McCarthy v. Recordex Service, Inc. ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
4-4-1996
McCarthy v. Recordex Svcs. Inc
Precedential or Non-Precedential:
Docket 95-1005
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1
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
----------
No. 95-1005
----------
MARY RUTH MCCARTHY; GUY COLVILLE; EDWARD ORMSBY;
CARMEN TOMASETTI; JOSEPH HOFFMAN,
Appellants
v.
RECORDEX SERVICE, INC.; COPYRIGHT, INC.; SMART CORP., National
Headquarters Medical Records Copying; MEDFAX INCORPORATED;
HOSPITAL CORRESPONDENCE COPIERS; MERCY HEALTH CORPORATION OF
SOUTHEASTERN PENNSYLVANIA, Misericordia Hospital Division;
METHODIST HOSPITAL; THE GRADUATE HOSPITAL; HAHNEMANN
UNIVERSITY HOSPITAL; THE LOWER BUCKS HOSPITAL
----------
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 93-cv-00281)
----------
Argued Monday, January 22, 1996
BEFORE: STAPLETON, COWEN and GARTH, Circuit Judges
----------
(Opinion filed April 4, 1996)
----------
Stephen R. Bolden (Argued)
Richard C. Ferroni
Fell & Spalding
100 South Broad Street
2230 Land Title Building
Philadelphia, PA 19110
2
Attorneys for Appellants
2
Leslie M. Gerstein
Law Offices of Nancy D. Wasser
One Penn Center at Suburban Station
1617 J.F.K. Boulevard
Suite 1100
Philadelphia, PA 19103-1811
Attorney for Appellees
Recordex Services, Inc.,
Copyright, Inc. and Medfax, Inc.
David H. Marion
David Zalesne
Montgomery, McCracken, Walker & Rhoads
Three Parkway, 20th Floor
Philadelphia, PA 19102
Attorneys for Appellee Smart Corporation
Christopher W. Mattson
Katherine B. Kravitz
Barley, Snyder, Senft & Cohen
126 East King Street
Lancaster, PA 17602
Attorneys for Appellee Hospital
Correspondence Copiers, Inc.
Alan M. Lieberman
Schnader, Harrison, Segal & Lewis
1600 Market Street
Suite 3600
Philadelphia, PA 19103
Attorney for Appellee Mercy Health
Corporation of Southeastern Pennsylvania,
Misericordia Hospital Division
Edward C. Mengel, Jr.
White & Williams
One Liberty Place
1650 Market Street
Suite 1800
Philadelphia, PA 19103
Attorneys for Appellee Methodist
Hospital
3
Anthony E. Creato
Mesirov, Gelman, Jaffe, Cramer
& Jamieson
1735 Market Street
37th Floor
Philadelphia, PA 19103-7598
Attorney for Appellee The Graduate
Hospital
Michael T. Scott (Argued)
Martin H. Karo
Reed, Smith, Shaw & McClay
1650 Market Street
2500 One Liberty Place
Philadelphia, PA 19103-7301
Attorneys for Appellee
Hahnemann University Hospital
Jonathan B. Sprague
Kathleen Chancler
Post & Schell
1800 JFK Boulevard
19th Floor
Philadelphia, PA 19103
Attorneys for Appellee
The Lower Bucks Hospital
----------
OPINION OF THE COURT
----------
GARTH, Circuit Judge:
The instant appeal requires us to decide whether the plaintiff-clients, w
attorneys purchased photocopies of the clients' hospital records for the purpose of
prosecuting their clients' personal injury and medical malpractice claims, have sta
to bring an antitrust action against the sellers of the photocopies. We hold that
clients lack standing to bring a treble-damages claim because they are not "direct
purchasers," as required by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). Ho
4
we also hold that these clients are not barred from seeking injunctive relief under
section 16 of the Clayton Act.
I.
Plaintiffs Mary Ruth McCarthy,0 Guy Colville, Edward Ormsby, Carmen Tomasetti0
Joseph Hoffman filed a three-count complaint, on January 19, 1993, against five hos
(the "Hospital defendants")0 and five copy-service companies (the "Copy Service
defendants").0 The complaint asserted violations of the Sherman Antitrust Act, 15 U
§§ 1 and 2 (count I);0 violations of the Racketeering, Influence, and Corrupt Organ
tions Act (RICO), 18 U.S.C. §§ 1433 and 1962 (count II); and violations of the civi
rights laws, 42 U.S.C. § 1983 (count III). The complaint and amended complaint sou
injunctive relief, money damages, class certification and attorneys' fees. In essen
plaintiffs allege that the Hospital Defendants and the Copy Service Defendants cons
0
McCarthy died subsequent to the institution of this litigation. A personal
representative has been named for her but has not been formally substituted on the
as of the date of this appeal.
0
Tomasetti died after commencing this action. No personal representative has been n
as of the date of this appeal.
0
The Hospital Defendants are Mercy Health Corporation of Southeastern Pennsylvania,
Misericordia Hospital Division ("Misericordia"); Methodist Hospital ("Methodist");
Graduate Hospital ("Graduate"); Hahnemann University Hospital ("Hahnemann"); and th
Bucks Hospital ("Lower Bucks"). They are all hospital corporations that operate hos
in the Commonwealth of Pennsylvania.
0
The Copy Service Defendants are Recordex Services, Inc. ("Recordex"), CopyRight, In
("CopyRight"), Smart Corporation ("Smart"), Medfax, Inc. ("MedFax"), and Hospital
Correspondence, Copiers ("HCC"). They are all corporations doing business in the
Commonwealth of Pennsylvania, who have entered into contracts with one of the Hospi
Defendants to perform copying services in response to requests for copies of hospit
records.
0
Count I specifically alleges that the defendants engaged in a "contract combinatio
conspiracy in restraint of trade effecting [sic] interstate commerce"; and that "th
defendants possess a monopoly in the relevant market for the performance of copying
services of hospital patient records, and have willfully maintained that power in o
illegally extract unlawful prices for the performance of said copy services." Comp
at ¶ 52.
5
to charge excessive prices for photocopies of medical records requested by patients
former patients.
Each of the named plaintiffs, at some time within four years before filing the
instant action, were patients at hospitals owned by the Hospital Defendants. Each
plaintiff had retained either Matty & Ferroni ("M&F"), a New Jersey law firm, or Fe
Spalding ("F&S), a Philadelphia firm, to file a personal injury or medical malpract
claim on his or her behalf. In each case, after the particular plaintiff had signe
medical consent form authorizing the appropriate hospital to release his or her med
records, the plaintiff's attorney requested photocopies of the client's hospital re
The copy service company, in each case, billed the attorney directly.0
Each of the five plaintiffs had entered into a contingent-fee agreement with e
M&F or F&S. With the exception of McCarthy, none of the plaintiffs were obligated
the relevant retainer agreement to reimburse the law firm for costs, including the
photocopying expenses at issue, unless a monetary recovery in favor of the particul
client was obtained.0 McCarthy's agreement with F&S, on the other hand, provided th
0
Tomasetti retained M&F, which requested copies of patient records from Hahnemann;
Recordex provided the photocopying services and charged M&F $44.40. Hoffman retain
which requested copies of records from Lower Bucks; MedFax performed the photocopyi
charged M&F $19.22. Both Tomasetti and Hoffman settled their cases and reimbursed
of their settlement proceeds for the photocopying costs.
Colville retained M&F, which requested copies from Methodist; Smart, which per
the photocopying, charged M&F $25.49. Ormsby also retained M&F, which requested co
from Graduate; HCC photocopied the records, charging M&F $38.40. At the time this
was filed, neither Colville nor Ormsby had reached a settlement, and neither had
reimbursed M&F for the copying expenses incurred. Ormsby has apparently discontinu
personal injury claim. App. at 536.
