Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03514/USCOURTS-cand-3_04-cv-03514-14/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE TABLEWARE ANTITRUST

LITIGATION

 /

THIS DOCUMENT RELATES TO

ALL ACTIONS

 /

No C-04-3514 VRW

ORDER

Plaintiffs in these consolidated cases allege that May

Department Stores Co (“May”) and Federated Department Stores, Inc

(“Federated”), which operate department stores across the United

States, and Lenox, Inc (“Lenox”) and Waterford Wedgwood, USA

(“Waterford”), both of which produce fine tableware sold in the

United States, conspired with one another to boycott Bed, Bath and

Beyond, a competitor of May and Federated. Plaintiffs claim to

have purchased fine tableware from May and Federated during the

period of the alleged boycott and were thus injured because the

boycott impaired competition in that product market. Plaintiffs

bring suit under § 1 of the Sherman Act, alleging that defendants’

conduct is condemned per se.

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On November 17, 2006, Federated (joined by May) and

Waterford moved for summary judgment asserting a variety of

grounds. Doc #116; Doc #128. For reasons discussed below, the

court GRANTS Waterford’s motion for summary judgment and GRANTS IN

PART and DENIES IN PART Federated’s and May’s motion for summary

judgment.

I

In early 2000, both Waterford and Lenox considered

expanding the distribution channels for their high-end tableware

lines to include Bed, Bath & Beyond and other specialty retailers. 

Doc #183 at Ex 67 (“In a perfect world, this [Bed, Bath & Beyond

partnership] is the kind of new distribution that we should be

exploring; otherwise, we will be forever in the grip of the

department stores. However, we will have to assess the amount of

angst at Federated compared with the prize before we decide whether

or not to be a part of this [Bed, Bath & Beyond] test.”). See also

Doc #180, Ex 10 (Mielke depo) at 48:8-51:15.

On March 7, 2001, Bed, Bath & Beyond and Waterford

executives met and agreed to proceed with a test project. Doc

#180, Ex 10 (Mielke depo) at 74:12-75:9; Ex 32 (“A * * * meeting in

New York when we agreed to proceed with the test * * *”). During

subsequent meetings, Bed, Bath & Beyond and Waterford personnel

finalized site plans for the opening of a fine china department at

Bed, Bath & Beyond. Doc #180, Ex 10 (Mielke depo) at 82:11-84:8;

Doc #179, Ex 5 (Johnson depo) at 144:1-16; Doc #183, Ex 72. 

Lenox also met with Bed, Bath & Beyond to discuss the

prospect of distributing tableware. Doc #179, Ex 2 (Gavin depo) at

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50:19-53:6, 56:18-21, 58:15-24, 59:8-21; Ex 6 (Krangel Depo) at

94:8-98:23, 106:3-19; Doc #180, Ex 14 (Scala depo) at 68:5-70:11,

71:12-19. Eventually, on March 30, 2001, Lenox agreed to

participate in a test rollout with Bed, Bath & Beyond. Doc #179,

Ex 2 at 64:20-65:3; Doc #183, Ex 59 (“We will be piloting a 7 store

test program in Bridal tabletop products”). The parties confirmed

specific product assortments at subsequent meetings. Doc #179, Ex

2 at 139:20-142:2; Doc #180, Ex 15 (Temares depo) at 59:9-63:22,

160:2-161:3; Doc #179, Ex 5 (Johnson depo) at 73:20-74:9,

198:18-199:9.

Because Waterford had an interest in knowing the

identities of the other manufacturers participating in the Bed,

Bath & Beyond rollout, its executives had their “ear to the ground

from day one about which manufacturers were going to be

participating and who were not going to be participating.” Doc

#179, Ex 10 (Mielke depo) at 156:8-14. Indeed, Waterford’s Mielke

testified that he probably mentioned the Bed, Bath & Beyond rollout

during conversations with Lou Scala and Moira Gavin at Lennox. Doc

#179, Ex 2 (Gavin depo) at 139:20-141:9); Doc #180, Ex 10 (Mielke

depo) at 153:24-157:7; Ex 60 (“Lenox and Waterford are anchoring

the department.”). 

On May 31, 2001, Lenox informed May about its plans to

distribute through Bed, Bath and Beyond “as a ‘6 door test,’

starting in 9/01,” Doc #182, Ex 44 at May 6528l. Lenox further

mentioned that Waterford would also be participating in the Bed,

Bath & Beyond rollout. Doc #179, Ex 7 (Locraft depo) at 179:13-16.

The evidence suggests that this news spurred the retailers into

action. Gregory Locraft, an executive at May, was “agitated,

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disappointed, concerned [and] upset” by this news. In a raised

voice, Locraft exclaimed “you do what you have to do and we’ll do

what we have to do.” Doc #179, Ex 7 at 176:14-16. Soon

thereafter, May executive Don Engelman called Carl Mielke at

Waterford to confirm whether Waterford intended to participate in

the Bed, Bath & Beyond rollout. Mielke told Engelman that

Waterford was “working on something” with Bed, Bath & Beyond. Doc

#180, Ex 10 at 163:11-12. 

The next day, Lenox contacted May executive Judith Hofer

“to try to take care of the situation” and “settle things down.” 

Doc #179, Ex 6 at 206:16-25. Hofer was “very professional” in

response, but reiterated Locraft’s admonition, “you have to do what

you need to do to grow your business and we need to do what we need

to do.” Id at 209:7-9. 

About a week after the May 31 meeting, Federated

contacted both Lenox and Waterford to complain about their

participation in the rollout. Federated’s Salus telephoned Lenox

President Krangel and said he was “concerned” about the decision. 

Doc #179, Ex 6 (Krangel depo) at 241:9-10. At the end of the

conversation, Salus told Krangel: “[y]ou have to do what you have

to do to grow your business and we have to do what we need to do

with our business.” Doc #170, Ex 6 (Krangel depo) at 239:16-25,

236:19-244:17; Doc #180, Ex 14 (Scala depo) at 148:5-149:19,

151:3-12. 

On the same day, Federated president Terry Lundgren and

executive Janet Grove telephoned Waterford CEO Chris McGillivary

about the Bed, Bath & Beyond program, warning that it “was not

going to help the relationship between the two companies.” Doc

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#179, Ex 9 (McGillivary depo) at 65:5-66:11. A few days later,

James Zimmerman, Federated’s CEO, telephoned Anthony O’Reilly,

Chairman of Waterford, to discuss Waterford’s participation in the

Bed, Bath & Beyond rollout. According to Waterford, Zimmerman said

he “would advise against it.” Doc #180, Ex 19 at FED 001223; Ex 16

(Zimmerman depo) at 24:4-26:6, 29:4-30:3. 

On June 12, 2001, Federated executives held an internal

meeting during which the Bed, Bath & Beyond rollout was mentioned. 

