Opinion
02 Civ. 4911 (HB)
March 29, 2004
OPINION ORDER
Defendants, Ford Models, Inc. ("Ford"), Mr. Gerald W. Ford ("G. Ford"), Que Management, Inc. ("Que"), Wilhelmina Models, Inc. ("Wilhelmina"), Elite Model Management Corp. ("Elite"), Next Management Co. ("Next"), IMG Models, Inc. ("IMG"), Click Model Management, Inc. ("Click"), Images Management ("Images"), and Model Management Corp. ("MMC") f/k/a International Model Managers Association, Inc. ("IMMA"), (collectively "moving defendants"), all of whom are New York model management companies (and one modeling association), move for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Fed.R.Civ.P."), dismissing the lawsuit brought by plaintiffs, a class of models who now work or have worked at some point over the past three decades for one or more of the defendant modeling management companies. Plaintiff oppose defendants' motions for summary judgment For the foregoing reasons, defendants' motions are granted-in-part and denied-in-part.
Wilhelmina is incorrectly sued as Wilhelmina Model Agency, Inc.
There are other defendants in the lawsuit but only these ten defendants moved for summary judgment
I. BACKGROUND
A. Procedural History
Plaintiffs filed their first complaint in their action on June 25, 2002, an amended complaint on August 12, 2002, and a first consolidated complaint on September 24, 2002. Defendants moved to dismiss the first consolidated complaint and fully-briefed motions were submitted in November 2002. In an Opinion and Order dated January 17, 2003, this Court dismissed plaintiffs' Article 11 cause of action and the antitrust claims beyond the statute of limitations, i.e., prior to June 25, 1998. Plaintiffs filed a second amended complaint on February 5, 2003 and a third amended complaint on April 30, 2003. The moving defendants submitted their fully-briefed summary judgment motions on January 15, 2004. Oral argument on the summary judgment motions was held on March 9, 2004.
B. Factual Background
Plaintiffs allege that defendants, through their membership in or association with others who were or had been members of the modeling industry's trade association, IMMA (now called MMC), had the opportunity to — and indeed did — fix prices (of both models' commissions and clients' service fees), terms and conditions of models' employment, and the manner in which to structure their businesses (as management companies rather than employment agencies).
Plaintiffs assert that defendants' price-fixing conspiracy originated with "an intention and plan collectively to evade the licensing requirements and fee restrictions imposed by New York state law [General Business Law ("GBL") §§ 170-90 (1998) ("Article 11")]." Plaintiffs' Opposition ("Pl. Opp.") at 8. Plaintiffs argue that by claiming "that they were each entitled to the 'incidental booking' exception (licensure required if more than incidentally involved in procuring work for clients), defendants gained exemption from the licensure and 10% fee restriction under GBL Article 11." Pl. Opp. at 8. By way of background, "Article 11 requires employment agencies to be licensed and places restrictions [caps of ten percent] on the amount of commissions they may charge." Masters, et al. v. Wilhelmina Model Agency, Inc., et al., 02 Civ. 4911, 2003 U.S. Dist. LEXIS 698, at *8 (S.D.N.Y. Jan. 16, 2003) (emphasis added). Under plaintiffs' theory, collusion provided support and credibility for defendants' transformation — i.e., it was more believable that Ford — the first agency to undergo the change — was now legitimately a management company if Elite and Wilhelmina were simultaneously undergoing the same transformation. And, plaintiffs would not bolt against a particular agency that raised its commission, became a management agency, or adopted unfavorable terms and conditions if all of the major New York agencies acted together.
Plaintiffs' theory is that defendants agreed upon uniform practices on several fronts — all with the motive to quash competition and preclude objection or dissent.
II. DISCUSSION
A. Summary Judgment StandardPursuant to Fed.R.Civ.P. 56(c), a district court must grant summary judgment if the evidence demonstrates that "there is no genuine issue as to any material fact and [that] the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). "Summary judgment is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to 'secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986), quoting Fed.R.Civ.P. 1. The Court's role at the summary judgment stage is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. Rule 56(c) requires a Court to enter summary judgment when, "after adequate time for discovery . . . a party [ ] fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322.
In antitrust cases, the non-moving party must set forth "evidence that tends to exclude the possibility that the [movants] were acting independently." Apex Oil Co. v. Dimauro, et al., 822 F.2d 246, 253 (2d Cir. 1987) (reversing district court's grant of summary judgment as to certain defendants), citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). To prevail, plaintiffs "must show that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed [plaintiffs]." Matsushita, 475 U.S. at 588, citing First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 280 (1968). "[W]hile some assessing of evidence is necessary in order to determine rationally what inferences are reasonable and therefore permissible, it is evident that the question of what weight should be assigned to competing permissible inferences remains within the province of the fact-finder at a trial." Apex Oil Co., 822 F.2d at 253 (citations omitted).
The Court's requirement in Matsushita that the plaintiffs' claims make economic sense did not introduce a special burden on plaintiffs facing summary judgment in antitrust cases. The Court did not hold that if the moving party enunciates any economic theory supporting its behavior, regardless of its accuracy in reflecting the actual market, it is entitled to summary judgment. Matsushita demands only that the nonmoving party's inferences be reasonable in order to reach the jury, a requirement that was not invented, but merely articulated, in that decision.Eastman Kodak Co. v. Image Technical Servs., 504 U.S. 451, 468 (1992). Therefore, while the inferences that may be drawn from ambiguous evidence in antitrust cases may be limited, "[n]o special burden is imposed on a plaintiff opposing summary judgment in an antitrust case." Virgin Atlantic Airways Ltd. v. British Airways PLC, 257 F.3d 256, 262 (2d Cir. 2001) (citations omitted). "[A]t a minimum, . . . 'the circumstances [must be] such as to warrant a jury in finding that the conspirators had a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement.'" Int'l Distribution Cntrs., Inc. v. Walsh Trucking Co., 812 F.2d 786, 793 (2d Cir. 1987), quoting Michelman v. Clark-Schwebel Fiber Glass Corp., 534 F.2d 1036, 1043 (2d Cir. 1976).
B. Section One Violations
Section One of the Sherman Act ("Section One"), 15 U.S.C. § 1, prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States . . ." In order to establish a Section One violation, a plaintiff must sufficiently demonstrate "(1) a combination or some form of concerted action between at least two legally distinct economic entities; and [that] (2) such combination or conduct constituted an unreasonable restraint of trade either per se or under the rule of reason." Dresses For Less, Inc., et al. v. CIT Group/Commercial Servs., Inc., et al, 01 Civ. 2669, 2002 U.S. Dist. LEXIS 18338, at *17 (S.D.N.Y. Sept. 30, 2002), quoting Virgin Atlantic Airways Ltd., 257 F.3d at 273.
In analyzing claims under Section One, the Court may entertain both direct and circumstantial evidence. Direct evidence is "evidence that is explicit and requires no inferences to establish the proposition or conclusion being asserted." In re Baby Food Litig., 166 F.3d 112, 118 (3d Cir. 1999). "Illegal conspiracies, of course, can rarely be proved through evidence of explicit agreement, but must generally be proved through inferences from the conduct of the alleged conspirators." Venture Tech., Inc. v. Nat'l Fuel Gas Co., et al., 685 F.2d 41, 45 (2d Cir. 1982) (citations omitted). Circumstantial evidence provides the material for such inferences and encompasses "everything else including ambiguous statements." In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 662 (7th Cir. 2002).
