California Civil Jury Instructions (CACI)

3402. Horizontal Restraints - Dual Distributor Restraints— Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] [stopped doing business with/refused to deal with/restrained] [[him/her/it]/a reseller]. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of defendant] sold [products] directly in competition with [[name of plaintiff]/a reseller] to a significant portion of [[name of plaintiff]/the reseller]'s customers or potential customers;

2. That [name of defendant] [stopped doing business with/ refused to deal with/restrained] [[name of plaintiff]/the reseller];

3. That a motivating reason for the decision to [end business with/refuse to deal with/restrain] [[name of plaintiff]/the reseller] was [his/her/its] refusal to agree to [name of defendant]'s [specify the claimed restraint, e.g., territorial or customer restrictions];

4. That [name of plaintiff] was harmed; and

5. That [name of defendant]'s conduct was a substantial factor in causing [name of plaintiff]'s harm.

Directions for Use

The appropriate bracketed options should be selected and the balance deleted depending on the specific facts. For example, the word "reseller" should be used instead of plaintiff if the plaintiff is not the reseller—such as, when the plaintiff is a government enforcer.

Sources and Authority

Business and Professions Code section 16726 provides: "Except as provided in this chapter, every trust is unlawful, against public policy and void."

Business and Professions Code section 16720(a) provides: "A trust is a combination of capital, skill or acts by two or more persons for any of he following purposes: To create or carry out restrictions in trade or commerce."

"We hold that it is unlawful for a manufacturer who also distributes its own products in one geographic area to terminate an independent distributor when a substantial factor in bringing about the termination is the distributor's refusal to accept the manufacturer's attempt to enforce or impose territorial or customer restrictions among distributors." (Guild Wineries & Distilleries v. J. Sosnick and Son (1980) 102 Cal.App.3d 627, 630 [162 Cal.Rptr. 87].)

" '[A] refusal of a manufacturer to deal with a distributor can constitute a "combination" in restraint of trade within the purview' of the Sherman Act. . . . We conclude that this case . . . is governed by a per se principle." (Guild Wineries & Distilleries, supra, 102 Cal.App.3d at p. 633.)

In Dimidowich v. Bell and Howell (9th Cir. 1986) 803 F.2d 1473, 1482-1484, opn. mod. (9th Cir. 1987) 810 F.2d 1517, the Ninth Circuit Court of Appeals rejected the holding in Guild Wineries, supra, that the per se standard applied, and predicted that the California Supreme Court would overrule Guild Wineries. This has not yet occurred. In the meantime, the decision in the Guild court remains binding on all subordinate state courts. (Auto Equity Sales v. Superior Court (1962) 57 Cal.2d 450, 455 [20 Cal.Rptr. 321, 369 P.2d 937].)

"It is settled that distributors cannot lawfully agree to divide territories or customers. Such conduct is sometimes called a 'horizontal restraint,' and is a per se violation of the Sherman Act. . . . When Guild became a distributor the same rule became applicable to it. Guild could not lawfully coerce a fellow distributor into allocating customers any more than Sosnick and other distributors could lawfully agree to such an allocation." (Guild Wineries & Distilleries, supra, 102 Cal.App.3d at p. 633.)

"The alleged antitrust violation need not be the sole or controlling cause of the injury in order to establish proximate cause, but only need be a substantial factor in bringing about the injury." (Saxer v. Philip Morris, Inc. (1975) 54 Cal.App.3d 7, 23 [126 Cal.Rptr. 327], internal citation omitted.)

"The plaintiff in a Cartwright Act proceeding must show that an antitrust violation was the proximate cause of his injuries. The frequently stated 'standing to sue' requirement is merely a rule that an action for violation of the antitrust laws may be maintained only by a arty within the 'target area' of the antitrust violation, and not by one incidentally injured thereby. An 'antitrust injury' must be proved; that is, the type of injury the antitrust laws were intended to prevent, and which flows from the invidious conduct which renders defendants' acts unlawful. Finally, a plaintiff must show an injury within the area of the economy that is endangered by a breakdown of competitive conditions." (Kolling v. Dow Jones and Co., Inc. (1982) 137 Cal.App.3d 709, 723-724 [187 Cal.Rptr. 797], internal citations and footnote omitted.)

"The exact parameters of 'antitrust injury' under section 16750 have not yet been established through either court decisions or legislation." (Cellular Plus, Inc. v. Superior Court (1993) 14 Cal.App.4th 1224, 1234 [18 Cal.Rptr.2d 308].)

Secondary Sources

1 Witkin, Summary of California Law (9th ed. 1987) Contracts, §§ 575- 590

2 Antitrust and Trade Regulation Law Section, State Bar of California, California Antitrust Law (2d ed. 2001), §§ 9.03, 9.04, 9.08

6 Antitrust Laws & Trade Regulation, Ch. 105, California, § 105.02 (Matthew Bender)

3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.168 (Matthew Bender)

49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition (Matthew Bender)

(New September 2003)