### 1998 D e c i sion s O p inion s of the U nit e d

S t a t e s C our t of Appe al s for the Thir d C ir c uit

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Filed September 9, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 97-5185

JOSEPH ROSSI; ROSSI FLORENCE, CORP.; ROSSI ROOFING, INC., Appellants

v.

STANDARD ROOFING, INC.; ARZEE ROOFING SUPPLY CORP.; GAF CORPORATION; ALLIED ROOFING, INC.; SERVISTAR CORP.; ROBERT HIGGINSON; HARDWARE WHOLESALERS, INC.; WILLIAM HIGGINSON; CERTAINTEED CORP.; WOLVERINE CORP.; NAILITE CORP.; ESTATE OF ROBERT HIGGINSON; AL ROTH;
CARY ROTH; JOSEPH LICCIARDELLO; WOOD FIBRE INDUSTRIES, INC.

On Appeal From the United States District Court For the District of New Jersey (D.C. Civ. No. 92-cv-05377)

Argued: November 6, 1997

Before: BECKER, ROTH, Circuit Judges and DIAMOND, District Judge.*

(Filed September 9, 1998)

___________________________________________________ ______________

* Honorable Gustave Diamond, United States District Judge for the Western District of Pennsylvania, sitting by design ation.Finally, another former employee at Standard, Micha el

Hydro, testified that GAF comprised eighty percent of his

sales while he worked there and at least five of St andard's customers purchased exclusively GAF product. He als o explained that in 1989 and 1990, a large number of townhouse projects were already "spec'd" with GAF product, which made it impossible for the roofers t o switch product lines mid-stream. Thus, anyone who could no t supply GAF product was effectively barred from bidd ing for these jobs. On the basis of all of this evidence, w e believe that Rossi has demonstrated that a genuine issue of material fact exists as to whether GAF product was special, and necessary for a distributor like Rossi to succe ssfully compete in northern New Jersey.

Against this background on the roofing market in ge neral and GAF 's place in the market in particular, we mo ve to

the evidence Rossi adduced that GAF used secret reb ates with several of its biggest distributors in norther n New Jersey, including Standard, Arzee, and Allied, for that is critical to understanding the motivations of Rossi' s horizontal competitors. Pursuant to this scheme, GA F provided these distributors off-invoice, non-volume discounts on their purchases. These "rebates," assu ming they were only offered to a few favored distributor s as Rossi contends, allowed those distributors to sell GAF pr oduct at or below the prevailing market price (as set by the distributors who did not receive the discounts) whi le secretly conspiring to pocket the difference. In GA F district sales manager Bud Krusa's words, "the less [sic] pe ople [who] knew about it [the discounts], the less chanc e you [the smaller distributors] have of getting it[and] dropping the entire market price." The most favorable infere nce we can draw for Rossi from Krusa's statement is that i f these highly secret rebates became widely known, the smal ler distributors who were not receiving rebates would h ave put pressure on GAF to receive equal treatment, and tha t this shakeup of the market could ultimately destabilize prices, lead to a price war, and "drop[ ] the entire market price" for GAF product.

By adducing evidence of the GAF rebate scheme and t he importance of GAF and GAF product, Rossi transforms

42what might otherwise have been a very difficult (an d

implausible) conspiracy into a realistic opportunit y for a few cooperating competitors to fix prices and earn subs tantial profits while still operating within what appears t o be a competitive marketplace. Cf. Brooke Group Ltd. v. B rown & Williamson Tobacco Corp., 509 U.S. 209, 239 (1993) (holding that a conspiracy to fix supra-competitive prices in a market with many variables was implausible becaus e of the complexity required to monitor and enforce it) (citations omitted).

We find this case, as it relates to GAF, Standard, and Arzee, fundamentally unlike Matsushita. There, the critical problem with the conspiracy as alleged was that the conspirators had been losing large sums of money ov er a period of twenty plus years by undercutting the mar ket in the hope of building market share and eventually establishing a monopoly. Not only did the Courtfind it difficult to distinguish the allegedly predatory pr icing strategy from actual price competition, but given t he extremely low chance that the scheme would succeed, the Court concluded that the defendants, if they operat ed in a rational manner, had no motive to engage in the con duct with which they were charged. In contrast, it is no t difficult to divine the likely motive of the three distributo rs, Standard, Arzee, and Allied, in boycotting Rossi. A s Rossi's horizontal competitors, they wanted to rid the mark et of a price-cutting competitor with a reputation for exce llent service and reliability who had refused to cooperat e in their price-fixing schemes in the past. Moreover, Rossi i s aided in asking us to permit the fact finder to draw this in ference by the strong likelihood that the boycott would actual ly succeed (as evidenced by the results).

Even if all of this is true, submits GAF, it still does not explain why it would make sense for GAF to join the conspiracy. We agree that GAF 's motive, as the manufacturer-supplier, is less obvious than Standar d's or Arzee's, but ultimately we find it no less compelli ng. This is because Rossi has adduced evidence that Standard, A rzee, and Allied possessed substantial economic leverage over GAF. Together, they purchased $10.7 million of the $24.1 million of GAF product sold in New Jersey in 1989, or

4344.5% of GAF 's total northern New Jersey sales. Th ese

distributors were not happy about the prospects of Rossi entering the market and competing with them, and th ey made their views known to GAF. Complaints and threa ts from three of GAF's largest customers in New Jersey are sufficient to establish a rational motive for GAF t o engage in the concerted conduct that Rossi alleges. For th ese reasons, we do not accept GAF's submission that Ros si's conspiracy theory, and the economic motivations beh ind it, are inherently implausible.

(2) Circumstantial Evidence Against GAF

We turn next to the circumstantial evidence that supports Rossi's allegations that GAF joined with S tandard and Arzee (and potentially others) to enforce a mar ket-wide boycott of first Rossi Florence and later Rossi Roo fing, The evidence comes in several forms. First, as we will detail,

Rossi has adduced evidence that GAF received numero us complaints about Rossi's pricing practices while he was at Standard and responded to them by asking Rossi to r aise his resale prices on GAF product. While these compl aints antedate Rossi entering the marketplace, they are u seful background information to establish motive and prac tice. See Big Apple BMW, 974 F.2d at 1360-61.

Second, GAF participated in the group boycott again st Rossi through monitoring and enforcement activities andthe implementation of an unprecedented anti-transshipment policy. Third, there is evidence that GAF singled out Rossi and acted contrary to its own corporate p olicy in refusing to deal with him (an important factor unde r Monsanto and Matsushita), in that GAF employees tes tified that the company had an "open distribution" policy under which they sold to all comers, yet GAF refused to s ell to Rossi and went to considerable lengths to see that he was not able to secure GAF product from other sources. Finally,

Rossi has also adduced evidence that two of GAF 's explanations why it refused to deal with him -- tha t it had adequate distribution in New Jersey and product sho rtage -- were pretextual.