When the alleged scheme is implausible, such as a price cutting agreement, "a conspiracy must be proved by strong direct or strong circumstantial evidence, and the implausibility of a scheme will reduce the range of inferences that may permissibly be drawn from ambiguous evidence." Apex Oil Co., 822 F.2d at 253, citing Matsushita, 475 U.S. at 594-598. Further, while schemes that involve long-term complex relationships among competitors are more susceptible to direct proof, short-term simple schemes are less apt to involve express agreements. See Apex Oil Co., 822 F.2d at 253 (citation omitted).
While parallel conduct may be probative of an antitrust conspiracy, it does not alone establish a conspiracy, even if the alleged conspirators "knew the other defendant companies were doing likewise." Modern Home Institute, Inc. v. Hartford Accident Indemnity Co., 513 F.2d 102, 110 (2d Cir. 1975).
"'Conscious parallelism' describes conduct by rivals in an industry who 'coordinate their conduct simply by observing and reacting to the moves of their competitors.' Stephens v. CMG Health, 96 Civ. 7798, 1997 U.S. Dist LEXIS 23797, at *18 n. 12 (S.D.N.Y. July 21, 1997) (citation omitted).
To be sure, business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. But this Court has never held that proof of parallel business behavior conclusively establishes agreement or, phrased differently, that such behavior itself constitutes a Sherman Act offense. Circumstantial evidence of consciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward conspiracy; but "conscious parallelism' has not yet read conspiracy out of the Sherman Act entirely.Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540-541 (1954) (internal citations omitted).
Because parallel activity may be equally suggestive of independent conduct, plaintiffs offering parallel conduct as evidence of an antitrust conspiracy must demonstrate additional circumstances, often referred to as "plus factors," which provide a supplemental basis to infer a conspiracy. See Apex Oil Co., 822 F.2d at 253. "Plus factors" have been recognized to include (1) a common rational motive to conspire ( see Ambook Enters, v. Time Inc., 612 F.2d 604, 616 (2d Cir. 1979)); (2) a concentrated degree of inter-firm communications ( see Apex Oil Co., 822 F.2d at 254); (3) the performance of actions that are against a defendant's own business interest without collective involvement ( see id.); (4) evidence of coercion ( see Ambook Enters., 612 F.2d at 616); and (5) market phenomena that may only be attributed to concerted action ( see Stephens, et al. v. CMC Health, et al., 96 Civ. 7798, 1997 U.S. Dist. LEXIS 23797, at *19 n. 13 (S.D.N.Y. July 22, 1997) (citation omitted). "It is enough that a concert of action is contemplated and that the defendants conformed to this arrangement." In re Nasdaq Market-Makers Antitrust Litig., 894 F. Supp. 703, 713 (S.D.N.Y. 1995), quoting Ambook Enters., 612 F.2d at 614.
While factors considered independently, such as the "dissemination or gathering of price-related information," may be insufficient to establish an inference of conspiracy ( Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647 (1980) ("advance price announcements are perfectly lawful"); United States v. Citizens S. Nat'l Bank, et al., 422 U.S. 86, 113 (1975) ("dissemination of price information is not itself a per se violation of the Sherman Act.")), "the character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole" ( Continental Ore Co. v. Union Carbide Carbon Corp., 370 U.S. 690, 699 (1962)). In the same vein, "seemingly innocent or ambiguous behavior can give rise to a reasonable inference of conspiracy in light of the background in which the behavior takes place." In re Medical X-Ray Film Antitrust Litig., 946 F. Supp. 209, 218 (E.D.N. Y. 1996), quoting Minpeco, S.A. v. Conticommodity Serves., Inc., 673 F. Supp. 684, 688 (S.D.N.Y. 1987), quoting Apex Oil Co., 822 F.2d at 254-55.
1. Per Se Violations
Conduct is only deemed illegal per se in a limited context of cases "where a defendant's actions are so plainly harmful to competition and so obviously lacking in any redeeming pro-competitive values that they are 'conclusively presumed illegal without further examination.'" Capital Imaging v. Mohawk Valley Medical Ass'n, 996 F.2d 537, 542 (2d Cir. 1993), citing Broadcast Music, Inc. v. CBS, 441 U.S. 1, 8 (1979). With per se illegal conduct, there is no need to establish that the restraint was unreasonable, i.e. that it had a negative effect on competition. See NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 133-34 (1998). Per se violations have been held to include, inter alia, horizontal and vertical price-fixing ( United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940); Dr. Miles Medical Co. v. Park Sons Co., 220 U.S. 373, 405 (1911)), territorial market division, and certain group boycotts involving concerted refusals to deal ( NYNEX, 525 U.S. at 133; Capital Imaging, 996 F.2d at 542-43). The majority of cases fall outside these narrow categories found to be illegal per se. See Capital Imaging, 996 F.2d at 543; CDC Techs., Inc. v. IDEXX Laboratories, Inc., 186 F.3d 74, 79 (2d Cir. 1999). See also Nat'l Camp Assoc., Inc. v. Am. Camping Assoc., Inc., 99 Civ. 11853, 2000 U.S. Dist. LEXIS 18194, at *15 (S.D.N.Y. Dec. 15, 2000) (highlighting Supreme Court's refusal to expand per se categories).
a. Conspiracy to Fix Models' Commissions
In Count I of their third amended complaint ("complaint"), plaintiffs assert that defendants violated Section One by (1) initially conspiring to charge the majority of their models a commission in excess of the ten percent statutory cap imposed by Article 11, and then (2) conspiring to increase this commission to fifteen percent, and finally twenty percent.3d Am. Compl. ¶¶ 98-99.
Plaintiffs allege that defendants colluded to fix models' commissions through discussions, exchanges, and agreements at IMMA meetings and outside of IMMA's formal setting. Because the alleged conspiracy, as it involves horizontal price-fixing, is illegal per se, this Court need only determine whether plaintiffs have established a material issue of fact as to whether defendants conspired to fix models' commissions. See Capital Imaging, 996 F.2d at 542. Although the defendants, through well-briefed and argued motions, have convinced me that this claim raises difficult questions and close calls, I conclude that, at least with regard to all defendants other than Que, who was never a member of IMMA or MMC, plaintiffs have provided sufficient evidence to allow for a reasonable inference of collusion on models' commissions. It will be for the jury to decide, after watching and listening to live testimony and cross-examination, whether these defendants actually conspired to fix the commissions required to be paid by the models to the defendants.
"The specific elements necessary to prove a claim of horizontal price fixing, as set forth by the Supreme Court, are: (1) the existence of an agreement, combination or conspiracy, (2) among actual competitors, (3) with the purpose or effect of 'raising, depressing, fixing, pegging, or stabilizing the price of a commodity,' (4) in interstate or foreign commerce." In re Medical X-Ray Film Antitrust Litig., 946 F. Supp. at 215-16, citing Socony-Vacuum Oil Co., 310 U.S. at 223-24. The critical element here, and the one in dispute, is the first — whether defendants agreed to fix models' commissions.
i. Parallel Pricing "Plus"
While plaintiffs have not uncovered direct "smoking gun" evidence to confirm that defendants operated under an agreement to fix models' commissions, it is undisputed that there is evidence of parallel pricing, both at rates exceeding ten percent, and at rates of twenty percent. Plaintiffs' expert, Martin A. Asher, Ph.D. ("Asher") concluded, "from data provided by defendants" that "more than 97 percent of models who had billings within the class period, from 1998 through 2003, paid commissions in excess of 10 percent." Asher, 12/15/03, at 6. Further, Asher reports that "approximately 91 percent of the models paid commission rates of 20 percent." Id. at 8. Similarly, plaintiffs' second expert, John C. Beyer, Ph.D. ("Beyer"), concludes that "[m]ost models (approximately 96 percent) have been charged a commission rate of 20 percent or more . . . " Beyer, 12/15/03, at 4. While plaintiffs' experts demonstrate parallel pricing, assuming defendants were aware of each other's pricing patterns, which the evidence suggests they were, conscious parallelism alone is insufficient to create a material issue of fact as to whether an agreement was formulated. For purposes of summary judgment, additional circumstances, referred to as "plus factors," must "provide a supplemental basis to infer a conspiracy." Theatre Enters., 346 U.S. at 540-41. Among recognized plus factors, two in particular have received significant exposure in case law, both of which have a strong presence in this case — a motive to conspire and a high level of inter-firm communication. See Modern Home Institute, Inc., 513 F.2d at 110; Ambook Enters., 612 F.2d at 616.