McCarthy retained F&S, which requested copies of her medical records from
Misericordia. CopyRight, which was responsible for providing copying services rela
requests for Misericordia patient records, billed F&S $540. F&S refused to pay the
but eventually obtained the copies from opposing counsel. App. at 517-20, 525.
0
The four plaintiffs other than McCarthy entered into contingent fee agreements wit
Under these agreements, the law firm would receive its fee (33-1/3% for Tomasetti a
for each of the other three plaintiffs) only if it successfully litigated or settle
case. Under Colville's contract, M&F would be entitled to 40% of the recovery plus
reimbursement of any costs. The other three contracts only awarded M&F a percentag
6
"[t]he absence of a recovery shall not relieve [McCarthy] from the obligation of pa
court costs and other proper litigation and investigative costs."0 App. 498. Howe
Stephen R. Bolden, a partner at F&S, admitted in an affidavit that despite the cont
language, in actual practice, the firm never sought reimbursement for advanced cost
representation of the client did not lead to a recovery:
Although under the express language in this Contingent Fee Agreement, Fell &
Spalding is contractually entitled to seek reimbursement from a client even
where a representation of that client has not led to the recovery of funds; as
matter of actual practice, where Fell & Spalding has been unsuccessful in
obtaining a recovery of funds by way of settlement or otherwise . . . Fell &
Spalding has not sought reimbursement for the costs incurred in copying a
client's hospital records . . . .
App. 526.0
Each of the Hospital Defendants had entered into a contract with one of the Co
Service Defendants, granting the Copy Service Defendant the exclusive right to phot
hospital records requested by patients or other members of the public entitled to s
records. Under the contract, the copy-service company agreed to photocopy any medi
the recovery (i.e. M&F would have to cover its costs out of its percentage share of
settlement or award).
None of the fee agreements entitled M&F to reimbursement of costs if the clien
failed to recover. Colville's contract provided: "If there is no recovery there w
no charge for services rendered." App. 414. Likewise, Hoffman's agreement stated:
no monies are recovered there will be no fee for services rendered." App. 433. Or
agreement similarly read: "If there is no recovery, there are no charges for any f
App. 455. Finally, Tomasetti's contingent fee agreement provided: "If no monies a
recovered attorney to have no claim for services rendered. -- Attorney to advance a
costs necessary, & to be reimbursed at settlement." App. 470.
0
If McCarthy prevailed, F&S would receive a 1/3 contingent fee (calculated based on
amount of the award or settlement before deducting expenses) plus litigation expens
0
Richard C. Ferroni, a partner at M&F, similarly stated in an affidavit that
[h]e had not, nor has his firm, ever sought reimbursement for costs (including
costs of obtaining copies of a client's hospital records) from a client where
there has not been a recovery in the action in which he or his firm has
represented the client and the Contingent Fee Agreement does not address costs
although clients are advised they are responsible for costs regardless of
outcome.
App. 536.
7
records requested by patients or other requestors. The sole remuneration received
Copy Service Defendants derived from the copying charges paid by the requestors. A
685, 692, 694, 698, 701.
Patients or their attorneys were charged $1 per page for copies of medical rec
In addition, they also typically paid a retrieval fee, which was remitted to the ho
an "administrative" or "basic" fee (i.e. a flat fee unrelated to the number of copi
which was retained by the copy-service company; and postage and handling fees.
Certain "favored" requestors were charged a reduced rate0 or no fee at all.0 T
Hospital Defendants set the schedule of charges, designating the requestors who wou
would not be charged. Typically, sixty percent or more of the requests for hospita
records were nonbillable.
Plaintiffs claim that the practice of subsidizing certain requestors while cha
patients or their agents an inflated fee violated a Pennsylvania regulation, which
provides in relevant part:
Patients or patient designees shall be given access to or a copy of their
medical records, or both . . . . Upon the death of a patient, the hospital sha
provide, upon request, to the executor of the decedent's estate or, in the
absence of an executor, the next of kin responsible for the disposition of the
remains, access to all medical records of the deceased patient. The patient o
the patient's next of kin may be charged for the cost of reproducing the copie
however, the charges shall be reasonably related to the cost of making the cop
28 Pa. Code § 115.29 (emphasis added).
After plaintiffs filed an amended complaint, the defendants moved to dismiss p
to Federal Rule of Civil Procedure 12(b)(6). The district court, by order dated Au
1993, denied defendants' motion to dismiss counts I (antitrust) and II (RICO) but g
the motion to dismiss count III (civil rights).
0
For example, Medicare copy requests were billed at seven cents per page; and the
Workmen's Compensation Appeal Board paid a ten dollar flat fee per request regardle
the number of pages actually copied.
0
For example, other hospitals, physician's offices, Blue Cross and Blue Shield, the
Veteran's Administration and social service agencies received copies for free. The
military and certain HMOs also received free copies.
8
Subsequently, on April 4, 1994, plaintiffs moved to certify the case as a clas
action. On November 18, 1994, in a Memorandum and Order, the district court denied
plaintiffs' motion for class certification.
On April 1, 1994, defendant Hahnemann filed a motion for partial summary judgm
count I (the antitrust claim), which was eventually joined by all of the defendants
Smart. The district court denied the motion for partial summary judgment in an ord
dated May 5, 1994.
Subsequently, Hahnemann moved for reconsideration. On July 8, 1994, the distr
court granted Hahnemann's motion for reconsideration and granted summary judgment o
I in favor of all defendants, holding that the plaintiffs lacked standing because t
were not "direct purchasers" of the hospital records, within the meaning of Illinoi
Co. v. Illinois, 431 U.S. 720 (1977).
On December 12, 1994, all of the defendants joined in a motion for summary jud
on the remaining RICO claim, on the theory that antitrust standing principles appli
equally in the RICO context. On December 29, 1994, the district court granted summ
judgment to all defendants on count II, thus disposing of all three counts of the
complaint. Plaintiffs timely filed the instant appeal.
II.
The district court had jurisdiction over plaintiffs' antitrust and RICO claims
15 U.S.C. § 15; 18 U.S.C. § 1964; and 28 U.S.C. § 1331. We have appellate jurisdic
over the district court's grant of summary judgment in favor of defendants under 28
§ 1291.
The issue of antitrust standing is a legal issue, over which we exercise plena
review. In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1164 (3d C
1993), cert. dismissed, 114 S. Ct. 625, 652, and cert. denied, 114 S. Ct. 921 (1994
also exercise plenary review of a district court's grant of summary judgment, apply
9
same standards applied by the district court. Rosen v. Bezner, 996 F.2d 1527, 1530
Cir. 1993); Koshatka v. Philadelphia Newspapers, Inc., 762 F.2d 329, 333 (3d Cir. 1
Summary judgment is proper only where "there is no genuine issue as to any mat
fact and . . . the moving party is entitled to judgment as a matter of law." Fed.
P. 56(c). The moving party bears the burden of proving that no genuine dispute exis
to any material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Moreover, any inferences to be drawn must be viewed in the light most favorable to
party opposing summary judgment. Id. at 247; Matsushita Elec. Indus. Co. v. Zenith
Corp., 475 U.S. 574, 587 (1986).
III.
A.
