United States District Court, E.D. New York
July 13, 2005.
DRUG MART PHARMACY CORP., et al., Plaintiffs,
AMERICAN HOME PRODUCTS CORP., et al., Defendants.
The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge
MEMORANDUM AND ORDER
Pending before the Court is the motion submitted by the
designated defendants for judgment on the pleadings or, in the
alternative, summary judgment, dismissing the representative
plaintiffs' claims for conspiracy under the Robinson-Patman Act,
15 U.S.C. § 13(a) (the "Act"), and precluding plaintiffs from
seeking joint and several liability under the Act.*fn1 Each
side cites to a different case, the plaintiffs to a Seventh
Circuit decision, and the defendants to a Supreme Court decision,
arguing that it is dispositive of the issue before me.
As set forth below, the Court grants defendants' motion for
judgment on the pleadings dismissing plaintiffs' claims for conspiracy under the Act and for the
imposition of joint and several liability upon the defendants.
The background of this case has been recounted in numerous
prior opinions by this Court, by the United States District Court
for the Northern District of Illinois, and by the Court of
Appeals for the Seventh Circuit. See 288 F. Supp. 2d 325
(E.D.N.Y. 2003); 296 F. Supp. 2d 423 (E.D.N.Y. 2003); 2002 WL
31528625 (E.D.N.Y. Aug. 21, 2002). See also 288 F.3d 1027
(7th Cir. 2002); 186 F.3d 781 (7th Cir. 1999);
123 F.3d 599 (7th Cir. 1997); 1999 WL 33889 (N.D. Ill. Jan. 19, 1999);
1996 WL 167350 (N.D. Ill. Apr. 4, 1996); 867 F. Supp. 1338 (N.D.
Ill. 1994); 1994 WL 240537 (N.D. Ill. May 27, 1994). Familiarity
with prior opinions is therefore assumed, but for purposes of
this opinion, it is sufficient to know that plaintiffs are
approximately 3,800 independent pharmacies who have filed suit
under the Act against defendants, pharmaceutical manufacturers,
for giving discounts or rebates on brand name prescription drugs
to health maintenance organizations and mail order pharmacies,
while denying discounts to them.*fn2 Among other things,
plaintiffs allege a conspiracy under the Act between the
defendants for price discrimination, separate and apart from the
conspiracy claim giving rise to their Sherman Act case which has
settled in principle.
I. Motion for Judgment on the Pleadings Relating to
Plaintiffs' Conspiracy Claims under the Act and Assertion of
Joint and Several Liability
A. Standard on a Motion to Dismiss Pursuant to Fed.R.Civ.P.
12(c) In deciding a motion under Fed.R.Civ.P. Rule 12(c), the
Court applies the same standard as that applicable to a motion
under Fed.R.Civ.P. 12(b)(6), accepting the allegations
contained in the complaint as true and drawing all reasonable
inferences in favor of the nonmoving party. Ziemba v. Wezner,
366 F.3d 161, 163 (2d Cir. 2004); Conley v. Gibson,
355 U.S. 41, 45-46 (1957). A complaint will be dismissed under Rule 12(c)
"if it appears beyond doubt that the [nonmoving party] can prove
no set of facts in support of his claim which would entitle him
to relief." Patel v. Searles, 305 F.3d 130, 135 (2d Cir. 2002)
(internal quotations omitted), cert. denied, 538 U.S. 907
(2003). Although the parties submitted evidence, the Court does
not convert defendants' motion into one for summary judgment
because it does not consider that evidence.
B. Whether Conspiracy Claims Are Elements of a Robinson-Patman
Cause of Action
Section 2(a) of the Robinson-Patman Act provides in relevant
part that: "It shall be unlawful for any person engaged in
commerce, in the course of such commerce, either directly or
indirectly, to discriminate in price between purchasers of
commodities of like grade and quality, where either or any of the
purchases involved in such discrimination are in commerce, where
such commodities are sold for use, consumption, or resale within
the United States or any Territory thereof . . . and where the
effect of such discrimination may be substantially to lessen
competition or tend to create a monopoly in any line of commerce,
or to injure, destroy, or prevent competition with any person who
either grants or knowingly receives the benefit of such
discrimination, or with customers of either of them. . . ."
15 U.S.C. § 13(a). Defendants argue that plaintiffs' Robinson-Patman
Act claims must be dismissed insofar as they are predicated on
allegations of a "conspiracy to discriminate in price."
Defendants further assert that since there is no viable
conspiracy claim under the Act, plaintiffs' argument that they
may be held jointly and severally liable is meritless. In opposition, plaintiffs contend that the law supports their
position, and they rely heavily on the Seventh Circuit's decision
in Sidney Morris & Co. v. Nat'l Ass'n of Stationers, Office
Outfitters & Mfrs., 40 F.2d 620 (7th Cir. 1930). In that case,
the plaintiff, a retailer and wholesaler of stationery products,
asserted that defendants issued recommended price lists for their
products "which purported to state prices at which articles
should be resold by retailers." Sidney Morris, 40 F.2d at 622.