While defendants may contest the reliability of the evidence utilized by plaintiffs' experts to make conclusions as to pricing, and offer evidence of "variation in average earning by commission rates among Defendants," (Daniel S. Levy, Ph.D., at 7), the task of weighing the competing evidence is the role of the jury. Anderson, 477 U.S. at 249.
Asher noted that he had incomplete financial data productions from a few defendants, and intended to "supplement [his] presentation with respect to the defendants from whom more complete computerized data may be required and may hereafter be obtained." Asher, 12/15/03, at 7 fn 9. This "intention" resulted in an Order to Show Cause by several of these defendants, aimed at blocking plaintiffs' ability to supplement the record. Shortly thereafter, the parties amicably resolved their dispute without the need for a hearing. Although plaintiffs again raise questions, in supplemental submissions, requested by the Court, about the adequacy of certain defendants' productions, and defendants again hotly contest any deficiencies, plaintiffs and defendants agree that their dispute should not affect the timing of the summary judgment decision. Therefore, although unaware of the substance of plaintiffs' and defendants' discussions and resolutions concerning productions, the Court will proceed under the assumption that these percentages apply to all defendants.
With regard to the first plus factor, there is no question that defendants possessed a common rational motive to conspire — the ability to raise models' commissions without suffering loss of business. General theories of competition make clear that without collective action, price increases can result in loss of business. See Apex Oil Co., 822 F.2d at 254. The benefit of joint action with regard to pricing was discussed at a September 16, 1986 IMMA meeting, when Monique Pillard ("Pillard") of Elite "made a point about lowering the prices of catalogs; that we are all committing suicide, if we do not stick together . . . Pauline's agreed with me . . . by not sticking together, we would have to make 40% more volume in order to make the same figures as last year . . ." Haazen Affirmation, Exhibit. ("Pl. Exh.") 26 at EL 04131.
Second, it is beyond peradventure that IMMA members engaged in a concentrated degree of inter-firm communication ( Apex Oil Co., 822 F.2d at 254), including but hardly limited to models' commissions directly. This Court was unable to find any cases in this Circuit or in this District that elucidated whether the inter-firm communication, in order to be relevant, had to be specifically about the subject matter of the alleged conspiracy, or instead, whether it was sufficient to uncover extensive discussions and agreements among defendants, on related but collateral issues. The cases merely state that "a high level of interfirm communications" can serve to bolster the inference of a conspiracy drawn from parallel acts. See, e.g. In re Medical X-Ray Film Antitrust Litig., 946 F. Supp. at 218; Apex Oil Co., 822 F.2d at 254; Minpeco, 673 F. Supp. at 688. While I agree with defendants that evidence of discussions directly about models' commissions would represent the strongest inference of price-fixing, I disagree that evidence of discussions and agreements, even related to other pricing strategies, lacks relevance here and fails to bolster an inference that defendants colluded on commissions as well. The evidence of parallel pricing, the sheer volume of communications and agreements, coupled with crystal clear evidence that suggests IMMA members even colluded to fix client service fees, a close cousin of models' commissions, when viewed together, "tends to exclude the possibility" that the defendants acted independently with regard to models' commissions.
a. Inter-firm Communications
1. About Pricing (Commissions. Rates. Service Fees) and Billing Practices
Plaintiffs assert that the conspiracy began with an agreement among defendants, collectively, to transform the structure of their businesses from employment agencies to management agencies — for the express purpose of avoiding the ten percent cap imposed upon employment agencies by Article 11. According to plaintiffs, Ford initiated the formal transformation on April 15, 1971, when it declined to renew its license with the DCA because it had "now become management" Pl. Opp. at 11, citing Pl. Exh. 4 (letter to DCA). Notably, Ford retained its licensure as an employment agency in California (Pl. Exh. 261D (California Licensure Certificates, including 2003)), a fact which plaintiffs suggest warrants an inference that Ford needed the unified action of its New York co-conspirators to effectuate this transformation without scrutiny. Plaintiffs then assert that "[s]hortly after IMMA was founded [in 1971,]" predominantly by Ford, "each IMMA member — comprising essentially the entire industry in New York — had either resigned or not renewed its license." Pl. Opp. at 7, citing PL Exh. 317 (Foster-Fell Dep.) at 42:14-21. Plaintiffs assert that this pattern was hardly a coincidence, as a requirement of membership in IMMA was "that they be managers and not employment agents." PL Exh. 283 (Gerald Ford Dep.) at 71:18-20. Prior to IMMA's eventual. adoption of a form contract, plaintiffs assert that several. defendants, Ford, IMG, and Wilhelmina, utilized essentially identical. contract language to elucidate the position that they were not artist managers, but rather were personal. managers, and that they were not employment agencies under Article 11. Pl. Exhs. 304 (Ford Contract) at ¶ 10; 306 (IMG Contract) at ¶ 9; 309 (Wilhelmina Contract) at ¶ 3.
Defendants expend considerable time and effort arguing that plaintiffs are barred by the Noerr-Pennington doctrine from introducing evidence of defendants' alleged evasion of Article 11. The Noerr-Pennington doctrine, however, does not protect conspiracies so defendants may evade the law, but rather, conspiracies so defendants may change the law. See Eastern Railroad Presidents Conference, et al. v. Noerr Motor Freight, Inc., 365 U.S. 127, 136-37 (1961) ("We think it equally clear that the Sherman Act does not prohibit two or more persons from associating together in an attempt to persuade the legislature or the executive to take particular action with respect to a law that would produce a restraint or a monopoly. although such associations could perhaps, through a process of expansive construction, be brought within the general. proscription of 'combination[s] . . . in restraint of trade,' they bear very little if any resemblance to the combinations normally held violative of the Sherman Act, combinations ordinarily characterized by an express or implied agreement or understanding that the participants will jointly give up their trade freedom, or help one another to take away the trade freedom of others through the use of such devices as price-fixing agreements, boycotts, market-division agreements, and other similar arrangements.") (emphasis added), citing 15 U.S.C. § 1; United Mine Workers v. Pennington, 381 U.S. 657, 670 (1965) (citing to Noerr and stating that "[j]oint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. Such conduct is not illegal., either standing alone or as part of a broader scheme itself violative of the Sherman Act."). To the extent that plaintiffs have any intention of introducing evidence of defendants' joint efforts to "seek legislation" by, for example, lobbying to amend or revoke Article 11, which this Court has no reason to believe they do, such evidence will be barred by the Noerr-Pennington doctrine. In other words, while any efforts that defendants undertook to influence the DCA are protected by the Noerr-Pennington doctrine, defendants' joint efforts to avoid the DCA's enforcement are not shielded.