Almost twenty years ago, the Supreme Court articulated the so-called "direct
purchaser" rule, an antitrust standing doctrine that barred downstream indirect pur
from bringing an antitrust claim. See Illinois Brick Co. v. Illinois, 431 U.S. 720
(1977). Recognizing that allowing an indirect purchaser to assert an antitrust cla
the portion of an overcharge "passed on" to the indirect purchaser would create an
intractable problem of tracing and apportioning damages between different purchaser
the chain of distribution, the Court chose to avoid this morass by enunciating a br
line rule that only the purchaser immediately downstream from the alleged monopolis
bring an antitrust action. Id.
Almost a decade before Illinois Brick, the Supreme Court laid the foundation f
"direct purchaser" standing requirement in Hanover Shoe, Inc. v. United Shoe Machin
Corp., 392 U.S. 481 (1968), which rejected a "pass-on" defense proffered by an anti
defendant who claimed that the plaintiff was not entitled to treble damages for cos
"passed on" to its customers. Id. at 487-89. In Hanover Shoe, the plaintiff shoe
manufacturer, Hanover Shoe, Inc., brought suit under section 4 of the Clayton Act a
10
United Shoe Machinery Corp. (USMC), a manufacturer and distributor of shoe machiner
alleging that USMC had monopolized the shoe machinery industry by refusing to sell
equipment and requiring users to lease the equipment instead. Id. at 486-87. USMC
that Hanover Shoe had been able to recoup its losses by charging its customers more
the shoes and thus did not suffer any cognizable injury because it had passed on th
allegedly illegal overcharge to its customers. Id. at 487-88.
The Court rejected USMC's pass-on theory, explaining that entertaining such a
would raise difficult proof issues as to the amount of the overcharge passed on and
whether, absent the overcharge, Hanover Shoe could have raised its prices. Id. at
The Court also expressed concern that downstream buyers would have only "a tiny sta
lawsuit" and thus little incentive to prosecute a private antitrust claim. Id. at
The Court reasoned that allowing a pass-on defense would diminish private antitrust
enforcement and thereby increase the likelihood that violators of antitrust laws wo
escape liability. Id.
In Illinois Brick, the Supreme Court addressed the corollary to the problem th
faced in Hanover Shoe: offensive use of the pass-on theory by indirect purchasers
recover treble damages for injuries "passed on" to them by intermediaries in the
distribution chain. Illinois Brick involved a suit brought by the State of Illinoi
700 local governmental entities against a group of concrete block manufacturers, wh
allegedly engaged in a price-fixing conspiracy. 431 U.S. at 726-27. The State and
local municipalities had hired general contractors for several large construction p
in the Chicago area. Id. at 726. The general contractors, in turn, had subcontrac
masonry work to certain masonry contractors who had purchased the allegedly overpri
blocks from the conspirators. Id. The State of Illinois and the local government
entities were thus indirect purchasers of concrete block, two levels down the distr
chain from the manufacturers. Id.
11
Illinois and the other governmental entities claimed that part or all of the
overcharge had been passed on by the subcontractors and general contractors. Id. a
As a result, according to the plaintiffs, they had overpaid for the concrete block
than three million dollars. Id. The Court dismissed the claim, holding that indir
purchasers may not sue for antitrust damages. Id. at 736.
The Court in Illinois Brick explained that the outcome was dictated by Hanover
and that principles of judicial consistency compelled the Court to prohibit the off
use of a pass-on theory where it had disallowed the defensive use of the pass-on do
in a similar factual situation. Id. at 730. The Court further explicated that perm
the latter while disallowing the former would create a risk of multiple liability:
one-sided application of Hanover Shoe substantially increases the possibility of
inconsistent adjudications--and therefore of unwarranted multiple liability for the
defendant--by presuming that one plaintiff (the direct purchaser) is entitled to fu
recovery while preventing the defendant from using that presumption against the oth
plaintiff . . . ." Id.
The State posited that the danger of duplicative recovery could be avoided by
apportioning the damages attributable to the concrete-block manufacturers' wrongful
conduct. The Court, however, rejected the State's argument that indirect purchaser
should be allowed to recover the fraction of the overcharge "passed on" to them,
explaining:
Permitting the use of pass-on theories . . . essentially would transform
treble-damages actions into massive efforts to apportion the recovery among al
potential plaintiffs that would have absorbed part of the overcharge--from
direct purchasers to middlemen to ultimate consumers. However appealing this
attempt to allocate the overcharge might seem in theory, it would add whole ne
dimensions of complexity to treble-damages suits and seriously undermine their
effectiveness.
Id. at 737.
12
Subsequently, in Kansas v. Utilicorp United, Inc., 497 U.S. 199 (1990), the Co
reaffirmed its commitment to the "direct purchaser" rule, refusing to carve out an
exception to Illinois Brick for situations where the full cost of the product (and
one hundred percent of any overcharge) had been passed on to the indirect purchaser
at 216. In Utilicorp, the States of Kansas and Missouri, acting as parens patriae,
brought an antitrust action on behalf of their residents, claiming that a pipeline
and five gas producers had conspired to inflate the price of the natural gas that t
supplied to public utilities. Id. at 204. These utilities, according the States,
passed on the full amount of the overcharge to their residential and commercial cus
Id.
Kansas and Missouri argued that the concerns voiced in Illinois Brick, namely
difficulties of apportionment, the risk of multiple recovery and the diminution of
incentives for private antitrust enforcement, were absent because regulated public
utilities pass on one hundred percent of their costs to consumers, who are the ones
actually suffer antitrust injury. The Court forcefully rejected that argument, opi
that "[a]lthough the rationales of Hanover Shoe and Illinois Brick may not apply wi
equal force in all instances, we find it inconsistent with precedent and imprudent
event to create an exception for regulated public utilities." Id. at 208.
We have applied Illinois Brick's antitrust standing principle on several occas
For example, in Mid-West Paper Products Co. v. Continental Group, Inc., 596 F.2d 57
Cir. 1979), we relied on Illinois Brick in holding that indirect purchasers of cons
bags could not maintain a treble-damages suit against the manufacturers of such bag
at 575. In Mid-West Paper, the defendants manufactured so-called consumer bags--si
multilayered paper bags used for packaging pet foods, coffee, cookies, chemicals an
like. Id. The plaintiff-grocery stores purchased either empty consumer bags (whic
used to package their own products) from middlemen and wholesalers or products that
pre-packaged in consumer bags for resale to their customers. Id. at 575-76. After
13
reviewing the teachings of Illinois Brick, we determined that the "direct purchaser
barred the treble-damages claims of all of the plaintiffs (except Mid-West Paper Pr
Company, which had purchased consumer bags directly from a subsidiary of one of the
defendants). Id. at 575.
Similarly, in Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d 958 (3d Cir.
cert. denied, 465 U.S. 1024 (1984), non-factory-authorized dealers, who had purchas
electrical generators from authorized dealers for resale in foreign markets, allege
Caterpillar, the manufacturer of these electrical generators, had illegally imposed
penalty on its dealers to prevent or discourage the dealers from selling Caterpilla
products to independent marketers. Id. at 960. The district court held that the
plaintiffs had standing under Illinois Brick because the nonfactory-authorized deal
were the "direct target[s] of an unlawful conspiracy." Id. at 962. We reversed, h
that an indirect purchaser, even if a "direct target" of an antitrust conspiracy, l
standing under Illinois Brick. Id. at 966.
Likewise, in Link v. Mercedes-Benz, Inc., 788 F.2d 918 (3d Cir. 1986), Mercede
repair customers claimed that Mercedes dealers, who were required to purchase parts
exclusively from Mercedes at artificially inflated prices, had passed on those cost
retail customers. Id. at 928-30. Citing Illinois Brick, we held that retail custo
were indirect purchasers and therefore lacked antitrust standing. Id. at 930.
