The opinion of the court was delivered by: POLLACK
MILTON POLLACK, Senior District Judge
This is an antitrust suit for violation of § 1 of the Sherman Act, claiming damages pursuant to § 4 of the Clayton Act for alleged injuries to the business or properties of the plaintiffs, Argus Incorporated and Interphoto Corporation.
The defendant, Eastman Kodak Company, has moved for summary judgment dismissing the amended complaint. Kodak contends that: 1) neither plaintiff has standing to sue under § 4 because neither plaintiff is a "person injured in his business or property by reason of anything forbidden in the antitrust laws"; 2) neither plaintiff was engaged in the business -- i.e., the camera manufacturing market -- that was directly affected by the antitrust violation relied on; 3) neither plaintiff suffered an injury that was proximately caused by the antitrust violation asserted; and 4) neither plaintiff has presented evidence of damages that is sufficiently probative to be submitted to a jury.
In opposition to the defendant's motion, the plaintiffs have submitted 25 affidavits, 11 statements taken under Rule 26(b) (4), a Rule 3(g) statement sworn to by the President of Interphoto, Daniel A. Porco, 12 depositions, answers to interrogatories, all documents identified by both parties in their proposed pretrial orders, and the testimony of 18 witnesses. Many arguments have been briefed.
For reasons that appear below, the plaintiffs' claims will be dismissed because neither plaintiff has shown, by specific probative evidence, the existence of standing to sue or a proximate causal link between the violation and the alleged injuries. Even if plaintiffs had established standing to sue and proximate causation and were permitted to proceed to trial before a jury, most of their damage claims would have to be excised; the scope of cognizable damages would be limited to de minimus claims.
On April 10, 1975, Kodak and General Electric Company announced a new flash product, the flipflash, and a compatible new amateur pocket camera. These were technical advances over the 110 Pocket Cameras using magicubes to take flash pictures. Flipflash was a unique lighting system that moved the flash away from the lens center so that it eliminated the problem known as "red-eye" (i.e., red dots in the eyes of the photographed subject). Flipflash also used a unique method to ignite the flash lamp, the "piezo crystal system." Flipflash was developed over a period of years by General Electric Company and Kodak, in a joint development project. General Electric agreed, at Kodak's request, not to disclose flipflash to other camera manufacturers before the completion of the project and simultaneous public announcement of the flipflash and the Kodak cameras designed to use it.
Immediately upon announcement of the flipflash, Interphoto, a wholesale distributor of photographic equipment, set out to find a camera capable of incorporating a flipflash lighting arrangement; it looked to W. Haking Enterprises Ltd., a large Hong Kong camera manufacturer second in size to Kodak, which manufactures and sells cameras throughout the world. Haking had the necessary capabilities to turn out a flipflash camera promptly.
In May, 1975, Interphoto decided to buy a flipflash camera designed and offered for sale by Haking. Haking undertook to manufacture and sell the desired camera to Interphoto and to label it with the "Argus" brand name. (Argus previously had licensed Interphoto to use its trademark.) On July 17, 1975, Interphoto placed an order for 50,000 units, and Haking accepted the order on August 14, 1975. The delivery schedule called for a total of 28,000 units to be delivered in September, October, and November, in time for the Christmas retail season, with the remainder to be delivered in December through the following February. The price of the camera to Interphoto was $6.20; Interphoto's gross markup of 40% per unit was $2.48. In order to produce the camera, Haking had to change its existing tooling but was able to do so quickly. Haking also manufactured and sold flipflash cameras to other customers, each of whom labelled the product with its own brand name.
Due to production delays, the flipflash cameras from Haking did not reach Interphoto until October and November, 1975, when 18,000 of the 28,000 expected were delivered. These were all sold by Interphoto. Argus-brand flipflash cameras were on the shelves of retailers in December of 1975.
During 1975, no one other than Kodak had substantial quantities of flipflash cameras. Consequently, camera dealers sold conventional cameras at a lower price.
By February, 1976, the cameras were readily available to Haking's customers, including Interphoto. By that time, ample quantities of the flipflash camera were in the market, and from then on there was no shortage of the cameras. Interphoto bought and distributed flipflash cameras thereafter, for years.
Interphoto claims that the unavailability of flipflash cameras during the 1975 Christmas selling season triggered an irreversible decline in its entire wholesale distribution business, causing it to cease operations in 1980. Argus claims that Interphoto's inability to sell Argus products cost Argus lost royalty payments.