44(a) Distributors' Complaints and GAF's Res ponse

While Rossi worked at Standard, the company receive d, as did Arzee and Allied, the off-invoice, non-volum e rebates discussed supra. Rossi used these rebates to reduce the prices he charged to his customers in an effort to increase sales volume; he did not, as his competitors did, r etain the rebates to increase gross profits. This aggressive pricecutting strategy understandably angered Standard's competitors, and several of them complained to GAF about Rossi's behavior. Krusa and Licciardello, both then working as GAF district sales managers in the New Jersey re gion, frequently called Rossi at Standard and passed alon g the complaints of Arzee, Allied, Passaic Metals and oth ers about Rossi's pricing. Krusa and Licciardello also called Bob Schaab, the Controller of Standard, to complain that Rossi was passing on the discounts given by GAF to

Standard to his customers.

Although GAF did not have suggested resale prices,

Krusa and Licciardello told Rossi to raise his resa le prices for GAF product. Schaab, relaying GAF's messages, a lso asked Rossi to refrain from passing the GAF rebates to Standard's customers. Rossi refused, and vowed to p rice as he saw fit. This evidence suggests several things. First, it reaffirms the motives of Rossi's horizontal competi tors, Arzee and to a lesser extent Standard. Second, it s hows that a group of distributors (even a group that did not include Standard) could wield economic leverage ove r GAF

and influence its interactions with recalcitrant di stributors. Third, it suggests that GAF's course of conduct was to curry favor with its larger distributors by doing w hat it could to assist them in stabilizing the market and keeping price levels up.

We agree with GAF that evidence that it succumbed t o pressure from distributors is not sufficient, by it self, to survive summary judgment, since the evidence of complaints and threats GAF received from Standard a nd Arzee is not enough in isolation to prove concerted action. See Monsanto, 465 U.S. at 763-64 ("[p]ermitting an agreement to be inferred merely from the existence of complaints, or even from the fact that termination came about `in response to' complaints, could deter or p enalize

45perfectly legitimate conduct."); Sweeney, 637 F.2d at 111.

However, we do not rely solely on these complaints. Rather,

there is a substantial amount of additional evidenc e to support a finding of an unlawful conspiracy. In thi s circumstance, we are permitted to consider the evid ence of distributor complaints. See Monsanto, 465 U.S. at 7 64 n.8 ("We do not suggest that evidence of complaints has no probative value at all, but only that the burden re mains on the antitrust plaintiff to introduce additional evi dence sufficient to support a finding of an unlawful cont ract, combination, or conspiracy.").

(b) Actions in Contravention of GAF Corpor ate Policy

GAF's boycott against Rossi appears to be contrary to its own corporate policy, particularly in light of the evidence

adduced of GAF's draconian enforcement and anti-tra nsshipment activities. There is testimony in the reco rd that GAF had an open distribution system. Peter Bacchion e, GAF 's director of marketing and sales and Krusa's superior in 1989, testified that GAF never had a closed dist ribution network and never rejected a potential distributor because

the local market was saturated. Bacchione testified :

Q: Do you recall in 1989 whether GAF, with r espect to the roofing products that you had responsibi lity for, had any particular objectives with respect t o increasing, decreasing, or otherwise, its di stribution

channel.

A: . . . We always looked to increase our sh are of business with any distributor.

Q: Did GAF have any exclusive distributors f or roofing products while you were national sales direc tor?

A: No.

* * *

Q: Wasn't GAF's philosophy to have an open

distribution network?

* * *

46A: Maybe it was -- maybe it was a philosophy . A

practice. Whether it was a philosophy that w as up on a wall some place, I don't recall that.

Q: Was it the practice?

A: Generally, we sold on an open basis. Ther e were no exclusivities.14

This testimony directly contradicts GAF's litigatio n position as stated by Krusa, who has maintained sin ce 1989 that GAF refused to supply Rossi because it ha d "adequate distribution."15 Krusa is also contradict ed by Lorraine Campbell, Ruth Rogers, Mary Lou Sperr and Bob Tafaro, all of whom worked for Krusa, and all of wh om testified that Krusa never told them that GAF had a dequate distribution in New Jersey. Finally, Rossi submits that Krusa is contradicted by the fact that GAF supplied 34 out of the 39 distributors in northern New Jersey, and only refused to sell to three distributors including Ros si Roofing. On summary judgment, of course, we need not resolve this dispute, but rather grant Rossi all favorable infer ences.

(c) Monitoring and Enforcement Activities

GAF, through Krusa and Licciardello, took still mor e steps to ensure that Rossi did not get any GAF prod uct. In January 1989, when Droesch told Krusa that he plann ed to buy GAF product through his Florence Corporation in Long

___________________________________________________ ______________

14. Bacchione appears to contradict himself during his deposition. For example, in reference to the decision whether to op en up ABC as a distributor after Rossi Roofing had gone out of bus iness, Bacchione also said: "The concern was not whether or not to open u p another

distributor. The concern was whether or not we had adequate distribution, I think was the subject at hand. I th ink we felt there was adequate distribution. . . . There was not a valid reason to open up another distributor [next door to Standard]." This contradictory testimony leads to two possible conclusions, and on summary judgment, we must accept the one most favorable to Rossi.

15. For example, Krusa allegedly told Droesch in Ja nuary 1989 that GAF would not sell to Rossi Florence in New Jersey beca use it had adequate distribution. In July 1989, when Krusa prevented Ro ssi from picking up an order of GAF product from HWI, Rossi spoke with Krusa who told him, "The distribution is filled. GAF requires no o ther distributors."

47Island and resell it to Rossi Florence, Krusa told Droesch

that "he would not allow that and he would not sell me [sic] in Long Island if I did that." GAF also warned othe r distributors not to resell its products to Rossi, a nd there is evidence that, on at least one occasion, GAF took s teps to enforce its boycott. GAF salesmen Sal Granfort and Doug Collins warned DiNaso & Sons, a roofing and siding distributor located in Staten Island, New York, not to resell its product to Rossi. After DiNaso & Sons ignored t heir warnings, GAF raised DiNaso's prices by $1.00/unit, arguably in retaliation. Similarly, when Rossi cont acted Stroeber Supply, another northern New Jersey distri butor, to see if it would sell GAF product to him, Larry Hammershock of Stroeber told a Rossi Roofing employ ee that Stroeber had already been told by GAF not to s ell GAF product to Rossi Roofing. Hammershock defied GAF an d sold to Rossi Roofing anyway, but at a higher price

.

There is also evidence that GAF extended the boycot t to buying groups like HWI and Servistar which Rossi be gan to use, in addition to distributors like Stroeber and DiNaso, to try to circumvent the GAF boycott.16 To this end, R ossi

___________________________________________________ ______________

16. Rossi contests the district court's affirmance of an order by the magistrate judge, denying his motion to compel GAF to disclose the names of the entity or entities that were the subje ct matter of certain

conversations between GAF 's in-house counsel Rober t Poyourow and Krusa on July 27, 1989, August 10, 1989, and Januar y 6, 1990. Rossi hypothesizes that several of these discussions cent ered around HWI and Servistar, and he submits that the district court a bused its discretion when it accepted GAF's description of the "subject matter" of these conversations on its privilege log as "absence of a legal obligation to

sell product." We conclude, however, that the district c ourt did not abuse its discretion by denying Rossi's motion to compel the name of the entity discussed or any other additional information conce rning the "subject matter" of the conversation catalogued in GAF's pri vilege log. See Rabushka v. United States, 122 F.3d 559, 565 (8th C ir. 1997) (standard of review), cert. denied, Rabushka ex rel. United S tates v. Crane Co., 118 S. Ct. 1336 (1998). Rule 26(b)(5) only requires tha t a party claiming a privilege "describe the nature of the documents, co mmunications, or things not produced or disclosed in a manner that . . . will enable other parties to assess the applicability of the privileg e or protection." Fed.