Doc #179, Ex 3 (Grove depo) at 129:13-130:14. One week later,

Helaine Suval, a vice-president at Federated, sent an email

summarizing the meeting as relayed to her from Federated’s Dawn

Robertson (Suval did not attend the meeting). The email states in

pertinent part: 

Waterford, Lenox and All-Clad have agreed to sell

Bed, Bath & Beyond (6 stores). Major point of

contention – [Federated’s president] Terry Lundgren

involved. Federated has threatened to drop them if

they go ahead and sell BB&B. No new initiatives

with them in stores[.] 

Doc #181, Ex 38. Robertson disputes the accuracy of the Suval

email; although unable to recall what was said at the meeting,

Robertson firmly relates what was not said. She contends that

nobody at the meeting “stated that Lenox or Waterford, or any of

their products, would be dropped by Federated or any of its stores,

nor did any Federated [employee] at the meeting state that there

would be no new initiatives with Lenox.” Doc #131, Ex T, ¶ 4. The

point, of course, is that the evidence discloses conflicting

versions of events, albeit both from Federated personnel. 

Around June 12, 2002, May executive Tom Hayes had a

meeting with Scala at Lenox, the substance of which Hayes relayed

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to Gregory Locraft. Doc #179, Ex 7 at 215:20-23. According to

Locraft’s notes, Hayes maintained that he would not distribute

several Lenox and Gorham brands if Lenox sold to Bed, Bath &

Beyond. Doc #179, Ex 7 at 218:17-21; Doc #183, Ex 57. 

The concerns of Federated and May appear to have borne

fruit. Waterford’s McGillivary told his subordinate, Carl Mielke,

“[t]his is bad * * *, [w]e need to stop the test.” Doc #180, Ex 10

(Mielke depo) at 113:5-18. McGillivary remarked to Mielke “[w]e

needed to find a way to stop this and we need to tell [Bed, Bath &

Beyond] we can’t do this test, and we can’t tell them that it is

because of Federated.” Doc #180, Ex 10 (Mielke depo) at

111:21-113:25, 115:22-116:10. Accordingly, Mielke drafted a script

of what to tell Bed, Bath & Beyond, which McGillivary approved. 

Doc #181, Ex 10 at 119:20-120:5, 130:22-131:7; Doc #181, Ex 31-33. 

On June 12, 2001, Mielke called James Peikon and Todd

Johnson at Bed, Bath & Beyond and told them Waterford would not be

able to participate in the test program. Doc #179, Ex 5 (Johnson

depo) at 78:3-79:18; Doc #180, Ex 10 (Mielke depo) at 120:6-15,

130:22-134:21. According to Mielke, Peikon and Johnson told Mielke

that his reasons were “bullshit,” Doc #180, Ex 10 at 133:3-25, and

that “[t]hese F---- up department stores will promise you guys

anything if you don’t sell us but will go right back to F---- you

up the --- like they always have.” Doc #181, Ex 32. 

At McGillivary’s instruction, Mielke reported his

conversation with Bed, Bath & Beyond to Federated’s Janet Grove. 

Doc #180, Ex 10 (Mielke depo) at 134:22-136:18; Doc #181, Ex 31. 

According to Mielke, Grove said “[t]hat’s great[,] [y]ou guys do

what you have to do and we do what we have to do, but I’m glad you

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guys made this decision.” Doc #180, Ex 10 (Mielke depo) at

136:19-137:17; Doc #179, Ex 3 (Grove depo) at 83:7-18. 

Next, Lenox called Bed, Bath & Beyond and terminated its

participation in the Bed, Bath & Beyond program. Doc #180, Ex 15

(Temares depo) at 168:5-169:22. Lenox’s Krangel called Bed, Bath &

Beyond President and CEO Steven Temares and told him that Lenox

needed to “pull back.” Doc #180, Ex 15 (Temares depo) at

95:13-96:4, 99:15-101:14, 103:16-107:22, 109:16-110:15,

168:5-170:16). Temares thought Krangel’s purported justification

for pulling out of the deal “was a bunch of horse shit,” sounded

“scripted” and made no sense. Doc #180, Ex 15 at 111:8-112:16,

170:17-171:7: 

It is just inconsistent with common sense since I

sat with them at a meeting a month before, that I

imagine people told him all along where we were in

the process, that we had selected the assortment,

that they approved the fixturing, that we had gone

through with the selection of stores, that we

involved all these people and time and effort and

we had numerous meetings at all different levels in

the organization, so common sense would indicate

that what he said is farfetched. 

Id, Ex 15 at 170:17-172:17. 

Finally, on June 18, 2001, Federated’s Zimmerman wrote to

O’Reilly at Waterford, praising him for making the “right

decision”: 

I wanted to write and tell you I think your team

made the right decision. You have a great brand

and it needs to be protected and enhanced. I

assume you played a role and I think you did the

right thing for all partners in this game. Thanks

for listening to me as I voiced my thoughts. 

Doc #180, Ex 18; Ex 16 (Zimmerman depo) at 26:13-20, 28:1-29:1. 

//

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About one year later, Waterford began to sell its

Wedgwood tableware products to Bed, Bath & Beyond in August 2002

and its Waterford brand products in November 2004. Lenox followed

suit in November 2002. Doc #179, Ex 2 (Gavin depo) at

221:12-221:21, 231:2-21, 243:21-244:9; Doc #183, Ex 62; Doc #183,

Ex 67 at 29. 

II

In its order denying defendants’ motion to dismiss, the

court remarked that plaintiffs “appear to state claims (presumably

in the alternative) for (1) vertical minimum resale price

maintenance, (2) horizontal price fixing and (3) an exclusionary

group boycott.” Doc #52 at 5. Since that time, plaintiffs have

shed the first two theories of relief, rendering this suit, in

plaintiffs’ words, “a group boycott case.” Doc #161 at 8. 

As a legal matter, however, this case is better

characterized as three group boycott cases: in plaintiffs’ view,

the successful boycott of Bed, Bath & Beyond arose from (1) a

horizontal agreement between Federated and May, (2) a horizontal

agreement between Waterford and Lenox and (3) vertical agreements

among all defendants. Moreover, plaintiffs presumably regard each

set of agreements as independently sufficient to effect the boycott

of Bed, Bath & Beyond. Although plaintiffs add these alleged

agreements together to arrive at one grand (and overdetermined)

conspiracy, various antitrust doctrines impel the court to

distinguish among these three categories at various points along

the court’s analysis. 

//

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In reviewing a summary judgment motion, the court must

determine whether genuine issues of material fact exist, resolving

any doubt in favor of the party opposing the motion. “[S]ummary

judgment will not lie if the dispute about a material fact is

‘genuine,’ that is, if the evidence is such that a reasonable jury

could return a verdict for the nonmoving party.” Anderson v

Liberty Lobby, 477 US 242, 248 (1986). “Only disputes over facts

that might affect the outcome of the suit under the governing law

will properly preclude the entry of summary judgment.” Id. And

the burden of establishing the absence of a genuine issue of

material fact lies with the moving party. Celotex Corp v Catrett,

477 US 317, 322-23 (1986). When the moving party has the burden of

proof on an issue, the party’s showing must be sufficient for the

court to hold that no reasonable trier of fact could find other

than for the moving party. Calderone v United States, 799 F2d 254,

258-59 (6th Cir 1986). Summary judgment is granted only if the

moving party is entitled to judgment as a matter of law. FRCP

56(c).