The defendants represented a diverse group, and included two
industry associations, wholesalers, retailers and manufacturers.
Id. at 621. Defendants purportedly "insisted that plaintiff
desist from its practice of reselling . . . office equipment at
less than the published resale prices" and "demanded that
plaintiff become a member of [a trade association] and pay the
said association the regular initiation fees and dues." Id. at
622. The complaint acknowledged that certain of the defendants
did not have any direct contact with the plaintiff, and therefore
these defendants did not discriminate in price against the
plaintiff directly, but rather "aided and abetted," or
"conspired," to further the discrimination. Id. When plaintiff
did not comply with defendants' demand, they refused to sell
their products to plaintiff. Id. Plaintiff filed suit against
the defendants under a precursor to the Robinson-Patman
Act.*fn3 Id. at 623. The Seventh Circuit reversed the
district court's grant of defendants' motion to dismiss the
The Seventh Circuit first noted the well established principle
that an "action may lie for damages suffered by reason of torts
committed pursuant to a conspiracy but no action for damages lies
for the conspiracy alone." 40 F.2d at 624 (citation omitted).
Accordingly, it went on to observe, "[n]ot being an action for
conspiracy and no action for a conspiracy, as such, being
maintainable, it is idle to examine the complaint to test its
allegations by the standards of an alleged good complaint for
conspiracy." Id. at 625. Notwithstanding these statements, the Court proceeded to find
that certain of the defendant entities, whose sole unlawful
conduct was alleged to be their participation in an "unlawful
conspiracy," could be liable under the Act. The Court's
conclusion was bolstered by the following hypothetical:
[T]he question arises, may B, who has unlawfully
discriminated in prices against A, and who has
unlawfully refused to sell its goods to A, because of
A's refusal to agree to sell only at a fixed resale
price, avoid liability because X, Y, and Z agree and
conspire with B to force A into an association, the
object of which is the maintenance of a fixed resale
price, etc.? We think not. A cause of action is
stated against B. A's damages arises by virtue of B's
unlawful discrimination in price and its refusal to
sell A its merchandise. X, Y, and Z become liable,
not because of their refusal to sell A, but because,
through their unlawful conspiracy with B, they became
liable for B's wrongful act committed on A. There
would have been no occasion and no justification for
joining the retailer defendants who did not sell
[plaintiff] excepting as they, through their
agreement with B, became the agents and partners of
B. B would have been the sole party whose wrongful
acts gave A a cause of action but for the action of
X, Y, and Z in participating in B's unlawful
enterprise. The cause of action did not bec[o]me one
for conspiracy, however, but remained one for damages
resulting from the doing of acts prohibited by the
statute. But the parties liable for the damage were
increased through the entry of other parties into the
Sidney Morris, 40 F.2d at 624 (emphasis added).
The Court declines to regard the holding in Sidney Morris as
authoritative. The Seventh Circuit recognized that there was no
conspiracy claim under the Act, but then inconsistently ruled
that X, Y, and Z in the Court's hypothetical, and the defendants
in the case before it, could be held liable for price discrimination based solely on their participation in the
conspiracy "enterprise."*fn4 Moreover, in this case, unlike
Sidney Morris, each defendant is charged with engaging in price
discrimination against plaintiffs.
Further support for this Court's decision to reject the holding
in Sidney Morris comes from the Supreme Court, which sixty
years later, stated clearly that the Act "is aimed at price
discrimination, not conspiracy." FTC v. Henry Broch & Co.,
363 U.S. 166, 174 (1960). Since the Supreme Court's decision in
Broch, the only court to squarely address the issue whether an
action for conspiracy can be maintained under the Robinson-Patman
Act has held that it does not. See General Supply Deck and
Floor Underlayment Co. v. Maxxon Southwest, Inc., 2001 WL
1480768, at *4 (N.D. Tex. Nov. 19, 2001) (dismissing conspiracy
claim because "[t]here is no provision in the Robinson-Patman Act
providing for such a claim") (citing Broch, 363 U.S. at 174);
see also Kaspar Wire Works, Inc. v. Leco Engineering and
Machine, Inc., 190 U.S.P.Q. 85, 92 (M.D. Fla. 1976) (judgment
entered against plaintiffs where they failed to introduce "any
evidence whatsoever respecting any price discrimination" and
noting that the "purpose of the Robinson-Patman Act . . . is to
curb and prohibit all devices by which large buyers (or sellers)
gain discriminatory preferences over small ones by virtue of
their greater economic power; it is aimed at price
discrimination, not conspiracy") (citing Broch), aff'd,
575 F.2d 530 (5th Cir. 1978).
There are at least three additional reasons why this Court
declines to follow Sidney Morris. First, plaintiffs' argument
that evidence of a "conspiracy" is relevant to its damages claim
under the Act is a poorly disguised tautology that would allow
plaintiffs to prove a conspiracy not provided by the Act which
merely grants a remedy for redress against price discrimination.