R. Civ. Pro. 26(b)(5). These matters are generally bes t left to the district

and magistrate courts' discretion. In the circumstances that exist here, we will not second guess the courts' conclusion that t he description provided was adequate to support the privilege clai m.

48joined HWI in July 1989 and placed an order for GAF

product. Membership in HWI ordinarily should have allowed Rossi to purchase products from all of HWI' s suppliers, including GAF. Likewise, GAF normally su pplied its products to all HWI members, regardless of whet her they appeared on GAF's own customer list. Notwithstanding this, when a Rossi Roofing driver w ent to GAF's facility on July 27, 1989, to pick up the GAF product ordered through HWI, GAF would not release it. After several hours of wrangling over the order, Ro ssi eventually spoke with Krusa, who had given the orde r not to release the GAF product. Krusa told Rossi "I am not selling to you. The distribution is filled. GAF req uires no other distributors." Rossi replied that GAF was not really selling to Rossi Roofing, but rather to HWI, to whi ch Krusa responded, "We are not selling to you." After this dramatic exchange, Dave Heine of HWI remarked that he had ne ver seen anything like this in his ten years working at the buying group. App. at 2596, 3513.

In yet another effort to obtain GAF product and circumvent the boycott, Rossi used Far Hills Lumber and Hardware ("Far Hills"), a start-up hardware store o f which he was a principal, to place orders through the buy ing group Servistar. See supra S II.B.2.a and infra S I I.B.2.c. Rossi was able to purchase one order of $30,000 wor th of GAF product on August 2 and 3, 1989. However, after GAF

and Standard found out that Rossi had used Far Hill s and Servistar to get GAF product, see infra S II.B.2.c, GAF refused to fill Far Hills' second order for $456 of GAF product.

Rossi has also adduced evidence that GAF and Standa rd coordinated to ensure that Rossi was not getting an y GAF product. See supra S II.B.2.a. Rossi developed evid ence that

Licciardello of Standard confirmed with Gessner of GAF that GAF was not selling to Rossi, and there is evi dence that, after seeing GAF product in front of Rossi Ro ofing, Licciardello called and was reassured by GAF that t he load

was not for Rossi but bound for Walmart on a Jentar truck. See id. In addition, there is the statement made by Licciardello after he learned that Rossi Roofing ha d been getting GAF product through Far Hills and Servistar that

49" `that's the last time we're going to be seeing an y GAF

across the street.' They got the -- they were getti ng the loads through [Far Hills], which is [Servistar]. Th at's how Joe Rossi was getting GAF and he's [Licciardello] g oing to put an end to that. `Never going to see another GAF load across the street.' " See supra S II.B.2.a.

(d) Pretextual Excuses

Finally, Rossi argues that GAF used pretextual excu ses to explain why it refused to supply Rossi, and that th is use of pretext is further circumstantial evidence of the c onspiracy he alleges. See Fragale, 760 F.2d at 474 (pretextua l excuses are circumstantial evidence that can disprove the l ikelihood of independent action). The first excuse is that Ro ssi was not needed because GAF had adequate distribution. R ossi notes that, despite Krusa's contention that everyon e in his office knew that he had "adequate distribution" in New Jersey, neither his boss, Peter Bacchione, nor his employees, Lorraine Campbell, Ruth Rogers, Mary Lou Sperr, and Bob Tafaro had ever heard of this policy . Even

Krusa admits that GAF had never refused to fill an order through a buying group like Servistar because its distribution was allegedly full.

This "adequate distribution" excuse is just the "fl ip side" of Rossi's contention that GAF was acting in contra vention of its open distribution policy, and for the same r easons that there is a genuine issue whether GAF 's policy was to supply all distributors who wished to purchase its products, there is also a genuine issue of material fact whether the "adequate distribution" justification K rusa gave to Rossi was legitimate or simply pretextual. We no te again that GAF supplied its roofing product to at least 3 4 of the 39 distributors in the northern New Jersey marketpl ace, but not to Rossi.

GAF's second excuse, which Rossi submits was also pretextual, was that GAF had a product shortage and therefore could not supply any new distributors. Ro ssi contends that there is a genuine issue of material fact as to the validity of this excuse because Bacchione, GAF' s national sales manager, testified that he could rec all no

50problems in filling customer orders for GAF product in

1989, despite the fact that this would have been a matter within his job responsibilities. In addition, Rossi argues that the only document GAF has been able to produce to corroborate Krusa's claim that GAF product was in s hort supply in 1988 and 1989 was a memorandum dated August 11, 1989. Rossi submits that this memorandum should not be considered conclusive for the purpose s of summary judgment because it was written almost nine months after GAF had decided not to supply Rossi

Florence. GAF counters that the memorandum refers t o the product shortage as a "continuing" issue, and there fore that summary judgment is appropriate.

The critical language in the memorandum is:

We continue to have an im-balance of invento ry between Baltimore and So. Bound Brook. The l ack of warehousing has been a very critical issue, causing the im-balance in inventory.

We are receiving more calls, on a daily basi s, from

customers in the southern half of the distri ct complaining of our lack of product and the c ongestion of trucks and also the length of time it tak es to get

loaded at the Baltimore Plant.

Our reading of the document is that it is ambiguous and therefore insufficient to command summary judgment. For example, it is unclear whether the memorandum refer s to an overall GAF product shortage or just a warehousi ng "imbalance" that was temporarily interfering with deli very to the southern half of Krusa's territory. Also, while the memorandum refers to the problem as a "continuing" one, there is no indication what that means. On summary judgment, viewing the evidence in a light most favo rable to Rossi, he has established a genuine issue of fact w hether both the "adequate distribution" and the "product s hortage" excuses were pretextual.

(e) Conclusion

To summarize, we find that Rossi has adduced compet ent evidence that GAF: (1) responded to distributor com plaints

51in the past; (2) singled out Rossi as one of the fe w

distributors out of a large number in northern New Jersey not to receive GAF product; (3) acted in contravent ion of its own established open distribution policy in dealing with Rossi; (4) threatened and punished distributors who resold to Rossi; (5) refused to supply Rossi through buyin g groups; (6) implemented an unprecedented policy prohibiting transshipment of GAF product to Rossi; (7) cooperated wi th Standard in monitoring and enforcing the boycott; a nd (8) offered pretextual excuses to explain its behavior. Examining the totality of this evidence, it is suff icient to support a reasonable inference that GAF was acting in concert with Standard and Arzee to boycott Rossi.