Plaintiffs base their claim of an antitrust violation solely on the determination in Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 62 L. Ed. 2d 783, 100 S. Ct. 1061 (1980), that the secrecy agreement between General Electric and Kodak during the development of the flipflash unreasonably restrained competition in the manufacturing of amateur still cameras. The secrecy agreement gave Kodak a head start over other manufacturers after April 10, 1975 in offering a flipflash camera. The Second Circuit held that the jury could "consider whether Kodak's refusal to permit . . . GE to disclose [its] inventions to other camera manufacturers was unreasonable." 603 F.2d at 304. Berkey was given collateral estoppel effect in this case. See Argus Inc. v. Eastman Kodak Co., 552 F. Supp. 589 (S.D.N.Y. 1982) (Gagliardi, J.). The parties have stipulated that "no recovery shall be had for any damages sustained prior to April 10, 1975."
Argus has elected to present only a single damage claim, sustained after April 10, 1975; it claims $3,450,000 of "lost" trademark royalties on "expected" Interphoto sales of the entire line of Argus-brand products for the ten-year period 1975-1985. Argus does not present any claims for its lost sales or inventory made obsolete; its claim is wholly derivative of Interphoto's damage claim.
Interphoto presents a single damage claim of $53,475,000 for ten years of "lost" profits on "expected" sales of its entire line of photographic and non-photographic products. Interphoto contends that the flipflash secrecy agreement caused "direct damage" to its 126 and 110 camera sales and "indirect damage" to "expected" sales of the other products it distributed, or could have distributed, during the next ten years. Interphoto does not segregate its damages for lost camera sales; instead, it makes a global claim for lost sales of all photographic products. In short, Interphoto claims that its inability to offer flipflash - compatible pocket cameras as a "lead line" to its retail customers during the 1975 Christmas selling season started a chain reaction which caused it to go out of business five years later, in 1980.
Kodak contends that only firms that had invested in manufacturing 110 cameras using magicubes can assert the violation found in Berkey and claim damages compensible under Section, 4 of the Clayton Act. It asserts that the plaintiffs' claims have nothing to do with camera manufacturing and that the violation found in Berkey had at most an indirect impact on plaintiffs' distribution and licensing businesses.
III STANDARD FOR DECISION
This case is before the Court on Kodak's motion for summary judgment. Although the Supreme Court has counseled that "[s]ummary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles," Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962), it has recognized that summary adjudication can have a significant role in antitrust litigation. As the Court stated in First Nat'l Bank v. Cities Service, 391 U.S. 253, 290, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1968),
"While we recognize the importance of preserving litigants' rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint."
The Advisory Committee for the Federal Rules has stated that "The mission of the summary judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for a trial." To serve that purpose, a Court may use summary procedures to assay the alleged probative evidence of the plaintiffs in order to narrow the controverted issues to triable matters and to dispose of matters unsupported by admissible evidence. Rule 43(e), Fed. R. Civ. P., which authorizes the use of oral testimony on motions, is applicable to motions for summary judgment. See State of Utah v. Marsh, 740 F.2d 799, 801 n.2 (10th Cir. 1984).
The instant litigation presents a model for such treatment in light of the substantial discovery which has been had. In limine consideration of expert testimony and other evidentiary issues is far more efficient than deferring them until trial. In examining expert opinion in limine, the Court may consider the underlying assumptions, inferences drawn, and conclusions reached in order to determine whether the opinion would help the trier of fact to understand the evidence or determine the fact in issue.
The Court ordered a hearing to assay plaintiffs' evidence on the issues of standing to sue, proximate cause, and damages flowing from the antitrust violation. At the hearing, Kodak introduced a broad array of extrajudicial statements made by plaintiffs which appeared both in documents filed publicly pursuant to the requirements of law and in internal corporate minutes and records. Many of these statements were prepared by witnesses who gave oral testimony at variance with the documents.
The published and recorded extrajudicial statements are legal admissions. See 4 Wigmore on Evidence §§ 1048, 1057a (3d ed. 1940). Cf. Student Public Interest Research Group v. Fritzsche, Dodge & Olcott, Inc., 579 F. Supp. 1528, 1538 (D.N.J. 1984). Once such statements were made part of the record, "the burden shifted to [respondents] to come forward with evidence disproving the correctness of th[e] report[s] or explaining error and mistakes in preparation of [them]." United States v. Maritime Investment Corp., 465 F.2d 434, 436 (5th Cir. 1972).
