Unpublished Disposition, 894 F.2d 1344 (9th Cir. 1989)

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US Court of Appeals for the Ninth Circuit - 894 F.2d 1344 (9th Cir. 1989)

Robert Kent SCHUMACHER, Lora L. Schumacher, husband andwife; Thomas T. Telford, R. Nadine Telford, husband andwife, the partners in a partnership doing business asLindsay Water Conditioners, Plaintiffs-Appellants,v.ECODYNE CORPORATION, a Delaware corporation, Defendant-Appellee.

No. 88-15535.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 13, 1989.Decided Jan. 30, 1990.

Before FARRIS, PREGERSON and RYMER, Circuit Judges.


Appellants filed an eight-count complaint against appellee Ecodyne, alleging federal and state antitrust violations, federal and state RICO violations, breach of contract, and breach of the covenant of good faith and fair dealing. The defendants filed a motion to dismiss. The district court converted the motion to a motion for summary judgment and granted summary judgment on all eight counts.

Appellants argue that the district court should not have converted the motion. They also appeal the summary judgment on three of the antitrust claims and the breach of contract and breach of covenant of good faith and fair dealing claims. We affirm.

* Appellants Robert Schumacher and Thomas Telford formed a partnership and entered into a dealership agreement with Lindsay, a division of appellee Ecodyne. Under the contract, the partnership was an authorized Lindsay dealer. Acting as an independent entity, not an agent of Lindsay or Ecodyne, the partnership would buy Lindsay's products and resell to the public. The contract provided that either party could terminate it for any reason at the end of any calendar year upon 60 days notice to the other party.

Through their dealings with Lindsay, Schumacher and Telford met John Levin, whom they believed to be a Lindsay manager and distributor. In April 1986, several Lindsay officials and Lindsay dealers attended a meeting in Phoenix, Arizona. Levin, Schumacher and Telford were all present. Levin announced that the purpose of the meeting was to get all Lindsay dealers to raise their prices and have uniformly high prices. Another dealer presented a list of reasons why dealers' prices were too low, and the dealers were told to exchange pricing information. Schumacher and Telford refused to raise their prices.

On July 27, 1987, Ecodyne gave the partnership notice that it was terminating the dealership agreement. On April 29, 1988, appellants filed suit against Ecodyne, alleging violations of state and federal antitrust and racketeering laws, breach of contract, and breach of the covenant of good faith and fair dealing.

Appellants also filed a Notice of Deposition on Ecodyne on April 29, 1988, for Levin's deposition. However, Levin was not an Ecodyne employee, so an individual subpoena on Levin was required. Appellants made no further attempt to depose Levin and conducted no additional discovery.

Ecodyne moved to dismiss the complaint under Fed. R. Civ. P. 12(b) (6) on June 30, 1988. It attached three exhibits to its motion: a copy of the dealership agreement between Lindsay and the partnership; Levin's affidavit; and the letter to the partnership from Ecodyne terminating the agreement. Appellants responded on Aug. 15, 1988. They also attached three exhibits to the motion papers: a copy of a different contract with Lindsay; another copy of the termination letter; and Schumacher's affidavit.

Levin's affidavit states that he was not a Lindsay employee but an independent contractor. That evidence is uncontroverted. Schumacher's affidavit indicates that the appellants believed Levin was a Lindsay employee because he was introduced at Lindsay meetings as a Lindsay district manager.

The district court heard the motion on Sept. 12, 1988. The court asked both parties if they had converted the motion into a motion for summary judgment by including extraneous material. Appellants' counsel said they had not. Ecodyne's counsel said the motion was only converted to the extent that the parties had submitted materials outside the pleadings.

On Oct. 13, 1988, the court issued an order converting the motion to one for summary judgment and granting summary judgment on all counts. Appellants challenge this order.