Particularly forceful is the evidence that GAF proh ibited distributors from trans-shipping GAF product to Ros si and that GAF prevented Rossi from purchasing its produc ts from buying groups. These actions simply do not mak e sense in light of GAF's asserted justifications for its behavior vis a vis Rossi. For example, if there wer e truly a product shortage in northern New Jersey, presumably GAF would then have cut off supply to all Servistar and HWI members who were not on GAF's approved customer lis t to ensure that its larger distributors like Standard a nd Arzee would not suffer from the short supply. Yet, GAF su pplied Far Hills, also an entity that was not on GAF's cus tomer list, until it discovered that Far Hills was under Rossi's control. Moreover, the product shortage excuse is n ot consistent with GAF's claim that it unilaterally implemented a policy precluding trans-shipment of p roduct at the distributor level. Assuming that GAF product was scarce, GAF would understandably want to ensure tha t its

favored distributors received it ahead of all other s. However, once GAF decided how it would allocate among its ap proved distributors whatever amount of GAF product existed , it is difficult to conceive of a legitimate reason why GA F would care whether that distributor used the product or r esold it to Rossi Roofing at a profit.

Additionally, the product shortage justification do es not explain why GAF would sell Droesch as much GAF prod uct as he wanted in Long Island but would not allow him to trans-ship that product to New Jersey. Similarly, i t is hard

52to comprehend why GAF would continue to fill $30,00 0

orders, obviously commercial-sized purchases, to bu ying group members in northern New Jersey, if it was tru ly believed that it had adequate distribution in that market. One explanation of this behavior is that GAF was ac ting in concert with Standard, Arzee, and Allied to boycott Rossi

and force him out of business.

For the reasons described above, Rossi has met his burden of adducing evidence that tends to exclude t he possibility of independent action, and hence we wil l reverse the district court's order granting summary judgmen t in

favor of GAF.

c. Servistar

In contrast to the defendants discussed above, we w ill affirm the district court's grant of summary judgme nt in

favor of Servistar because Rossi has failed to intr oduce

either direct or circumstantial evidence that tends to exclude the possibility that Servistar acted indepe ndently rather than joining the conspiracy against Rossi.

Servistar's involvement in this case stems from its refusal to honor Rossi's second purchase request for $456 o f GAF product on August 11, 1989. Rossi had already obtai ned a little over $30,000 of GAF product on August 8 and 9, 1989, via his Far Hills account with Servistar, whi ch was resold to Rossi Roofing. Two days later, when Rossi attempted to order a second batch, Servistar did no tfill it, claiming that GAF had cut Far Hills off from obtain ing GAF product. Rossi contends that after he received thef irst order of GAF product, Standard and Arzee discovered how he had circumvented the blockade, notified GAF, and that GAF then enlisted Servistar to join the group boyco tt and cut off this new avenue of supply. Rossi offers thr ee pieces of evidence to support this allegation: (1) a discu ssion he

had with Jim Cherbonneau of Servistar in which

Cherbonneau told him that GAF did not want Servista r to ship its product to Rossi and that GAF would not su pply Rossi through his Servistar account;17 (2) Servist ar's

___________________________________________________ ______________

17. Cherbonneau told Rossi, "GAF called, they knew where the product was going. They had filled their needs in that area , and [ ] they do not want us to ship to you."

53curious and sudden change of mind, selling Rossi $3 0,000

of GAF product one day and refusing a minuscule $45 6 order two days later; and (3) Servistar's use of th e allegedly pretextual excuse that Far Hills had credit problem s to justify its refusal to deal.

Rossi's only direct evidence, the phone conversatio n with Cherbonneau, is not evidence of Servistar's conspir atorial

involvement. Cherbonneau said that "GAF would not s ell product to Servistar to go to -- through [Far Hills ] to me." Cherbonneau's statement, while not precluding conce rted action, is evidence only of a unilateral decision b y GAF to not supply Rossi through any means (or a multilater al conspiracy that did not include Servistar). Additio nally, it is undisputed that Servistar could not force GAF to su pply it or its members with GAF product. Unlike other produ cts Servistar supplied, Servistar neither stored GAF pr oduct in its warehouses nor had the contractual right to com pel GAF to supply the product. The Servistar-GAF purchasing agreement did not obligate GAF to accept all of Ser vistar's

members' orders.

Because Servistar provided GAF product to its membe rs on what is known in the industry as a "drop shipmen t" basis, it had no control over whether its suppliers would actually deliver their products to its members. The "drop shipment" relationship between Servistar and GAF me ant that when a Servistar member placed an order with Servistar for GAF product, Servistar would forward that order to GAF. The member would then go to the GAF warehouse to pick up the GAF product directly from GAF,

not Servistar. GAF then would invoice Servistar for the purchase, and Servistar would pay GAF. Subsequently

, Servistar would collect the amount due from its mem ber. Using this "drop shipment" purchasing method, Servi star assists its members by: (1) negotiating group disco unts from manufacturers, and (2) acting as the guarantor of its members' credit to those manufacturers. Thus, Servi star's role did not include pre-purchasing and warehousing of GAF product, and it had virtually no say over which of its members GAF chose to supply.

Under these circumstances, Rossi's claim that "at t he request of GAF, Servistar refused to fill Far Hills ' next order

54for $450 because Far Hills had resold it to Rossi R oofing,"

is not supported by Rossi's own testimony. As descr ibed above, according to the undisputed evidence, GAF di d not have to conspire with Servistar to boycott Rossi Ro ofing because GAF did not need Servistar's acquiescence t o prohibit Far Hills or Rossi Roofing from buying its product through Servistar. Since there is no evidence that Servistar

could overrule a unilateral GAF decision to refuse to supply a Servistar member, we cannot reasonably infer on t he basis of such ambiguous evidence that Servistar and GAF agreed to refuse to sell to Far Hills. See Internat ional Logistics Group Ltd. v. Chrysler Corp., 884 F.2d 90 4, 907 (6th Cir. 1989) (no credible conspiracy is alleged where a manufacturer imposing distribution restraints does not need agreement or acquiescence from its distributor s in formulating marketing conditions for its product); 6 Phillip E. Areeda, Antitrust Law P 1402b4 (1986) ("discussi ons, suggestions, recommendations, and the giving of information do not indicate any conspiracy where th e actor imposing the alleged restraint does not wish or nee d the acquiescence of the other party or any quid pro quo from him").

Similarly, Rossi's allegation that Servistar made n o effort to require GAF to fill the order of its member Far Hills does not support his theory of conspiracy. Without direc t evidence (or other strong circumstantial evidence) of concerted action by Servistar and GAF, we cannot dr aw an inference of an unlawful conspiracy from the equivo cal

nature of Servistar's decision not to make what wou ld most likely have been a futile effort to encourage GAF t o sell to Rossi. Servistar's refusal to disrupt its relations hip with GAF because GAF unilaterally (from Servistar's pers pective) refused to deal with Rossi is clearly "as consisten t with permissible competition as with illegal conspiracy, " Matsushita, 475 U.S. at 588 (citations omitted), an d is not

evidence of a "conscious commitment to a common scheme." Monsanto, 465 U.S. at 764. We note in this regard

that there is no evidence that Servistar was on not ice that GAF was part of a conspiracy to boycott Rossi Roofi ng. Thus, from Servistar's point of view, this was simp ly a unilateral refusal to deal. Indeed, even if Servist ar did know that GAF was involved in an unlawful group boycott, its

55decision to continue relations with GAF would still not rise

to the level of concerted action.

