaplan:

I’m sorry?

Thurgood Marshall:

Are you talking about the Beltone case in this?

Elliot S. Kaplan:

Beltone case?

Thurgood Marshall:

Beltone, yes.

Elliot S. Kaplan:

That is correct.

In the hearing a case of what we have right here, there were also dealer actions brought.

Thurgood Marshall:

Before or after his one?

Elliot S. Kaplan:

Prior to.

And perhaps a year or two before, this case was brought.

Thurgood Marshall:

You assumed that I agree with you that its importance —

Elliot S. Kaplan:

No.

However, I point out that in terms to the deterrent effect, if the court will examine almost every action that has been brought by a non-business consumer, it will find that almost every situation.

There is also been a companion case brought by a business consumer.

Therefore, the deterrent effect not lost by the fact that the non-business consumer cannot bring the action.

If there are no further questions —

Byron R. White:

Mr. Kaplan, could you explain for me again why you think Congress use both words?

Elliot S. Kaplan:

In order to demonstrate that there must be a commercial or business interest involved.

If they had just said business without property for example, it would have excluded the kind of industry that Mr. Waldron had who was employed in one business but was injured in an investment.

Elliot S. Kaplan:

A contract, he was buying and selling contracts in oil importation.

Byron R. White:

That’s an injury to business?

Elliot S. Kaplan:

That wasn’t his business.

Byron R. White:

Well, it was an injury to business.

Elliot S. Kaplan:

But not to his.

And we believe that the court — the Congress had in mind interest — what about the situation, perhaps of owning a building.

That is a piece of property, and that may be an investment.

That is not your business, but it is a commercial property interest.

I believe in 1890, the court saw distinction between the two.

There had to be a reason if the court — if the Congress Mr. Justice White had intended that everyone recover, then —

Byron R. White:

It’s a strange way to cover just the things you want to say is to say property, if all that we’re trying to do is to cover the things you just mentioned, that’s a strange way of doing it.

Why didn’t they just say commercial?

Elliot S. Kaplan:

Well certainly, we all wish we knew why they said what they said.

We believe that had the converse was to be true if they intended to permit everyone to have a right for compensation, they could less —

Byron R. White:

Do you think Congress intended then to cover something besides business?

Elliot S. Kaplan:

They intended to cover property interest, something that was commercial.

Byron R. White:

And the answer is yes?

Elliot S. Kaplan:

No.

The answer is commercial property and business, and there is a distinction between the two.

Byron R. White:

So, it does cover something besides business?

Elliot S. Kaplan:

It covers commercial property interest, yes.

Byron R. White:

So, it does cover something besides business like I say, yes it does?

Elliot S. Kaplan:

Yes, it does sir.

Byron R. White:

So, the answer is not no?

Elliot S. Kaplan:

The answer is not no.

It covers business and commercial property.

Are there any questions from the Court?

John Paul Stevens:

I wasn’t quite sure you start to answer why the Pfizer case wasn’t important or didn’t control, and I never quite understood the end of your answer, you just started discussing —

Elliot S. Kaplan:

In the Pfizer decision, Mr. Justice Stewart looked to legislative history and didn’t find any help to the legislative history.

He then went to other areas of the law beyond the antitrust area, beyond Section 4 of the Clayton Act which uses the term person found that foreign governments have traditionally, had standing to sue in our courts.

Elliot S. Kaplan:

He therefore found that a foreign government must therefore have standing to sue under Section 4.

In our case, we have called this Court’s attention to a clear legislative history that indicates that a person who buys for non-business use or non-commercial use does not have standing.

John Paul Stevens:

Do you think your argument applies to foreign governments who buy drugs for non-commercial use?

Elliot S. Kaplan:

Mr. Justice Stevens, I can’t conceive a situation where any government would buy in a non-business or non-proprietary capacity.

If it is buying rugs for its state office building —

John Paul Stevens:

Say they’re buying drugs for their army to use to bandages to bandage up people who get wounded.

Elliot S. Kaplan:

In our opinion that anything —

John Paul Stevens:

Would they have to —

Elliot S. Kaplan:

Yes, they would.

In our opinion —

John Paul Stevens:

If I bought bandages for my family, I would not be?

Elliot S. Kaplan:

That is correct.

John Paul Stevens:

What’s the difference?

Elliot S. Kaplan:

The difference being that you are not a state or a government purchaser (Voice Overlap)

John Paul Stevens:

There is a preferred physician to foreign government?

Elliot S. Kaplan:

Yes.

And that is they will have —

Thurgood Marshall:

(Voice Overlap) Chattanooga case if you own a big place like King Ranch and you bought a 100 million pipes to put on your ranch, you wouldn’t be govern.

Elliot S. Kaplan:

That is correct.

And you point out — you point out the inequities of the situation Mr. Justice Marshall, and we concede those inequities may exist.

They may trouble all of us.

Thurgood Marshall:

Yes, but where is the business in the King Ranch thing?

Elliot S. Kaplan:

There is no business there.

Thurgood Marshall:

But they couldn’t until night?

Elliot S. Kaplan:

That’s right.

Thurgood Marshall:

But if they set up a business there and they own the McDonalds, then they become —

Elliot S. Kaplan:

They’re in the business that is correct.

Potter Stewart:

Your answer may have been too fast, I mean I don’t know about the King Ranch, but I suppose they’re in the cow business, aren’t they?

Elliot S. Kaplan:

If that’s the case, I’m sorry.

If they are, yes.

Potter Stewart:

So, your —

Elliot S. Kaplan:

Then, they would be in the business, that’s correct.

Thank you.

Warren E. Burger:

Very well, Mr. Kaplan.

John E. Thomas:

Mr. Chief Justice and the other members of this Court, I have nothing to say in rebuttal.

Warren E. Burger:

I have a question —

John E. Thomas:

Yes.

Warren E. Burger:

— for you Mr. Thomas.

John E. Thomas:

Excuse me.

Warren E. Burger:

On your theory of the case, suppose an action were brought by a housewife saying that there were nine people in their household and they consume three loaves of bread everyday, I don’t know what bread is now but it’s around 50 cents I guess or maybe more, and that’s 21 loaves of bread a week and she’s being overcharged 15 cents per loaf and that she’s acting on behalf of all the people who buy loaves of bread in St. Paul, Minneapolis, covered by the theory of your case here?

John E. Thomas:

That this price fixed?

Yes, Your Honor and the beauty of it is that there are certain courts in this country that are managing those cases.

The other side of it and the beauty of it is from the judicial aspect that the judges are free to say I cannot manage this case.

There is a milk case out in Arizona where they actually sent out the class — notices excuse me, under the court direction on the milk cartons.

They could go out on the bread wrappers, Your Honor.

Thank you very much.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.