Cite as 532 F.2d 674 (1976)
cy in favor of competition. A more fastidious regard for the relative moral worth of the parties would only result in seriously undermining the usefulness of the private action as a bulwark of anti-trust enforcement. And permitting the plaintiff to recover a windfall gain does not encourage continued violations by those in his position since they remain fully subject to civil and criminal penalties for their own illegal conduct.” 392 U.S. at 139, 88 S.Ct. at 1984, 20 L.Ed.2d at 990.
Contending that their defense is not one of in pari delicto or unclean hands, and is thus not barred by Perma Life, defendants argue that they are not challenging Calnetics’ right to bring an antitrust action but merely its reliance on illegal sales for proof of damages. See E. Timberlake, Federal Treble Damage Antitrust Action § 21.10, at 326–28 (1965).[1] Labels, however, are not controlling,[2] and we find no legitimate reason for distinguishing defendants’ “illegal sales” argument from the in pari delicto type of defense struck down in Perma Life.
From a practical point of view, Calnetics is in a position no different from that of the plaintiff in Purex Corp. v. General Foods Corp., 318 F.Supp. 322 (C.D.Cal.1970), who had acquired an antitrust cause of action by virtue of an acquisition which was itself illegal. Recognizing the asserted defense of illegality as a species of in pari delicto, the Purex court rejected it. VW’s and Subsidiary’s defense is also strikingly similar to that rejected by the Tenth Circuit in Semke v. Enid Automobile Dealers Ass’n, 456 F.2d 1361 (10th Cir. 1972). In Semke, the plaintiff, an unlicensed dealer in new cars, brought suit against an automobile dealers’ association for its interference with his business efforts. Citing Perma Life, the court refused to let defendant argue that plaintiff’s whole business operation was illegal because he was in violation of state licensing statutes designed to protect the public from unscrupulous automobile dealers. The plaintiff, the court found, was entitled to prove damages his business suffered, even though at the time of injury plaintiff may have been illegally engaged in the automobile retail business. 456 F.2d at 1370. See also Adolf Coors Co. v. A & S Wholesalers, Inc., 1975-1 CCH Trade Cases ¶ 60,187, at 65,626, 65,631 (D.Colo.1975).
Similarly, if Calnetics proves that defendants unlawfully foreclosed it from the Distributor market in 1970 and 1971, it is entitled to recover damages actually suffered even though the market position from which Calnetics was displaced had been attained only through illegal conduct. To rule otherwise would effectively frustrate the important public policy underlining the antitrust laws: encouragement of private antitrust suits in order to deter the illegal exercise of market power. See Lanier Business Products v. Graymar Co., 355 F.Supp. 524, 526 (D.Md.1973). By allowing Calnetics to base its proof of damages on its 1969 sales, even assuming arguendo their illegality, we are not giving a green light to companies to violate the law against commercial bribery. As stated in Perma Life, antitrust violators “remain fully subject to civil and criminal penalties for their own illegal conduct.” 392 U.S. at 189, 88 S.Ct. at 1984, 20 L.Ed.2d at 990. The fact that Calnetics is itself not immune from liability is underlined by Subsidiary’s counterclaim for damages which, if sustained, will force Calnetics to disgorge any gains shown to be ill-gotten.
- ↑ As stated by Timberlake:
“This [refusal to consider ill-gotten gains as a basis of damages] is not a pari delicto defense, nor is it a defense that plaintiff was otherwise violating the antitrust laws * *. It is simply that profits made in the ‘before’ period, when plaintiff was the beneficiary of the unlawful acts, are not proper evidence upon which to predicate lost profits in the ‘after’ period.” E. Timberlake, Federal Treble Damage Antitrust Action § 21.10, at 326.
However, Timberlake’s argument should be read in light of the fact that his treatise was written three years before the Supreme Court’s opinion in Perma Life. Further, Victor Talking Machine Co. v. Kemeny, 271 F. 810, 819 (3d Cir. 1921), upon which Timberlake primarily relies, was decided long before the trend against the use of the in pari delicto defense in antitrust suits took hold.
- ↑ See Waldron v. British Petroleum Co., Ltd., 231 F.Supp. 72, 90–92 (S.D.N.Y.1964).