Without direct evidence with respect to Servistar, we must also consider whether Rossi's conspiracy theor y is plausible, and whether inferring concerted action u nder

these circumstances would have the effect of deterr ing significant procompetitive conduct. See Petruzzi's, 998 F.2d at 1233. Both of these considerations militate agai nst inferring concerted action with respect to Servista r. Apart

from the evidence discussed above that it would be unreasonable to infer that Servistar would conspire with GAF to do what GAF could do unilaterally (i.e. refu se to release GAF product to Rossi from GAF warehouses), it is similarly implausible that GAF, an extremely minor Servistar supplier, could "pressure" Servistar, a b illion plus dollar buying cooperative, into joining the group b oycott of Rossi Roofing, a small start-up roofing and siding distributor. Similarly, Rossi has adduced no eviden ce of a motive for Servistar to join the conspiracy. See Ma tsushita, 475 U.S. at 596-97. Nothing in the record indicates that Servistar had any reason to support a conspiracy to increase or stabilize wholesale roofing prices in N ew Jersey, and, to repeat, there is simply no evidence of GAF leverage

over Servistar.18

Perhaps most importantly, inferring a conspiracy fr om the slim circumstantial evidence would have the eff ect of deterring Servistar's significant procompetitive co nduct in this as well as many other markets. As a wholesale purchasing cooperative, Servistar bolsters competit ion and increases economic efficiency by aggregating small purchasers thereby permitting them "to achieve econ omies of scale in both the purchase and warehousing of wh olesale supplies, and also ensur[ing] ready access to a sto ck of goods that might otherwise be unavailable on short notice. The cost savings and order-filling guarantees enabl e smaller retailers to reduce prices and maintain their retai l stock so

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18. Sales of GAF product through Servistar, estimat ed at about $2.5 million, comprised only 12% of Servistar's total ro ofing purchases on behalf of its members and an insignificant fraction of Servistar's one billion plus national purchases in 1989.

56as to compete more effectively with larger retailer s."

Northwest Wholesale Stationers, 472 U.S. at 295. If we were to permit an antitrust violation to be inferred und er the facts of this case, it would significantly impact t he ability of Servistar to continue its procompetitive actions in the

market.

Because Servistar could not compel GAF to sell to F ar Hills, Servistar's only option in response to GAF's decision not to supply Far Hills would have been to somehow bring pressure to bear on the roofing manufacturer. Such action would undoubtedly adversely affect all Servistar me mbers nationwide who were receiving improved pricing for GAF product through Servistar, especially if it led to the restriction or cessation of Servistar's purchasing agreement with GAF. Indeed, inferring concerted action in the se circumstances could encourage Servistar to terminat e relationships with every supplier that refused to s ell to a particular Servistar member. This would deter Servi star's procompetitive activities and deny Servistar's memb ers the significant benefits of cooperative membership.

Finally, Rossi submits that Servistar offered a pre textual excuse to explain its decision not to supply Far Hi lls with GAF product. Pretextual excuses, as noted, can disp rove the likelihood of independent action. See Fragale, 760 F.2d at 474. Rossi challenges Servistar's explanation th at it refused to supply the second order of GAF product t o Far Hills because of Far Hills' credit problems. Althou gh it appears that there are genuine issues of fact conce rning Far Hills' credit-worthiness and its impact on Serv istar's decision to refuse Rossi's second order of GAF prod uct,19 considering Servistar's lack of motive to conspire, GAF's lack of any leverage over Servistar, and the fact t hat GAF did not need to enlist Servistar's help to boycott Rossi, this

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19. On the one hand, the record indicates that Serv istar refused Far Hills credit on August 15, 1989, even though Far Hills ha d only used $30,755 of its outstanding $75,000 credit limit and no paym ents were yet due. On the other hand, Servistar contends that it exten ded the $75,000 credit limit to Far Hills for the purpose of fundin g hardware purchases, not roofing supplies. According to Servistar's forc eful rejoinder, the

initial order of $30,755 was an error, and after it was dis covered, Servistar unilaterally determined not to permit it to happen again.

57slim reed of pretext is simply not enough. In view of the

procompetitive role Servistar plays in the market g enerally and concerned that we do not "chill the very conduc t the antitrust laws are designed to protect," Matsushita , 475 U.S. at 594, we conclude that Rossi has not met his burden here in opposing summary judgment, and therefore we will affirm the district court's order granting summary judgment

in favor of Servistar.

d. Wood Fiber

Like GAF, Wood Fiber manufactures roofing products, including Structodek FS, which is widely used in ce rtain commercial roofing applications. Unlike GAF, howeve r, Wood Fiber is only tangentially involved in the all eged conspiracy with its activity centering around a sin gle

incident in which Rossi was frustrated in his attem pt to purchase approximately $5,000 worth of Structodek F S. We will affirm the district court's grant of summary j udgment in favor of Wood Fiber because, as with Servistar, Rossi has

failed to introduce evidence that tends to exclude the possibility that Wood Fiber acted independently rat her than joining the conspiracy against Rossi.

On June 6, 1989, Rossi Roofing ordered Structodek F S from Wood Fiber for its customer, Star Roofing. Woo d Fiber quoted a price and a shipping date of July 5th to R ossi Roofing. On June 27, 1989, Karl Loser, Wood Fiber's sales representative in New Jersey, called and told Rossi Roofing's Mike Issler that Wood Fiber would notfill the order. As a result, Rossi Roofing lost the order fo r Structodek FS from Star Roofing. Rossi claims that Loser told him that Wood Fiber was being pressured by Sta ndard and Arzee not to sell to him and that there was a"p roblem" with his pricing. Loser also told Issler that Wood Fiber had previously sold product to a small distributor on L ong Island and suffered when Allied canceled orders in retaliation. Loser testified that he wanted to supp ly Rossi Roofing, but that his concerns that Rossi Roofing's competitors would retaliate "influenced" his decisi on not to supply Rossi Roofing.

Based upon these facts, Rossi asks us to infer that Wood Fiber participated in a conspiracy to boycott Rossi Roofing

58because it gave in to pressure and fear of retaliat ion by

several of its distributors. It is well established that this kind of evidence, by itself, is legally insufficien t to prove a conspiracy. See Monsanto, 465 U.S. at 763-64; Sween ey, 637 F.2d at 111. In Sweeney, the plaintiffs contend ed that "the retailers' acts of complaining and [the defend ant's] reaction to the complaints constituted concerted ac tion in restraint of trade." Sweeney, 637 F.2d at 110. We r ejected that argument and noted that "even if the appellant s had demonstrated that [the defendant's] actions were in response to these complaints, such evidence alone w ould not show the necessary concerted action." Id. Simil arly, in Monsanto, the Supreme Court opined that "[p]ermitti ng an agreement to be inferred merely from the existence of complaints, or even from the fact that termination came about `in response to' complaints, could deter or p enalize perfectly legitimate conduct." 465 U.S. at 763. Thu s, the Court held that " `[t]o permit the inference of con certed action on the basis of receiving complaints alone a nd thus to expose the defendant to treble damage liability would both inhibit management's exercise of independent business judgment and emasculate the terms of the statute.' " Id. at 764 (quoting Sweeney, 637 F.2d a t 111 n.2).