The nonmoving party may not simply rely on the pleadings,

however, but must produce significant probative evidence supporting

its claim that a genuine issue of material fact exists. TW Elec

Serv v Pacific Elec Contractors Ass’n, 809 F2d 626, 630 (9th Cir

1987). The evidence presented by the nonmoving party “is to be

believed, and all justifiable inferences are to be drawn in his

favor.” Anderson, 477 US at 255. “[T]he judge’s function is not

himself to weigh the evidence and determine the truth of the matter

but to determine whether there is a genuine issue for trial.” Id

at 249.

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III

A

Section 4 of the Clayton Act provides that “any person

who shall be injured in his business or property by reason of

anything forbidden in the antitrust laws may sue * * * .” 15 USC §

15(a). Although this language could be read to afford relief to

all persons whose injuries are causally related to an antitrust

violation, Lucas v Bechtel Corp, 800 F2d 839, 843 (9th Cir 1986),

the doctrine of “antitrust standing” precludes such an

interpretation. Los Angeles Memorial Coliseum Comm’n v NFL, 791

F2d 1356, 1363 (9th Cir 1986). “Only those who meet the

requirements for ‘antitrust standing’ may pursue a claim * * *; and

to acquire ‘antitrust standing,’ a plaintiff must adequately allege

and eventually prove ‘antitrust injury.’” Glen Holly

Entertainment, Inc v Tektronix Inc, 352 F3d 367 (9th Cir 2003)

(citing Associated Fed Contractors of California, Inc v California

State Council of Carpenters, 459 US 519, 530-35 (1983)).

To determine whether plaintiffs have standing to pursue

their antitrust claim, the court considers five factors:

 (1) the nature of plaintiffs’ alleged injury -- whether it

was the type the antitrust laws were intended to

forestall;

 (2) the directness of the injury;

 (3) the speculative measure of the harm;

 (4) the risk of duplicative recovery; and

 (5) the complexity in apportioning damages.

Associated General Contractors, 459 US at 538-45;

To conclude that there is antitrust standing, the court

need not find in favor of plaintiffs on each factor, see Amarel v

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Connell, 102 F3d 1494, 1507 (9th Cir 1996); generally, “no single

factor is decisive.” R C Dick Geothermal Corp v Thermogenics, Inc,

890 F2d 139, 146 (9th Cir 1989) (en banc). Yet courts give great

weight to the nature of plaintiffs’ alleged injury. See Amarel,

102 F3d at 1507. Indeed, the Supreme Court has noted that “[a]

showing of antitrust injury is necessary, but not always

sufficient, to establish standing.” Cargill, Inc v Monfort of

Colorado, Inc, 479 US 104, 110 n5 (1986). To demonstrate an

antitrust injury, it is not enough that the plaintiffs’ claimed

injury flows from the unlawful conduct; an antitrust injury must

“flow[] from that which makes defendants’ acts unlawful.” Atlantic

Richfield Co v USA Petroleum Co, 495 US 328, 334 (1990) (quoting

Brunswick Corp v Pueblo Bowl-O-Mat, Inc, 429 US 477, 489 (1977)). 

Plaintiffs principally rely on Blue Shield v McCready,

457 US 465 (1982), in asserting their injury was the type the

antitrust laws were intended to forestall. In McCready, the

Supreme Court held that an individual had standing to sue her

health insurer for reimbursement of payments to a clinical

psychologist for allegedly conspiring with physicians to bar

clinical psychologists from the market by excluding their services

from coverage under the insurance policy. In doing so, the Court

rejected the argument that the plaintiff lacked standing because

she was not an actor in the relevant market and because the more

appropriate plaintiffs were the psychologists. Id. The Court

reasoned that antitrust remedies “cannot be restricted to those

competitors whom the conspirators hope to eliminate from the

market. * * * As a consumer of psychotherapy services * * * [the

plaintiff] was within that area of the economy * * * endangered by

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[the] breakdown of competitive conditions.” Id at 479-80. Even

though the plaintiff “was not a competitor of the conspirators, the

injury she suffered was inextricably intertwined with the injury

the conspirator sought to inflict on psychologists and the

psychotherapy market.” Id at 483. 

Like the plaintiff in McCready, plaintiffs here are

consumers in the restrained market – the tableware market. And by

purchasing tableware directly from the alleged co-conspirators,

plaintiffs participated in the area of the economy endangered by

anticompetitive conditions. See id at 480. See also Glen Holly

Entertainment, 352 F3d at 372 (noting that “the party alleging the

injury must be either a consumer of the alleged violator’s goods or

services or a competitor of the alleged violator in the restrained

market”) (citing Eagle v Star-Kist Foods, Inc, 812 F2d 538 (9th Cir

1987). Accordingly, under McCready, although plaintiffs were not

the direct target of defendants’ boycott, their injuries were

“inextricably intertwined with the injury the conspirators sought

to inflict” on Bed, Bath & Beyond. See McCready, 457 US at 483.

The second factor assesses whether plaintiffs’ asserted

injuries were the direct result of defendants’ allegedly

anticompetitive conduct. Plaintiffs contend that defendants

increased the price of its tableware by boycotting expansion to

Bed, Bath & Beyond. To assess the directness of this injury,

courts look to the chain of causation linking plaintiffs’ injury to

the alleged restraint in the market. See Associated General, 459

US at 540; Yellow Pages Cost Consultants, Inc v GTE Directories

Corp, 951 F2d 1158, 1162 (9th Cir 1991) (“Directness in the

antitrust context means close in the chain of causation.”). The

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chain of causation vis-à-vis Federated and May is direct because

the boycott of Bed, Bath & Beyond allegedly affected the price

plaintiffs paid Federated and May for Lenox and Waterford

tableware. See Glen Holly, 352 F3d at 374 (antitrust injury flowed

from discontinuation of a competing product). The chain of

causation with respect to Waterford and Lenox, however, is more

attenuated and, for reasons discussed below, implicates the socalled “direct purchaser” requirement. 

Under the third factor, courts consider whether

plaintiffs’ damages are speculative. See Associated General, 459

US at 542. In Associated General, the Supreme Court found the

damages claim in question to be speculative because (1) the alleged

injury was indirect; and (2) “the alleged effects * * * may have

been produced by independent factors.” Id; see also Eagle v

Star-Kist Foods, Inc, 812 F2d 538, 542 (9th Cir 1987). 

The court finds that plaintiffs’ alleged damages are not

speculative enough to eviscerate plaintiffs’ standing. First, as

discussed above, plaintiffs’ asserted injury flows directly from

defendants’ alleged decision to boycott Bed, Bath & Beyond. 