Most recently, in Gulfstream III Associates, Inc. v. Gulfstream Aerospace Corp
F.2d 425 (3d Cir. 1993), we held that only the direct purchaser of an aircraft, and
downstream buyer or assignee, had standing to pursue an antitrust claim. Id. at 43
emphasized that "any exception to the direct purchaser rule would be inappropriate
case for the same reasons that the Supreme Court held an exception would be inappro
in Utilicorp." Id.
B.
14
 Plaintiffs argue that the Supreme Court has receded from Illinois Brick's "dir
purchaser" rule. Specifically, plaintiffs contend that the "direct purchaser" requ
has been displaced by the multi-factor approach to antitrust standing outlined in
Associated General Contractors v. California State Council of Carpenters, 459 U.S.
(1983) [hereinafter "AGC"].
In AGC, the plaintiff-unions, representing California construction workers, su
association of employers with whom the unions had entered into collective bargainin
agreements. Id. at 522-24. The complaint alleged that the association and its memb
coerced certain landowners and other contractors to hire non-union labor. Id.
In determining whether the plaintiff-unions had standing to sue under section
the Clayton Act, the AGC Court employed a five-part analytical framework, which
encompassed the following considerations: (1) the causal connection between the an
violation and the harm to the plaintiff (including whether the defendant intended t
that harm), id. at 537; (2) whether the "nature" of the plaintiff's alleged injury
the type that the antitrust laws were intended to forestall," id. at 538; (3) the
directness or indirectness of the asserted injury, id. at 541; (4) the existence of
direct victims of the alleged injury (i.e. whether the plaintiff is the party most
to seek redress of the antitrust violation), id. at 542; and (5) the potential for
duplicative recovery or complex apportionment of damages, id. at 543-44. The AGC f
factor framework was an attempt by the Court to synthesize and clarify the confusin
collection of the then-extant antitrust-standing rules.0
0
Prior to AGC, the courts of appeals applied a variety of different tests to determi
standing under section 4 of the Clayton Act: (1) the "direct injury" test, see Chr
Corp. v. Fedders Corp., 643 F.2d 1229, 1233 (6th Cir.), cert. denied, 454 U.S. 893
Loeb v. Eastman Kodak, 183 F. 704, 709 (3d Cir. 1910); (2) the "zone of interests"
see Malamud v. Sinclair Oil Corp., 521 F.2d 1142, 1151-1152 (6th Cir. 1975); and (3
"target area" test, see Pan-Islamic Trade Corp. v. Exxon Corp., 632 F.2d 539, 546-4
Cir. 1980), cert. denied, 454 U.S. 927 (1981); Calderone Enters. Corp. v. United Ar
Theatre Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir. 1971), cert. denied, 406 U.S. 9
(1972). Recognizing that these alternative formulations for assessing antitrust st
often led to contradictory and inconsistent results, the Supreme Court in AGC attem
15
Contrary to plaintiffs' intimation, however, the AGC Court neither overruled I
Brick nor limited its application. Indeed, the AGC Court cited Illinois Brick with
approval. See id. at 544-45. Moreover, factors four and five in the AGC framework
Illinois Brick's concerns. In our view, AGC incorporates, rather than repudiates,
principles of Illinois Brick.0
Plaintiffs assert, however, that the absolute bar of the "direct purchaser" ru
been supplanted by AGC's balancing approach. In support of this contention, plaint
cite to certain passages from our opinion in In re Lower Lake Erie Iron Ore Antitru
Litigation, 998 F.2d 1144 (3d Cir. 1993), cert. dismissed, 114 S. Ct. 625, 652, and
denied, 114 S. Ct. 921 (1994), wherein we adumbrated that "indirect purchaser statu
[not necessarily] the death knell of [an antitrust] claim . . . ." Id. at 1168. I
Lake Erie, several steel companies, dock companies and trucking companies filed civ
actions in federal district court, alleging that the defendant railroad companies s
the lower Lake Erie industrial region had conspired to monopolize the transportatio
handling of iron ore in the region. Id. at 1151, 1152.
articulate a unified set of factors that could be applied generally in determining
antitrust standing.
0
Of course, AGC and Illinois Brick address two analytically distinct aspects of anti
standing. See Merican, 713 F.2d at 963-65 (noting that "the Supreme Court has reco
two types of limitations on the availability of the section 4 remedy which the cour
consider when examining whether a treble damage action may be maintained"). The AG
was concerned primarily with the issue of whether a particular plaintiff's injury w
remote from an antitrust injury to warrant providing that plaintiff a section 4 rem
Id. at 964. This inquiry, akin to the determination of "proximate cause" in the
negligence context, is subtle and resists the use of hard-and-fast "black letter" r
See id.
In contrast, Illinois Brick dealt with the issue of whether a plaintiff who is
to trace an injury to an antitrust violation falls "within the group of 'private at
general' that Congress created to enforce the antitrust laws under section 4." Id.
963. Illinois Brick focuses exclusively on the risk of duplicative recovery and th
potential for overly-complex damages and apportionment calculations. Id. at 963-64
Because there would always be a risk of duplicative recovery, as well as the potent
complex apportionment computations, if indirect purchasers were allowed to bring an
claims, the "direct purchaser" rule, unlike the AGC standard, is a bright-line rule
16
In a bifurcated trial, the liability jury found against Bessemer and Lake Erie
Railroad Company (BL&E), the sole remaining defendant,0 and in favor of all plaintif
one; and the damages jury awarded all but one claim for damages. Id. at 1151. On
we applied AGC and affirmed the district court's denial of BL&E's motion to dismiss
lack of standing and the district court's denial of BL&E's motion for judgment n.o.
Plaintiffs here contend that Lower Lake Erie requires that we set aside the di
court's grant of summary judgment and remand for a determination of standing pursua
the AGC factors. We disagree.
Lower Lake Erie is fully distinguishable. In Lower Lake Erie, we found that t
plaintiffs' claims did not involve "the particular kind of double recovery Illinois
sought to prevent." Id. at 1169.
By contrast, all of the policy concerns expressed in Illinois Brick are implic
the present case. First, there is considerable risk that the Hospital defendants a
Service defendants would be exposed to multiple liability. Although plaintiffs' att
here have chosen not to sue the defendants directly, it is probable that lawyers wh
themselves purchase photocopies of their clients' hospital records would bring treb
damage claims against the Hospital defendants and the Copy Service defendants in th
future. Indeed, both the district court and this court inquired as to why the inst
complaint had not been amended to substitute the attorneys as plaintiffs. No satis
answer was given. Hence, if we were to deny the defendants the protection of the "
purchaser" rule, they could potentially be held liable to both the clients and the
attorneys representing the clients.
Furthermore, this lawsuit involves apportionment problems perhaps more complex
those implicated in Illinois Brick. Because the costs of the photocopies are only p
on to the client, if the costs are passed on at all, on a contingent basis, the dis
0
The other defendants all settled before trial.
17
court would be faced with complex statistical calculations as to the percentage of
photocopying costs borne by the attorneys as compared to the costs borne by their c
In addition, the district court would have to ascertain the degree to which conting
fees charged to successful plaintiffs includes a recoupment of photocopying costs n
charged to losing plaintiffs.
Under these circumstances, plaintiffs cannot escape the absolute bar of the "d
purchaser" rule. In order to survive summary judgment, plaintiffs must establish t
clients, and not their attorneys, are the direct purchasers of the hospital-record
photocopies. On this record, no such proof exists.
C.
Plaintiffs argue that they, and not their lawyers, are the direct purchasers o
hospital record photocopies.0 Plaintiffs contend that their attorneys merely acted a
their agents in purchasing the photocopies. Citing In re Toilet Seat Antitrust
Litigation, 1977-2 Trade Cases ¶ 61,601 (E.D. Mich. 1977), plaintiffs posit that pu
made by an agent on behalf of the agent's principal do not come within the scope of
"direct purchaser" rule.
0
Plaintiffs first contend that their attorneys cannot be considered part of the cha
distribution because they do not make a profit from, or charge separately for, the
photocopies. We are not persuaded for at least two reasons. First, in order for a
consumer to be considered an indirect purchaser of an item, it is not necessary tha
consumer incur a separate charge for that item; it is only necessary that the consu
have purchased the item through a middleman. For example, a homeowner who hires a
housepainter who charges by the hour and does not invoice the homeowner separately
cost of materials cannot be considered the "direct purchaser" of the paint used by
housepainter.
Second, attorneys do profit, albeit indirectly, from their purchase of their c
hospital record photocopies. That is, they earn a contingent fee at the end of a
successful action. Moreover, even if the attorneys failed to profit (or even if the
suffered a loss) on the transaction, this fact does not transform their clients int
direct purchasers. For example, in the previous hypothetical, the homeowner would
be considered an indirect purchaser even if the housepainter had charged a fee
insufficient to recoup the costs of the paint job or if the housepainter had charge
fee at all.
18
We are unpersuaded by plaintiffs' argument and find In re Toilet Seat Antitrus
Litigation, the single case relied upon by the plaintiffs in support of their agenc
theory, to be inapposite. That case involved an alleged conspiracy by toilet seat
manufacturers to fix the price of wood-flour toilet seats. See In re Toilet Seat An
Litig., 387 F. Supp. 1342, 1343 (J.P.M.L. 1975). One of the plaintiffs, Harvey Lum
Company, purchased toilet seats through a purchasing agent, Biddle Purchasing Compa
which actually placed the order for the toilet seats at a price approved by Harvey.
Biddle received a flat monthly fee, unrelated to the quantity of toilets ordered, a
no inventory. In re Toilet Seat Antitrust Litigation, 1977-2 Trade Cases ¶ 61,601,
72,496. The district court concluded that under these limited circumstances, Harve
direct purchaser of the toilet seats and had standing to bring an antitrust claim.0
at 72,496-97.
In the present case, in contrast, none of the plaintiffs retained their lawyer
act as mere purchasing agents whose sole objective and function was to buy photocop
the clients. Rather, each client hired his or her attorney to file a lawsuit on hi
her behalf and to protect the client's legal interests. Moreover, a fair reading o
record reveals that the lawyers purchased the photocopies for their own use in
representing their clients. The attorneys, and not the clients, were undeniably th
direct purchasers of the photocopies.
Furthermore, the fact that the costs of the photocopies were passed on to the
on a dollar for dollar basis (at least where the attorney obtained a recovery on be
0
The district court relied on the dictum in footnote 16 of Illinois Brick, which st
"Another situation in which market forces have been superseded and the pass-on defe
might be permitted is where the direct purchaser is owned or controlled by its cust
Illinois Brick, 431 U.S. at 736 n.16 (citing Perkins v. Standard Oil Co., 395 U.S.
648 (1969) and In re Western Liquid Asphalt Cases, 487 F.2d 191, 197, 199 (9th Cir.
cert. denied, 415 U.S. 919 (1974)). Because Harvey "controlled" Biddle's actions
regarding purchases made on Harvey's behalf, the district court "view[ed] the relat
between Harvey and Biddle as falling within the above exception." In re Toilet Seat
Antitrust Litigation, 1977-2 Trade Cases ¶ 61,601, at 72,497.
19
the client) is not dispositive.0 Indeed, the subcontractors in Illinois Brick and
utility companies in Utilicorp passed on their costs to the plaintiffs in those res
cases; yet the Supreme Court deemed this fact insufficient to confer standing to th
indirect-purchaser plaintiffs in those cases.
Plaintiffs attempt to distinguish these precedents by characterizing the middl
those cases as "independent contractors." Plaintiffs take the position that the at
in the present case, in contrast, are agents and not independent contractors.
It is, of course, beyond cavil that the attorney-client relationship is an age
principal relationship. However, attorneys are also independent contractors as wel
agents. See Restatement (2d) Agency § 14N (1958) ("One who contracts to act on beha
another and subject to the other's control except with respect to his physical cond
an agent and also an independent contractor."); id. § 14N comment a ("[M]ost of the
persons known as agents, that is, brokers, factors, attorneys, collection agencies,
selling agencies are independent contractors . . . .") (emphasis added); 41 Am. Jur
Independent Contractors § 4 (1995) ("[F]or example, attorneys at law . . . and othe
similar persons . . . are agents, although as to their physical activities they are
independent contractors . . . .") (emphasis added); see also Commonwealth v. Minds
Mining Corp., 60 A.2d 14, 20 (Pa. 1948) (adopting Restatement definitions of indepe
contractor).
An agent may be either an independent contractor or a servant (or employee in
day parlance). See Restatement (2d) Agency § 2 comment b (1958) ("An agent who is
servant is, therefore, an independent contractor when he contracts to act on accoun
the principal."). Therefore, the relevant inquiry here is not whether a principal-
0
Plaintiffs are no more direct purchasers of the hospital record photocopies at iss
than a passenger in a taxicab would be considered a direct purchaser of the gasolin
by the taxicab to carry the passenger to his destination. Moreover, even if a sepa
charge for gasoline were assessed, the taxi passenger still could not be considered
direct purchaser in any sense.
20
relationship exists between clients and their attorneys, but whether attorneys are
independent contractors or mere employees. Although there are a number of factors
relevant to this inquiry, see Restatement (2d) of Agency § 220 (1958), the most imp
factor is the degree of control exercised by the principal:
The legal distinction between an employee and an independent contractor is so
well established as to require little, if any, discussion. The characteristic
of the former relationship is that the master not only controls the result of
the work but has the right to direct the way in which it shall be done, wherea
the characteristic of the latter is that the person engaged in the work has th
exclusive control of the manner of performing it, being responsible only for t
result.
Feller v. New Amsterdam Cas. Co., 70 A.2d 299, 300 (1950). See also Moon Area Sch.
v. Garzony, 560 A.2d 1361, 1367 (Pa. 1989); Hammermill Paper Co. v. Rust Eng'g Co.,
A.2d 389, 392 (Pa. 1968).
It is clear that attorneys exercise "exclusive control of the manner of perfor
[their legal work], being responsible [to the client] only for the result." Feller
A.2d at 300.
Furthermore, plaintiffs here are not even directly liable for the cost of the
photocopies. Except for McCarthy, plaintiffs are liable only if their attorneys su
in achieving a recovery on their behalf. Indeed, three of the contingent-fee agree
do not impose a separate charge for litigation costs; rather, the attorneys are rei
out of their percentage share of the settlement or award.
In McCarthy's case, although the retainer agreement does indicate that she is
responsible for costs irrespective of the outcome, her attorney acknowledged that i
actual practice, his law firm never charged clients unless the firm obtained a reco
Furthermore, McCarthy faces another insurmountable obstacle: her attorney never pa
photocopying charges but rather obtained the needed copies from opposing counsel.
Therefore, McCarthy (and indeed, even her attorney) cannot show any injury -- much
antitrust injury.
21
Based on these undisputed facts, we must conclude that the clients are not dir
purchasers.0 And unless an exception to the "direct purchaser" principle applies h
the plaintiffs have no standing to assert their antitrust claim under count I.
D.