The burden is not met by contradictory oral statements or speculations that are "unaccompanied by any direct evidence of reporting inaccuracies." Student Public Interest Research Group, 579 F. Supp. at 1538. Nor can plaintiffs rely on the conclusory statements of its corporate officers or competitors. "When the fact of injury is in issue, the 'isolated self-serving' evidence of plaintiff's corporate officers may not provide substantial evidence upon which a jury can rely." H & B Equipment Co. v. International Harvester, 577 F.2d 239, 247 (5th Cir. 1978). See also Yoder Bros, Inc. v. California-Florida Plant Corp., 537 F.2d. 1347, 1371 & n.25 (5th Cir. 1976), cert. denied, 429 U.S. 1094, 51 L. Ed. 2d 540, 97 S. Ct. 1108 (1977) (conclusory statements of plaintiff's officers do not constitute substantial evidence). To defeat a motion for summary judgment, the respondent must adduce "factual material which raises a substantial question of the veracity or completeness of the movant's showing or presents countervailing facts." Beal v. Lindsay, 468 F.2d 287, 291 (2d Cir. 1972) (Friendly, J.).
As described in greater detail below, plaintiffs have not raised any genuine issue of material fact by acceptable factual evidence that contradicts or varies the documentary proof. Plaintiffs presented no probative evidence raising a substantial question about, or casting doubt upon, the veracity or completeness of the public documents, reports, and corporate minutes.
Kodak contends that Berkey holds that the flipflash conspiracy was an unreasonable restraint of competition only in the manufacturing of amateur still cameras. Since plaintiffs rely on Berkey to establish the antitrust violation, Kodak contends that plaintiffs must allege an injury to their manufacturing of cameras, not some other injury which the Berkey court did not address. Kodak asserts that "plaintiffs abandon th[e Berkey] framework and adopt a wholly different one in advancing Interphoto's claim for lost sales as a 'full line' photographic distributor and Argus's derivative claim for lost trademark royalties on Interphoto's sale of a broad and undefined group of 'Argus' products."
Plaintiffs contend that they have standing since they "competed with Kodak in the production and distribution of pocket cameras" and "were within the area of the economy endangered by the breakdown of competitive conditions caused by the flipflash conspiracy." Plaintiffs further contend that it is immaterial whether Interphoto was a manufacturer "since the flipflash conspiracy gave Kodak an illegal competitive advantage in the sale of its pocket cameras over Interphoto and other distributors competing with Kodak for sales to retailers of pocket cameras."
Section 4 of the Clayton Act, 15 U.S.C. § 15, states, in pertinent part, that:
"[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . ."
The Supreme Court has held that by this statutory language, "Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation." Hawaii v. Standard Oil Co., 405 U.S. 251, 263, 31 L. Ed. 2d 184, 92 S. Ct. 885 n.14 (1972). "It is common ground that the judicial remedy cannot encompass every conceivable harm that can be traced to alleged wrongdoing." Associated General Contractors of Calif., Inc. v. California State Council of Carpenters, 459 U.S. 519, 536, 74 L. Ed. 2d 723, 103 S. Ct. 897 (1983).
The Supreme Court has likened the inquiry on standing to sue to the "proximate cause" analysis in torts. See id. at 535; Blue Shield of Virginia v. McCready, 457 U.S. 465, 477-78, 73 L. Ed. 2d 149, 102 S. Ct. 2540 n.13 (1982). Accordingly, it has "identif[ied] factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances." Associated General, 459 U.S. at 537. Factors precluding the right to sue under antitrust laws are the indirectness of the asserted injury, the speculative nature of the damage theory, the risk of duplicative recoveries, and the danger of complex apportionment. See id. at 538 - 45; Triple M Roofing Corp. v. Tremco, 753 F.2d 242 (2d Cir. 1985).
In Associated General, the plaintiffs, two Unions, alleged that an association of employers had illegally restrained trade by coercing third parties and some union members to enter into contracts with nonunion contractors. The Court held that the Unions lacked standing, in part because the Unions were "neither a participant in the market . . . nor a direct victim of the defendants' coercive practices." Associated General, 459 U.S. at 540 n.44.
The Court noted that other potential plaintiffs, the "immediate victims of coercion" were "an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement" and said that this "diminishe[d] the justification for allowing a more remote party such as the Union to perform the office of a private attorney general." Id. at 542. If the Unions were allowed to recover, the courts "would face problems of identifying damages and apportioning them among directly victimized contractors and subcontractors and indirectly affected employees and union entities." Id. at 545.
By contrast, in Blue Shield the Court granted standing based on a more direct link between injury and violation and the absence of countervailing considerations. In Blue Shield, the plaintiff was a subscriber to a group health plan that reimbursed members for services provided by psychiatrists but not for those provided by psychologists. Plaintiff, who had been treated by a psychologist, alleged that the bar against compensation to psychologists was a group boycott that violated the Sherman Act § 1.
