Perma Life Mufflers, Inc. v. International Parts Corp./Dissent Harlan

by John Marshall Harlan II

United States Supreme Court

392 U.S. 134

Perma Life Mufflers, Inc.  v.  International Parts Corp.

 Argued: April 22 and 23, 1968. --- Decided: June 10, 1968

Mr. Justice HARLAN, with whom Mr. Justice STEWART joins, concurring in part and dissenting in part.

The variety of views this case has engendered seems to me to stem from lack of agreement on a definition of the term 'in pari delicto,' as well as a disagreement, perhaps, on the standards that should govern the use of the defense to which that term is properly applied. I believe that the courts below misused the term, but that properly used it refers to a defense that should be permitted in antitrust cases. Consequently, I would remand this case not for immediate trial but for fresh consideration of the motion for summary judgment upon proper standards.

Plaintiffs who are truly in pari delicto are those who have themselves violated the law in cooperation with the defendant. ^[1] If the law is the Sherman Act, both are, in principle, liable equally to criminal prosecution. For example, two manufacturers who agree on a price at which they will sell are 'of equal fault,' as are a manufacturer and a dealer who strike a bargain whereby each accepts an illegal restriction that benefits the other.

When a peron suffers losses as a result of activities the law forbade him to engage in, I see no reason why the law should award him treble damages from his fellow offenders. It seems to me a bizarre way to 'further the overriding public policy in favor of competition,' ante, at 139, to pay violators three times their losses in doing what public policy seeks to deter them from doing. Even if the threat of intra-conspiracy treble damages had some deterrent effect, however, I should not think it a too 'fastidious regard for the relative moral worth of the parties,' ibid., to decline to sanction a kind of antitrust enforcement that rests upon a principle of well-compensated dishonor among thieves.

There are, however, three situations quite disinct from that to which I think the term in pari delicto is properly applied. The first is the 'consent' situation in which the Latin maxim 'volenti non fit injuria' is sometimes invoked. Where X and Y conspire to fix prices at which they will sell, they are in pari delicto. If Z, knowing of the conspiracy, nevertheless purchases from X, he is not in pari delicto. He has committed no offense: the most that can be said is that he knowingly allowed an offense to be committed against him. I would agree, for many of the reasons stated in the opinions of Mr. Justice BLACK, Mr. Justice FORTAS, and Mr. Justice MARSHALL, that there should be no defense in such a situation, where the plaintiff has done nothing the law told him not to do.

A second situation distinguishable from true in pari delicto is illustrated by Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219, relied on by the Court. It was there alleged in defense to a trebledamage action that the defendants' illegal actions were taken in reprisal against altogether independent illegal actions by the plaintiff. Here again, I accept the decision that this is no defense. Our law frowns on vigilante justice. Since the plaintiff is in part enforcing the public interest against the defendants' violations, I would permit him to do so, and leave punishment for any independent violation by him to proper means of enforcement.

The third distinguishable situation may or may not be illustrated by Simpson v. Union Oil Co., 377 U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98, and Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998, two cases that I find it quite difficult to understand. ^[2] In each of them, the plaintiff had been offered a dealership, on terms that he did not participate in formulating, and in each case he at first 'accepted' such a dealership. Since neither case stated satisfactorily where the alleged combination in restraint of trade was to be found, it is not clear whether the plaintiff's acceptance of a dealership was itself a forbidden act. If it was not, then these cases fall under the heading of 'consent' cases. A person who engaged in a lawful business on the terms offered should not be prevented from suing merely by his knowledge that others violated the law in contriving those terms. If, however, those plaintiffs were doing something the law told them not to do, I suggest that recovery in those cases can best be understood on the theory of a 'coercion' exception to the in pari delicto doctrine. That is, although a large business with the power to dictate terms and a small business that can only accept them or cease doing business may both, in principle, be liable to legal sanctions for the contract that results from the offer and acceptance, it is considered that the liability is not 'par,' and that the business accepting dictation is only minimally blameworthy.

In my view, the District Court and the Court of Appeals did not apply the true in pari delicto standard to this case. The District Court said that 'each plaintiff voluntarily entered into the franchise agreement * * * and accepted the benefits therefrom. They are * * * (therefore?) in pari delicto with defendants * * *.' ^[3] At another point the court said, 'We have repeatedly held that a person who freely assents to an act suffers 'no legal injury' if harm results therefrom.' ^[4] Although the District Court made a passing distinction of the 'coercion' and 'unclean hands' doctrines, it is not clear that it meant to hold that the violation of the Sherman Act, if any, was one for which plaintiffs were subject to public-law sanctions along with the defendants.

The Court of Appeals decision was similar. That court relied on the District Court's language quoted above, adding that each of the plaintiffs had made a substantial profit from selling auto parts, a fact that might bear on the measure of any damages but which, apart from illegal action on the part of the plaintiffs, should not afford an absolute defense. ^[5]

It is by no means clear on this record, however, that the plaintiffs may not be said to have been in pari delicto in the proper sense of that term. This question is rendered more difficult by the complexity of the record history of plaintiffs' activities, and by the formidable obscurity of the law of dealer liability for vertical restraints, an obscurity fostered by Simpson, supra Albrecht, supra, and above all by United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505. Although I make no attempt to drain the bog at this point, I am of the view that before this case goes to trial the lower courts should be given another opportunity to consider the in pari delicto defense. I would remand this case to determine whether any agreement alleged to be in restraint of trade was one for which the plaintiffs were substantially as much responsible, and as much legally liable, as the defendants. I would permit the lower courts to consider this question upon the existing affidavits and such additional material as either side may wish to adduce.

Notes

1. This is at least the traditional use of the term. See, e.g., Williams v. Hedley, 8 East 378, 381-382, 103 Eng.Rep. 388, 389. See generally Note, In Pari Delicto and Consent as Defenses in Private Antitrust Suits, 78 Harv.L.Rev. 1241, distinguishing the two defenses. The present cases is as good an illustration as any of the usefulness of maintaining distinct terms for the distinct situations properly characterized by 'in pari delicto,' 'consent,' 'unclean hands,' and so forth.
2. See my dissenting opinion in Albrecht, 390 U.S., at 156, 88 S.Ct., at 875.
3. 1966 Trade Cases 71,801, at 82,705.
4. Id., at 82,706.
5. See 376 F.2d 692, at 693, 695.