We have explained at length supra why the claims against Standard, Arzee, and GAF survive, notwithst anding these precedents. However, because Rossi has not ad duced evidence of anything other than the fact that Wood Fiber may have responded to pressure and threats from Sta ndard and Arzee, we cannot infer the existence of concert ed action involving Wood Fiber. The evidence adduced against Wood Fiber stands in stark contrast to the evidence agai nst GAF. For example, Rossi has not adduced any evidence tha t Wood Fiber offered pretextual excuses, or prohibite d transshipment of its product, or engaged in monitoring a nd enforcement of the alleged boycott. Without some ad ditional evidence, a fact finder may not infer that Wood Fib er entered into an agreement to boycott Rossi Florence or Rossi Roofing, and therefore we will affirm the dis trict court's order granting summary judgment in favor of Wood

Fiber.

59III. PROXIMATE CAUSE AND ANTITRUST INJURY

Having determined that Rossi has adduced sufficient evidence of a conspiracy to satisfy the first prong of the prima facie case with respect to the Standard defen dants, the Arzee defendants, and GAF, we now consider whet her Rossi has adduced sufficient evidence to satisfy th e fourth prong, "that the plaintiffs were injured as a proxi mate result of that conspiracy." Tunis Bros., 763 F.2d a t 1489.20

The district court concluded that even if Rossi had established the existence of an agreement, his clai m still

would fail because he had not established that the business losses he suffered were in any way related to that conspiracy. See Rossi v. Standard Roofing, Inc., 95 8 F. Supp. 976, 991 (D.N.J. 1997). The court determined that Rossi's allegations -- that the defendants prevente d him from obtaining GAF and other roofing products he ne eded to compete and thereby stopped him from opening Ros si Florence and ultimately forced Rossi Roofing out of business -- are unsupported in the record. The dist rict court also concluded that Rossi's damages expert, R egan R. Rockhill, CPA, based his report upon unfounded assumptions that would force a trier of fact to use "guesswork and speculation" in determining what, if any, injury Rossi suffered as a result of the defendants ' actions. See id. The court criticized the Rockhill Report fo r being nothing more than an impermissible "but for" damage model that erroneously ignored several important fa ctors, including failing: (1) to consider that Rossi had n o experience running his own business; (2) to analyze specifically what products were needed to assure a successful distributorship; and (3) to engage in an y analysis of what harm, if any, was caused by the al leged antitrust violations as opposed to other factors, s uch as Rossi's management style or general business condit ions.

See id.

The district court accordingly held that Rossi had not presented sufficient evidence of damages such that a

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20. As explained above, because Rossi's allegations qualify for per se treatment, the second and third prongs of the four- part antitrust prima facie case are conclusively presumed. See supra S I I.A.

60reasonable inference could be made connecting the i njury

with the defendants' conduct. For the reasons we wi ll explain, we disagree with the court's conclusion th at Rossi has not identified a genuine issue of material fact with regard to the proximate cause and damages element o f his prima facie case.

To recover damages, an antitrust plaintiff must pro ve causation, described in our jurisprudence as "fact of damage or injury." See Danny Kresky Enters. Corp. v

. Magid, 716 F.2d 206, 209 (3d Cir. 1983). It is not necessary to show with total certainty the amount of damages sustained, just that the antitrust violation caused the antitrust injury suffered by the plaintiff. See Ame rinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1493 (8th Cir. 1992) ; Danny Kresky, 716 F.2d at 211 ("the standard of causation requires only that plaintiff prove that defendant's illegal conduct was a material cause of its injury"). As th e Supreme Court explained in Zenith Radio Corp. v. Ha zeltine Research, Inc., 395 U.S. 100, 114 n.9 (1968) (citat ions omitted) (emphasis in original):

[Plaintiff's] burden of proving the fact of damage under S 4 of the Clayton Act is satisfied by its p roof of some damage flowing from the unlawful conspiracy; inquiry beyond this minimum point goes only to the a mount and not the fact of damages. It is enough th at the illegality is shown to be a material cause o f the injury; a plaintiff need not exhaust all possible al ternative sources of injury in fulfilling his burden o f proving compensable injury under S 4.

Once causation is established, the jury is permitte d to calculate the actual damages suffered using a " `re asonable estimate, as long as the jury verdict is not the pr oduct of speculation or guess work.' " In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1176 (3d Cir. 1993 ) (citing MCI Communications Corp. v. American Tel. & Tel. Co ., 708 F.2d 1081, 1161 (7th Cir. 1983)) (other citations o mitted). Thus, in antitrust cases, there are ultimately two related, but distinct, inquiries to establish antitrust inju ry. First, the plaintiff must prove the fact of antitrust inju ry, as part of his prima facie case; then, he must make a showi ng regarding the amount of damages, in order to justif y an

61award by the trier of fact. Concerning the former, courts

apply the ordinary standard of proof, but with resp ect to the latter, the standard is somewhat relaxed. See I n re Lower Lake Erie Iron Ore, 998 F.2d at 1176 ("[t]he relaxed measure of proof is afforded to the amount, not the

causation of loss -- the nexus between the defendan t's illegal activity and the injuries suffered must be reasonably proven.") (citations omitted); see also Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264-65 (1946) (holding that when the plaintiff cannot prove his damages by precise computation, the jury "may make a just and reasonab le estimate of the damage based on relevant data, and render its verdict accordingly").

Under these standards, Rossi's antitrust claim does not suffer from the infirmities claimed by the district court. At the threshold, it is important to note that we need only

concern ourselves with the first element of antitru st injury, causation. At this procedural juncture, reviewing t he district court's grant of the defendants' motions f or summary judgment, we are not, as we would be upon reviewing a jury verdict, determining whether a pla intiff has brought forth sufficient evidence to justify the ac tual damages awarded. Rather, here, all we are concerned with

is whether Rossi has established that the defendant s' "illegal conduct was a material cause of [his] inju ry." Danny Kresky, 716 F.2d at 211; see also Zenith Radio, 395 U.S. at

114 n.9.

We find two sources of evidence sufficient for Ross i to demonstrate fact of injury or causation: (1) eviden ce of specific lost transactions based upon Rossi's inabi lity to purchase product; and (2) the Rockhill Damage Repor t. We

discuss these in turn.

We have already explained that there is ample evide nce in the record that Standard, Arzee, and GAF conspir ed to deny Rossi access to GAF product and prevent him fr om competing in the roofing and siding business in nor thern New Jersey. See supra S II.B.2.a & b. Also, there i s evidence that, with a few exceptions, the defendants success fully prevented Rossi from obtaining GAF product. See id. Moreover, there is evidence that GAF product was hi ghly desirable, if not critical, to Rossi's target custo mers. See

62supra S II.B.2.b(1). Finally, several of Rossi's fo rmer

customers from his Standard days, including Sean Co ffey, Francis Doherty, John Feher, Albert Logan, and Melv in Stanley, have testified that they would have done b usiness with Rossi Roofing if he had had access to the nece ssary products, primarily GAF product.

