The HONORABLE GARY A. FENNER, United States District Judge for *

the Western District of Missouri, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-4208

___________

The Corner Pocket of Sioux Falls, Inc., *

et al., *

*

Plaintiffs - Appellants, * Appeal from the United

States

* District Court for the

v. * District of South Dakota.

*

Video Lottery Technologies, Inc., et al., *

* 

Defendants - Appellees. *

___________

Submitted: June 9, 1997

Filed: August 29, 1997

___________

Before LOKEN and ROSS, Circuit Judges, and FENNER,*

District Judge.

___________

LOKEN, Circuit Judge.

In 1989, the State of South Dakota initiated a video

lottery regulated by the South Dakota Lottery Commission.

See S.D. CODIFIED LAWS Ch. 42-7A. In this type of lottery,

games of chance are played on coin-operated, computercontrolled video machines. The video lottery machines are

privately owned, but the State owns the 
The HONORABLE RICHARD H. BATTEY, Chief Judge of the United 1

States District Court for the District of South Dakota.

-2-

operating software and controls the games through a central computer

system. The machines repay players 80-95% of the amounts wagered. The

State takes a portion of the remaining gross revenues (initially 22%, now

50%) by electronically sweeping the machine owner’s bank

account. See generally Chance Mgmt., Inc. v. State of

South Dakota, 97 F.3d 1107, 1108 (8th Cir. 1996), cert.

denied, 117 S. Ct. 1083 (1997); Poppen v. Walker, 520

N.W.2d 238, 249 (S.D. 1994). 

In November 1993, the Lottery Commission investigated

the video lottery machine market and concluded there was

effective competition. Plaintiffs nonetheless commenced

this antitrust class action in June 1994, alleging that

Video Lottery Technologies, Inc. (“VLT”), manufacturer of

the most popular video lottery machines, had refused to

sell its machines to new customers for the purpose of

enforcing a conspiracy among vending machine distributors

to allocate territories and fix prices, all in violation

of Section 1 of the Sherman Act, 15 U.S.C. § 1.

Following discovery, the district court granted summary 1

judgment for defendants on the ground that plaintiffs had

failed to present sufficient evidence of an unlawful

conspiracy. Plaintiffs appeal, launching a three-pronged

attack on the district court’s decision. We affirm. 

A. Plaintiffs first argue that the district court

erred in applying the legal standard for granting

summary judgment in antitrust cases. Plaintiffs

criticize the court’s “heavy reliance” on Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588

(1986), where the Supreme Court stated that “conduct as

consistent with permissible competition as with illegal

conspiracy does not, standing alone, support an inference
-3-

of antitrust conspiracy.” Relying primarily on cases

from the Third and Ninth Circuits, plaintiffs argue that

this portion of Matsushita does not apply to this case

because the conspiracy they allege served defendants’

economic interests. However, we are among the majority

of courts and commentators who read Matsushita more

broadly. See
-4-

Lovett v. General Motors Corp., 998 F.2d 575, 578-79 (8th

Cir. 1993), cert. denied, 510 U.S. 1113 (1994); City of

Mt. Pleasant, Iowa v. Associated Elec. Co-op, Inc., 838

F.2d 268, 273 (8th Cir. 1988); II AREEDA AND HOVENKAMP, ANTITRUST LAW

¶ 322, at 70-72, 75-81 (rev. ed. 1995). In its Memorandum Opinion

and Order, the district court discussed at length the

appropriate summary judgment standard in complex

antitrust cases, carefully reviewing these relevant

cases. We conclude that the court properly articulated

and applied the governing summary judgment standard of

this Circuit.

B. Plaintiffs next argue that the district court

engaged in improper summary judgment fact-finding when it

accepted defendants’ explanations for market conditions

that, in plaintiffs’ view, evidence an unlawful

conspiracy. To put this issue in context, we must

briefly describe the South Dakota video lottery machine

market.