Plaintiffs argue, in the alternative, that Illinois Brick does not apply here
they fall within the "co-conspirator" exception to the direct purchaser rule. Citi
Link, 788 F.2d at 918, and In re Brand Name Prescription Drugs Litigation, 867 F. S
1338 (N.D. Ill. 1994), plaintiffs advance the proposition that indirect buyers have
standing to bring an antitrust claim against defendants who are co-conspirators in
vertical antitrust conspiracy. To the extent that these cases recognize a co-consp
exception, however, we hold that plaintiffs have failed to establish the applicabil
such an exception to the facts at hand.
Preliminarily, we reject plaintiffs' reading of Link as establishing an except
Illinois Brick where the middlemen, from whom the plaintiffs made purchases, partic
0
The attorneys are the real parties in interest. Indeed, as noted previously, the
district court offered the plaintiffs' attorneys an opportunity to substitute thems
as the plaintiffs of record. Although the defendants did not object to the distric
court's proposal, the attorneys for the plaintiffs declined the court's offer, choo
instead to appeal the district court's adverse ruling as to standing.
We acknowledge that generally an attorney is to be considered the agent of the
client, and as such, would not be held personally liable for expenditures made for
disclosed principal. See Messenger Publishing Co. v. Walkinshaw, 157 A. 18 (Pa. Su
Ct. 1931). However, the Pennsylvania Supreme Court has yet to address this subject
there is a wealth of authority that an attorney ordering goods or services in conne
with litigation, as is the case here, ordinarily be treated as a principal and henc
be liable for such expenses.
Even the lower courts in Pennsylvania, whose decisions are not binding on us,
had difficulty with this issue. See Pessano v. Eyre, 13 Pa. Super. 157 (1900). Bu
neither the cases revealed by the parties' research nor those revealed by our own r
have discussed this issue in the context of a federal antitrust action, such as we
here. In none of those cases was the Illinois Brick direct purchaser rule at issue
are satisfied that in the instant antitrust context, the attorney-appellants do not
standing to prosecute this action.
22
in a vertical antitrust conspiracy. To the contrary, in Link, we expressly refused
adopt such an exception where the alleged co-conspirators immediately upstream were
also joined as codefendants:
Alternatively, appellants argue that this court should carve out a narrow
exception to Illinois Brick in vertical conspiracies where the intervening
parties in the distribution process are named as co-conspirators (a so-called
"co-conspirator exception"). We decline to recognize this exception where, as
here, the alleged co-conspirators are not also joined as co-defendants.
Link, 788 F.2d at 931 (citations omitted) (emphasis added).
Similarly, in Brand Name, although the district court did allow the plaintiff
retailers of pharmaceutical drugs to sue both the manufacturers and the wholesalers
did so on the basis that the plaintiffs had alleged that the parties immediately up
(i.e. the wholesalers) had colluded with the manufacturers to fix prices. The plai
had not alleged that overcharges were passed on but rather that the wholesalers, as
of a price-fixing conspiracy, had directly imposed an overcharge on the plaintiff
retailers. See Brand Name, 867 F. Supp. at 1344.
Most significantly, the district court in Brand Name emphasized that the reaso
had not granted summary judgment in favor of the manufacturer-defendants was becaus
plaintiffs ha[d] named [as defendants] a large percentage of all possible [wholesal
had allegedly participated in the conspiracy]." Id. at 1346. The district court de
to "penalize[] [the plaintiffs] for the failure to join every single [w]holesaler
[involved in the alleged conspiracy] . . . ." Id.
Plaintiffs here posit that they have joined all of the co-conspirators in the
conspiracy (i.e. the Hospital defendants and the Copy Service defendants). Reasoni
they have thereby satisfied the requirements of the co-conspirator exception, plain
argue that they should therefore be accorded standing to bring an antitrust claim e
though they are not direct purchasers. We cannot agree.
23
Plaintiffs misconstrue Brand Name and Link, and misconceive the nature of the
conspirator exception. In order to fall within the exception, plaintiffs here woul
to allege that the intermediaries immediately upstream, that is, the attorneys, col
with the defendants to overcharge plaintiffs for the photocopies. Moreover, plaint
would be obliged to join the lawyers as defendants, which they have not done. In s
co-conspirator exception does not apply here.
E.
Plaintiffs also suggest that the present case falls within the "pre-existing c
plus contract" exception to the direct purchaser rule. This exception arises from
in Hanover Shoe:
We recognize that there might be situations--for instance, when an overcharged
buyer has a pre-existing "cost-plus" contract, thus making it easy to prove th
he has not been damaged--where the considerations requiring that the passing-o
defense not be permitted in this case would not be present.
Hanover Shoe, 392 U.S. at 494.
The vitality of the "pre-existing cost-plus contract" exception is doubtful, h
in light of Utilicorp. The Supreme Court, in that case, expressly refused to recog
exception to Illinois Brick even where one hundred percent of the cost increases ha
passed through to indirect purchasers. Utilicorp, 497 U.S. at 216.
Moreover, even if this exception survived Utilicorp, plaintiffs have failed to
that they meet the prerequisites of this exception. Specifically, plaintiffs have
to show the existence of a pre-existing agreement to purchase a fixed quantity of
photocopies from the attorneys. See Mid-West Paper, 596 F.2d at 580. In addition,
discussed earlier, plaintiffs have failed to demonstrate that they must pay the ful
of the copies since their liability for litigation costs is only contingent in natu
24
In sum, plaintiffs have failed to establish that any exception to the direct
purchaser rule obtains. Thus, we hold that plaintiffs lack standing to pursue thei
antitrust claim (count I).
IV.
Significantly, antitrust standing principles apply equally to allegations of R
violations. See Holmes v. Sec. Investor Protection Corp., 503 U.S. 258, 270 (1992)
precepts taught by Illinois Brick and Utilicorp apply to RICO claims, thereby denyi
standing to indirect victims. Wooten v. Loshbough, 951 F.2d 768, 770 (7th Cir. 199
County of Oakland v. City of Detroit, 866 F.2d 839, 851 (6th Cir. 1989), cert. deni
U.S. 1003 (1990); Carter v. Berger, 777 F.2d 1173, 1176 (7th Cir. 1985); Terre Du L
Ass'n v. Terre Du Lac, Inc., 772 F.2d 467, 473 (8th Cir. 1985), cert. denied, 475 U
1082 (1986); Daley's Dump Truck Serv., Inc. v. Kiewit Pac. Co., 759 F. Supp. 1498,
(W.D. Wash. 1991), aff'd sub. nom., Imagineering, Inc. v. Kiewit Pac. Co., 976 F.2d
(9th Cir. 1992), cert. denied, 113 S. Ct. 1644 (1993). Indeed, plaintiffs have con
that, if they lacked antitrust standing, they also lacked RICO standing. See Plaint
Motion to Secure Certification (Nov. 29, 1994), at 3-4 (App. at 1168-69).
Hence, the central and dispositive issue is whether plaintiffs are "direct
purchasers." If so, they are entitled to pursue both their antitrust and RICO clai
not, and insofar as damages are concerned, the district court properly granted summ
judgment in favor of the defendants.
25
V.
Finally, plaintiffs argue that even if they lack standing to recover damages u
section 4 of the Clayton Act,0 they may still seek injunctive relief under section 1
the Act.0
Standing analysis under section 16 is not identical to that for section 4. Se
Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 111 n.6 (1986). "Section
been applied more expansively, both because its language is less restrictive than t
§ 4 . . . and because the injunctive remedy is a more flexible and adaptable tool f
enforcing the antitrust laws than the damage remedy . . . ." Schoenkopf v. Brown &
Williamson Tobacco Corp., 637 F.2d 205, 210 (3d Cir. 1980). Most importantly, "bec
standing under § 16 raises no threat of multiple lawsuits or duplicative recoveries
the concerns voiced in Illinois Brick], some of the factors other than antitrust in
that are appropriate to a determination of standing under § 4 are not relevant unde
16." Cargill, 479 U.S. at 111 n.6.