Ford asserts that it altered its business structure in the mid-1960's but did not formalize the change with the DCA until 1971. Pl. Opp. at 12.
although the parties dispute whether defendants are employment agencies (subject to Article 11) or management agencies (permitted to exceed the ten percent cap), this Court does not have jurisdiction to adjudicate this substantive disagreement. See Masters, 2003 U.S. Dist. LEXIS 698, at *29-32 (the statute's legislative scheme provides for exclusive enforcement (in New York City) by the Department of Consumer Affairs ("DCA")). Though not controlling, it is interesting to note that on April 11, 2003, after this Court held that it lacked jurisdiction to determine whether defendants were in violation of Article 11, the DCA determined that " . . . we are unpersuaded by your [plaintiffs'] contention that model management companies . . . meet the New York General. Business Law ("GBL") § 171 definition of an 'employment agency.' Instead, every indication is that these types of companies fall under the theatrical. managers exception of GBL § 171(8). This is because they are primarily career managers and only 'incidentally' do job placements for their clients." After plaintiffs proffered additional. evidence, the DCA concluded that" . . . we remain unconvinced that model management companies do not fall within the managers exception to the employment agency licensing law in § 171(8)." Def. Reply at 2.
Ford was a member of IMMA from October 1974 through December 2003, Wilhelmina from the early 1970's through December 2003, Elite from 1979 through November 1993, Next from April 1990 through September 1994 and again from March 1996 through April 1997, IMG from in or about 1980 through December 2003, Click from April or May 1994 through December 2003, and Images from 1982 through December 2003.
Therefore, the agencies that subsequently joined IMMA were all unlicensed. Pl. Opp. at 13. Plaintiffs assert that Que, though never a member of IMMA, still adopted contracts "that were either silent regarding the agencies' role in finding work for the model, or affirmatively disavowed any obligation to do so." Pl. Opp. at 13. And, plaintiffs assert that the fact that Elite was invited to join IMMA, when Ford was currently suing it and Gerald Ford had made statements attacking Elite's founder, John Casablancas ("Casablancas"), and more particularly, his moral. fiber, suggested that the current members of IMMA had an ulterior interest in securing the membership of all major New York modeling companies — i.e., a desire to perpetuate the conspiracy. Pl, Opp. at 13, citing Pl. Exh. 283 at 67:19-70:5. After all, if a predominant agency were excluded, and that agency were not forced, through membership, to become a management company, models would have the option of hiring a modeling agency, which would be obliged to charge a commission at or below ten percent.
Quite notably, Elite's suit alleged (almost identically to plaintiffs' current action) that Ford, Wilhelmina, and other IMMA members "had agreed to increase their rates and adopt a uniform price structure and circumvent the licensing requirements of the New York General. Business Law." Pl. Opp. at 15, citing Pl. Exhs. 7-10 (Court Documents). John Casablancas, Elite's founder, was even quoted as stating that he was contemplating an antitrust class action on behalf of the models. It appears that Elite abandoned the action, and instead joined IMMA.
Plaintiffs argue that through their conspiracy to evade Article 11, or more aptly their joint agreement to become management companies, defendants were able to raise the commission that they charged to models above Article 11's ten percent cap, and eventually agree to uniformly charge models commissions of twenty percent — a commission rate which would have been impossible under their previous configurations. While defendants hotly contest the formation of any agreements as to models' commissions, they concede that there was significant information exchanged among IMMA members about pricing. Casablancas noted proudly that each company "basically knew the price practices of all the agencies . . . [e]verybody knows what everybody else is doing." Pl. Exh. 281 (Casablancas Dep.) at 109:5-6, 44:22-23. He also admitted that he "knew instantly every time an agency raised or when an agency didn't raise." Id. at 143: 1-2. Dieter Esch ("Esch"), then President and Chief Executive Officer of Wilhelmina, admitted that he may have announced to attendees of an EMMA meeting, in the approximate timeframe of 1996 through 1998, that he was charging a twenty-five percent commission to models (Pl. Exh. 279 (Esch Dep.) at 299:12-24, 323:12-16) and Casablancas made a similar, yet even more troubling announcement at the December 12, 1991 IMMA meeting that he too " would be charging twenty percent commission to all clients as a firm policy." Pl. Exh. 53 at FORD 058239 (emphasis added). While Casablancas' announcement does not explicitly demonstrate an agreement among IMMA members to follow course, it suggests that IMMA members were made aware of their competitors' price increases before the price increases were enacted — leaving time for others to agree to increase their fees accordingly. Further, Casablancas conceded that "the more uniformity in the prices, the more I think it was — it was something that you could then compete on the quality of your models on the service, and not just on — on rates, you know. So we were always favorable to letting everyone know as much as possible about — about our pricing policies." Pl. Exh. 281 at 121:8-16. Casablancas also testified that "I was always hoping that as leaders, we would be followed, and that we would not be left as we were on many instances by ourselves with higher rates, and having a lot of clients segregating against us because we were too expensive." Id. at 112:9-113:15. While it is possible that Elite simply took the lead in raising its commissions, with the blind hope that other members would follow, it is far more reasonable to assume that Elite sought some guarantee that the other defendants would acquiesce, to ensure that its clients would not segregate against them.
Whether Casablancas learned about the other defendants' pricing practices from clients or from discussions with defendants will be for the jury to decide.
This assumption is bolstered by significant evidence of discussions and agreements concerning raising the client service fees. Elite's internal. memorandum "RE: IMMA Meeting — Minutes," reports that at a January 21, 1980 IMMA meeting, trade association members acted in unison with regard to pricing decisions. The memorandum reads in part that "[t]he suggestion of increasing client service charge from 10% which Alain Kittler suggested I [Jo Zagami ("Zagami")] make at this meeting was not accepted by the Association. The general. feeling was that with the increase of model rates, and the agencies benefiting by models' commissions, clients would not be agreeable to a higher service charge." PL Exh. 13 at EL 04073 (emphasis added). This memorandum reveals both that one agency sought the "acceptance" of the trade association before increasing its client service fee and also strongly suggests that the "increase of model rates" was applicable to all members and not a decision made unilaterally by each company. Similarly, a memorandum recounting a November 14, 1980 IMMA meeting, makes clear that "certain members" had made "requests" "to increase the service charge from 10 to 15%." This Court can think of no other rationale for the need for such a "request," other than that members were required to act jointly with regard to price increases. At the same meeting, the memorandum reflects that Zagami suggested that "IMMA send out a letter stating that we plan on pursuing [a 1 1/2 percent finance charge on clients who pay after 30 days] in lieu of increasing our service charge." Id. at EL 04086-04087. Again, this statement suggests joint action.
At this same November 14 meeting, the members also discussed the lost fees associated with allowing models to book hourly rates instead of day, quarter day, half day, or three quarter day rates, which have increased at levels greater than hourly rates. G. Ford "came up with a much better suggestion which he has in effect, that being: certain of his top girls can only be booked half and full days. It was the general. feeling that Elite too would put this into effect, although as John mentioned, we would have to give the clients the availability of half and three quarter days." Id. at 04085. Members even discussed, as proposed by Casablancas, "that IMMA members have meeting [sic] with the different branches of the industry, such as publishing houses, administrative agencies, etc." regarding rates. Id. At his deposition, Casablancas could not recall this discussion concerning hourly/day rates, but stated that "at this time I think it's not good [to discuss]." Pl. Exh. 283 at 119:21.