Second, defendants do not suggest that plaintiffs’ asserted injury

may have stemmed from other exogenous market factors. Third,

although the extent of plaintiffs’ damages hinges on a complex

counterfactual (the price of tableware if Bed, Bath & Beyond had

participated in the market), “this complexity is not so unusual as

to distinguish this case from other complex business disputes * *

*.” American Ad Management, Inc v GTE Corp, 190 F3d 1051, 1059

(9th Cir 1999). See also Forsyth v Humana, Inc, 114 F3d 1467, 1478

(9th Cir 1997) (“Complex antitrust cases * * * invariably involve

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complicated questions of causation and damages.”).

The fourth factor — the risk of duplicative recovery — 

also weighs in favor of plaintiffs’ standing. The purpose

undergirding this factor is to avoid the risk “that potential

plaintiffs may be in a ‘position to assert conflicting claims to a

common fund * * * thereby creating the danger of multiple liability

for the fund.’” Eagle, 812 F2d at 542 (quoting Associated General,

459 US at 544). Even if Bed, Bath & Beyond could bring suit

against defendants (it appears the statute of limitations has run,

see 15 USC § 15(b)), duplicative recovery is unlikely because

plaintiffs’ damages are distinct from Bed, Bath & Beyond’s. To the

extent defendants’ alleged tactics raised artificially the price

for tableware, plaintiffs’ damages exceed – and thus diverge from –

Bed, Bath & Beyond’s lost profits. See American Ad, 190 F3d at

1059-60 (damages related to lost profits are distinct from those

related to increased costs). 

As discussed above with respect to the speculative

measure of harm factor, the court does not find the apportionment

of damages in this case to be exceedingly complicated. 

Furthermore, unlike Associated General, in which damages needed to

be apportioned among “directly victimized contractors and

subcontractors and indirectly affected employees and union

entities,” 459 US at 545, apportioning damages in this case would

require only a determination of the damages suffered by direct

customers.

In sum, because all five of the Associated General

factors weigh in plaintiffs’ favor, the court finds that plaintiffs

have antitrust standing in this litigation, at least with respect

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to Federated and May.

One issue involving standing remains: inasmuch as

plaintiffs’ suit targets an alleged horizontal agreement between

Waterford and Lennox, plaintiffs run afoul of the so-called “direct

purchaser” requirement from Illinois Brick Co v Illinois, 431 US

720 (1977). The Court in Illinois Brick ruled that a plaintiff

does not state a claim for relief for an illegal overcharge due to

an anticompetitive agreement if the plaintiff did not purchase

directly from a member of the conspiracy. In doing so, the Court

precluded antitrust claims based on overcharges that were “passedon” through the distribution chain to the ultimate consumer. Id.

Illinois Brick does not preclude this suit entirely

because plaintiffs purchased the relevant goods directly from

Federated and May. Yet the allegations concerning a horizontal

agreement between Waterford and Lennox implicate Illinois Brick, as

plaintiffs stand as indirect purchasers vis-à-vis this alleged

agreement. Putting aside, for a moment, the alleged vertical

agreements, the allegations concerning an agreement between

Waterford and Lennox are probative only to the extent they

substantiate horizontal agreements between Federated and May or

vertical agreements among defendants. See Arizona v Shamrock

Foods, 729 F2d 1208 (9th Cir 1984) (concluding that Illinois Brick

is inapplicable to claims against remote sellers when the

plaintiffs allege that the sellers conspired with intermediates in

the distribution chain to fix the price at which the plaintiffs

purchased). Moreover, if Federated and May succeed in obtaining

summary judgment, leaving only an alleged horizontal agreement

between Waterford and Lennox, then plaintiffs become indirect

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purchasers with respect to the alleged conspiracy and thereby cease

to have standing to sue. 

 

B

The next issue posed by defendants’ motions is whether

the alleged agreements among defendants to prevent the sale of

Waterford and Lenox tableware to Bed, Bath and Beyond is properly

viewed as a group boycott deserving of per se scrutiny. Although

the Supreme Court lists “group boycotts” among the classes of

economic activity that warrant per se invalidation under § 1, the

Court acknowledges that “exactly what types of activity fall within

the forbidden category is * * * far from certain.” Northwest

Wholesale Stationers, Inc v Pacific Stationery & Printing Co, 472

US 284, 294-95 (1985). See also id at 295 (“There exists more

confusion about the scope and operation of the per se rule against

group boycotts than in reference to any other aspect of the per se

doctrine.”). Or as one court quipped, using the term “boycott” is

“the equivalent of yelling ‘fire’ in the halls of traditional

antitrust jurisprudence.” Universal Amusements Co v General Cinema

Corp, 635 F Supp 1505, 1523 (SD Tex 1985).

The application of the per se rule to group boycotts

developed from a series of cases in which the Supreme Court

invalidated such boycotts as § 1 violations. In Eastern States

Retail Lumber Dealers’ Association v United States, 234 US 600,

611-14 (1914), for example, the Court held unlawful concerted

refusals to deal with wholesalers who sold directly to customers. 

Similarly, in Fashion Originators’ Guild of America v FTC, 312 US

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457 (1941), the Court deemed unlawful a joint “program” of textile

and garment manufacturers that prohibited the sale of garments to

stores that sold “style pirated” garments and the sale of fabrics

to manufacturers who sold to stores selling pirated goods. 

The Court’s predilection for designating group boycotts

per se unlawful law reached its highwater mark in Klor’s Inc v

Broadway-Hale Stores, Inc, 359 US 207 (1959). A retailer,

Broadway, entered into an agreement with suppliers of appliances

“either not to sell to Klor’s or to sell to it only at

discriminatory and highly unfavorable prices.” Id at 209. 

Broadway argued that because consumers and other competitors had

access to supply, the public was not injured. The Court disagreed

with Broadway, declaring that 

[g]roup boycotts, or concerted refusals by traders to

deal with other traders, have long been held to be in

the forbidden category. They have not been saved by

allegations that they were reasonable in the specific

circumstances, nor by a failure to show that they “fixed

or regulated prices, parcelled out or limited

production, or brought about a deterioration in

quality.”

Id at 212 (citing Fashion Ordinators’ Guild v Federal Trade

Commission, 312 US 457, 466 (1941). 

The Supreme Court has since retreated from its stance in

Klor’s and has cautioned against blindly fixing the per se label on

all concerted refusals to deal. See Richard A Posner, Antitrust

Law (2d ed 2001) (“A boycott * * * used to be deemed a per se

violation * * *; [t]he Supreme Court has wisely abandoned that

position, which anyway was never taken seriously”). Indeed, in

Northwest Wholesale Stationers, Inc v Pacific Stationery Printing

Co, 472 US 284 (1985), the Court rejected, except for a narrow

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category of cases, the per se characterization for concerted

refusals to deal. Under this new standard, the Court declined to

apply the per se approach to the expulsion of a member from a

cooperative purchasing agency because the agency achieved

“economies of scale in both the purchase and warehousing of

wholesale supplies.” Northwest Wholesale, 472 US 295. 

According to the Northwest Wholesale Court, a per se

standard generally applies to cases involving “joint efforts by a

firm or firms to disadvantage competitors by ‘either directly

denying or persuading or coercing suppliers or customers to deny

relationships the competitors need in the competitive struggle.’” 

