U.S. WHOLESALE OUTLET & DISTR. V. INNOVATION VENTURES, LLC, No. 21-55397 (9th Cir. 2023)
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In this case, a group of California wholesale businesses, the plaintiffs, brought a lawsuit against Innovation Ventures, LLC, and Living Essentials, LLC, the defendants, under the Robinson-Patman Price Discrimination Act. The plaintiffs accused the defendants of offering less favorable pricing, discounts, and reimbursements to them than to the Costco Wholesale Corporation for the sale of 5-hour Energy drink. The United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the district court’s judgment.
The court held that the district court did not abuse its discretion in instructing the jury that the plaintiffs needed to show that Living Essentials made “reasonably contemporaneous” sales to them and to Costco at different prices and that the price discrimination was not justified by functional discounts compensating Costco for marketing or promotional functions. The court concluded that the functional discount doctrine was available to the defendants, regardless of whether the plaintiffs and Living Essentials were on the same level in the distribution chain.
However, the court vacated the district court's ruling on the plaintiffs' claim for injunctive relief under section 2(d) of the Robinson-Patman Act. This section prohibits a seller from providing anything of value to one customer unless it is available on proportionally equal terms to all other competing customers. The court found that the district court committed legal and factual errors in determining that Costco and the plaintiffs operated at different functional levels and therefore competed for different customers of 5-hour Energy. The case was remanded for the district court to reconsider whether Costco and the plaintiffs purchased 5-hour Energy from Living Essentials within approximately the same period of time, or if the plaintiffs were otherwise able to prove competition.
Court Description: Robinson-Patman Price Discrimination Act The panel filed (1) an order amending its opinion, denying a petition for panel rehearing, and denying a petition for rehearing en banc; and (2) an amended opinion affirming in part and reversing in part the district court’s judgment after a jury trial and a bench trial in favor of the defendants in an action brought under the Robinson-Patman Price * The Honorable Ronald Lee Gilman, United States Circuit Judge for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation. ** Judge Ikuta authored Part III. U.S. WHOLESALE OUTLET & DISTR. V. INNO. VENTURES, LLC 3 Discrimination Act by U.S. Wholesale Outlet & Distribution, Inc., and other California wholesale businesses.
Parts I and II, authored by Judge Miller Defendant Living Essentials, LLC, sold its 5-hour Energy drink to the Costco Wholesale Corporation and also to the plaintiff wholesalers, who alleged that Living Essentials offered them less favorable pricing, discounts, and reimbursements in violation of the Robinson-Patman Act. On summary judgment, the district court found that the wholesalers had proved the first three elements of their section 2(a) claim for secondary-line price discrimination. At a jury trial on the fourth element of section 2(a), whether there was a competitive injury, the jury found in favor of defendants. At a bench trial on the wholesalers’ section 2(d) claim for injunctive relief, the court ruled in favor of defendants.
Affirming in part, the panel held that the district court did not abuse its discretion in finding that there was some factual foundation for instructing the jury that section 2(a) required the wholesalers to show, as part of their prima facie case, that Living Essentials made “reasonably contemporaneous” sales to them and to Costco at different prices.
The panel further held that the district court did not abuse its discretion in instructing the jury that the wholesalers had to prove that any difference in prices could not be justified as “functional discounts” to compensate Costco for marketing or promotional functions. The panel concluded that the functional discount doctrine was legally available to defendants regardless of whether the wholesalers and Living Essentials were at the same level in the distribution chain, 4 U.S. WHOLESALE OUTLET & DISTR. V. INNO. VENTURES, LLC and that there was some foundation in the evidence to support the jury instruction.
Part III, authored by Judge Ikuta Section 2(d) of the Robinson-Patman Act provides that it is unlawful for a seller to pay anything of value to or for the benefit of a customer in connection with the sale of a product unless the payment is available on proportionally equal terms to all other customers competing in the distribution of this product. As to whether Costco and the wholesalers were in competition, it was undisputed that they both were customers of Living Essentials and purchased goods of the same grade and quality. The panel held that the district court did not clearly err in finding that the wholesalers’ businesses were in geographic proximity to the Costco outlets that sold 5-hour Energy. The district court, however, committed both legal and factual errors in finding that Costco and the wholesalers operated at different functional levels and therefore competed for different customers of 5-hour Energy. The district court erred as a matter of law in concluding that when the jury found in favor of Living Essentials on the section 2(a) claim, it made an implicit factual finding that there was no competition between Costco and the wholesalers. And the record did not support the district court’s finding that Costco and the wholesalers operated at different functional levels.
The panel vacated the district court’s holding as to section 2(d) and reversed and remanded for the district court to consider whether Costco and the wholesalers purchased 5-hour Energy from Living Essentials within approximately the same period of time in light of the record, or whether the wholesalers otherwise proved competition.
U.S. WHOLESALE OUTLET & DISTR. V. INNO. VENTURES, LLC 5 Concurring in part and dissenting part, Judge Gilman wrote that he agreed with the majority that the district court did not abuse its discretion in giving the “functional discount” jury instruction, but he would reverse and remand for a new trial on the section 2(a) claim because the district court abused its discretion in giving the “reasonably contemporaneous” instruction. As to the section 2(d) claim, Judge Gilman agreed with the majority that the district court abused its discretion in finding that Costco and the wholesalers operated at different functional levels.
Dissenting in part, Judge Miller wrote that he would affirm the judgment in its entirety because he agreed that the district court did not abuse its discretion in instructing the jury on the section 2(a) claims, but he did not agree that the district court erred in rejecting the section 2(d) claims.
This opinion or order relates to an opinion or order originally issued on July 20, 2023.
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