The evidence suggests that the management companies did approve an increase in the client service fee to twenty percent, with Elite taking the initiative in doing so. On April 14, 1987, Casablancas sent Pillard the letter that he intended to send to his clients, announcing the increase in the service fee, and explained that "you may show [the letter] to some people at the next IMMA meeting." He explained further that "[y]ou should say that it is our intent to send this letter and you should be very careful that in no way can this be construed as 'price fixing'. You are merely to inform our competitors of our intention to send this letter or a similar one." Pl. Exh. 30 at EL 04160. The tone and tense of this letter suggests that Casablancas provided his fellow IMMA members with advance notice of Elite's intended price increase. As further evidence that Elite actually provided its competitors with notice of its intended price increase, and secured their agreement to follow suit, plaintiffs provide a May 5, 1987 memorandum from Pillard to all Elite staff, informing them of the service charge increase from fifteen to twenty percent, effective June 1, and stating that " all other agencies will go along with this increase. Please inform you clients accordingly so that there is no misunderstanding." PL Exh. 32. Only a rich fantasy life could lead one to an inference other than that Pillard was directing her staff to inform clients that the other agencies would institute similar increases so that clients would not "misunderstand" and cease utilizing Elite's services, in hopes of moving to a management company with lower fees. Additionally, in October 1987, Zagami circulated to all IMMA members a copy of an article, published in a trade publication, denouncing the increase in service fees by Elite, Wilhelmina, and Zoli. At the same time, Zagami circulated Casablancas' July 17, 1987 letter response to Stan Malinowski (the author), in which he asked, "[w]hy did you single out Elite Wilhelmina and Zoli" and informs Malinowski that "Ford, as well as American Models, Faces and others have also increased their service charge." Pl. Exh. 33 at DEV 00427-00430. For obvious reasons, both Casablancas' knowledge that other companies had increased their service charges and his interest in informing the public of such a fact, support powerful inferences of a conspiracy as to service fees.
Pillard's testimony that she "decided it was best not to show the letter" (Pl. Exh. 288 (Pillard Dep.) at 61:8-62:2) at best, creates an issue of fact as to whether Pillard did in fact follow Casablancas' instructions.
At a September 16, 1986 IMMA meeting, as reflected in an internal. Elite memorandum, Pillard "made a point about lowering the prices of catalogs; that we are all committing suicide, if we do not stick together. Pauline's agreed with me but as usual., Bill Weinberg [of Wilhelmina] cautioned me about price fixing . . . Ha! Ha! Ha!. . . . the usual. bulls..t! I warned him that by not sticking together, we would have to make 40% more volume in order to make the same figures as last year, but you know Bill, he always thinks he can get more if he acts that way." Pl. Exh. 26 at EL 04131. Again, it is difficult for me to escape the inference that discussions of the benefits of joint action on pricing ensued. While Wilhelmina objects to the outward discussion of price fixing, it is plausible from Pillard's reaction that Wilhelmina's objection was to the dissemination of information not to the underlying price-fixing agreement.
On March 31, 1987, Zagami wrote to Joseph Hunter ("Hunter"), then the President of IMMA, to assert that "the members of IMMA must stop the photographers and or studios from using us to increase their profits. As long as models fees are billed to the various studios and not directly to the client, this practice will never cease." Zagami suggested "a meeting first with all IMMA members" and then "a meeting with the Photo Studio Association and Photographers Association." He explained that "[u]nless we curtail the holding back of money due us . . . we as managers will lose our ability to control model fees even more in the future." Pl. Exh. 29 at PAU 00417. On the flip-side of this letter is what appears to be a proposed letter on IMMA stationery, with a blank where the recipient(s) name(s) would be inserted, informing the recipient(s) that after "discussion[s] at recent IMMA meetings . . . [w]e have [ ] decided that as of this date we will honor bookings only and exclusively when they have been directly made to the mother agency in New York City [not by out-of-town agencies]." Id. at PAU 00418. Earlier, on March 19, 1987, Jeremy Foster-Fell ("Foster-Fell") had written to Hunter, regarding "the [same] issue of 'out of town agency' bookings." He had explained that "we discussed and partially resolved" that all agencies would send letters "along the lines of the drafted example handed out at the meeting, to those clients who have made this practice the norm." However, he suggested, instead, that IMMA send "one letter signed by the industry in unison," which in his opinion, would be more "startling." He added that "I don't believe all our clients are aware of the existence of IMMA and its members who can and will act in concert together." Pl. Exh. 28. He also explained that discussions had ensued regarding "the contractual. relationship between manager and model" and creating a system of exclusivity to prohibit models from working through out-of-state agencies. In Foster-Fell's words, "[a] model can afford to lose one New York agent but cannot afford to lose New York." Id. These letters demonstrate once more that the members viewed (and wanted the public to view) EMMA as a unified front who worked in concert to achieve jointly beneficial. results.
Notably, just prior to IMMA's distribution of its standard Model Management Agreement to its members in May 1993, its counsel Edward Klagsbrun ("Klagsbrun") found serious antitrust problems with pertinent sections. Klagsbrun noted in an April 6, 1993 memorandum to co-IMMA counsel David Blasband ("Blasband") that "[a]ny agreement suggested by a trade association to its members who are competitors is inherently suspect and vulnerable to attack from the point of view of Federal. and state antitrust law." Pl. Exh. 65. In this same memorandum, Klagsbrun stated that "[i]f it is in any way mandated rather than suggested it is unlawful per se." Id. Klagsbrun instructed that "[t]he risks associated with the proposed agreement . . . may be reduced by . . . [m]aking it clear to all members on the record that it is a recommended agreement and that agencies are entirely free to develop their own agreements . . ." Id. When this "proposed form of management agreement" was sent to IMMA members on or about May 7, 1993, Blasband was careful to instruct that "there are no financial. terms incorporated in this form, and none are suggested. Each manager should insert in their form the financial. terms that they have negotiated with models, as well as any other terms that they believe should be added, deleted from or otherwise modify the enclosure." Pl. Exh. 75 at 1. However, in July 1993, Casablancas sent Blasband a draft of the letter that he wished to circulate among IMMA members — a letter which can, without much embellishment, be read to urge agreement on forbidden terms such as rates, fees, and commissions. Pl. Exh. 79 at M SX 01938-01940. For example, Casablancas wrote that "Blasband took note of our 'wish list' of elements to be included into the contract" but that "[u]nfortunately some elements could be interpreted as restraining models trade, and therefore can not be included . . . " Id. at M SX 01938. Casablancas explained further that "[i]t will be up to each agency thereafter to add, on an individual. basis, the elements that they feel are missing; but such additions may not be discussed collectively." Id. With regard to a clause concerning agreements between competitors as to models who switch agencies, Casablancas explained that while this issue could not be decided "collectively," "there is nothing objectionable about this type of agreement existing between managers on a one to one basis." Id. at M SX 01939. Further, with regard to the reimbursement of models' debts, Casablancas similarly offered that "even though there may not be a concerted agreement, there can exist a substantial. amount of information that allows each agency, if it so wishes, to harmonize their policies with other members of their profession." Id. As to "payments and advances to models," Casablancas stated that while "[w]e maynot agree on a common policy . . . there is nothing wrong with individual. managers, informing each other case by case about their own methods of payment . . ." Id. at M SX 01940. In general., Casablancas urged that while "the guidelines set by the law are clearly strict and [ ] limit IMMA's ability, as an association, to discuss certain matters or to take any decision that could, in anyway [sic], be interpreted as a restraint of trade for either models, other competitors, or clients . . . it is obvious that a certain harmonization of systems can only benefit our profession . . ." Id. Casablancas closed his letter with the following plea: "[o]ur attorney and Joey Hunter will include into our model contracts as many common elements as the law permits, the rest can only be left to each manager's individual. initiative." Id. While it is unclear whether Casablancas' letter was ever circulated, it provides evidence that management companies — members of IMMA and beyond — may have entered into implicit agreements on terms that were omitted from the model contract.