The private sector participants in the South Dakota

video lottery are defined by statute. The State

separately licenses video lottery machine manufacturers

and distributors, who manufacture and sell the machines;

“operators,” who own the machines and account to the

State for their revenues; and gambling “establishments,”

where the machines are played by consumers of this

government-sponsored gambling. See S.D. CODIFIED LAWS

§§ 42-7A-1(15-17), 41-45. Licensed manufacturers and

distributors must sell their machines to licensed

operators, who typically lease the machines to licensed

establishments. Only bars, restaurants, and inns that

sell alcoholic beverages may become licensed
-5-

establishments. Operators and establishments negotiate

their respective shares of the machine revenues remaining

after the State takes its cut. Typically, those shares

are stated as a percentage “split,” such as 50-50.

The South Dakota video lottery commenced in October

1989. By the end of 1989, six manufacturers were

licensed to sell video lottery machines approved by the

State. Not surprisingly, those best prepared to

distribute these machines were the established

distributors of coin-operated vending machines,

businesses that for years 
-6-

had placed juke boxes, pool tables, pinball machines, and

dart boards in bars and restaurants around the State.

These distributors and their trade association, the Music

and Vending Association (“MVA”), had successfully lobbied

the Legislature to authorize a video lottery. When the

lottery began, MVA members had obtained operator licenses

and were ready to supply video lottery machines to

licensed establishments located on the operators’ wellestablished vending machine routes. 

As the lottery got underway, something unanticipated

occurred -- South Dakota gamblers overwhelmingly

preferred to play video lottery machines manufactured by

VLT. But these popular machines proved hard to get.

Beginning as early as the fall of 1989, newly-established

operators, including licensed establishments that

obtained operator licenses so they could buy their own

machines, had difficulty buying machines from VLT. To

outsiders, it appeared that VLT was refusing to deal with

anyone other than well-established vending machine

distributors and those “squeaky wheels” who threatened

litigation or complained to the Lottery Commission.

Though VLT denied such an exclusionary policy and the

Lottery Commission’s investigation concluded that the

marketplace was sufficiently competitive, the named

plaintiffs -- two licensed operators and three licensed

establishments -- smelled an unlawful conspiracy and

began this action against VLT, certain licensed operators

who are long-standing vending machine distributors, and

the MVA. 

Plaintiffs’ Allegations. Although the lawsuit was

initially prompted by VLT’s refusal to sell video lottery
-7-

machines to plaintiffs and others from the fall of 1989

to late 1993, plaintiffs’ antitrust claims evolved

through discovery and the summary judgment process to

include the following allegations:

-- MVA and the operator defendants conspired to

allocate operator territories in South Dakota. MVA

members have their own distribution routes and went to

great lengths to avoid competing in each other’s

territories. For example, MVA member 
Paradoxically, plaintiffs allege that the conspiracy broke down as a result of 2

the Lottery Commission’s investigation but argue that the Commission’s report --

which found the video lottery machine marketplace competitive -- should be ignored

as irrelevant. In our view, the heavily regulated nature of this business is highly

relevant in determining whether “the inference of conspiracy is reasonable in light of

the competing inferences of independent action.” Matsushita, 475 U.S. at 588.

-8-

protocol is to refer a competitor’s complaining customer

to that competitor, rather than try to obtain the

account.

-- MVA and the operator defendants conspired to fix

prices by agreeing to make video lottery machines

available to establishments for a 50-50 split of the net

revenues. In 1989, one MVA member circulated a sample

lease agreement showing a 60-40 split. The operator

defendants then agreed to adopt the 50-50 split, which

was reflected in over 80% of their contracts with

establishments between 1989 and 1993. When the

conspiracy broke down, the operators’ share of negotiated

2

splits decreased. 

-- VLT knowingly enforced the operator conspiracy by

refusing to sell its video lottery machines directly to

establishments, or to licensed operators other than the

operator conspirators. VLT’s policy of not selling

machines to operators who leased to establishments at 90-

10 or 80-20 splits helped enforce the cartel’s conspiracy

to impose 50-50 splits on establishments. VLT assumed the

role of cartel enforcer out of gratitude for help MVA

members gave VLT in quickly obtaining a South Dakota

manufacturer license, and out of fear that MVA would

otherwise use its influence to tarnish VLT’s reputation
-9-

in other States. 

Defendants’ Response. In moving for summary

judgment, defendants painted a very different picture of

the video lottery machine market than plaintiffs’

conspiracy-dominated portrait:
-10-

-- When the video lottery began, long-time vending

machine distributors had well-defined territories or

routes, typically encompassing the area in which customer

machines can be serviced in one day’s drive. These

operators concentrated on placing the new video lottery

machines with existing bar, restaurant, and hotel

customers in their traditional territories. When

supplies of the popular VLT machines became limited,

operators served their existing customers first. There

was no agreement to allocate territories or customers.