The Court held that the subscriber had standing because there was a "physical and economic nexus between the alleged violation and the harm to the plaintiff," Blue Shield, 457 U.S. at 478, and because the harm to plaintiff "was clearly foreseeable; indeed, it was a necessary step in effecting the ends of the alleged illegal conspiracy." Id. at 479.
Prior to the Supreme Court's decisions in Blue Shield and Associated General, the Second Circuit used a "target area" test to determine whether an antitrust plaintiff had standing. Under that standard, a plaintiff could sue only if he could "allege a causative link to his injury which is 'direct' rather than 'incidental' or which indicates that his business or property was in the 'target area' of the defendant's illegal act." Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183, 187 (2d Cir. 1970), cert. denied, 401 U.S. 923, 27 L. Ed. 2d 826, 91 S. Ct. 877 (1971) (franchisor lacks standing to sue for injury to franchisee).
See also Vincel v. White Motor Corp., 521 F.2d 1113, 1119 (2d Cir. 1975) (stockholder lacks standing to sue for injury to corporation); Calderone Enterprises v. United Theatre Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir. 1971), cert. denied, 406 U.S. 930, 32 L. Ed. 2d 132, 92 S. Ct. 1776 (1972) (landlord lacks standing to sue for injury to tenant); SCM Corp. v. Radio Corp. of America, 407 F.2d 166 (2d Cir.), cert. denied, 395 U.S. 943, 23 L. Ed. 2d 461, 89 S. Ct. 2014 (1969) (patentee lacks standing to sue for his injuries to his licensees). These cases remain influential; after the two Supreme Court decisions, the Second Circuit stated that the target area cases have not been "drained of their precedential vitality on their own or very similar facts . . ." Crimpers Promotions, Inc. v. Home Box Office, Inc., 724 F.2d 290, 293 (2d Cir. 1983) (Friendly, J.), cert. denied, 467 U.S. 1252, 104 S. Ct. 3536, 82 L. Ed. 2d 841 (1984).
Under the law of standing, a camera manufacturer has standing to sue for the antitrust violation found in Berkey because camera manufacturers were the "direct" victims of the violation. The secrecy agreement restricted the disclosure of the flipflash project to camera manufacturers, thereby delaying the manufacturers from designing, tooling-up, and advertising for a new product. Camera manufacturers were the "direct" victims of the violation.
Under § 4 of the Clayton Act, a distributor of a general line of photographic items is not a person injured in his business "by reason of" a conspiracy to restrain competition by keeping secret an innovation by a camera manufacturer and a flash lamp maker. Unlike a manufacturer, a distributor is remote from the violation, on a different level of the markets involved; a distributor is not a competitor of the manufacturer and not his rival. Although a distributor may suffer a loss of some kind, it is not "'the type of loss that the claimed violations ... would be likely to cause.'" Brunswick Corp. v. Pueblo Bowl - 0 - Mat, Inc., 429 U.S. 477, 489, 97 S. Ct. 690, 50 L. Ed. 2d 701 (1977).
Injury to the distribution of a general line of photographic supplies was not a necessary step in attaining a manufacturing headstart from the illegal secrecy of the innovative flipflash. Admittedly, a camera producer is injured by the violation, and a distributor suffers too -- but the latter's is not the same injury, but rather a distinct one. Berkey did not present the issue whether the secrecy agreement had an unreasonable impact on photographic distributors. In this case Interphoto is suing solely because of an injury to a level of the market that was not considered in Berkey. In short, a distributor is not in the restrained market as that was defined in Berkey.
Similarly, a trademark licensor is not within the area of the economy endangered by the breakdown of competitive conditions found in Berkey. Such a licensor merely sells the rights to its name for use on goods designed, produced, and sold by others. It is not at the level of the market directly affected by the agreement to keep the development of flipflash secret from other camera manufacturers.
To deny standing to a distributor or trademark licensor does not leave a substantial antitrust violation unremedied, since camera manufacturers do have standing. In fact, to permit a trademark licensor or distributor to have standing would increase the risks of duplicative recovery and complex apportionment, since the Court would have to determine how to apportion damages among the actors along a lengthy chain. To allow standing in these circumstances would be contrary to the teachings of Blue Shield and Associated General.
