APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 75-1201)
Before: SEITZ, Chief Judge and GIBBONS and WEIS, Circuit Judges.
The parties to this Sherman Act case are in the extremely important but unglamorous enterprise of refuse collection. While the local nature of the venture is apparent, the interstate ramifications of the business are such that the plaintiff's arguments for federal court jurisdiction cannot be dismissed as rubbish. The effect on interstate commerce as alleged was substantial enough that the district court erred in refusing jurisdiction. Accordingly, we vacate its entry of summary judgment in favor of the defendants.
Plaintiff J. P. Mascaro & Sons, Inc., a refuse hauler, alleges that the defendant haulers, landfill operators, and trade association have conspired to fix prices and allocate territories so as to drive it out of business. The complaint charges violations of Sherman Act §§ 1 and 2 and asks for injunctive relief as well as treble damages. After the parties had conducted discovery, the district court granted summary judgment for the defendants on the ground that their business was a purely local operation, not in interstate commerce, nor substantially affecting interstate commerce.
Mascaro and the defendants' enterprises cover Bucks, Delaware, Montgomery and Chester Counties in suburban Philadelphia. The parties service a large number of customers, the defendant haulers collectively accounting for 16,416, including commercial and industrial establishments of all kinds, as well as private households. One of the defendant landfill operators services a federal military installation. All but one of the defendants' customers and all of the plaintiff's are located in Pennsylvania. Defendant O'Hara serves one customer in New Jersey, using a truck permanently stationed there to haul refuse to a landfill also in that state. The truck is brought to Pennsylvania two or three times a month for maintenance work but does not haul rubbish on those trips.
The haulers dump the refuse at a landfill location and pay the operator for the privilege.The amounts paid for transportation to the site and for landfill use are significant costs which affect the prices charged customers. In order to keep expenses low, haulers prefer to utilize landfills as close to the customers as is feasible.
The complaint alleges that the defendants conspired to allocate customers, fix and maintain prices, engage in predatory practices, including a foreclosure of plaintiff from the use of certain landfills, and otherwise "[to] impede, obstruct, threaten, intimidate, harass, and take action against plaintiff and certain operators in order to exclude plaintiff from the refuse removal business." As a result of these activities, the plaintiff contends that it has incurred greater expenses in conducting its business, and that competition has been reduced.
The defendants assert their businesses and Mascaro's are purely intrastate and there is no basis for jurisdiction under the Sherman Act.*fn1 The district court observed that subject matter jurisdiction would attach if the activity complained of occurred within the flow of interstate commerce or if acts on the state or local level substantially affected interstate commerce. The district judge defined the issue as "whether the purchase of equipment from out-of-state firms as an adjunct to conducting a local enterprise substantially affects interstate commerce."
Between 1971 and 1975, the critical time span in this case, Mascaro purchased in excess of $310,925 in equipment and supplies which were manufactured outside of Pennsylvania. During that period, Mascaro paid out-of-state insurers more than $55,000 in premiums and borrowed at least $256,389 from out-of-state lending institutions to finance equipment used in its operations. Moreover, twenty-four corporate customers paid approximately $108,000 to Mascaro from their home offices located outside Pennsylvania.
In 1974 and 1975, defendant O'Hara received approximately $74,000 from its New Jersey customer and defendant Knickerbocker received fees from the federal government for its landfill services to the military reservation. Most of the haulers purchased equipment manufactured outside of Pennsylvania. Some financed their operations by loans from out-of-state institutions and some received payment for services from corporate headquarters located beyond the state borders. Plaintiff's calculations of the amount of interstate commerce affected include these purchases and loans. The defendants contend, however, that the total amounts they spent for equipment in 1974 and 1975 (about $900,000) should not be considered because about 82 percent of the purchases were from Pennsylvania vendors. Thus, both parties advanced different figures representing the amount of interstate commerce which was affected.
The district judge did not believe that the differences were material. Relying on such cases as Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969); Lieberthal v. North Country Lanes, Inc., 332 F.2d 269 (2d Cir. 1964), and Page v. Work, 290 F.2d 323 (9th Cir. 1961), cert. denied, 368 U.S. 875, 7 L. Ed. 2d 76, 82 S. Ct. 121, he concluded that purchases of trucks and equipment by the defendants from out-of-state sellers do not affect interstate commerce. However, after an appeal had been taken in this case, the Supreme Court decided Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 48 L. Ed. 2d 338, 96 S. Ct. 1848 (1976), and its opinion casts substantial doubt on the authorities supporting the district court's reasoning.
The Sherman Act does not set out precise guidelines on jurisdiction. Although it is generally held that jurisdiction may be found if the alleged acts occurred in the "flow of commerce," sometimes termed "in commerce," or if acts in the local or state markets "affect" interstate commerce, it has been suggested that the two tests really are but one.*fn2 The distinction between the two apparently depends upon the perception of when the interstate journey begins and ends. In theory, a violation which occurs before the interstate trip commences or after it has halted is covered by the Act only if it "affects" commerce. But if the concept of "flow" is extended so it does not cease until the goods reach the ultimate consumer, then the "in commerce" test suffices. The Supreme Court, however, has not adopted that rationale. In Burke v. Ford, 389 U.S. 320, 19 L. Ed. 2d 554, 88 S. Ct. 443 (1967), the Court stated: "[An] activity which does not itself occur in interstate commerce comes within the scope of the Sherman Act if it substantially affects interstate commerce." 389 U.S. at 321 (emphasis in original). Similarly, in Hospital Building Co. v. Rex Hospital, supra, the Court found jurisdiction in an "affecting commerce" situation. Though at times the two tests overlap, the distinction between them has persisted,*fn3 and it seems that the "flow of commerce" test under Sherman can be equated with the "in commerce" requirements of the Clayton and Robinson-Patman Acts. See Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 42 L. Ed. 2d 378, 95 S. Ct. 392 (1974); cf. United States v. American Building Maintenance Industries, 422 U.S. 271, 45 L. Ed. 2d 177, 95 S. Ct. 2150 (1975).Ferguson, The Commerce Test for Jurisdiction under the Sherman Act, 12 HOUS. L. REV. 1052, 1058 (1975).
While there has been some tendency to narrow the "in commerce" concept, the trend in interpreting the "affecting commerce" test has been to broaden it. The Supreme Court has repeatedly asserted that Congress intended to confer jurisdiction under the Sherman Act to the full extent of its power under the commerce clause, Gulf Oil Corp. v. Copp Paving Co., supra at 194; United States v. Southeastern Underwriters Association, 322 U.S. 533, 558, 88 L. Ed. 1440, 64 S. Ct. 1162 (1944). Moreover, as the concept of congressional power expanded, so has the reach of the Sherman Act. Hospital ...