Many MVA members have overlapping routes, and plaintiffs

have no evidence describing defendants’ behavior along

route overlaps, where one might reasonably expect to find

competition absent a conspiracy.

-- The 50-50 revenue split was common in the coinoperated vending machine industry long before the video

lottery. When the lottery was new and its prospects

uncertain, licensed operators and establishments

reasonably adopted this equitable-looking split; indeed,

the named plaintiffs and other non-MVA operators did so.

When the initial leases expired, operators and

establishments renegotiated based upon actual experience

with VLT machines. Establishments with profitable

machines demanded and received more generous splits.

Thus, the increase in split variety (pricing diversity),

which plaintiffs attribute to the conspiracy breaking

down, is entirely consistent with what would have

happened in a competitive marketplace.

-- VLT was not the enforcer for an operator cartel.

Throughout the alleged conspiracy, VLT sold machines to

non-MVA members, to new entrants in the operator market,
-11-

and occasionally to establishments that obtained operator

licenses and could lawfully buy machines. VLT’s refusals

to deal are explained by factors other than the alleged

conspiracy. First, VLT’s sales policy, which predated

its entry into the South Dakota market, was to sell

machines to vending machine distributors, not retail

establishments. VLT markets to distributors because it

believes that well-serviced machines will be more popular

and generate more revenues, because in VLT’s experience

bars and restaurants do not properly service machines,

and because VLT does not wish to perform the service

function. VLT prefers well-established 
-12-

distributors experienced in servicing machines. This

policy explains many of VLT’s refusals to deal during the

alleged conspiracy period, including its refusal to sell

to operators who leased machines at 90-10 or 80-20

splits, terms that VLT considered tantamount to resale.

A manufacturer may refuse to deal for these reasons, so

long as it does so independently. See Monsanto Co. v.

Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984); Weather

Wise Co. v. Aeroquip Corp., 468 F.2d 716, 718 (5th Cir. 1972), cert.

denied, 410 U.S. 990 (1973). Second, the immediate success of

VLT’s machines in South Dakota meant that VLT received

many more orders than it could fill. In the 1989-1992

period, virtually all buyers encountered back order

delays. When forced to prioritize, VLT understandably

favored its best customers -- well-established vending

machine distributors -- and other prospective buyers who

threatened litigation or complained to the Lottery

Commission. Thus, as the Lottery Commission concluded,

factors other than the alleged conspiracy explain why

plaintiffs encountered difficulty in obtaining VLT

machines. 

In granting summary judgment to defendants, the

district court concluded that VLT had rationally

explained its policy of selling only to selected

operators, that the prevalence of 50-50 splits was nonactionable conscious parallelism by the defendant

operators, and that the operators’ practice of staying

within their well-established service routes did not

evidence an agreement to allocate territories.

Plaintiffs contend the court usurped the jury’s function

by inferring lawful conduct from defendants’ descriptions

of the marketplace. We disagree. Because “antitrust law
-13-

limits the range of permissible inferences from ambiguous

evidence in a § 1 case,” the court must necessarily weigh

the summary judgment evidence of both parties in

determining whether plaintiffs’ evidence “tends to

exclude the possibility that the alleged conspirators

acted independently.” Matsushita, 475 U.S. at 588. 

After carefully reviewing the record, we agree with

the district court that the objectively observable market

conditions are consistent with defendants’ assertions (i)

that VLT acted unilaterally in choosing customers for its

video lottery machines in 
Though VLT received at least one written complaint from an operator 3

customer about another operator’s “cost cutting,” complaints by distributors are not

sufficient to overcome the presumption of unilateral decision-making. See Lovett,

998 F.2d at 578; H.J., Inc. v. International Tel. & Tel. Corp., 867 F.2d 1531, 1544-

45 (8th Cir. 1989).

After oral argument, defendants moved to exclude the letter or to expand the 4

record on appeal to include the author’s deposition testimony regarding the letter. 

-14-

South Dakota, and (ii) that the operator defendants acted

independently in buying and leasing VLT’s machines.