This evidence is enough by itself to satisfy Rossi' s burden on causation for the purposes of summary judgment. Rossi has put forth evidence that the defendants' alleged conspiracy unlawfully prevented him from obtaining GAF product, and that he lost multiple sales as a resul t. Thus, if Rossi can successfully prove the existence of th e conspiracy, he will have proved fact of injury. The case before us is not analogous to Van Dyk Research Corp . v. Xerox Corp., 478 F. Supp. 1268 (D.N.J. 1979), a cas e upon which the district court relied, where the plaintif f failed to prove fact of injury primarily because it could not show that it lost even a single contract based upon the alleg ed unlawful practices of the defendant. See 478 F. Sup p. at

1327.

In the same vein, Amerinet is not availing to the defendants either. In Amerinet, the Eighth Circuit concluded that the plaintiff had not shown antitrus t injury or causation in large part because statements and assertions by its own damage expert "strongly sugge st[ed] . . . that [plaintiff's] decline was caused at leas t partly by, if not substantially or mainly by, other factors th an [defendant's] alleged antitrust violations." Amerin et, 972 F.2d at 1495 (noting that the plaintiff's damage ex pert admitted that the plaintiff was in a period of decl ine prior to the defendant's alleged antitrust violations). I n addition, the plaintiff in Amerinet was only able to show tha t, at most, the allegedly illegal activity was "one facto r among many, and not a controlling or major factor" in spe cific potential clients' decisions not to purchase from t he plaintiff. Id. at 1497. Therefore, the Eighth Circu it held that the plaintiff had not adduced sufficient evidence o f element of causation to enable it to withstand summary judg ment.

Here, Rossi's evidence is more substantial than in either Van Dyk Research or Amerinet. Rossi has proffered e vidence from five specific customers that they would have

63purchased GAF product from Rossi if he had been abl e to

sell it to them, and Rossi's inability to consummat e those sales (leading to a loss of business and therefore injury) is a direct result of the alleged antitrust violation- - the group boycott. In addition, Richard Droesch, Rossi's part ner in the failed Rossi Florence venture, backed out of th at venture at least in part based upon his understandi ng that the company would not be able to get the products i t needed, particularly GAF product, to compete succes sfully in the market. For all these reasons, we believe th at the record supports Rossi's allegations that he suffere d antitrust injury, and that it was caused by the def endant's allegedly unlawful actions.

The district court also utterly rejected Rossi's da mage expert, holding that his report was nothing more th an a "but for" damage model that failed as a matter of l aw to support Rossi's damage allegations. We believe, how ever, that the Rockhill Report, when combined with the testimony concerning the five lost sales, is indica tive of a larger pattern of loss and helps Rossi demonstrate causation. Thus, while the other damage evidence is enough alone to satisfy Rossi's summary judgment bu rden, for the guidance of the district court on remand, w e nonetheless consider the Rockhill Report.

A typical "but for" damage model, like the one in S outhern Pacific Com. Co. v. American Tel. & Tel. Co., 556 F . Supp. 825 (D.D.C. 1983), aggregates the defendant's alleg ed violations and creates a hypothetical calculation p rojecting the plaintiff's profits and losses "but for" the de fendant's antitrust violations. In Van Dyk Research, for exam ple, this estimate was based upon an internal "task force" re port created by the plaintiff projecting its own future performance. See 478 F. Supp. at 1327. The plaintif f then compares this hypothetical figure with its actual performance to calculate its damages. Courts usuall y highlight two problems with models created using th is methodology.

First, they do not attempt to measure the particula rized effects of any specific alleged illegal practices, but rather rely on an aggregation of injury from all factors. See Southern Pacific, 556 F. Supp. at 1092. Second, the ir

64hypothetical "but for" calculations usually rely up on

unrealistic ex ante assumptions about the business environment, such as assumptions of perfect knowled ge of future demand, future prices, and future costs that tend to overstate the plaintiff's damage claim. See id. at 1092-93 (pointing out many difficulties not caused by the defendants that negatively impacted plaintiff's pro fitability yet were not accounted for in the "but for" damage model). Thus, using a "but for" damage model arguably makes it impossible for the trier of fact to determine what, if any, injury derived from the defendant's antitrust viola tions as opposed to other factors, and courts sometimes reje ct such

models as the basis of either causation or amount o f injury. See Southern Pacific, 556 F. Supp. at 1090, 1098; V an Dyk Research, 478 F. Supp. at 1327.

The Rockhill Report is in many respects a "but for" damage model because it does not deal with the particularized effects of specific injuries, but ra ther aggregates all of Rossi's damages into one figure. Relying on Van Dyk Research and Southern Pacific, defendants a rgue that all "but for" models should be precluded as a matter of law from serving as a basis for antitrust causation and damage calculation. We do not agree with the defend ants' reading of these cases (and, at all events, are not bound by them), which we conclude only stand for the proposi tion that some, not all, "but for" models are too specul ative and must be precluded as a matter of law. The Rockhill Report, as we shall see, is much less speculative and does not suffer from many of the flaws in the damage models discussed in Van Dyk Research and Southern Pacific, and thus it is not comparable with them.

Rockhill made two major assumptions in calculating the damages Rossi suffered because of his inability to procure products. First, he estimated that Rossi Florence a nd/or Rossi Roofing would have achieved the same pattern of sales revenues (and revenue growth) beginning in 19 89 and extending to 2008 that ABC's Morristown sales branc h actually achieved from 1990-1993, operating out of the same location, with Rossi as branch manager. Rossi makes a strong argument that this estimate took into acco unt the poor general business conditions that existed at th e time,

65as well as any other extrinsic factors not related to the

defendants' alleged boycott, because Rockhill based his estimate upon actual sales figures Rossi was able t o achieve competing against the same firms, selling t he same products at the same location to the same customers under

the actual business conditions that existed at the time.21 The second major assumption in the Rockhill Report is that Rossi would have been able to manage Rossi Florence and Rossi Roofing in the manner that he had run Standar d's

Morristown branch from 1974-1987. Rockhill used

Standard's Morristown branch financial statements t o develop 14-year averages for cost of sales, payroll expenses, equipment expenses, and administrative expenses (as a percentage of total sales) and applied them to the sales estimate. This kind of estimate, while perhaps not one upon which we would base our own personal investment decisions, nevertheless is sufficient to establish causation (especially when considered in conjunction with the five lost transactions).22

(Text continued on page 68)

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21. Defendants also complain that it is inappropria te to use sales figures Rossi achieved working for ABC, a major national ch ain, to estimate the revenues that Rossi Florence or Rossi Roofing would have achieved without the boycott. This position has some force a nd is certainly an appropriate argument to advance before the trier of fact; however, it is not uncontroverted. There is ample evidence in the record that wholesale roofing and siding sales has a strong local accent, and that after price, service and reliability are the next most critical factors in customers' purchasing decisions. Rossi had a long track record in northern New Jersey, and several witnesses testified that they w ould patronize Rossi regardless of whom he worked for, as long as he car ried the product they needed at a competitive price, because he provided the best service. Thus, it is not clearly evident that Rossi's salesf igures with ABC (or Standard) would necessarily be higher than with Ros si Roofing. 22. For the guidance of the district court on reman d, we note that the Rockhill Report satisfies the relaxed Bigelow stand ard of proof for estimating the amount of damages under which:

the jury [may] conclude as a matter of just and reasonable

inference from the proof of defendants' wrongful acts and their tendency to injure plaintiffs' business, and from the ev idence of the decline

in prices, profits and values, not shown to be attributable to other causes, that defendants' wrongful acts had c aused damage to the plaintiffs. . . . [When] [ ] tortious acts . . . preclude[ ]

ascertainment

66of the amount of damages more precisely, by comparison of profits,

prices and values as affected by the conspir acy, with what they would have been in its absence under freely competitive conditions . . . we [have] held that the jury could ret urn a verdict for the plaintiffs, even though damages could not be measured with the exactness which would otherwise have been po ssible.