Northwest Wholesale, 472 US at 294 (quoting L Sullivan, Law of

Antitrust 261-62 (1977)). See also P Areeda & L Kaplow, Antitrust

Analysis: Problems, Text, and Cases 333 (5th ed 1997) (defining

paradigmatic boycott as “collective action among a group of

competitors that may inhibit the competitive vitality of rivals”).

In these cases, “the boycott often cut off access to a supply,

facility or market necessary to enable the boycotted firm to

compete, and frequently the boycotting firm possessed a dominant

position to the relevant market. In addition, the practices were

generally not justified by plausible arguments that they were

intended to enhance overall efficiency and make markets more

competitive.” Northwest Wholesale, 472 US at 294.

Guided by Northwest Wholesale, the Court in FTC v Indiana

Federation of Dentists, 476 US 447 (1986), refused to apply the per

se designation to an agreement by competitors, dentists, to deny

patient X-rays to insurance companies. These X-rays posed a

problem for Indiana’s dentists because they enabled insurance

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companies to review the appropriateness of the dentists’ charges. 

The Court declined to invoke the per se rule and “forc[e] the

[dentists’] policy into the ‘boycott’ pigeonhole,” reasoning that

the category of restraints classed as group

boycotts is not to be expanded indiscriminately,

and the per se approach has generally been limited

to cases in which firms with market power boycott

suppliers or customers in order to discourage them

from doing business with a competitor. 

Id at 458. 

A number of courts have construed Northwest Wholesale and

Indiana Federation of Dentists as holding that per se analysis is

inappropriate unless the boycotting party possesses market power or

exclusive access to an element in effective competition. See, e g,

Hahn v Oregon Physicians’ Service, 868 F2d 1022, 1030 (9th Cir

1989). But in FTC v Superior Court Trial Lawyers Association, 493

US 411 (1990), the Supreme Court concluded that at least some group

boycotts among horizontal competitors are per se unlawful without

regard to the market power of the participants. This case involved

an agreement by members of a bar association not to represent

indigent criminal defendants unless the District of Columbia

increased their compensation. The Court held that this agreement

“was unquestionably a ‘naked restraint’ on price and output” and,

as such, was per se unlawful. Id at 423. See also NYNEX Corp v

Discon, Inc, 525 US 128 (1998) (limiting per se scrutiny to cases

“involving horizontal agreements among direct competitors”).

The Ninth Circuit reads Northwest Wholesale and its

progeny as establishing three criteria for determining whether the

per se standard applies to a group boycott:

//

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(1) the boycott cuts off access to a supply, facility, or

market necessary to enable the victim firm to compete; 

(2) the boycotting firm possesses a dominant market position;

and 

(3) the practices are not justified by plausible arguments

that they enhanced overall efficiency or competition.

Adaptive Power Solutions, LLC v Hughes Missile Systems Co, 141 F3d

947, 950 (9th Cir 1998) (quoting Hahn v Oregon Physicians’ Serv,

868 F2d 1022, 1030 (9th Cir 1988)). In the Ninth Circuit, these

three criteria “are indicative of per se illegal conduct.” 

Adaptive Power Solutions, 141 F3d at 950. 

Notwithstanding the importance of this court’s

determination whether to apply per se scrutiny, neither party deals

with this issue adequately. Defendants misstate the Ninth

Circuit’s test and portray these factors as prerequisites for

adopting the per se approach. See Doc #184 at 2 (“horizontal

agreements are eligible for per se condemnation only if * * * ”). 

Plaintiffs relegate their analysis to a footnote, asserting that

(1) the boycott cut off Bed, Bath and Beyond’s access to two of the

principal suppliers of high-end tableware (Lenox and Waterford);

(2) the firms instigating the boycott (Federated and May) held

dominant positions in the retail tableware market; and (3) there

are no plausible justifications for the boycott. Doc #161 at n4. 

With respect to the first factor, the court notes that

Waterford and Lennox were suppliers of tableware products necessary

to enable Bed, Bath & Beyond to compete in the high-end tableware

market. Further, defendants allegedly cut off this essential

supply in order to obstruct Bed, Bath & Beyond’s access to this

market. The second factor (whether the boycotting firm possesses a

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“dominant” position in the market) is difficult to assess on the

present record. In 2001, Federated and May were the third and

fourth largest department store chains in the United States,

respectively. Doc #181, Ex 35 at 26-27. Although this ranking

among department stores does not imply market power, it may suggest

that defendants held a “dominant” position. As the Seventh Circuit

observed in Toys “R” Us, Inc v FTC, 221 F3d 928 (7th Cir 2000), the

term “dominant” was “plainly chosen to stand for something

different from antitrust’s term of art ‘monopoly.’” Id at 936. In

view of this uncertainty, the court finds that this second factor

weighs in neither party’s favor.

Most damaging to Federated’s argument in favor of rule of

reason review is the third factor — whether the boycott arguably

enhances efficiency or competition. In accordance with this

consideration, courts have noted that in the following factual

settings, the effect of a refusal to deal is “more complex” than in

the “classic boycott” scenario: industry self-regulation, sports

leagues, health care, noneconomic boycotts and access to joint

venture facilities. ABA Section of Antitrust Law, Antitrust Law

Developments, 114 (5th ed 2002). The conduct alleged by plaintiffs

falls within none of these exceptions. Nor does Federated proffer

an independent pro-competitive justification for the alleged

horizontal agreements to boycott Bed, Bath and Beyond. This

silence is unsurprising, as the alleged horizontal agreement falls

squarely within the ambit of per se treatment as dictated by

Northwest Wholesale: “joint efforts by a firm or firms to

disadvantage competitors by either directly denying or persuading

or coercing suppliers or customers to deny relationships the

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competitors need in the competitive struggle.” Northwest

Wholesale, 472 US at 294. Accordingly, the court concludes that

the alleged horizontal agreement between Federated and May

constitutes a classic boycott and thus warrants per se treatment. 

The court hastens to add that its conclusion does not

extend to the alleged vertical agreements to boycott Bed, Bath &

Beyond. The Supreme Court has expressly “limit[ed] the per se rule

in the boycott context to cases involving horizontal agreements

among direct competitors.” NYNEX Corp v Discon, Inc, 525 US 128,

136 (1998). The vertical agreements therefore warrant per se

treatment only to the extent they implemented the alleged

horizontal agreements — a distinction plaintiffs appear to

acknowledge. See Doc #161 at 9 (“Since, as explained above, the

boycott of [Bed, Bath & Beyond] at issue here includes horizontal,

as well as vertical, agreements, the per se rule applies.”).

As such, plaintiffs need not define and support a

relevant market (as they would need to do for a § 2 claim), nor do

they need to demonstrate harm to competition, something which is

presumed in a per se case, see Fortner Enterprises, Inc v United

States Steel Corp, 394 US 495, 498 (1969) (“‘[T]here are certain

agreements or practices which because of their pernicious effect on

competition and lack of any redeeming virtue are conclusively

presumed to be unreasonable and therefore illegal without elaborate

inquiry as to the precise harm they have caused or the business

excuse for their use.’” (quoting Northern Pacific R Co v United

States, 356 US 1, 5 (1958))). But plaintiffs’ decision to rely on

per se scrutiny comes at a cost: it renders the existence of a

horizontal agreement essential to their suit.