In Mid-West Paper, we expressly rejected the contention that the direct purcha
rule bars injunctive relief under section 16 as well as a treble damages suit under
section 4. We explained that
in contrast to the treble damage action, a claim for injunctive relief does no
present the countervailing considerations--such as the risk of duplicative or
ruinous recoveries and the spectre of a trial burdened with complex and
0
Section 4 of the Clayton Act allows for recovery of treble damages in a private an
action:
[A]ny person who shall be injured in his business or property by reason of
anything forbidden in the antitrust laws may sue therefor . . . and shall
recover threefold the damages by him sustained, and the cost of suit, includin
a reasonable attorney's fee.
15 U.S.C. § 15(a).
0
Section 16 provides in relevant part:
Any person . . . shall be entitled to sue for and have injunctive relief . . .
against threatened loss or damage by a violation of the antitrust laws.
15 U.S.C. § 26.
26
conjectural economic analyses--that the Supreme Court emphasized when limiting
the availability of treble damages.
Mid-West Paper, 596 F.2d at 590. See also Merican, 713 F.2d at 962 n.6; In re Beef
Antitrust Litig., 600 F.2d 1148, 1167 (5th Cir. 1979), cert. denied, 449 U.S. 905 (
We cautioned that
the rule of standing urged by the defendants, which would completely bar
indirect purchasers from seeking injunctive relief, would leave a serious gap
the antitrust enforcement scheme, as the fate of these injured parties, and of
the competitive economy in an entire industry, would be made dependent upon th
willingness of the government and the direct purchasers to assume the burdens
a lengthy lawsuit.
Mid-West Paper, 596 F.2d at 593-94.
Although plaintiffs need not satisfy Illinois Brick's "direct purchaser" requi
in order to seek injunctive relief, they must still make a threshold showing of
entitlement to injunctive relief. That is, plaintiffs must show: (1) threatened lo
injury cognizable in equity; (2) proximately resulting from the alleged antitrust
violation. City of Rohnert Park v. Harris, 601 F.2d 1040, 1044 (9th Cir. 1979), ce
denied, 445 U.S. 961 (1980); Central Nat'l Bank v. Rainbolt, 720 F.2d 1183, 1186 (1
Cir. 1983). Because the district court never considered whether plaintiffs would b
entitled to injunctive relief under section 16, separate and apart from the Illinoi
standing rule, we will remand to allow the district court to undertake such an anal
VI.
For the foregoing reasons, we will affirm the district court's grant of summar
judgment in favor of the defendants on plaintiffs' treble-damages claim (count I) a
claim (count II),0 but we will reverse as to plaintiffs' claim for
0
Count III, the civil rights claim, was dismissed by the district court and is not o
appeal before us.
27
injunctive relief and remand for further proceedings consistent with this opinion.0
MARY RUTH MCCARTHY, ET AL. V. RECORDEX SERVICE, INC., ET AL.
NO. 95-1005
STAPLETON, J., Concurring in part and dissenting in part:
As the court acknowledges, it is "beyond cavil that the attorney-client relati
is an agent-principal relationship." (Majority Op. at 25.) Nevertheless, the court
declares that the "attorneys [in this case], and not the clients, were undeniably t
direct purchasers of the photocopies." (Majority Op. at 24.) The first of these
inconsistent propositions is clearly correct; it necessarily follows that the secon
not. Because the photocopies were purchased from the defendant copy services by th
attorneys, as agents for their disclosed client-principals, it is the clients, and
attorneys, who purchased them. For this reason, I would reverse the judgment of the
district court and remand for further proceedings on all of the plaintiffs' claims.
I.
In part III-B, the court concludes that: (1) the Supreme Court in Associated G
Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S.
(1983) [hereinafter AGC], neither overruled Illinois Brick Co. v. Illinois, 431 U.S
(1977), nor limited its application; (2) "AGC incorporates, rather than repudiates,
0
Although the injunctive relief issue was only perfunctorily briefed and discussed,
seriously question whether the issue can be successfully pursued. We note, for ins
that plaintiffs apparently have obtained all of the medical records relevant to the
particular personal injury claims, and there is little, if any, likelihood that pla
will request additional copies of those records from the defendants. Moreover, it i
highly doubtful that additional hospital records pertaining to plaintiffs' personal
claims will be generated. Nevertheless, because our precedents require that a clai
an injunction under section 16 be treated differently than a claim for treble damag
under section 4, it is appropriate that the district court, rather than this Court,
consider the merits of the claim for injunctive relief in the first instance.
28
principles of Illinois Brick," (Majority Op. at 19;) (3) AGC and Illinois Brick add
two distinct aspects of antitrust standing; and (4) in order to escape summary judg
the plaintiffs must establish that they and not their attorneys are the direct purc
of the photocopies. I agree.
Whether the plaintiffs are direct purchasers of the copies, however, depends o
whether the attorneys are agents for the plaintiffs with respect to the purchase of
copies. If the attorneys bought the copies as agents for the plaintiffs, then the
plaintiffs are the direct purchasers of the copies. If, on the other hand, the att
purchased the copies on their own behalves, then the plaintiffs are indirect purcha
the copies. When the applicable law is applied to the facts reflected in the summa
judgment record, the conclusion is inescapable that the attorneys purchased the cop
their clients and that the clients are the direct purchasers.
A.
In Pennsylvania, the elements of agency are "the manifestation by the principa
the agent shall act for him, the agent's acceptance of the undertaking and the
understanding of the parties that the principal is to be in control of the undertak
Scott v. Purcell, 415 A.2d 56, 60 (Pa. 1980) (quoting Restatement (Second) of Agenc
Comment b (1958)). When a lawyer undertakes to represent a client, he consents to t
client's having control of the representation even though he may be expected to exe
professional judgment with respect to the means of pursuing the objectives of the
representation. Pennsylvania Rules of Professional Conduct 1.2(a). For this reason
attorney-client relationship, as the court acknowledges, is generally regarded as a
agency relationship. As a principal, the client is bound by the actions of the atto
the course of the representation. As an agent, the attorney, like other agents, is
fiduciary and owes to his client-principal a duty of care, obedience, and loyalty.
Restatement (Second) of Agency §§ 377-398; e.g., Pennsylvania Rules of Professional
Conduct 1.1, 1.2, 1.3, 1.15. In particular, an attorney who obtains tangible prope
29
the course of carrying out the agency owes to his client-principal a duty to exerci
reasonable care in its protection, to use it only in accordance with the directions
principal and for his benefit, and to surrender it upon demand on the termination o
agency. Id. § 422; Pennsylvania Rules of Professional Conduct 1.15, 1.16(d). Whil
attorney may have a lien to secure any unpaid compensation, it is only a lien and a
tangible property obtained or created in the course of the representation belongs t
client-principal. Pennsylvania Rules of Professional Conduct 1.16(d).
The record here reflects typical attorney-client relationships between the pla
and their attorneys. The attorneys agreed to represent the plaintiffs in their per
injury suits and thus to obtain on their behalf the goods and services necessary to
prosecute those suits.0 Although the attorneys, as permitted by Pennsylvania's Rul
Professional Conduct,0 are advancing to their clients the expenses associated with
litigating their cases, this does not, in my view, alter the relationship between t
attorneys and their clients or between the clients and third parties with whom the
attorneys deal on the clients' behalf. By contrast, nothing in the record suggests
the attorneys are purchasing the records on their own behalves in the hope of makin
profit on resales to their clients.