Regarding the former, VLT has given legitimate business

reasons for its sales practices, which we may not lightly

disregard. See Lovett, 998 F.2d 580-81; Illinois

Corporate Travel, Inc. v. American Airlines, Inc., 806

F.2d 722, 726 (7th Cir. 1986). Regarding the operators’ 3

conduct, giving priority to customers in an established

territory is to be expected, particularly when VLT

machines are in short supply, and the prevalence of 50-50

splits in the early years of the video lottery is

parallel conduct that, standing alone, lacks probative

value. See Pumps and Power Co. v. Southern States

Indus., Inc., 787 F.2d 1252, 1258 (8th Cir. 1986). 

At oral argument, plaintiffs pointed to a letter sent

from defendant Hub Music to Ramkota, Inc., a chain of

licensed establishments, as direct evidence of pricefixing. The letter appears to be a joint proposal on

behalf of MVA operators to lease VLT machines on common

terms (including a 50-50 split) to the various Ramkota

hotels located “in their respective areas.” There is

nothing in the record putting this proposal in context,

and plaintiffs apparently did not argue its significance

to the district court. Because the letter disclosed the 4
We deny that motion because the letter was part of the record before the district

court, and the deposition passages encompassed by the motion to expand the record

were not.

-15-

author’s affiliation with MVA, plaintiffs suggest it is

proof of a general agreement among MVA members to fix

standard lease terms. But it could also have been a

specific proposal on behalf of multiple suppliers none of

whom could satisfy the needs of a multi-location

customer, which from an antitrust 
-16-

standpoint is a very different document indeed. Without

more context, the letter is too ambiguous to help

plaintiffs defeat summary judgment. 

For the foregoing reasons, we conclude that, absent

additional evidence of concerted action, the market

conditions emphasized by plaintiffs do not prove that

“the inference of conspiracy is reasonable in light of

the competing inference[] of independent action.”

Matsushita, 475 U.S. at 588. 

C. Finally, plaintiffs’ argue that the district

court erred in discounting affidavits and secretly taped

conversations, testimonial evidence that plaintiffs

contend provides sufficient additional evidence of the

alleged conspiracy to withstand summary judgment. This

evidence consisted of the following:

1. In response to defendants’ motion for summary

judgment, plaintiffs submitted an affidavit by Bill Welk,

a former partner of defendant James Koehler in developing

motels. Welk averred that Koehler was late for a May

1989 business flight and explained that he had been

meeting with MVA members at the “Goose Camp,” where they

agreed to “limit the area within which they conducted the

video lottery business” and not compete in each other’s

route areas. Defendants responded with affidavits and

business records establishing that Welk and Koehler could

not have had such a meeting and conversation before

January 1990. Plaintiffs responded with a second Welk

affidavit in which he admitted confusion regarding the

dates, reaffirmed that the conversation with Koehler did

occur, and promised a third affidavit supplying the
-17-

proper dates. Plaintiffs never submitted a third

affidavit. 

The district court noted that the Welk affidavit

could be rejected on procedural grounds because

plaintiffs disclosed neither Welk as a witness nor the

substance of his affidavit during discovery. Based on

the summary judgment record, the court dismissed Welk’s

alleged conversation with Koehler as a “factual

impossibility” that did not raise a genuine issue of

material fact. We agree. Plaintiffs inexcusably

concealed Welk 
According to the Lottery Commission’s November 1993 Report, witnesses 5

at the Commission’s hearing included “[o]ne licensed establishment owner, Bill

Welk of 

Aberdeen.” Thus, concealment of Welk’s assertions was unconscionable. A

reasonable inference is that plaintiffs knew Welk’s accusations against his former

partner and current litigation adversary, Koehler, would not withstand scrutiny.

-18-

during discovery and then sprung his affidavit testimony during the summary

judgment briefing process. Despite years to perfect this sneak attack,

5

presumably with the aid of Welk’s business records, plaintiffs submitted

an affidavit in which every verifiable detail was incorrect. When

defendants pointed out the errors, including the critical error as to the

date of the alleged conversation, Welk promised to clarify his recollection

and then reneged on that promise. “Where a party emphatically and

wittingly swears to a fact, it bears a heavy burden -- even in the summary

judgment context -- when it seeks to jettison its sworn statement.”