1. Argus Was No Longer a Manufacturer
Argus is a publicly held Delaware corporation incorporated in 1960. Its stock was listed on the American Stock Exchange until 1974, when it was delisted. At one time Argus was a manufacturer of photographic products, including cameras. At its peak, it had five manufacturing facilities for photographic supplies and equipment located in the United States and Canada. By 1964, its five photographic manufacturing facilities had been reduced to two, one in South Carolina, and one in Ontario. Sometime prior to 1970 Argus ceased manufacturing cameras at either one. There is no evidence that Argus was a manufacturer at any time relevant to this action.
From 1970 to March 1, 1975, at the latest, Argus functioned as an importer and distributor of cameras manufactured abroad. Argus imported and distributed cameras labelled with the "Argus" name which were manufactured by two Japanese firms, Cosina (35 mm still cameras; 8 mm movie cameras), and Sedic (110 cameras). The Sedic Agreement described Argus as a "distributor." Argus' business with both of these firms terminated in 1974.
After March 1, 1975, Argus was not even a camera importer; it merely licensed its "Argus" trademark to Interphoto for use on cameras and other photographic equipment. Under the Argus - Interphoto licensing agreement, the latter purchased, imported, and resold cameras and had them labelled with the name "Argus." All sales of Argus labelled products were made through Interphoto. The agreement called for a royalty of 1-1/2% on Interphoto's sales of "Argus" merchandise, but specified that no royalties were payable to Argus during the first year.
Argus' contemporaneous documents establish that it was no longer a manufacturer of cameras at the time of the flipflash announcement. There is no probative evidence to the contrary. Argus' Form 10-K for the year ending February 29, 1976, acknowledges: "Argus Incorporated ("Argus") is engaged primarily, through its 81.3% owned subsidiary, Interphoto Corporation ("Interphoto"), in importing and distributing cameras, projectors and other photographic equipment for the amateur market in the United States and Canada."
The only manufacturing that Argus reported was the "[l]imited manufacturing of photographic equipment, principally slide trays and viewers, . . . performed by the Company's General Tool and Die Division. Such products are sold to Interphoto for distribution."
Argus' research and development had dwindled to almost nothing by the time of the flipflash announcement. Argus' Form 10-K and its Annual Report, transmitted to shareholders on July 21, 1976, reported: "Argus spent approximately $115,000 during the year ended February 28, 1975 on the development of new products or services, or the improvement of existing products or services. There were no significant expenditures in 1976. It employs one employee on a full-time basis on product development."
The lack of research and development did not go unnoticed by senior Argus personnel. On June 25, 1975, E.R. Isaacson wrote Dan Porco, "As new products became fewer and fewer and as product purchases dropped off, the personnel involved were layed [sic] off indefinitely. . . . Suddenly now, new products are being sought and samples have been delivered for evaluation. I have not trained manpower for this type of work other than to do it myself as best I can fit it into my schedule."
In September 1976, Argus' patent attorney admitted that "he believed all products sold by Argus for the past several years were not truly of Argus design or manufacture . . ."
2. The Maurer Project Collapsed
Argus' only conceivable claim to being a manufacturer of cameras after 1970 was through a venture with Maurer Commercial Products Corporation. In 1973, Argus decided to try to produce a pocket camera in this country which would solve the "red-eye" problem. It made an agreement with Maurer, dated August 22, 1973, under which the latter was to produce such a camera within eight months. No such camera was ever produced.
The Agreement provided for Maurer to produce magicube cameras. It stated: "Maurer agrees to manufacture for Argus, and Argus agrees to purchase from Maurer" certain pocket cameras "according to designs, plans and specifications submitted by [Maurer] to Argus." The Agreement further provided that "Maurer is an independent contractor" and that neither party could bind the other, "the relation between MAURER and ARGUS hereunder being solely that of manufacturer and purchaser." An amendment dated December 4, 1973, "expand[ed] the scope of work to be performed by Maurer to include engineering, design and manufacture of a second generation pocket type camera identified as the Model 40."
The Agreement, as Maurer described it in a February 26, 1974 memorandum, was a "purchase order between Argus and Commercial." Although Argus did routine product evaluation, Maurer had design responsibility; on August 27, 1974, E.R. Isaacson wrote to Maurice Day that "the evaluation [of the first C-25 camera] work was completed on 8/16 and the sample camera has been returned to Maurer to determine the cause of failure."
The camera venture was repeatedly delayed and collapsed completely before the flipflash announcement. On April 19, 1974, near the time the Agreement called for mass production, Lewis wrote to Day that "Irving [Brand of Maurer] is talking June pilot and production starting August 1 on Model C25." Yet on July 17, 1974, Porco wrote Maurer complaining that the camera had thus far cost twice ...