A plain reading of the Act gives no indication that Congress intended to provide a cause of action
for conspiracy. Sidney Morris, the sole prop upon which the
plaintiffs' argument rests, creates a questionable wrong to
provide a remedy.
Second, as already noted, the plain language of the Act
addresses price discrimination, and price discrimination alone.
The word "conspiracy" is not mentioned either in the statute or
in its legislative history. Price discrimination causes actual
injury under the Act when the favored purchaser uses its
advantage in a way that impairs the disfavored purchaser's
ability to compete. The plaintiff disfavored purchaser must show
that it lost customers or profits because the favored purchaser
used its favored advantage either to lower its resale prices or
otherwise to attract business. It is for that reason that a
plaintiff asserting a claim under the Act must proffer
individualized proof of lost customers or profits as against each
defendant. See, e.g., The Intimate Bookshop, Inc. v. Barnes
& Noble, Inc., 2003 WL 22251312, at *8 (S.D.N.Y. Sept. 30, 2003)
(the plaintiff's failure to disaggregate the effect and
contribution of each defendant's unlawful conduct to its alleged
injury is fatal to its claim) (citing American Booksellers
Ass'n, Inc. v. Barnes & Noble, Inc., 135 F. Supp. 2d 1031,
1039-40 (N.D. Cal. 2001) (the plaintiffs cited no authority
allowing them to average the effects of allegedly unlawful acts
of defendants to show that, on average, they were harmed by those
acts. Each plaintiff must show a causal connection between the
unlawful price discrimination and his injury)).
Third, if plaintiffs are allowed to recover on their claim for
price discrimination conspiracy under the Act, they would recover
twice for the same claim. As indicated above, see infra fn.
2, the plaintiffs asserted a claim against the defendants under
the Sherman Act for the same underlying conduct, which has been
resolved by a settlement in principle. The Sherman Act, at its
most basic level, prohibits conspiracies agreements between two
or more persons or entities to achieve an illegal purpose in
restraint of trade. 15 U.S.C. § 1. At oral argument, plaintiffs'
counsel acknowledged that these two conspiracy claims under the Sherman Act and the Robinson-Patman Act are
The Court: Would it [price discrimination] also be a
conspiracy to violate the Sherman Act?
Mr. Gravante: Yes, it would.
The Court: You were able to pursue that remedy and
you did pursue that remedy under section 1, didn't
Mr. Gravante: We're happy to continue to pursue it.
The Court: You have settled it?
Mr. Gravante: We have not settled it. We have an
agreement in principle to settle it.
(Hearing Transcript of May 26, 2005 ("5/26/05 Tr.") at 21). This
attempt to recover twice for the same wrong provides an
independent and sufficient reason to dismiss plaintiffs'
conspiracy claims pursuant to the Robinson-Patman Act. See,
e.g., Defiance Indus. v. Galdi, 256 F. Supp. 170, 172
(S.D.N.Y. 1964) (motion to dismiss complaint granted where the
plaintiff "in practical effect would be asking the court to
permit double recovery for the same actionable wrongs").
Finally, plaintiffs argue that defendants are jointly and
severally liable for damages under the Act. However, as
plaintiffs' counsel recognizes, there is no authority supporting
that assertion, except for Sidney Morris, a case which, as
discussed above, has, at the very least, been undermined by
Broch. See 5/26/05 Tr. at 33 (at oral argument, plaintiffs'
counsel stated that "the only case law that exists is a Seventh
Circuit decision that I believe is binding on this Court that
squarely supports our view"). If the Court imposes joint and
several liability on defendants, it would find one or more
defendants liable for price discrimination even in the absence of
evidence to support a finding of a causal connection between its
alleged discrimination and the plaintiffs' claimed injury, and
based, in turn, upon an alleged conspiracy not targeted by the
Consistent with the Court's conclusion, research has not
revealed a single case in which a conspiracy claim was asserted
and allowed in a Robinson-Patman case, nor has research revealed a single reference in a treatise or law review in which Sidney
Morris has been cited for the proposition that such a claim can
be made under the Act. The inference, I suggest, is permissible,
that the unavailability of such a claim is accepted by the legal
and academic community.
For the foregoing reasons, defendants' motion for judgment on
the pleadings dismissing plaintiffs' claims for conspiracy under
the Robinson-Patman Act and precluding plaintiffs from seeking
joint and several liability under that Act is granted. The Court
directs counsel to appear for a status conference on Tuesday,
July 26, 2005 at 11:00 am in Courtroom Five.