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To sum up the court’s analysis heretofore, plaintiffs

lack standing to rest their case on an agreement between Waterford

and Lennox and lack the evidentiary wherewithal to rely alone on

the alleged vertical agreements and proceed under the rule of

reason. The upshot is that the alleged agreement between Federated

and May is the cornerstone of plaintiffs’ legal theory; without it,

the case collapses. With these insights in mind, the court turns

to the substance of plaintiffs’ suit.

C

The essential issue propounded by defendants’ summary

judgment motions is whether plaintiffs adduced enough evidence of

concerted action to survive summary judgment. In Monsanto Co v

Spray-Rite Service Corp, 465 US 752 (1984), the Supreme Court

announced the modern formula by which courts determine the

existence of concerted action:

The correct standard is that there must be evidence

that tends to exclude the possibility of

independent action by the [parties]. That is,

there must be direct or circumstantial evidence

that reasonably tends to prove that [the parties]

had a conspicuous commitment to a common scheme

designed to achieve an unlawful objective.

465 US at 768.

Conspiracies may be shown either by direct or

circumstantial evidence. The Court recognizes, however, that

“[o]nly rarely will there be direct evidence of an express

agreement” in conspiracy cases; hence, circumstantial evidence

plays a pivotal role in antitrust litigation. Although

interpreting such evidence and drawing inferences from it

ordinarily are responsibilities of the factfinder, the Supreme

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Court mandates a threshold judicial assessment of such evidence as

set forth in Matsushita Electric Industrial Co v Zenith Ratio Corp,

475 US 574 (1986):

[A]ntitrust law limits the range of permissible

inferences from ambiguous evidence in a § 1 case.

Thus, * * * conduct as consistent with permissible

competition as with illegal conspiracy does not,

standing alone, support an inference of antitrust

conspiracy. * * * To survive a motion for summary

judgment or for a directed verdict, a plaintiff

seeking damages for a violation of § 1 must present

evidence “that tends to exclude the possibility”

that the alleged conspirators acted independently.

* * * [Plaintiffs], in other words, 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

[them].

Id at 588 (citations omitted). 

Citing its earlier decision in First National Bank v

Cities Service Co, 391 US 253, 288-289 (1968), the Court in

Matsushita identified two separate inquiries that are relevant to

this issue: (1) whether the defendant had “any rational motive” to

join the allege conspiracy, and (2) whether the defendant’s conduct

“was consistent with the defendant’s independent interest.” 

Matsushita, 475 US at 596-97.

Animating the Matsushita standard is the Court’s concern

that “permitting the inference of conspiratorial behavior from

circumstantial evidence consistent with both lawful and unlawful

conduct would deter pro-competitive conduct — an especially

pernicious danger in light of the fact that the very purpose of the

antitrust laws is to promote competition.” In re Citric Acid

Litigation, 191 F3d 1090, 1094 (9th Cir 1999). See also

Matsushita, 475 US at 593 (“Courts should not permit factfinders to

infer conspiracies when such inferences are implausible, because

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the effect of such practices is often to deter pro-competitive

conduct.”).

Relying in part on Matsushita, the Ninth Circuit has

crafted a two-part test to be applied whenever plaintiffs rest

their case entirely on circumstantial evidence. First, defendants

may “rebut an allegation of conspiracy by showing a plausible and

justifiable reason for its conduct that is consistent with proper

business practice.” In re Citric Acid Litigation, 191 F3d at 1094

(citing Richards v Neilson Freight Lines, 810 F2d 898, 902 (9th Cir

1987). The burden then shifts back to plaintiffs to provide

specific evidence tending to show that defendants were not engaging

in permissible competitive behavior. See City of Long Beach v

Standard Oil Co of California, 872 F2d 1401, 1406 (9th Cir 1989).

The present action implicates this two-part test because

plaintiffs have not produced direct evidence in support of their

group boycott theory. As noted by the Ninth Circuit, “[d]irect

evidence in a [§] 1 conspiracy must be evidence that is explicit

and requires no inferences to establish the proposition or

conclusion being asserted.” In re Citric Acid Litigation, 191 F3d

at 1093-94. As plaintiffs appear to concede, none of plaintiffs’

evidence satisfies this test, at least with respect to an alleged

agreement between Federated and May. 

Turning to the Ninth Circuit’s two-part test, the court

first finds that defendants proffer a “plausible and justifiable

reason” for acting as they did. In re Citric Acid Litigation, 191

F3d at 1094. City of Long Beach v Standard Oil Co, 872 F2d 1401,

1406 (9th Cir 1989) (defendant is entitled to summary judgment when

it “provides a plausible and justifiable alternative interpretation

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of its conduct that rebuts the alleged conspiracy”). Defendants

assert that Federated and May were concerned that the sale of its

tableware products by Bed, Bath & Beyond would broaden the

distribution into a lower prestige channel, a valid and lawful

concern. See Winn v Edna Hibel Corp, 858 F2d 1517, 1520 (11th Cir

1988) (recognizing a company’s interest in avoiding the

“cheapening” of the image of its products); Richards v Neilson

Freight Lines, 810 F2d 898, 902 (9th Cir 1987) (finding independent

self-interest an adequate explanation).

Prior to 2001, Bed, Bath & Beyond, a national “big-box”

retailer of kitchen, bath and other items, was selling various

standard tableware products, including, for example, lower-end

dinner plates manufactured by Lenox. Doc #131, Ex B, (Johnson

depo) at 30:10-12, 37:24-40:2; Doc #141, Ex C (Lundgren depo) at

38:14-21. Bed, Bath & Beyond became interested in expanding its

offerings to include more expensive china and crystal manufactured

by Lenox, Waterford and others. Doc #131, Ex E (Temares depo) at

35:11-16. Federated and May opposed the broad distribution its

manufacturers sought because Federated and May had made significant

investments in the sale of Lenox and Waterford products. Doc #141,

Ex C at 39:4-40:2, 44:12-45:9. See also Monsanto, 465 US at 763

(complaints by retailers regarding other retailers are “natural –

and from the manufacturer’s perspective, unavoidable – reactions by

distributors to the activities of their rivals”).

Consequently, the burden shifts back to plaintiffs to

provide specific evidence tending to show that the defendants were

not engaging in permissible competitive behavior. See City of Long

Beach v Standard Oil Co of California, 872 F2d 1401, 1406 (9th Cir

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1989). Such evidence must “tend[] to exclude the possibility that

the alleged conspirators acted independently.” Matsushita, 475 US

at 588. In assessing this evidence, the court also considers (1)

whether the defendants had “any rational motive” to join the

alleged conspiracy, and (2) whether the defendants’ conduct “was

consistent with the defendant’s independent interest.” Id at at

596-97.

The court focuses on the alleged agreement between

Federated and May because, as established above, this suit turns on

the existence of such an agreement. Plaintiffs assert that a

horizontal agreement may be inferred from the following pieces of

information:

(1) one week after May was advised by Lennox in May 2001 of

Lenox’s and Waterford’s intent to participate in the Bed,

Bath & Beyond rollout, Federated contacted both Lenox and

Waterford to complain about the rollout;

(2) both Federated and May used similar language when they

separately pressured Lenox and Waterford to break their

deal with Bed, Bath & Beyond (“you do what you have to

do, and we will do what we have to do”) (Doc #180, Ex 10

(Mielke depo) at 136:19-137:17);

(3) in a letter from Federated’s Zimmerman to a Waterford

executive, written after Waterford terminated its

participation in the rollout, Zimmerman thanked Waterford

for doing “the right thing for all partners in the game”

(Doc #180, Ex 18); and

(4) Federated’s Zimmerman “took the Fifth” when asked at

deposition whether Federated and May entered into any

agreements concerning their approach to the Bed, Bath &

Beyond rollout (Doc #180, Ex 16 at 48:6-13).

With respect to the first point, defendants note that 

that plaintiffs offer no evidence that Federated learned of the

manufacturers’ plans from May. Federated asserts that it probably

learned about the rollout from the manufacturers themselves, as

employees from Federated met with the employees of Lenox and

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Waterford regularly. Doc #186, Ex HH, (Gavin depo) at 44:21-45:11,

48:21-49:2, 129:4-8; Ex LL, (McGillivary depo) at 153:9-21.

Defendants also dispute plaintiffs’ reasoning concerning

the second piece of evidence — the allegation that employees of

Federated and May, in separate conversations, used similar language

in speaking to the manufacturers about the rollout (“you do what

you have to do, and we will do what we have to do”). Doc #161 at

19, 31. According to defendants, the similarity is unsurprising

because the phrase is precisely what retailers should say in order

to avoid implicating the antitrust laws. 

Third, defendants argue that Federated’s letter to

Waterford did not refer to May when it thanked Waterford for doing

“the right thing for all partners in the game.” In support,

defendants claim that Federated and Waterford frequently referred

to each other as “partners.” Doc #141, Ex F, (“Grove depo”) at

67:14-24, 69:9-13, 84:7. Federated’s expert also used the term

“partner” to describe the nature of the relationships between

vendors and retailers. Doc #131, Ex DD at ¶¶ 48, 64, 79. 

Regarding plaintiffs’ fourth point, defendants cite

Curtis v M & S Petroleum, Inc, 174 F3d 661, 675 (5th Cir 1999), for

the proposition that the invocation of the Fifth Amendment by

Federated’s CEO is not sufficient to create a genuine issue of

material fact. Defendants also urge the court to interpret

Zimmerman’s conduct in light of prior events: When the New York

attorney general’s office deposed Zimmerman in 2004, he testified

that he could not recall a conversation he had with an executive at

Waterford. In response, the attorney general’s office indicted him

for perjury. A New York trial court dismissed the indictment, but

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the attorney general’s office had appealed the dismissal. As a

result, when he was deposed in this action, Zimmerman invoked his

Fifth Amendment rights. Doc #131, Ex X (Zimmerman depo) at

20:20-22:25. 

Finally, defendants aver that all witnesses pertinent to

this case have denied the existence of any communications between

Federated and May regarding Bed, Bath & Beyond. See Doc #141, Ex C

(Lundgren depo) at 75:25-76:7; Ex F (Grove depo) at 88:15-19,

91:10-17; Ex G, (Engelman depo) at 99:19-25; 192:24-193:4; Ex H

(Locraft depo) at 181:11-24, 273:20-274:6, 275:1-10; Doc #131, Ex D

(Hofer depo) at 158:24-159:2, 214:15-24. Nor were employees of

Bed, Bath & Beyond, Lenox or Waterford aware of any communications

between Federated and May. Doc #131, Ex B (Johnson depo) at

239:12-14; Ex I (Mielke depo) at 158:18-159:6; Ex J (Krangel depo)

at 300:14-18; Ex K (Gavin depo) at 255:12-16. 

Defendants’ methodical critique of plaintiffs’ evidence

implies that Matsushita demands a certain quantum of evidence of

verbal agreement to avoid summary judgment. Yet the Matsushita

court never insisted that any particular kind of evidence of

collusion was required. Instead, the Court demanded that the

evidence be of such quality that makes collusion a likely

explanation of the activity before the court. Matsushita’s

analysis, moreover, arose from the context of a highly improbable

twenty-year-long predatory pricing conspiracy; as such, the Court

required high-quality evidence to permit such a conspiracy to be

presented to a jury. Matsushita, 475 US at 587-88 (“If the factual

context renders respondents’ claim implausible - if the claim is

one that simply makes no economic sense - respondents must come

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forward with more persuasive evidence to support their claim than

would otherwise be necessary.”). Hence, plaintiffs need not

demonstrate the existence of an explicit conspiracy, only that “the

inference of conspiracy is reasonable in light of the competing

inferences of independent action.” Id at 588. 

The court therefore assesses whether defendants had “any

rational motive” to conspire and whether defendants’ conduct was

consistent with their independent interest. Matsushita, 475 US at

596-97. Plaintiffs correctly note that Federated and May had a

“rational motive” to conspire against Bed, Bath & Beyond. The

gravamen of plaintiffs’ theory is that Federated and May acted

together in an effort to block a new entrant’s access to the

market. The reasons why such behavior would be economically

rational are straightforward. During the alleged conspiracy,

consumers were steadily migrating from department stores to home

specialty chain stores, such as Bed, Bath & Beyond, and bridal

registries (which made up a significant portion of the tableware

business) were following suit. Doc #180, Ex 10 (Mielke depo) at

43:25-44:25. Federated and May, as established market

participants, could reasonably fear that Bed, Bath & Beyond would

erode their profit and market share. As one commentator remarked,

“[w]here the ‘victim’ [of an exclusionary group boycott] is a

competitor of the alleged conspirators, there is no mystery as to

why the defendants would want to injure the rival. It is axiomatic

that firms prefer to have fewer rather than more rivals.” Kenneth

L Glazer, Concerted Refusals to Deal Under Section 1 of the Sherman

Act, 70 Antitrust L J 1, 17 (2002)

//

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But the motive to conspire articulated by plaintiffs

works both ways: insofar as Bed, Bath & Beyond’s competitive

threat encouraged conspiracy, it also bolsters defendants’ version

of the events — that Federated and May pressured the manufacturers

unilaterally. Accordingly, each party’s account of the events make

“economic sense,” see Adaptive Power Solutions, LLC v Hughes

Missile Systems Co, 141 F3d 947, 953 (9th Cir 1998), and the

emergence of Bed, Bath & Beyond as a competitor does not weigh in

either party’s favor.

Yet this same economic intuition fails to account for the

alleged conspiracy between Lenox and Waterford. Nothing in the

present record establishes an economic motive for a conspiracy

between Waterford and Lenox to back out of the Bed, Bath & Beyond

rollout. Nor do plaintiffs articulate why Waterford and Lenox

would have harbored animosity toward Bed, Bath & Beyond. 