Defendants rightly assert that form contracts are efficiency-enhancing tools that do not violate antitrust law when the use of the form contract is voluntary and the rate or fee is left blank. See U.S. Dep't of Justice, Antitrust Division, Business Review Letter 02-7 (Nov. 15, 2002).
Despite advice of counsel as to the antitrust problems associated with mandating any agreement, by cover letter of August 16, 1993, Hunter circulated a draft of the model contract and wrote that he felt that it was "a very good contract for IMMA Members to endorse." Pl. Exh. 78 (emphasis added). Similarly, draft IMMA meeting minutes from September 15, 1993 reflect that "[m]embers who had received copies of the draft agreement were in agreement that the contract wasready to be adopted." Pl. Exh. 81 at M SX 01889. While it is unclear who objected to the words "ready to be adopted," it is obvious that someone recognized that a record reflecting the "adoption" by the members could be seen to contradict the advice of counsel that the agreement must not be "in any way mandated." These IMMA minutes were later amended to replace the troublesome language with the words "in good order." Pl. Exh. 83 at M SX 01580. Shortly after IMMA adopted its standard Model Management Agreement in 1993, plaintiffs assert that four defendants, Ford, IMG, Next, and Wilhelmina, inserted substantially identical. language in the section stating that models understood that managers were also "entitled to receive a service charge from clients." Pl. Exhs. 305 (Ford Agreement), 306 (IMG Agreement), 308 (Next Agreement), 309 (Wilhelmina Agreement).
2. About Terms, Conditions, and Practices
An internal. Elite memorandum, reflecting discussions at a January 21, 1980 IMMA meeting, suggests that members entered into tentative agreements concerning cancellation fees. In this memoranda, Zagami explains to Casablancas and Pillard, all of Elite, that "[a]s you recall my discussion with you, this matter was brought up at the first meeting and at that time it was decided that this was a policy we would only try to implement. However, the other agencies went ahead without notifying Elite that they had put this into effect." Pl. Exh. 13 at EL 04072 (bold emphasis added). An Elite memorandum from a May 5, 1982 IMMA meeting reflects an agreement between G. Ford and Zagami about "problem clients," namely that "if we work together . . . we will eliminate additional. work or collection problems." PL Exh. 16 at EL 04101. This same memorandum also provides evidence of an agreement between IMMA members, that was formalized in a letter from IMMA to the Fashion Photographers Association, that "tentative bookings when cancelled by photographers are not billed as cancellations" so "no model could be charged if the model or agency does not honor a tentative." Id. at EL 04102.
Defendants argue that plaintiffs, in opposing summary judgment, may not rely on internal. Elite memoranda, summarizing IMMA meetings, which have yet to be authenticated, as the non-movant may only rely on "such facts as would be admissible in evidence." Fed.R.Civ.P. 56(e). While defendants are correct as to Rule 56(e)'s requirement on admissibility, I have no reason to believe that these memoranda are inherently inadmissible, and instead find, based on the arguments presented at this stage, that plaintiffs may, for example, authenticate these documents as business records pursuant to Federal. Rule of Evidence ("Fed.R.Evid.") 803(6).
IMMA minutes also reflect that IMMA members adopted uniform schedules for the Christmas holiday. For example, in 1990, "[i]t was confirmed that IMMA agencies will close . . . on Friday, December 21 and reopen on Wednesday, January 2." Pl. Exh. 47. And, in 1992, "[a]ll agencies agreed to be closed December 24th and to reopen January 4th 1993." Pl. Exh. 54 at FORD 058322. Similarly, in 1993, "[m]embers agreed to close at 6:00 P.M. December 23, 1993 and to reopen on January 3, 1994." Pl. Exh. 81 at M SX 01890. The fact that IMMA members realized the benefit in eliminating differences among them in seemingly innocuous areas such as holiday schedules, lends credence to plaintiffs' assertion that IMMA members agreed to significantly more crucial. details. At the very least, the inference to be drawn from these minutes raises an issue of fact for the jury.
Plaintiffs also provide evidence that IMMA has "generally accepted rules by which we all agree to ethically operate," which include "never offer[ing] a model a guarantee to intice [sic] a model to leave an agency at which they were happy, to come to your agency." In particular, plaintiffs offer a November 27, 1991 letter from Millie Pellet ("Pellet") of Next to Esch, copying all members of IMMA, bringing to light that Esch broke this rule with regard to a particular model, Michele Weweje. Pellet wrote that "[i]f I am naive in believing what is said and agreed to by all of the participating agencies, then the EMMA meetings are just a waste of everyone's time." Pl. Exh. 52. While this agreement alone obviously strikes at the essence of competition, Pellet's statement is broad enough to warrant a general. inference that the "generally accepted rules" forbade additional. actions that could stir competition.
The record also contains a November 18, 1993 memorandum from Blasband to Klagsbrun, requesting that Klagsbrun "look over the attached resolution, which may have actually been voted on as an amendment to IMMA's by-laws back in 1979" because Blasband believed that the resolution "may violate the antitrust laws." Pl. Exh. 90 at M SX 01831. The resolution, which begins: "Upon motion duly made, seconded, and unanimously carried, it is RESOLVED . . . " establishes a system whereby, in the event of a change in representation from one New York agency to another, a model's debts with the first agency would be subsumed by the second. Id. at M SX 01832. Subsequently, the minutes from a March 30, 1995 IMMA meeting reflect that "[a]n additional. document purporting to be an agreement among the membership of IMMA has been found in the IMMA files . . . The members of IMMA do not recognize the document or its validity." The members then voted unanimously that "the document has no force or effect and does not constitute either a by-law of IMMA or an agreement among its members." Pl. Exh. 123 at DEVX 04328. In this manner, IMMA members rid themselves of this problematic resolution in a manner that questioned, perhaps dishonestly, its validity and hinted that it had never been adopted by IMMA.
Notably, at an IMMA meeting on January 21, 1980, "all members were very much in favor of instituting" "an agreement among ourselves whereas any model debt will be honored by any agency in the event the model should switch agencies." Pl. Exh. 14 at EL 04086-04087. "John mentioned the procedure at Elite wherby [sic] all models sign a letter to this effect . . . " Id. at EL 04086.
ii. Sufficiency of Evidence To Establish Price-Fixing Conspiracy
While I agree with defendants that the majority of this evidence more directly demonstrates agreement on elements other than models' commissions, about which, for other reasons, Plaintiffs' claims do not survive ( see infra), I do not agree that, as a result, such evidence is irrelevant. Rather,
I find that the extensive evidence of agreements between EMMA members, on various components of their businesses, such as client service fees, holiday closing schedules, cancellation policies, and penalties borne by management companies who attract models from competitors, may reasonably be inferred to demonstrate an industry inundated with collusion. This evidence provides additional. support for an inference of collusion on models' commissions.
I find Plaintiffs' reliance on Fed.R.Evid. 404, as the basis for which to allow evidence of collateral. agreements to establish a conspiracy on models' commissions, to be inapposite. Rule 404, as an evidentiary rule, pertains to the admissibility of evidence, not to the sufficiency of evidence on a summary judgment motion in an antitrust case.
Despite the artful innocent explanations that defendants have offered for their parallel pricing, and sworn testimony, expressly refuting that any conspiracy occurred, the fact that "associations are not walking conspiracies" ( AD/SAT v. Assoc. Press, et al., 920 F. Supp. 1287, 1308 (S.D.N.Y. 1996) (citation omitted), aff'd, 181 F.3d 216 (2d Cir. 1999)), and that "[t]he mere opportunity to conspire does not by itself support the inference that such an illegal. combination actually occurred" ( Capital Imaging, 996 F.2d at 545 (citation omitted)), when analyzed together, as it must be, the evidence of parallel pricing coupled with the evidence of discussions and agreements among association members, demonstrates a material. issue of disputed fact as to whether IMMA members acted independently with regard to models' commissions. See In re Med. X-Ray Film Antitrust Litig., 946 F. Supp. at 220 ("Despite the Plausibility of defendants' innocent explanations for the circumstantial. evidence Plaintiffs have presented when considered piece by piece, this evidence when taken in combination tends to exclude the possibility that defendants acted independently in setting their prices for medical. x-ray film each year.").
See In re Citric Acid Litig., 191 F.3d 1090, 1098 (9th Cir. 1999)("Gathering information about pricing and competition in the industry is standard fare for trade associations. If we allowed conspiracy to be inferred from such activities alone, we would have to allow an inference of conspiracy whenever a trade association took almost any action. As the Supreme Court has recognized, however, trade associations often serve legitimate functions, such as providing information to industry members, conducting research to further the goals of the industry, and promoting demand for products and services."), citing Maple Flooring Mfrs. Ass'n v. United States, 268 U.S. 563, 567 (1925). Here, IMMA members engaged in significantly more than "gathering information about pricing and competition."
Plaintiffs have established that all defendants who were members of IMMA, and therefore participated in or were privy to the conversations and agreements discussed above, "had a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement." Int'l Distribution Centers, Inc., 812 F.2d at 793. None of these defendants have sufficiently established, through their cessation of involvement in IMMA, that they withdrew from the alleged price-fixing conspiracy. Even the strongest cases, where certain defendants terminated their membership because they disagreed with particular agreements adopted by the association, do not establish such defendants' withdrawals from the alleged price-fixing conspiracy, as these contested agreements were collateral. to the conspiracy on models' commissions. Therefore, Ford's, G. Ford's, Wilhelmina's, Elite's, Next's, IMG's, Click's, Images, and MMC's motions for summary judgment on Plaintiffs' claim of a conspiracy to fix models' commissions are denied.
See Drug Mart Pharm. Corp. v. Am. Home Prods. Corp., 288 F. Supp.2d 325, 328-329 (E.D.N.Y. 2003) ("To withdraw from a conspiracy, a defendant must show: (1) 'affirmative acts inconsistent with the object of the conspiracy,' that are (2) 'communicated in a manner reasonably calculated to reach co-conspirators.' United States v. United States Gypsum Co., 438 U.S. 422, 464-65 (1978); Hyde v. United States, 225 U.S. 347, 369 (1912). 'Mere cessation of activity is not enough.' United States v. Borelli, 336 F.2d 376, 388 (2d Cir. 1964); United States v. Greenfield, 44 F.3d 1141, 1149 (2d Cir. 1995). A defendant must take an affirmative action 'to disavow or defeat the purpose of the conspiracy,' United States v. Nerlinger, 862 F.2d 967, 974 (2d Cir. 1988) (quoting United States v. James, 609 F.2d 36, 41 (2d Cir. 1979)), 'to make sure that a withdrawal. did occur and is not simply being invented ex post,' Greenfield, 44 F.2d at 1150. Until affirmative evidence of withdrawal. has been produced, a defendant's participation in the conspiracy is presumed to continue until the last overt act by any of the conspirators. United States v. Panebianco, 543 F.2d 447, 453 (2d Cir. 1976). The burden of demonstrating withdrawal. lies on the defendant. See United States v. Berger, 224 F.3d 107, 118 (2d Cir. 2000); James, 609 F.2d at 41; Borelli, 336 F.2d at 388. Whether a defendant withdrew from a conspiracy is often a question of fact for the jury, see, e.g., Panebianco, 543 F.2d at 454 n. 5; Borelli, 336 F.2d at 390; however, when the material. facts are not disputed, courts have decided the issue as a matter of law, see, e.g., United States v. Goldberg, 401 F.2d 644, 648-49 (2d Cir. 1968); Morton's Mkt., Inc. v. Gustafson's Dairy, Inc., 198 F.3d 823, 839 (11th Cir. 1995) . . .").
Because a "corporate officer can also be held liable in civil antitrust actions" under Section One of the Sherman Act ( New York, et al. v. Feldman, 01 Civ. 6691, 2003 U.S. Dist. LEXIS 11759, at *8 (S.D.N.Y. July 10, 2003) (denying summary judgment for an individual. dealer), citing 15 U.S.C. § 15c)), G. Ford may be held liable in his representative capacity. Notwithstanding G. Ford's assertions to the contrary (G. Ford Decl. ¶¶ 22, 37), the evidence discussed supra, in addition to G. Ford's concession that "only liars like competition" (Pl., Exh. 283 at 138:10-15), allows for a reasonable inference that G. Ford participated in the conspiracy.
Despite the fact that "[o]nce a conspiracy is shown, only slight evidence is needed to link another defendant with it" ( Apex Oil Co., 822 F.2d at 257, quoting United States v. Wilkinson, 754 F.2d 1427, 1436 (2d Cir. 1985) (citations omitted)), there is still insufficient evidence to link Que to any illegal. price-fixing scheme. It is undisputed that Que has never been a member of IMMA or MMC and has never even attended a meeting of either association. Further, Plaintiffs fail to highlight any discussions that Que had with any of the other defendants, from which Que's participation in the alleged conspiracy could be inferred. Instead, Plaintiffs argue that the fact that the contracts utilized by Que resembled the ones utilized by the other defendants, especially with regard to the classification of the companies as management rather than employment agencies, coupled with the concept that when Que opened in 1998, two of its employees had previously worked for management companies with ties to IMMA and the alleged conspiracy, together establishes Que's involvement. I disagree. although Plaintiffs assert that the two individuals who came to Que from other management companies, carried with them information about the price-fixing conspiracy and other illicit agreements, whereby infecting Que, Plaintiffs offer no evidence to establish that these two individuals actually convinced Que to join the conspiracy, or for that matter, to act in any way upon any such information. While this Court credits Plaintiffs' theory as credible, albeit a bit of a stretch, the inference urged by Plaintiffs does not 'tend to exclude the possibility that [Que was] acting independently in following the pricing pattern of the industry." Monsanto Co. v. Spray-Rite Serv. Co., 465 U.S. 752, 764 (1984). Therefore, Que's motion for summary judgment on Plaintiffs' models' commissions claim, is granted.
Que contests both that its contracts parallel those of the other defendants and also that anyone on its staff was ever a former executive of any of the other defendants.
b. Conspiracy to Fix Client Service Fees
Plaintiffs also seek to recover damages from defendants' alleged price-fixing conspiracy to fix, at an inflated rate, the service fee charged to clients (those who hired models), based on a theory that clients would have been more willing to pay Plaintiffs a higher rate for their services had they not been charged an inflated fee by defendants. While there is evidence of significant inter-firm communication about instituting and raising client service charges, as demonstrated supra, Plaintiffs are not the proper class to assert this claim.
