Unpublished Disposition, 855 F.2d 860 (9th Cir. 1988)

Nos. 87-2427, 87-2619.

United States Court of Appeals, Ninth Circuit.

Before SCHROEDER and WIGGINS, Circuit Judges, and STEPHENS,^*  District Judge.

MEMORANDUM^** 

All Hawaii Tours, Corp. appeals, first from a grant of summary judgment in favor of the Polynesian Cultural Center ("PCC") and imposition of sanctions against All Hawaii for the filing of a motion to alter or amend the judgment, and second, from the order awarding attorney's fees as the amount of sanctions. We affirm the district court's grant of summary judgment, but reverse the imposition of sanctions.

PCC operates a popular tourist attraction on the Island of Oahu in Hawaii. All Hawaii is an independent tour operator. All Hawaii asserts that in response to advertisements for discounted ticket prices to PCC, PCC instituted resale price-fixing in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. All Hawaii contends that because it was selling discount tour packages, PCC refused to deal with All Hawaii and denied All Hawaii access to tickets to PCC events.

A manufacturer or producer who controls the price at which its product is resold to consumers commits a per se violation of section 1 of the Sherman Act. See California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 102-03 (1980); Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 404-09 (1911). However, when the arrangement involves an agency relationship between manufacturer and seller, so that the price is not a resale price, the arrangement is not subject to the Sherman Act. See United States v. General Electric Co., 272 U.S. 476 (1926). So long as the relationship is one that involves a true agency or consignment, and is not a sham, the antitrust laws are not violated. Contrast General Electric, 272 U.S. at 476, with Simpson v. Union Oil Co., 377 U.S. 13 (1964).

Although All Hawaii strives mightily to establish the independence necessary to avoid being viewed as an "agent," its arguments do not succeed. PCC establishes ticket prices and retains possession of all tickets. All Hawaii serves as a collection agent, purchasing no tickets for resale, holding no inventory of tickets, bearing no risk of unsold tickets, and receiving its compensation on a commission basis. All Hawaii's relationship to PCC was that of a bona fide agent.

We turn now to the issue of sanctions under Rule 11. Rule 11 sanctions shall be assessed "if the paper filed in district court and signed by an attorney or an unrepresented party is frivolous, legally unreasonable, or without factual foundation, even though the paper was not filed in subjective bad faith." Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir. 1986).

The district court imposed Rule 11 sanctions for All Hawaii's filing of a 35-page motion to alter or amend the judgment. The district court observed, correctly, that this was not properly a Rule 52(b) motion, but was more properly viewed as a Rule 59(e) motion for reconsideration. This, however, is not a ground for sanctions. We have repeatedly held that a motion should be viewed on its substance and not on the basis of the label used. See, e.g., United States v. 1982 Sanger 24' Spectra Boat, 738 F.2d 1043, 1046 (9th Cir. 1984); Miller v. Transamerican Press, Inc., 709 F.2d 524, 527 (9th Cir. 1983); Whittaker v. Whittaker Corp., 639 F.2d 516, 520 (9th Cir.), cert. denied, 454 U.S. 1031 (1981).

The district court correctly pointed out that motions under Rule 59(e) or Rule 60(b) must provide a convincing ground for reconsideration, and this motion provided none. However, Rule 11 sanctions are not to be imposed each time that a motion fails on the merits, or even each time that a motion fails to provide a strong argument. Sanctions are available only when the motion is frivolous, meaning "an indefensible, meritless legal argument." See Zaldivar, 780 F.2d at 831.

The district court also criticized All Hawaii for submitting material from the underlying record in Illinois Corporate Travel, Inc. v. American Airlines, 806 F.2d 722 (7th Cir. 1986), as untimely and as amounting to misrepresentation. In sanctioning for misrepresentation, the court relied upon the dissent from rehearing en banc in Golden Eagle Distributing Corp. v. Burroughs Corp., 809 F.2d 584 (9th Cir. 1987). That dissent is not the law of this circuit. We have recently cautioned against overzealous use of Rule 11.

Rule 11 must not be construed so as to conflict with the primary duty of an attorney to represent his or her client zealously. Forceful representation often requires that an attorney attempt to read a case or an agreement in an innovative though sensible way. Our law is constantly evolving, and effective representation sometimes compels attorneys to take the lead in that evolution. Rule 11 must not be turned into a bar to legal progress.... The simple fact that an attorney's legal theory failed to persuade the district court "does not demonstrate that [counsel] lacked the requisite good faith in attempting to advance the law." (citation omitted). Rather, we reserve sanctions for the rare and exceptional case where the action is clearly frivolous, legally unreasonable or without legal foundation, or brought for an improper purpose.... Rule 11 is an extraordinary remedy, one to be exercised with extreme caution.

Operating Engineers Pension Trust v. A-C Co., No. 85-5998, slip op. at 9030-32 (9th Cir. July 26, 1988).

We agree with the district court that the motion lacked merit, that it was overly long, and that it was not calculated to meet with a favorable response from a judge who had decided the case adversely to the moving party. It was not, however, so completely devoid of substance as to merit sanctions under Rule 11.

The judgment of the district court on the merits is AFFIRMED. The orders imposing sanctions and imposing fees are REVERSED. Each party is to bear its own costs.