Manufacturers generally lack incentives to conspire to undercut an

upstart retailer like Bed, Bath & Beyond; to the contrary, such

manufacturers have every reason to establish ties with these

newcomers. This intuition appears to have played out here: Lennox

and Waterford commenced dealings with Bed, Bath & Beyond that were

ruptured at the bidding of Federated and May. 

In light of plaintiffs’ evidence and defendants’ market

conditions, the issue for the court is to determine whether

plaintiffs satisfy their burden and “tend[] to exclude the

possibility that the alleged conspirators acted independently.” 

Monsanto, 465 US at 768. That determination is clear-cut with

respect to the alleged horizontal conspiracy between Lennox and

Waterford. As discussed above, the theory that Lennox and

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Waterford conspired to boycott Bed, Bath & Beyond neither makes

economic sense nor finds support in the record. See Michael v

Intracorp, Inc, 179 F3d 847 (10th Cir 1999) (granting summary

judgment in circumstantial evidence case because plaintiffs failed

to demonstrate any motive to conspire); Orson, Inc v Miramax Film

Corp, 79 F3d 1358, 1370 (3d Cir 1996) (affirming summary judgment

for defendant in part because of lack of motive to conspire). 

Accordingly, the court concludes that plaintiffs’ circumstantial

evidence of an agreement between Lennox and Waterford falls short

of the standard under Matsushita. 

Turning to the alleged agreement between Federated and

May, the court finds that plaintiffs satisfy their burden, albeit

with little evidence to spare. First, the court agrees with

plaintiffs that Federated’s and May’s simultaneous behavior within

a two-week period constitutes a pattern of uniform business conduct

that bespeaks a tacit agreement or even so-called “conscious

parallelism.” See Petruzzi’s IGA Supermarkets v Darling-Deleware

Co, 998 F2d 1224, 1242-43 (3d Cir 1993). To be sure, that

Federated learned about the rollout one week after Lenox informed

May about the program hardly establishes that Federated

communicated with May, as Federated met with its manufacturers on a

regular basis. But defendants fail to explain precisely when or

how Federated learned of the rollout from its manufacturers,

leaving open the inference of horizontal communications. See

generally Interstate Circuit, Inc v United States, 306 US 208, 225-

26 (1939) (“When the proof supported, as we think it did, the

inference of such concert, the burden rested on appellants of going

forward with the evidence to explain away or contradict it.”).

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The parallel language (“you do what you have to do, and

we will do what we have to do”) used by Federated and May also

carries some weight. Granted, in both situations, business

executives plausibly repeated this boilerplate to clarify that each

company had to act independently, not collusively. And it would be

anomalous for antitrust law to regard efforts against collusion as

evidence of collusion. But antitrust law does not direct

executives to invoke the particular phrase at issue; as such, the

striking similarity permits an inference of concerted action. See

e g, De Jong Packing Co v USDA, 618 F2d 1329 (9th Cir 1980)

(continuance of conspiracy inferred from identical letters sent

separately at the same time); Apex Oil v Di Mauro, 822 F2d 246,

255-57 (2d Cir 1987) (“striking” similarity of defendants’ separate

notebook entries of conversations among them gives rise to

reasonable inference of conspiracy).

Federated’s phrase (“partners in the game”) in its letter

to Waterford may also suggest a collusive agreement between

Federated and May. That said, if the phrase is construed to

encompass May, then Federated’s assertion simply offers an opinion

that Waterford’s exclusive relationship with the various department

stores is symbiotic; it does not necessarily imply an agreement

between the department stores. Nevertheless, Federated’s alleged

acknowledgment of May’s interests tends to undercut defendants’

contention that they acted independently. See Petruzzi’s IGA

Supermarkets, 998 F2d at 1242-43.

Finally, Zimmerman’s “pleading the Fifth” may be relevant

to the present dispute. In Baxter v Palmigiano, 425 US 308 (1976),

the Supreme Court held that the drawing of the adverse inference

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from the invocation the Fifth Amendment in civil suit is proper

when incriminating evidence is also presented. See id at 317-18. 

The Ninth Circuit interprets Baxter as licensing the drawing of an

adverse inference in the civil context only if “independent

evidence exists of the fact to which the party refuses to answer.” 

Doe by & Through Rudy-Glanzer v Glanzer, 232 F3d 1258, 1264 (9th

Cir 2000). This proviso is said to broker the competing interests

of the party asserting the privilege and those of the adverse

party, “who is deprived of a source of information that might

conceivably be determinative in a search for the truth.” SEC v

Graystone Nash, Inc, 25 F3d 187, 190 (3d Cir 1994). Here,

defendants neither contend that corroborating evidence is lacking

nor counsel against drawing an adverse inference based on

Zimmerman’s invocation of the privilege. This omission impels the

court to conclude that Zimmerman’s invocation of the Fifth

Amendment may have deprived plaintiffs of probative testimony. 

In view of plaintiffs’ evidence and the market conditions

defendants’ faced, the court finds that plaintiffs satisfy their

burden and tend to exclude the possibility that the Federated and

May acted independently. Accordingly, the court finds that

plaintiffs raise an inference of unlawful conspiracy between

Federated and May sufficient to overcome defendants’ summary

judgment motion.

The court stresses that plaintiffs only survive summary

judgment on the basis of the alleged horizontal agreement Federated

and May: the vertical communications remain relevant to the extent

they abetted the alleged horizontal agreement, but such

communications cannot serve as an independent ground for antitrust

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liability under the rule of reason. Even if plaintiffs provided

evidence under the rule of reason, which they have not, Monsanto

and its progeny would require the dismissal of any vertical claims

because plaintiffs’ evidence suggests, at most, that Lenox and

Waterford caved to complaints from Federated and May. See

Monsanto, 465 US at 763, (explaining that distributor complaints

“arise in the normal course of business and do not indicate illegal

concerted action”); OSC Corp v Apple Computer, Inc, 792 F2d 1464,

1468 (9th Cir 1986) (holding that “[dealer] complaints followed by

termination are not enough to provide sufficient proof of an

antitrust conspiracy”); The Jeanery, Inc v James Jeans, Inc, 849

F2d 1148 (9th Cir 1998), 849 F2d at 1157 (“Complaints by

competitors, standing alone, are not sufficient to show a

conspiracy.”); Isaksen v Vermont Castings, Inc, 825 F2d 1158, 1162

(7th Cir 1987) (Posner, J) (“Complaints to a supplier, made by

competitors of a dealer who is cutting prices below suggested

levels are not, standing alone, evidence of agreement”). Hence,

even if plaintiffs pursued a claim under the rule of reason, their

evidence is insufficient to raise an inference of unlawful

conspiracy or combination. 

//

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IV

In sum, the court GRANTS Waterford’s motion for summary

judgment and GRANTS IN PART and DENIES IN PART Federated’s and

May’s motion for summary judgment. The matter is set down for

trial on June 11, 2007.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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