In such a case, even where the defendant by his own wrong has prevented a more precise computation, the ju ry may not render a verdict based on speculation or guesswork. B ut the jury may make a just and reasonable estimate of the damage based on relevant data, and render its verdict accordingly. In such circumstances `juries are allowed to act on probable and i nferential as well as [upon] direct and positive proof.' Any other rule would enable the wrongdoer to profit by his wrongdoing at the expense of his victim. It would be an inducement to make wrongdoing so effective and complete in every case as to preclude any re covery, by rendering

the measure of damages uncertain.

Bigelow, 327 U.S. at 264 (internal citations omitte d).

In Bigelow, the Supreme Court upheld a jury's damag e award based upon a comparison of the plaintiff's actual profits with the contemporaneous profits of a competing theater with access to first-run films, which were illegally denied to plaintiff the ater by a group of conspiring film distributors. See J. Truett Payne C o., Inc. v. Chrysler Motors Corp., 451 U.S. 557, 566 (1981) (explaining Bigelow). The Bigelow plaintiff had also adduced evidence comparing his a ctual profits during the conspiracy with his profits when he had been ab le to obtain first-run films. See id. This was enough to uphold the jury's verdict. Similarly, in Zenith Radio, the Supreme Court permitted the plain tiff, who had been the victim of an illegal campaign against importers attempting to bring new products into Canada, to estimate its damages b y comparing its market share in the United States (where it compete d freely) with its market share in Canada (where it was the target of unlawful distribution-disrupting tactics). See 395 U.S. at 1 16 n.11 & 124-25. Finally, we have held that "plaintiffs must be free to select their own damage theories as long as they are supported by a reasonable foundation." Danny Kresky, 716 F.2d at 213 (upholdi ng a market share damage calculation approach in which the plaintiff argued that had it not been for the defendants' antitrust violations, it would have been able to achieve a percentage of the excluded market segm ent equal to the percentage of the market it enjoyed in the rest of the market generally).

Compared with these cases, Rossi's damage estimatio n is far less

67On the subject of the Rockhill Report, we add that the

defendants' criticism that the report is flawed as a matter of law because it improperly mixes data using "a va riety of sources including the historic operations of Standa rd; ABC actual data; input from Mr. Rossi; and judgment" is unavailing. Rockhill used actual data to support hi s estimates, and thus they are based upon a "reasonab le foundation." See Danny Kresky, 716 F.2d at 213. We do not suggest that Standard's problems with the report ar e baseless, only that they constitute genuine issues of material fact and should also be argued before the trier of

fact.

Finally, the defendants attack the evidence support ing Rossi's assertion of damages on several other bases

. Defendants submit that Rossi Florence and Rossi Roo fing failed because: (1) they were start-up operations, (2) they were founded during one of the worst recessions eve r to hit the New Jersey housing market, (3) Rossi, as a mana ger, failed to control his costs, and/or (4) Rossi worke d on other

ventures to the detriment and ultimate failure of b oth companies. One or more of these reasons, particular ly the theory that it was the recession, not a conspiracy, which mortally wounded Rossi's business efforts, might ex plain Rossi's failure in the roofing and siding business in northern New Jersey, and could conceivably result i n a verdict for the defendants at trial. They are, howe ver, unavailing to the defendants at this stage of the c ase because they all involve factual disputes that need to be resolved by the trier of fact, not by this court on a motion for summary judgment.

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speculative. The sales revenues (at least for the f irst few years of the

ten year estimate) were exactly those that Rossi actual ly achieved while working as ABC's branch manager at the same locatio n. Thus, the jury here need not even speculate whether the comparison market (or location) is similar enough to serve as a basis for its damage estimate, as the jury had to in Bigelow and Zenith Radio. Sim ilarly, both the sales and expenses are based on real world numbers, not p ure conjecture by an optimistic new competitor. These numbers may or may not accurately represent what Rossi Florence or Rossi Roofing woul d have done had it stayed in business, but they are clearly not mere s peculation or wishful thinking, as was the case in Van Dyk Research and S outhern Pacific.

68Standard also argues that Rossi failed to establish

causation because an essential element in causation involves proving that there are no comparable subst itutes for the desired product -- here, GAF product. See E lderBeerman Stores Corp. v. Federated Dep't Stores, Inc ., 459 F.2d 138, 148 (6th Cir. 1972). This is another fact ual issue that Standard may argue to the jury. As we have exp lained above, we are satisfied that Rossi's own testimony and that

of several of his witnesses are sufficient to estab lish that GAF product was, for practical purposes, unique and highly desired in this market. See supra S II.B.2.b(1).

In sum, Rossi has established a prima facie case of antitrust injury with respect to Standard, Arzee, a nd GAF. He has adduced evidence of specific lost transactio ns showing causation or fact of injury, which is bolst ered by an expert damage report that is not overly speculat ive as a matter of law. The combination of this evidence, wh ile not conclusive, provides enough of a foundation that an eventual finder of fact would be justified in makin g a "just and reasonable inference" of the damages Rossi may have suffered as a result of the defendants' allegedly u nlawful

activities.

IV. STATE LAW TORTIOUS INTERFERENCE

WITH CONTRACTUAL AND PROSPECTIVE

CONTRACTUAL RELATIONS

The district court dismissed Rossi's state law tort ious interference claims against defendants with no disc ussion. It very well may be, as some of the defendants sugg est, that

the district court concluded when it dismissed Ross i's state law claims that Rossi had not shown any wrongful or intentional conduct designed to interfere with alle ged contractual or prospective contractual relationship s. If that is the case, then based upon our disposition here, the state law claims will likely have to be reinstated with r espect to the Standard defendants, the Arzee defendants, and GAF

since we have found that there is sufficient eviden ce of their participation in an unlawful conspiracy to boycott Rossi. However, the district court may have had some other reason for dismissing these claims of which neither we nor the parties before us is aware. Our jurisprudence r equires

69district courts in this circuit to accompany grants of

summary judgment with an explanation sufficient to permit the parties and this court to understand the legal premise for the court's order. See Vadino v. A. Valey Eng'r s, 903 F.2d 253, 257-60 (3d Cir. 1990). We will therefore reverse the district court's order dismissing the state tor tious interference claims against all defendants and rema nd

them to the district court for further consideratio n and explanation consistent with this opinion.

V. CONCLUSION

For the foregoing reasons, we will affirm the distr ict court's judgment on the federal antitrust issues wi th respect to Servistar and Wood Fiber, but reverse on those issues with respect to the Standard defendants, the Arzee defendants, and GAF. We will also reverse the distr ict court's judgment dismissing the state claims with r espect

to all defendants. The case will be remanded for fu rther proceedings consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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