This court reviews de novo a district court's grant of summary judgment or dismissal on a 12(b) (6) motion. Rutman Wine Co. v. E & J Gallo Winery, 829 F.2d 729, 732 (9th Cir. 1987); Theee Movies of Tarzana v. Pacific Theatres, Inc., 828 F.2d 1395, 1398 (9th Cir. 1987), cert. denied, 56 U.S.L.W. 3569 (1988). Dismissal under Fed. R. Civ. P. 12(b) (6) is appropriate when "it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957), cited in Newman v. Universal Pictures, 813 F.2d 1519, 1521-22 (9th Cir. 1987), cert. denied, 56 U.S.L.W. 3849 (1988).

On a motion for summary judgment, "antitrust law limits the range of permissible inferences from ambiguous evidence in a Sec. 1 case.... [C]onduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy." Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S. Ct. 1548, 89 L. Ed. 2d 538 (1986) (citing Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984)); see also Theee Movies of Tarzana, 828 F.2d at 1398. However,

[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial'.... [I]f the factual context renders respondents' claim implausible--if the claim is one that simply makes no economic sense-- [the nonmoving party] must come forward with more persuasive evidence to support their claim than would otherwise be necessary.

Matsushita, 475 U.S. at 587 (citing First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).


Appellants claim the district court erred in converting Ecodyne's 12(b) (6) motion to a motion for summary judgment. Ecodyne submitted three "matters outside the pleadings" with its 12(b) (6) motion: a copy of the contract, the termination letter, and Levin's affidavit.

Appellants claim they did not have notice that the motion would be converted, and thus did not have "reasonable opportunity to present all material made pertinent ..." Fed. R. Civ. P. 12(b) (6). They argue that, under Rule 56(b), they should have had ten days notice of conversion.


Our circuit has not previously adopted a rule of strict adherence to formal notice requirements in cases in which motions to dismiss have been treated as summary judgment motions. Instead, we have examined the record in each case in order to determine whether the party against whom summary judgment was entered was "fairly apprised that the court would look beyond the pleadings and thereby transform the 12(b) motion to dismiss into one for summary judgment."

Garaux v. Pulley, 739 F.2d 437, 439 (9th Cir. 1984).

When a party is represented by counsel, formal notice may be unnecessary. Notice occurs when a party has reason to know that the court will consider matters outside the pleadings.

Grove v. Mead School District No. 354, 753 F.2d 1528, 1533 (9th Cir.) (citations omitted), cert. denied, 474 U.S. 826 (1985).

We find that, with respect to appellants' claim that Levin acted with apparent authority for Ecodyne, the court did not err in converting the motion to one for summary judgment. Appellants had adequate notice that in deciding this issue, the court would take into consideration matters outside the pleadings. They received Ecodyne's motion, with Levin's affidavit attached. In response, appellants did not object to the inclusion of exhibits, but rather submitted Schumacher's affidavit opposing Levin's statements. The exchange of papers should therefore have put appellants on notice that the court would look beyond the pleadings in deciding this issue. See id.

Appellants claim conversion was precluded by the parties' responses to the court's questioning at the hearing that they did not believe they had converted the motion by attaching extraneous material to the pleadings. While a more explicit statement by the court that it would convert the motion may have been preferable, on this issue, at least, the exhibits included in the motion papers put the parties on notice as to the possibility of conversion. Furthermore, the parties had adequate opportunity to conduct discovery with respect to Levin's apparent authority.


Appellants make no direct claims against Ecodyne or Lindsay. Instead, their antitrust claim against Ecodyne hinges on a showing that Levin's actions are attributable to Lindsay. Appellants allege Levin had apparent authority to act for Lindsay, and thus Lindsay is vicariously liable for his conduct at the April meeting.

The undisputed evidence shows that Levin is an independent contractor, not a Lindsay employee. The touchstone of apparent agency is the conduct of the principal that allows a third party reasonably to conclude that an agent is authorized to make certain representations or act in a particular way. Torres v. Goodyear Tire & Rubber Co., 867 F.2d 1234, 1236 (9th Cir. 1989). Appellants do not offer any evidence of acts on Lindsay's or Ecodyne's part that led them to believe Levin was authorized to act for Lindsay.