In order to recover for an alleged antitrust violation, a Plaintiff must have suffered "the kind of injury that the antitrust laws were directed at." G.K.A. Beverage Corp., et al. v. Honickman, et al., 55 F.3d 762, 766 (2d. Cir. 1995), citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). And, a plaintiff must have antitrust standing, which fails where "the indirectness of the asserted injury, the speculative nature of the damage theory, the risk of duplicative recoveries and the danger of complex apportionment" are at issue. Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242, 247 (2d Cir. 1985), citing Assoc. Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983). See also Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (indirect purchasers lack standing to recover for antitrust violations). In this case, the clients, as they were the parties directly charged the allegedly inflated service fees, not the models, whose injury, if any, is indirect and speculative, would be the proper Plaintiffs.
A customer of a customer who is overcharged . . . does not have antitrust standing . . . it is difficult to calculate the damages suffered by an indirect purchaser. The indirect purchaser is only damaged to the extent that the direct purchaser passes on to it the overcharge resulting from the anticompetitive conduct. Any such calculation would be imprecise and could result in double recovery if both the direct and indirect purchasers sue and the calculations in their suits differed.Law Offices of Curtis V. Trinko, LLP., et al. v. Bell Atlantic Corp., 305 F.3d 89, 106 (2d. Cir. 2002), rev'd and remanded on other grounds sub nom, Verizon Commns., Inc. v. Law Offices of Curtis V. Trinko, L.L.P., 124 S.Ct. 824 (2004), citing Illinois Brick, 431 U.S. at 737-47.
In this case, as in Illinois Brick, the plaintiffs are not the direct victims, but rather seek damages based on an argument that overcharges have been passed down the stream. It is clear beyond cavil that the clients, whom defendants allegedly charged a fixed inflated service fee, suffered the most direct injury. Therefore, as indirect victims, Plaintiffs lack antitrust standing to assert a claim that carries the potential. for duplicative recovery. Further, Plaintiffs' damage theory — that clients would have been willing to pay more for their services, had they been charged less by defendants — is highly speculative. This Court finds possible defendants' assertion that if defendants had not recouped this needed capital. from their clients, by way of increased service fees, they would have looked to Plaintiffs to supplement their profits, by way of further increases in commissions. While it is impossible to know with any definiteness exactly what would have ensued, had defendants not increased the service fees, one thing is clear — and that is that any damage suffered by Plaintiffs is wholly speculative. Therefore, Plaintiffs' claim that defendants conspired to fix the service charges invoiced to their clients is dismissed, as against all defendants, for lack of standing.
2. Rule of Reason Claims
In the preponderance of cases (those not within the per se illegal. categories), a plaintiff must establish an antitrust injury under the rule of reason. "Under this test Plaintiff bears the initial. burden of showing that the challenged action has had an actual adverse effect on competition as a whole in the relevant market; to prove it has been harmed as an individual. competitor will not suffice." Capital Imaging, 996 F.2d at 543 (emphasis in original.). "The traditional. indicators of an adverse effect [are] reduced output, increased price, or decreased quality . . ." Commercial. Data Servers, Inc. v. Int'l Bus. Machines Corp., 262 F. Supp.2d 50, 78 (S.D.N.Y. 2003), citing Virgin Atlantic Airways, Ltd., 257 F.3d at 264. A plaintiff may establish antitrust injury by proving that the defendant possesses sufficient "market power" to hinder competition "on a market-wide basis." Dresses For Less, Inc., 2002 U.S. Dist. LEXIS 18338, at *19. "Such power is defined as the power to 'raise prices significantly above the competitive level without losing all of one's business.' Id., citing CDC Techs., Inc., 186 F.3d at 81, quoting Capital Imaging, 996 F.2d at 546. Through requiring that a plaintiff demonstrate injury to a relevant market, the Sherman Act protects competition within a market, instead of "the individual. competitors within that market." Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 96 (2d Cir. 1998), citing Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 342-44 (1990). Once a plaintiff has fulfilled its initial. burden of proof, the burden shifts to the defendant to provide evidence of the "pro-competitive 'redeeming virtues' of their combination." Capital Imaging, 996 F.2d at 543 (citation omitted). If the defendant can make this showing, the burden shifts back to the plaintiff "to demonstrate that any legitimate collaborative objectives proffered by defendant could have been achieved by less restrictive alternatives, that is, those that would be less prejudicial. to competition as a whole." Id. (citations omitted).
A Court's rule of reason analysis involves a weighing of harms and benefits in order to make a determination as to whether conduct "purports to promote or to destroy competition." Capital Imaging, 996 F.2d at 543.
The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual. or probable. The history of the restraint, the evil believed to exist, therefore reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts. This is not because a good intention will save an otherwise objectionable regulation or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences.Id., citing Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918). "[I]n carrying out a rule of reason analysis, 'the existence of (less restrictive) alternatives is obviously of vital. concern in evaluating putatively anticompetitive conduct.'" North Am. Soccer League, et al. v. Nat'l Football League, et al., 670 F.2d 1249, 1259 (2d Cir. 1982), citing Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 303 (2d Cir. 1979).
a. Conspiracy to Evade Article 11
Plaintiffs argue, in Count II of their complaint, as a separate and distinct Section One violation, that defendants conspired to evade Article 11, by collusively holding themselves out to be management companies, entitled to charge commissions greater than the ten percent cap imposed by Article 11. although plaintiffs have, in their complaint, throughout the discovery process, and again in their summary judgment opposition, taken the position that this claim is also a per se violation (3d Am. Compl. ¶ 109; Pl. 56.1 Opp. ¶ 129 ("Market share is irrelevant in a per se case."); Oral. Argument Transcript, 3/9/04 ("Oral. Arg. Tr.") at 46:9-11), they have not provided any foundation for such an argument, either directly or by analogy. Because of their reliance on this position, plaintiffs have also failed to make the necessary showing required for a rule of reason claim, i.e., to define the relevant market, or demonstrate the anti-competitive effects of this alleged conspiracy. Summary judgment is granted for all defendants on plaintiffs' Count n claim, of a conspiracy to evade Article II (rather than a conspiracy to fix prices above ten percent which is subsumed in the surviving Count I) as a result of insufficient evidence.
b. Conspiracy to Fix Terms and Conditions of Employment
Similarly, to the extent that Count III of plaintiffs' complaint asserts, as a separate and distinct Sherman Act violation, a claim based on defendants' alleged conspiracy to fix various terms and conditions of models' employment, this claim also fails. although it is difficult to make out exactly what claim Count III is asserting, it is clear that Count III does not purport to comprise a per se claim, and even alleges market power, a touchstone of a rule of reason claim. Therefore, as to this claim, plaintiffs have the burden of establishing the relevant market, and demonstrating the antitrust injury associated with the violation. However, as explained supra, plaintiffs fail to present any evidence to support a rule of reason claim. Therefore, to the extent that plaintiffs did not also voluntarily withdraw this claim at oral. argument (Oral. Arg. Tr. at 52:2-4) ("We'd be prepared, your Honor, not to proceed on Count 3 as a rule of reason claim in order to streamline the issues"), this claim is hereby dismissed as to all defendants.
While this claim does not survive on its own, as discussed supra, evidence of agreements as to various terms and conditions of models' employment is admissible as probative of an agreement on models' commissions.