Pyramid Sec. Ltd. v. IB Resolution, Inc., 924 F.2d 1114, 1123 (D.C. Cir.

1991), cert. denied, 502 U.S. 822 (1992); cf. Prosser v. Ross, 70

F.3d 1005, 1008 (8th Cir. 1995); Wilson v. Westinghouse

Elec. Corp., 838 F.2d 286, 289 (8th Cir. 1988). The

district court properly disregarded the Welk affidavits. 

2. Plaintiffs submitted a secretly tape-recorded

conversation in May 1993 between the principals of

plaintiff G & T Gaming and James Trucano, brother of

defendant Michael Trucano. The ostensible purpose of the

meeting was to urge Trucano to use his personal

connections to help G & T obtain VLT machines.

Plaintiffs cite the resulting conversation as evidence

the defendant operators did not compete for each other’s

accounts and VLT only sold to MVA members. Trucano left

the coin-vending distributor business in South Dakota in

1988, prior to the start-up of the video lottery. At his

deposition, he denied firsthand knowledge of the South

Dakota video lottery machine market, and plaintiffs have

no evidence he participated in the conspiracy. His
-19-

comments in the taped conversation are ambiguous as to

whether operators avoid “stealing” accounts because of an

agreement not to do so, and 
For example, Huber’s question, what happens if an MVA member “doesn’t 6

play by the rules,” produced the following dialog:

Koehler: [It means y]ou’re no longer friends.

Huber: I mean fine you’re no longer friends but I mean there’s gotta be

more hold than that.

Koehler: No.

Huber: They don’t get a supply of product or they get sanctioned or I

assume you don’t have anything in writing between all of the

members.

Koehler: We don’t no, we’re trying . . . as an association we’re trying to

make everybody more profitable -- we can do a better job,

service our locations better, have money to reinvest[. Y]ou

-20-

lend no support to plaintiffs’ theory that VLT enforced

an operators’ conspiracy. The district court properly

discounted this tape as non-probative, inadmissible

hearsay.

3. Plaintiffs submitted two secretly tape-recorded

conversations in 1993 between Charles Huber, a G & T

Gaming principal, and a competing operator, defendant

James Koehler, owner of defendant Hub Music. Ostensibly,

Huber was seeking either an “allotment” of VLT machines

or to sell G & T Gaming to Koehler. In the course of

their lengthy conversations, Huber repeatedly made

statements or asked questions in a way that invited the

unsuspecting Koehler to acknowledge an operators’

conspiracy. Each time, Koehler either flatly denied that

an anticompetitive agreement existed, responded

ambiguously, or changed the subject. Nothing Koehler

6
know you make it sound like we’re doing price fixing . . . .

-21-

said is inconsistent with unilateral behavior. The

district court properly discounted these tapes as too

ambiguous for a reasonable jury to infer that a

conspiracy existed. Accord Richards v. Neilson Freight

Lines, 810 F.2d 898, 903-04 (9th Cir. 1987). 
Waggener later returned to VLT, so his deposition testimony did not support 7

plaintiffs’ conspiracy claim. Like the district court, we do not consider whether

plaintiffs may avoid summary judgment by relying on secretly taped conversations

that the unsuspecting declarant later disavows under oath.

-22-

4. Plaintiffs submitted three secretly tape-recorded

telephone conversations in April, May, and August 1993

between G & T Gaming and Dana Waggener, who had just

resigned as VLT’s sales manager to work for a competing

manufacturer. Waggener said that he left VLT because he 7

did not like its policy of not selling to all licensed

operators and that VLT “protected the hell out of” the

operators it preferred, who “kinda had their roots in the

industry.” Waggener’s ambiguous statements are

consistent with VLT’s explanation of its sales policy and

therefore do not support an inference that VLT acted as

the enforcer of an operator-level conspiracy. Moreover,

the statements were made while Waggener was working for

a VLT competitor and were not in furtherance of the

alleged conspiracy. Thus, the district court properly

discounted these tapes as non-probative, inadmissible

hearsay. See Fed. R. Evid. 801(d)(2)(E); United States

v. Snider, 720 F.2d 985, 992 (8th Cir. 1983), cert.

denied, 465 U.S. 1107 (1984).

The judgment of the district court is affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT