No. 95-1005.United States Court of Appeals, Third Circuit.Argued January 22, 1996.
Decided April 4, 1996.
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Stephen R. Bolden (Argued), Richard C. Ferroni, Fell
Spalding, Philadelphia, PA, for Appellants.
Leslie M. Gerstein, Law Offices of Nancy D. Wasser, Philadelphia, PA, for Appellees Recordex Services, Inc., Copyright, Inc. and Medfax, Inc.
David H. Marion, David Zalesne, Montgomery, McCracken, Walker Rhoads, Philadelphia, PA, for Appellee Smart Corporation.
Christopher W. Mattson, Katherine B. Kravitz, Barley, Snyder, Senft Cohen, Lancaster, PA, for Appellee Hospital Correspondence Copiers, Inc.
Alan M. Lieberman, Schnader, Harrison, Segal Lewis, Philadelphia, pA, for Appellee Mercy Health Corporation of Southeastern Pennsylvania, Misericordia Hospital Division.
Edward C. Mengel, Jr., White Williams, Philadelphia, PA, for Appellee Methodist Hospital.
Anthony E. Creato, Mesirov, Gelman, Jaffe, Cramer Jamieson, Philadelphia, PA, for Appellee The Graduate Hospital.
Michael T. Scott (Argued), Martin H. Karo, Reed, Smith, Shaw McClay, Philadelphia, PA, for Appellee Hahnemann University Hospital.
Jonathan B. Sprague, Kathleen Chancler, Post Schell, Philadelphia, PA, for Appellee 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).
Before: STAPLETON, COWEN and GARTH, Circuit Judges.
[1] OPINION
GARTH, Circuit Judge:
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I.
[3] Plaintiffs Mary Ruth McCarthy,[1] Guy Colville, Edward Ormsby, Carmen Tomasetti[2] and Joseph Hoffman filed a three-count complaint, on January 19, 1993, against five hospitals (the “Hospital defendants”)[3] and five copy-service companies (the “Copy Service defendants”).[4] The complaint asserted violations of the Sherman Antitrust Act, 15 U.S.C. §(s) 1 and 2 (count I);[5] violations of the Racketeering, Influence, and Corrupt Organizations Act (RICO), 18 U.S.C. §(s) 1433 and 1962 (count II);[6] and violations of the civil rights laws, 42 U.S.C. §(s) 1983 (count III). The complaint and amended complaint sought injunctive relief, money damages, class certification and attorneys’ fees. In essence, plaintiffs allege that the Hospital Defendants and the Copy Service Defendants conspired to charge excessive prices for photocopies of medical records requested by patients or former patients.
Spalding (“FS), a Philadelphia firm, to file a personal injury or medical malpractice claim on his or her behalf. In each case, after the particular plaintiff had signed a medical consent form authorizing the appropriate hospital to release his or her medical records, the plaintiff’s attorney requested photocopies of the client’s hospital records. The copy service company, in each case, billed the attorney directly.[7] [5] Each of the five plaintiffs had entered into a contingent-fee agreement with either MF or FS. With the exception of McCarthy, none of the plaintiffs were obligated under 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 particular client was
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obtained.[8] McCarthy’s agreement with FS, on the other hand, provided that “[t]he absence of a recovery shall not relieve [McCarthy] from the obligation of paying court costs and other proper litigation and investigative costs.”[9] App. 498. However, Stephen R. Bolden, a partner at FS, admitted in an affidavit that despite the contractual language, in actual practice, the firm never sought reimbursement for advanced costs where representation of the client did not lead to a recovery:
[6] App. 526.[10] [7] Each of the Hospital Defendants had entered into a contract with one of the Copy Service Defendants, granting the Copy Service Defendant the exclusive right to photocopy hospital records requested by patients or other members of the public entitled to such records. Under the contract, the copy-service company agreed to photocopy any medical records requested by patients or other requestors. The sole remuneration received by the Copy Service Defendants derived from the copying charges paid by the requestors. App. 685, 692, 694, 698, 701. [8] Patients or their attorneys were charged $1 per page for copies of medical records. In addition, they also typically paid a retrieval fee, which was remitted to the hospital; an “administrative” or “basic” fee (i.e. a flat fee unrelated to the number of copies), which was retained by the copy-service company; and postage and handling fees. [9] Certain “favored” requestors were charged a reduced rate[11]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 a 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 . . . .
or no fee at all.[12] The Hospital Defendants set the schedule of charges, designating the requestors who would or would not be charged. Typically, sixty percent or more of the requests for hospital records were nonbillable. [10] Plaintiffs claim that the practice of subsidizing certain requestors while charging patients or their agents an inflated fee violated
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a Pennsylvania regulation, which provides in relevant part:
[11] 28 Pa. Code Section(s) 115.29 (emphasis added). [12] After plaintiffs filed an amended complaint, the defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court, by order dated August 5, 1993, denied defendants’ motion to dismiss counts I (antitrust) and II (RICO) but granted the motion to dismiss count III (civil rights). [13] Subsequently, on April 4, 1994, plaintiffs moved to certify the case as a class action. On November 18, 1994, in a Memorandum and Order, the district court denied plaintiffs’ motion for class certification. [14] On April 1, 1994, defendant Hahnemann filed a motion for partial summary judgment on count I (the antitrust claim), which was eventually joined by all of the defendants except Smart. The district court denied the motion for partial summary judgment in an order dated May 5, 1994. [15] Subsequently, Hahnemann moved for reconsideration. On July 8, 1994, the district court granted Hahnemann’s motion for reconsideration and granted summary judgment on count I in favor of all defendants, holding that the plaintiffs lacked standing because they were not “direct purchasers” of the hospital records, within the meaning of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). [16] On December 12, 1994, all of the defendants joined in a motion for summary judgment on the remaining RICO claim, on the theory that antitrust standing principles applied equally in the RICO context. On December 29, 1994, the district court granted summary judgment to all defendants on count II, thus disposing of all three counts of the complaint. Plaintiffs timely filed the instant appeal.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 shall 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 or the patient’s next of kin may be charged for the cost of reproducing the copies; however, the charges shall be reasonably related to the cost of making the copy.
II.
[17] The district court had jurisdiction over plaintiffs’ antitrust and RICO claims under 15 U.S.C. §(s) 15; 18 U.S.C. §(s) 1964; and 28 U.S.C. §(s) 1331. We have appellate jurisdiction over the district court’s grant of summary judgment in favor of defendants under 28 U.S.C. §(s) 1291.
III. A.
[20] Almost twenty years ago, the Supreme Court articulated the so-called “direct purchaser”
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rule, an antitrust standing doctrine that barred downstream indirect purchasers from bringing an antitrust claim. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 744 (1977). Recognizing that allowing an indirect purchaser to assert an antitrust claim for the portion of an overcharge “passed on” to the indirect purchaser would create an intractable problem of tracing and apportioning damages between different purchasers in the chain of distribution, the Court chose to avoid this morass by enunciating a bright-line rule that only the purchaser immediately downstream from the alleged monopolist may bring an antitrust action. Id.
[21] Almost a decade before Illinois Brick, the Supreme Court laid the foundation for the “direct purchaser” standing requirement i Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481(1968), which rejected a “pass-on” defense proffered by an antitrust defendant who claimed that the plaintiff was not entitled to treble damages for costs “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 against United Shoe Machinery Corp. (USMC), a manufacturer and distributor of shoe machinery, alleging that USMC had monopolized the shoe machinery industry by refusing to sell its equipment and requiring users to lease the equipment instead. Id. at 486-87. USMC argued that Hanover Shoe had been able to recoup its losses by charging its customers more for the shoes and thus did not suffer any cognizable injury because it had passed on the allegedly illegal overcharge to its customers Id. at 487-88. [22] The Court rejected USMC’s pass-on theory, explaining that entertaining such a defense 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 489-94. The Court also expressed concern that downstream buyers would have only “a tiny stake in a lawsuit” and thus little incentive to prosecute a private antitrust claim. Id. at 494. The Court reasoned that allowing a pass-on defense would diminish private antitrust enforcement and thereby increase the likelihood that violators of antitrust laws would escape liability. Id. [23] In Illinois Brick, the Supreme Court addressed the corollary to the problem they faced in Hanover Shoe: offensive use of the pass-on theory by indirect purchasers to 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 Illinois and 700 local governmental entities against a group of concrete block manufacturers, who had allegedly engaged in a price-fixing conspiracy. 431 U.S. at 726-27. The State and the local municipalities had hired general contractors for several large construction projects in the Chicago area. Id. at 726. The general contractors, in turn, had subcontracted the masonry work to certain masonry contractors who had purchased the allegedly overpriced blocks from the conspirators. Id. The State of Illinois and the local governmental entities were thus indirect purchasers of concrete block, two levels down the distribution chain from the manufacturers. Id. [24] 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. at 727. As a result, according to the plaintiffs, they had overpaid for the concrete block by more than three million dollars. Id. The Court dismissed the claim, holding that indirect purchasers may not sue for antitrust damages. Id. at 736, 97 S.Ct. at 2069-70. [25] The Court in Illinois Brick explained that the outcome was dictated by Hanover Shoe and that principles of judicial consistency compelled the Court to prohibit the offensive use of a pass-on theory where it had disallowed the defensive use of the pass-on doctrine in a similar factual situation. Id. at 730. The Court further explicated that permitting the latter while disallowing the former would create a risk of multiple liability: “A one-sided application of Hanover Shoe substantially increases the
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possibility of inconsistent adjudications — and therefore of unwarranted multiple liability for the defendant — by presuming that one plaintiff (the direct purchaser) is entitled to full recovery while preventing the defendant from using that presumption against the other plaintiff . . . .” Id.
[26] 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 purchasers should be allowed to recover the fraction of the overcharge “passed on” to them, explaining:[27] Id. at 737. [28] Subsequently, in Kansas v. Utilicorp United, Inc., 497 U.S. 199Permitting the use of pass-on theories . . . essentially would transform treble-damages actions into massive efforts to apportion the recovery among all 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 new dimensions of complexity to treble-damages suits and seriously undermine their effectiveness.
(1990), the Court 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 hence one hundred percent of any overcharge) had been passed on to the indirect purchaser. Id. 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 company and five gas producers had conspired to inflate the price of the natural gas that they supplied to public utilities. Id. at 204, 110 S.Ct. 2810-11. These utilities, according the States, had passed on the full amount of the overcharge to their residential and commercial customers. Id. [29] Kansas and Missouri argued that the concerns voiced i Illinois Brick, namely the 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 that actually suffer antitrust injury. The Court forcefully rejected that argument, opining that “[a]lthough the rationales of Hanover Shoe and Illinois Brick may not apply with equal force in all instances, we find it inconsistent with precedent and imprudent in any event to create an exception for regulated public utilities.” Id. at 208. [30] We have applied Illinois Brick’s antitrust standing principle on several occasions. For example, in Mid-West Paper Products Co. v. Continental Group, Inc., 596 F.2d 573 (3d Cir. 1979), we relied on Illinois Brick in holding that indirect purchasers of consumer bags could not maintain a treble-damages suit against the manufacturers of such bags. Id. at 575. In Mid-West Paper,
the defendants manufactured so-called consumer bags — single or multilayered paper bags used for packaging pet foods, coffee, cookies, chemicals and the like. Id. The plaintiff-grocery stores purchased either empty consumer bags (which they used to package their own products) from middlemen and wholesalers or products that were pre-packaged in consumer bags for resale to their customers. Id. at 575-76. After reviewing the teachings of Illinois Brick, we determined that the “direct purchaser” rule barred the treble-damages claims of all of the plaintiffs (except Mid-West Paper Products Company, which had purchased consumer bags directly from a subsidiary of one of the defendants). Id. at 575. [31] Similarly, in Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d 958 (3d Cir. 1983), cert. denied, 465 U.S. 1024 (1984), non-factory-authorized dealers, who had purchased electrical generators from authorized dealers for resale in foreign markets, alleged that Caterpillar, the manufacturer of these electrical generators, had illegally imposed a penalty on its dealers to prevent or discourage the dealers from selling Caterpillar products to independent marketers. Id. at 960. The district court held that the plaintiffs had standing under Illinois Brick
because the nonfactory-authorized
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dealers were the “direct target[s] of an unlawful conspiracy.”Id. at 962. We reversed, holding that an indirect purchaser, even if a “direct target” of an antitrust conspiracy, lacked standing under Illinois Brick. Id. at 966.
[32] Likewise, in Link v. Mercedes-Benz, Inc., 788 F.2d 918 (3d Cir. 1986), Mercedes repair customers claimed that Mercedes dealers, who were required to purchase parts exclusively from Mercedes at artificially inflated prices, had passed on those costs to retail customers. Id. at 928-30. Citing Illinois Brick, we held that retail customers were indirect purchasers and therefore lacked antitrust standing. Id. at 930. [33] Most recently, in Gulfstream III Associates, Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425 (3d Cir. 1993), we held that only the direct purchaser of an aircraft, and not a downstream buyer or assignee, had standing to pursue an antitrust claim. Id. at 439. We emphasized that “any exception to the direct purchaser rule would be inappropriate in this case for the same reasons that the Supreme Court held an exception would be appropriate in Utilicorp.” Id. B.
[34] Plaintiffs argue that the Supreme Court has receded fro Illinois Brick’s “direct purchaser” rule. Specifically, plaintiffs contend that the “direct purchaser” requirement 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. 519 (1983) [hereinafter “AGC“].
framework echo Illinois Brick’s concerns.
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In our view, AGC incorporates, rather than repudiates, the principles of Illinois Brick.[14]
[38] Plaintiffs assert, however, that the absolute bar of the “direct purchaser” rule has been supplanted by AGC’s balancing approach. In support of this contention, plaintiffs cite to certain passages from our opinion in In re Lower Lake Erie Iron Ore Antitrust Litigation, 998 F.2d 1144 (3d Cir. 1993), cert. dismissed, ___ U.S. ___, ___, 114 S.Ct. 625, 652, and cert. denied, ___ U.S. ___, 114 S.Ct. 921 (1994), wherein we adumbrated that “indirect purchaser status is [not necessarily] the death knell of [an antitrust] claim . . . .” Id. at 1168. In Lower Lake Erie, several steel companies, dock companies and trucking companies filed civil actions in federal district court, alleging that the defendant railroad companies serving the lower Lake Erie industrial region had conspired to monopolize the transportation and handling of iron ore in the region. Id. at 1151, 1152. [39] In a bifurcated trial, the liability jury found against Bessemer and Lake Erie Railroad Company (BLE), the sole remaining defendant,[15] and in favor of all plaintiffs but one; and the damages jury awarded all but one claim for damages. Id.at 1151. On appeal, we applied AGC and affirmed the district court’s denial of BLE’s motion to dismiss for lack of standing and the district court’s denial of BLE’s motion for judgment n.o.v. Id. [40] Plaintiffs here contend that Lower Lake Erie requires that we set aside the district court’s grant of summary judgment and remand for a determination of standing pursuant to the AGC
factors. We disagree. [41] Lower Lake Erie is fully distinguishable. In Lower Lake Erie, we found that the plaintiffs’ claims did not involve “the particular kind of double recovery Illinois Brick sought to prevent.” Id. at 1169. [42] By contrast, all of the policy concerns expressed in Illinois Brick are implicated in the present case. First, there is considerable risk that the Hospital defendants and Copy Service defendants would be exposed to multiple liability. Although plaintiffs’ attorneys here have chosen not to sue the defendants directly, it is probable that lawyers who themselves purchase photocopies of their clients’ hospital records would bring treble-damage claims against the Hospital defendants and the Copy Service defendants in the future. Indeed, both the district court and this court inquired as to why the instant complaint had not been amended to substitute the attorneys as plaintiffs. No satisfactory answer was given. Hence, if we were to deny the defendants the protection of the “direct purchaser” rule, they could potentially be held liable to both the clients and the attorneys representing the clients. [43] Furthermore, this lawsuit involves apportionment problems perhaps more complex than those implicated in Illinois Brick.
Because the costs of the photocopies are only passed on to the client, if the costs are passed on at all, on a contingent basis, the district 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 clients.
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In addition, the district court would have to ascertain the degree to which contingent fees charged to successful plaintiffs includes a recoupment of photocopying costs not charged to losing plaintiffs.
[44] Under these circumstances, plaintiffs cannot escape the absolute bar of the “direct purchaser” rule. In order to survive summary judgment, plaintiffs must establish that the clients, and not their attorneys, are the direct purchasers of the hospital-record photocopies. On this record, no such proof exists. C.
[45] Plaintiffs argue that they, and not their lawyers, are the direct purchasers of the hospital record photocopies.[16]
Plaintiffs contend that their attorneys merely acted as their agents in purchasing the photocopies. Citing In re Toilet Seat Antitrust Litigation, 1977-2 Trade Cases Para(s) 61,601 (E.D.Mich. 1977), plaintiffs posit that purchases made by an agent on behalf of the agent’s principal do not come within the scope of the “direct purchaser” rule.
1977-2 Trade Cases Para(s) 61,601, at 72,496. The district court concluded that under these limited circumstances, Harvey was a direct purchaser of the toilet seats and had standing to bring an antitrust claim.[17] Id. at 72,496-97. [47] In the present case, in contrast, none of the plaintiffs retained their lawyers to act as mere purchasing agents whose sole objective and function was to buy photocopies for the clients. Rather, each client hired his or her attorney to file a lawsuit on his or her behalf and to protect the client’s legal interests. Moreover, a fair reading of the record reveals that the lawyers purchased the photocopies for their own use in representing their clients. The attorneys, and not the clients, were undeniably the direct purchasers of the photocopies.
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[48] Furthermore, the fact that the costs of the photocopies were passed on to the client on a dollar for dollar basis (at least where the attorney obtained a recovery on behalf the client) is not dispositive.[18] Indeed, the subcontractors in Illinois Brick and the utility companies in Utilicorp passed on their costs to the plaintiffs in those respective cases; yet the Supreme Court deemed this fact insufficient to confer standing to the indirect-purchaser plaintiffs in those cases. [49] Plaintiffs attempt to distinguish these precedents by characterizing the middlemen in those cases as “independent contractors.” Plaintiffs take the position that the attorneys in the present case, in contrast, are agents and not independent contractors. [50] It is, of course, beyond cavil that the attorney-client relationship is an agent-principal relationship. However, attorneys are also independent contractors as well as agents See Restatement (2d) Agency Section(s) 14N (1958) (“One who contracts to act on behalf of another and subject to the other’s control except with respect to his physical conduct is an agent and also an independent contractor.”); id. Section(s) 14N comment a (“[M]ost of the persons known as agents, that is, brokers, factors, attorneys, collection agencies, and selling agencies are independent contractors . . . .”) (emphasis added); 41 Am. Jur. 2d Independent Contractors Section(s) 4 (1995) (“[F]or example attorneys at law . . . and other similar persons . . . are agents, although as to their physical activities they are independent contractors . . . .”) (emphasis added); see also Commonwealth v. Minds Coal Mining Corp., 60 A.2d 14, 20 (Pa. 1948) (adopting Restatement definitions of independent contractor). [51] An agent may be either an independent contractor or a servant (or employee in modern day parlance). See Restatement (2d) Agency Section(s) 2 comment b (1958) (“An agent who is not a servant is, therefore, an independent contractor when he contracts to act on account of the principal.”). Therefore, the relevant inquiry here is not whether a principal-agent 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 Section(s) 220 (1958), the most important factor is the degree of control exercised by the principal:[52] Feller v. New Amsterdam Cas. Co., 70 A.2d 299, 300 (1950). See also Moon Area Sch. Dist. v. Garzony, 560 A.2d 1361, 1367 (Pa. 1989); Hammermill Paper Co. v. Rust Eng’g Co., 243 A.2d 389, 392 (Pa. 1968). [53] It is clear that attorneys exercise “exclusive control of the manner of performing [their legal work], being responsible [to the client] only for the result.” Feller, 70 A.2d at 300. [54] Furthermore, plaintiffs here are not even directly liable for the cost of the photocopies. Except for McCarthy, plaintiffs are liable only if their attorneys succeed in achieving a recovery on their behalf. Indeed, three of the contingent-fee agreements do not impose a separate charge for litigation costs; rather, the attorneys are reimbursed out of their percentage share of the settlement or award. [55] In McCarthy’s case, although the retainer agreement does indicate that she is responsible for costs irrespective of the outcome, her attorney acknowledged that in actual practice, his law firm never charged clients unless the firm obtained a recovery. Furthermore, McCarthy faces another insurmountable obstacle:The legal distinction between an employee and an independent contractor is so well established as to require little, if any, discussion. The characteristics 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, whereas the characteristic of the latter is that the person engaged in the work has the exclusive control of the manner of performing it, being responsible only for the result.
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her attorney never paid the photocopying charges but rather obtained the needed copies from opposing counsel. Therefore, McCarthy (and indeed, even her attorney) cannot show any injury — much less antitrust injury.
[56] Based on these undisputed facts, we must conclude that the clients are not direct purchasers.[19] And unless an exception to the “direct purchaser” principle applies here, the plaintiffs have no standing to assert their antitrust claim under count I.D.
[57] Plaintiffs argue, in the alternative, that Illinois Brick
does not apply here because they fall within the “co-conspirator” exception to the direct purchaser rule. Citing to Link, 788 F.2d at 918, and In re Brand Name Prescription Drugs Litigation, 867 F. Supp. 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 a vertical antitrust conspiracy. To the extent that these cases recognize a co-conspirator exception, however, we hold that plaintiffs have failed to establish the applicability of such an exception to the facts at hand.
[59] Link, 788 F.2d at 931 (citations omitted) (emphasis added). [60] Similarly, in Brand Name, although the district court did allow the plaintiff retailers of pharmaceutical drugs to sue both the manufacturers and the wholesalers, it did so on the basis that the plaintiffs had alleged that the parties immediately upstream (i.e. the wholesalers) had colluded with the manufacturers to fix prices. The plaintiffs had not alleged that overcharges were passed on but rather that the wholesalers, as part of a price-fixing conspiracy, had directly imposed an overcharge on the plaintiff retailers. See Brand Name, 867 F. Supp. at 1344. [61] Most significantly, the district court in Brand NameAlternatively, 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.
emphasized that the reason it had not granted summary judgment in favor of the manufacturer-defendants was because “the plaintiffs ha[d] named [as defendants] a large percentage of all possible [wholesalers who had allegedly participated in the conspiracy].”Id. at 1346. The district court declined to “penalize [the plaintiffs] for the failure to join every single [w]holesaler [involved in the alleged conspiracy] . . . .” Id.
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[62] Plaintiffs here posit that they have joined all of the co-conspirators in the alleged conspiracy (i.e. the Hospital defendants and the Copy Service defendants). Reasoning that they have thereby satisfied the requirements of the co-conspirator exception, plaintiffs argue that they should therefore be accorded standing to bring an antitrust claim even though they are not direct purchasers. We cannot agree. [63] Plaintiffs misconstrue Brand Name and Link, and misconceive the nature of the co-conspirator exception. In order to fall within the exception, plaintiffs here would have to allege that the intermediaries immediately upstream, that is, the attorneys, colluded with the defendants to overcharge plaintiffs for the photocopies. Moreover, plaintiffs would be obliged to join the lawyers as defendants, which they have not done. In sum, the co-conspirator exception does not apply here.E.
[64] Plaintiffs also suggest that the present case falls within the “pre-existing cost-plus contract” exception to the direct purchaser rule. This exception arises from dictum in Hanover Shoe:
[65] Hanover Shoe, 392 U.S. at 494. [66] The vitality of the “pre-existing cost-plus contract” exception is doubtful, however, in light of Utilicorp. The Supreme Court, in that case, expressly refused to recognize an exception to Illinois Brick even where one hundred percent of the cost increases had been passed through to indirect purchasers Utilicorp, 497 U.S. at 216. [67] Moreover, even if this exception survived Utilicorp,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 that he has not been damaged — where the considerations requiring that the passing-on defense not be permitted in this case would not be present.
plaintiffs have failed to show that they meet the prerequisites of this exception. Specifically, plaintiffs have failed 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, as discussed earlier, plaintiffs have failed to demonstrate that they must pay the full cost of the copies since their liability for litigation costs is only contingent in nature. [68] 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 their antitrust claim (count I).
IV.
[69] Significantly, antitrust standing principles apply equally to allegations of RICO violations. See Holmes v. Sec. Investor Protection Corp., 503 U.S. 258, 270 (1992). The precepts taught by Illinois Brick and Utilicorp apply to RICO claims, thereby denying RICO standing to indirect victims. Wooten v. Loshbough, 951 F.2d 768, 770 (7th Cir. 1991); County of Oakland v. City of Detroit, 866 F.2d 839, 851 (6th Cir. 1989), cert. denied, 497 U.S. 1003 (1990); Carter v. Berger, 777 F.2d 1173, 1176 (7th Cir. 1985); Terre Du Lac Ass’n v. Terre Du Lac, Inc., 772 F.2d 467, 473 (8th Cir. 1985), cert. denied, 475 U.S. 1082 (1986); Daley’s Dump Truck Serv., Inc. v. Kiewit Pac. Co., 759 F. Supp. 1498, 1504 (W.D.Wash. 1991), aff’d sub. nom., Imagineering, Inc. v. Kiewit Pac. Co., 976 F.2d 1303 (9th Cir. 1992), cert. denied, 113 S.Ct. 1644 (1993). Indeed, plaintiffs have conceded that, if they lacked antitrust standing, they also lacked RICO standing See Plaintiffs’ Motion to Secure Certification (Nov. 29, 1994), at 3-4 (App. at 1168-69).
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V.
[71] Finally, plaintiffs argue that even if they lack standing to recover damages under section 4 of the Clayton Act,[20] they may still seek injunctive relief under section 16 of the Act.[21]
[74] Mid-West Paper, 596 F.2d at 590. See also Merican, 713 F.2d at 962 n.6; In re Beef Indus. Antitrust Litig., 600 F.2d 1148, 1167 (5th Cir. 1979), cert. denied, 449 U.S. 905 (1980). We cautioned thatin contrast to the treble damage action, a claim for injunctive relief does not present the countervailing considerations — such as the risk of duplicative or ruinous recoveries and the spectre of a trial burdened with complex and conjectural economic analyses — that the Supreme Court emphasized when limiting the availability of treble damages.
[75] Mid-West Paper, 596 F.2d at 593-94. [76] Although plaintiffs need not satisfy Illinois Brick’s “direct purchaser” requirement 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 loss or 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), cert. denied, 445 U.S. 961the rule of standing urged by the defendants, which would completely bar indirect purchasers from seeking injunctive relief, would leave a serious gap in 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 the willingness of the government and the direct purchasers to assume the burdens of a lengthy lawsuit.
(1980); Central Nat’l Bank v. Rainbolt, 720 F.2d 1183, 1186 (10th Cir. 1983). Because the district court never considered whether plaintiffs would be entitled to injunctive relief under section 16, separate and apart from the Illinois Brick standing rule, we will remand to allow the district court to undertake such an analysis.
VI.
[77] For the foregoing reasons, we will affirm the district court’s grant of summary judgment in favor of the defendants on plaintiffs’ treble-damages claim (count I) and RICO
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claim (count II),[22] but we will reverse as to plaintiffs’ claim for injunctive relief and remand for further proceedings consistent with this opinion.[23]
Colville retained MF, which requested copies from Methodist; Smart, which performed the photocopying, charged MF $25.49. Ormsby also retained MF, which requested copies from Graduate; HCC photocopied the records, charging MF $38.40. At the time this appeal was filed, neither Colville nor Ormsby had reached a settlement, and neither had reimbursed MF for the copying expenses incurred. Ormsby has apparently discontinued his personal injury claim. App. at 536.
McCarthy retained FS, which requested copies of her medical records from Misericordia. CopyRight, which was responsible for providing copying services related to requests for Misericordia patient records, billed FS $540. FS refused to pay the bill but eventually obtained the copies from opposing counsel. App. at 517-20, 525.
None of the fee agreements entitled MF to reimbursement of costs if the client failed to recover. Colville’s contract provided: “If there is no recovery there will be no charge for services rendered.” App. 414. Likewise, Hoffman’s agreement stated: “If no monies are recovered there will be no fee for services rendered.” App. 433. Ormsby’s agreement similarly read: “If there is no recovery, there are no charges for any fees.” App. 455. Finally, Tomasetti’s contingent fee agreement provided: “If no monies are recovered attorney to have no claim for services rendered. — Attorney to advance all costs necessary, to be reimbursed at settlement.” App. 470.
App. 536.
(1981); Calderone Enters. Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir. 1971), cert. denied, 406 U.S. 930 (1972). Recognizing that these alternative formulations for assessing antitrust standing often led to contradictory and inconsistent results, the Supreme Court in AGC
attempted to articulate a unified set of factors that could be applied generally in determining antitrust standing.
Court was concerned primarily with the issue of whether a particular plaintiff’s injury was too remote from an antitrust injury to warrant providing that plaintiff a section 4 remedy 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” rules. See id.
In contrast, Illinois Brick dealt with the issue of whether a plaintiff who is able to trace an injury to an antitrust violation falls “within the group of `private attorneys general’ that Congress created to enforce the antitrust laws under section 4.” Id. at 963. Illinois Brick focuses exclusively on the risk of duplicative recovery and the 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 potential for complex apportionment computations, if indirect purchasers were allowed to bring antitrust claims, the “direct purchaser” rule, unlike the AGC standard, is a bright-line rule.
Second, attorneys do profit, albeit indirectly, from their purchase of their clients’ 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 they suffered a loss) on the transaction, this fact does not transform their clients into direct purchasers. For example, in the previous hypothetical, the homeowner would still 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 charged no fee at all.
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 a disclosed principal. See Messenger Publishing Co. v. Walkinshaw, 157 A. 18
(Pa. Super. Ct. 1931). However, the Pennsylvania Supreme Court has yet to address this subject and there is a wealth of authority that an attorney ordering goods or services in connection with litigation, as is the case here, ordinarily be treated as a principal and hence would be liable for such expenses.
Even the lower courts in Pennsylvania, whose decisions are not binding on us, have had difficulty with this issue. See Pessano v. Eyre, 13 Pa. Super. 157 (1900). But neither the cases revealed by the parties’ research nor those revealed by our own research have discussed this issue in the context of a federal antitrust action, such as we have here. In none of those cases was the Illinois Brick direct purchaser rule at issue. We are satisfied that in the instant antitrust context, the attorney-appellants do not have standing to prosecute this 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, including a reasonable attorney’s fee.
15 U.S.C. §(s) 15(a).
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. §(s) 26.
I.
[80] In part III-B, the court concludes that: (1) the Supreme Court in Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983) [hereinafter AGC], neither overruled Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), nor limited its application; (2) “AGC incorporates, rather than repudiates, the principles o Illinois Brick,” (Majority Op. at 19;) (3) AGC and Illinois Brick
address two distinct aspects of antitrust standing; and (4) in order to escape summary judgment, the plaintiffs must establish that they and not their attorneys are the direct purchasers of the photocopies. I agree.
A.
[82] In Pennsylvania, the elements of agency are “the manifestation by the principal that 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 undertaking.” Scott v. Purcell, 415 A.2d 56, 60 (Pa. 1980) (quoting Restatement (Second) of Agency Section(s) 1, Comment b (1958)). When a lawyer undertakes to represent a client, he consents to the client’s having control of the representation even though he may be expected to exercise 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, the attorney-client relationship, as the court acknowledges, is generally regarded as an agency relationship. As a principal, the client is bound by the actions of the attorney in the course of the representation. As an
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agent, the attorney, like other agents, is a fiduciary and owes to his client-principal a duty of care, obedience, and loyalty Restatement (Second) of Agency Section(s) 377-398; e.g.,
Pennsylvania Rules of Professional Conduct 1.1, 1.2, 1.3, 1.15. In particular, an attorney who obtains tangible property in the course of carrying out the agency owes to his client-principal a duty to exercise reasonable care in its protection, to use it only in accordance with the directions of the principal and for his benefit, and to surrender it upon demand on the termination of the agency. Restatement (Second) of Agency. Section(s) 422; Pennsylvania Rules of Professional Conduct 1.15, 1.16(d). While the attorney may have a lien to secure any unpaid compensation, it is only a lien and any tangible property obtained or created in the course of the representation belongs to the client-principal. Pennsylvania Rules of Professional Conduct 1.16(d).
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“ma[de] himself liable by a special promise.” Id.[3]
[87] In Messenger Publishing Co. v. Walkinshaw, 157 A. 18 (Pa. Super. Ct. 1931), the superior court held that where an attorney orders copies of “a paper book used on appeal” from a publishing company, the attorney does so in his capacity as an agent for his client. As the court explained:[88] Id. 157 A. at 19 (quoting Huntzinger v. Devlin, 80 Pa. Super. 187When an attorney has been acting for the defendant up to judgment and the client acts with him in the taking of an appeal and the attorney orders the printing of the paper-books required by the rules of the appellate court, it is to be presumed that he is acting under authority from his client. At least, the ordering of the paper-books is within the scope of the attorney’s authority.
(1922)). Thus, the publishing company, the court held, could not collect from the attorney. [89] Based on Moore, Pessano, Walkinshaw, and Huntzinger, I conclude that in Pennsylvania, “when an attorney contracts with a third party for the benefit of a client for goods or services to be used in connection with the attorney’s representation of a particular client and the third party is aware of these facts, the attorney is not liable on the contract unless he either expressly or impliedly assumes some type of special liability.”Eppler, Guerin Turner, Inc. v. Kasmir, 685 S.W.2d 737, 738 (Tex. Ct. App. 1985).[4] Numerous jurisdictions agree. See Christensen, O’Connor, Garrison Havelka v. State of Washington, Department of Revenue, 97 Wn.2d 764, 649 P.2d 839, 843 (Wash. 1982) Hasbrouck v. Krsul, 541 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. Helric Co., 688 P.2d 117, 119-20 (Or. Ct. App. 1984); Weeden Engineering Corp. v. Hale, 435 So.2d 1158, 1160 (La. Ct. App. 1983); Petrando v. Barry, 124 N.E.2d 85, 87 (Ill. Ct. App. 1955); 7A C.J.S. Attorney and Client Section(s) 140 (1980) (“In the absence of assumption of personal liability, an attorney is generally not liable for work done by third persons in connection with his representation of a client.”). [90] Under this case law, the plaintiff-clients, and not their attorneys, are responsible for the purchase price of the photocopies. Moreover, the record reflects that they have had to pay in the past[5] and will continue to have to pay in the future[6] the prices that the copy services choose to charge. Assuming that an antitrust violation has affected the prices that the copy services charge, I fail to understand how there could be a more direct causal relationship between that violation and the plaintiffs’ alleged injuries.
B.
[91] The court concludes that because the attorneys are independent contractors with respect to the purchase of the copies, the attorneys,
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rather than the plaintiffs, are the direct purchasers of the copies. The issue of whether the attorneys are independent 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 parties. According to the law of respondeat superior, where B acts for the benefit of A and commits a tort and injures C, if B is an independent contractor, then C cannot recover from A regardless of whether B is A’s agent. If, on the other hand, B is a servant of A, then C can recover from A regardless of whether B is A’s agent. Thus, even if it be true that the plaintiffs’ attorneys are independent contractors, all this tells us is that the plaintiffs are not responsible to third parties for torts committed by the attorneys. It tells us nothing about whether the attorneys, as their agents, purchased the copies on their behalves. See Restatement (Second) of Agency Section(s) 2, 219-220.
II.
[92] 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 plaintiffs have standing to prosecute their claim for injunctive relief under Section 16 of the Clayton Act, I would remand for further proceedings on all of plaintiffs’ claims.
(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.
(1900), the superior court “had difficulty with this issue.” (Majority Op. at 27 n. 18.) I am not sure of which difficulty the court speaks. On the contrary, the superior court in Pessano plainly articulates the principle that while an agent is not generally liable on a contract made on behalf of a disclosed principal, “even where the agency is known, an agent . . . may render himself liable by an express undertaking.”Pennsylvania R. Co. v. Gallagher, 101 A.2d 401, 402 (Pa. Super. Ct. 1953). In the record in this case, there is no evidence of 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 does not mean that the client is not also responsible or that any property purchased in the sale on behalf of the client does not belong to the client.