The attorneys' role as agent is controlling here because, unless otherwise agr
agent for a disclosed principal is not a party to a contract that the agent enters
0
Of course, it is understood that an attorney obtains goods used generally in his
practice, such as office supplies, on his own behalf. Office supplies are analogou
the paint purchased by a housepainter or the gasoline purchased by a taxicab driver
court's hypotheticals. (See Majority Op. at 22 n.15; 24 n.17.)
0
Pennsylvania's Rules of Professional Conduct 1.8(e) provides:
(e) A lawyer shall not provide financial assistance to a client in
connection with pending or contemplated litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the
repayment of which may be contingent on the outcome of the matter; and
(2) a lawyer representing an indigent client may pay court costs and
expenses of litigation on behalf of the client.
30
behalf of the principal. Restatement (Second) of Agency § 320 (followed in Revere
Inc. v. Blumberg, 246 A.2d 407, 409 (Pa. 1968)). Thus, unless it is agreed that suc
agent is to be a party to a contract, the contract is, in effect, a contract betwee
principal and the third party. Restatement (Second) of Agency §292 (followed in Hi
Apartments, Inc. v. NYCE Crete Co., 352 A.2d 148, 154 (Pa. Super. Ct. 1975)).
Accordingly, where, as here, an attorney purchases photocopies of records and it is
understood by the seller that they are being purchased on behalf of his client, the
and not the attorney is the purchaser. My review of Pennsylvania case law convinces
that Pennsylvania subscribes to these basic principles of agency in the context of
attorney-client relationship.
In Moore v. Porter, 13 Serg. & R. 100 (Pa. 1825), the Supreme Court of Pennsyl
addressed the remedies available to a prothonotary to collect fees incurred by liti
The court held that "[t]he party for whom the services are done, is responsible for
fees, and to him is the [prothonotary] to look. . . . The fees are not chargeable
attorney of the party for whom the services are done, unless he has become security
the costs." Id. at 101.
Pessano v. Eyre, 13 Pa. Super. 157 (1900), involved a suit by an expert witnes
against the attorney that hired him in pursuit of his client's claim. The superior
held that "[i]f . . . there was no express direct undertaking on the part of the
[attorney] to pay what was due to the [expert witness], that is the end of the matt
because the expert witness could not collect from the attorney. Id. at 163. The a
would be liable to the expert witness only if the attorney "ma[de] himself liable b
special promise." Id.0
0
The court concludes that in Pessano v. Eyre, 13 Pa. Super. 157 (1900), the super
court "had difficulty with this issue." (Majority Op. at 27 n.18.) I am not sure o
difficulty the court speaks. On the contrary, the superior court in Pessano plainl
articulates the principle that while an agent is not generally liable on a contract
on behalf of a disclosed principal, "even where the agency is known, an agent . . .
render himself liable by an express undertaking." Pennsylvania R. Co. v. Gallagher
31
In Messenger Publishing Co. v. Walkinshaw, 157 A. 18 (Pa. Super. Ct. 1931), th
superior court held that where an attorney orders copies of "a paper book used on a
from a publishing company, the attorney does so in his capacity as an agent for his
client. As the court explained:
When an attorney has been acting for the defendant up to judgment and the clie
with him in the taking of an appeal and the attorney orders the printing of th
paper-books required by the rules of the appellate court, it is to be presumed
he is acting under authority from his client. At least, the ordering of the p
books is within the scope of the attorney's authority.
Id. at 19 (quoting Huntzinger v. Devlin, 80 Pa. Super. Ct. 187 (1922)). Thus, the
publishing company, the court held, could not collect from the attorney.
Based on Moore, Pessano, Walkinshaw, and Huntzinger, I conclude that in Pennsy
"when an attorney contracts with a third party for the benefit of a client for good
services to be used in connection with the attorney's representation of a particula
client and the third party is aware of these facts, the attorney is not liable on t
contract unless he either expressly or impliedly assumes some type of special liabi
Eppler, Guerin & Turner, Inc. v. Kasmir, 685 S.W.2d 737, 738 (Tex. Ct. App. 1985).0
Numerous jurisdictions agree. See Christensen, O'Connor, Garrison & Havelka v. Sta
Washington, Department of Revenue, 649 P.2d 839, 843 (Wash. 1982); Hasbrouck v. Krs
P.2d 1197, 1198 (Mont. 1975); In re May, 261 N.E.2d 109, 110 (N.Y. 1970); Kates v.
Millheiser, 569 So. 2d 1357, 1357 (Fla. Dist. Ct. App. 1990); Free v. Wilmar J. Helr
688 P.2d 117, 119-20 (Or. Ct. App. 1984); Weeden Engineering Corp. v. Hale, 435 So.
A.2d 401, 402 (Pa. Super. Ct. 1953). In the record in this case, there is no evide
an express undertaking of liability by the attorneys. Moreover, the fact that the
attorney may commit himself to be responsible to the seller for the purchase price
not mean that the client is not also responsible or that any property purchased in
sale on behalf of the client does not belong to the client.
0
The court intimates that Pennsylvania case law may be inapposite because no
Pennsylvania case discusses the agency issue in a federal antitrust context and non
address the direct purchaser rule. (See Majority Op. at 27 n.18.) In my view, thi
distinction is not significant because the agency status of the attorneys is purely
question of state law. The court does not suggest a reason why the agency question
turn out differently in the federal antitrust context, and I perceive none.
32
1158, 1160 (La. Ct. App. 1983); Petrando v. Barry, 124 N.E.2d 85, 87 (Ill. Ct. App.
7A C.J.S. Attorney and Client § 140 (1980) ("In the absence of assumption of person
liability, an attorney is generally not liable for work done by third persons in
connection with his representation of a client.").
Under this case law, the plaintiff-clients, and not their attorneys, are respo
for the purchase price of the photocopies. Moreover, the record reflects that they
had to pay in the past0 and will continue to have to pay in the future0 the prices t
copy services choose to charge. Assuming that an antitrust violation has affected t
prices that the copy services charge, I fail to understand how there could be a mor
direct causal relationship between that violation and the plaintiffs' alleged injur
B.
The court concludes that because the attorneys are independent contractors wit
respect to the purchase of the copies, the attorneys, rather than the plaintiffs, a
direct purchasers of the copies. The issue of whether the attorneys are independen
contractors is simply not relevant here, however. Independent contractor status is
relevant only to determine the extent of a principal's tort liability to third part
According to the law of respondeat superior, where B acts for the benefit of A and
a tort and injures C, if B is an independent contractor, then C cannot recover from
regardless of whether B is A's agent. If, on the other hand, B is a servant of A,
can recover from A regardless of whether B is A's agent. Thus, even if it be true
the plaintiffs' attorneys are independent contractors, all this tells us is that th
plaintiffs are not responsible to third parties for torts committed by the attorney
0
As the court acknowledges in footnote 6, plaintiffs Thomasetti and Hoffman have
their attorneys' advances.
0
Even if one credits the testimony that F&S chooses not to press its contract rig
reimbursement in unsuccessful cases, it is clear that the clients will wind up payi
purchase price of the photocopies in all successful cases.
33
tells us nothing about whether the attorneys, as their agents, purchased the copies
their behalves. See Restatement (Second) of Agency §§ 2, 219-220.
II.
Because antitrust standing principles apply equally to allegations of RICO
violations, I would conclude, for the foregoing reasons, that the plaintiffs may go
forward on their RICO damage claims. Because I agree with the court that the plain
have standing to prosecute their claim for injunctive relief under Section 16 of th
Clayton Act, I would remand for further proceedings on all of plaintiffs' claims.
34