Although appellants claim Levin was introduced as a manager at Lindsay meetings, they do not identify the person who introduced him or sufficiently attribute this introduction to Lindsay or Ecodyne. It is unreasonable to infer from this that appellants have raised a triable issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Accordingly, the district court correctly assumed that "Levin was not acting on behalf of defendant under any apparent authority." We affirm the summary judgment on this issue.


* Appellants' antitrust claims against Ecodyne fail because of the lack of a showing that Levin had apparent authority. Therefore, we need not reach the issue of whether the district court erred in converting the 12(b) (6) motion to a motion for summary judgment on this claim.

Even if conversion were improper, however, dismissal was proper under Rule 12(b) (6), as appellants failed to allege an "antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent.... The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S. Ct. 690, 50 L. Ed. 2d 701 (1977) (emphasis omitted), cited in McGlinchy v. Shell Chemical Co., 845 F.2d 802, 811 (9th Cir. 1988). "Allegations of price-fixing alone, unconnected to any of plaintiffs' activities for which damages are sought, do not set forth a claim under the antitrust laws." Newman, 813 F.2d at 1523.

The only injury appellants allege is that "the partnership has been damaged...." Although appellants argue that this is an antitrust injury because it was a direct effect of the alleged conspiracy, this argument ignores the relevant case law. "The antitrust laws were enacted for the protection of competition, not competitors." McGlinchy, 845 F.2d at 812, quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S. Ct. 1502, 8 L. Ed. 2d 510 (1962) (emphasis in original). " [S]ection one claimants must plead and prove a reduction of competition in the market in general and not mere injury to their own positions as competitors in the market." Les Shockley Racing, Inc. v. National Hot Rod Ass'n, Nos. 88-5748 and 88-5789, slip opinion 10973, 10980 (9th Cir. Sept. 6, 1989). Appellants allege no injury to competition or to the marketplace, and indicated in oral argument their inability to do so. Thus, regardless of the propriety of conversion, the claim was properly dismissed for failure to state a claim for relief.


Appellants' claims under the Arizona antitrust laws also fail. In Arizona Revised Statute ( 44-1402, " [t]he Arizona legislature clearly intended to strive for uniformity between federal and state antitrust laws." Wedgewood Investment Corp. v. International Harvester Co., 126 Ariz.App. 157, 613 P.2d 620, 623 (1980). " [I]n construing this article, the courts may use as a guide interpretations given by the federal courts to comparable federal antitrust statutes." Ariz.Rev.Stat.Ann. 44-1412. See, e.g., All American School Supply v. Slavens, 128 Ariz. 261, 625 P.2d 324, 325 (1981).


Appellants' breach of contract claim is based on Lindsay's "wrongful termination" of the dealership agreement. Appellants' analogize to the employment-at-will doctrine. They argue that the public policy exception to the employment-at-will doctrine applies in this situation, and thus Lindsay cannot terminate the contract for "bad cause," i.e., as a result of a price-fixing agreement. See Wagenseller v. Scottsdale Memorial Hospital, 147 Ariz. 370, 710 P.2d 1025, 1033 (1985).

Even if this argument has merit, appellants, by failing properly to allege an antitrust claim, precluded the court's consideration of this claim. Thus, the court did not err in dismissing the breach of contract claim.


Appellants claim Lindsay breached the covenant of good faith and fair dealing which is implied in every contract under Arizona law. Wagenseller, 710 P.2d at 1038.

Courts recognize a tort action for breach of the covenant of good faith and fair dealing when the parties had a special, fiduciary-like relationship. See Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565, 574 (1986); Wagenseller, 710 P.2d at 1040; Rhoads v. Harvey Publications, Inc., 145 Ariz. 142, 700 P.2d 840, 847 (Ariz.App.1984). Nothing about appellants' relationship with Lindsay connotes the requisite kind of "special relationship." The court properly dismissed this claim.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3