### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 14

- 20267

MM STEEL, L.P.,

Plaintiff

- Appellee

v. JSW STEEL (USA) INCORPORATED; NUCOR CORPORATION,

Defendants

- Appellants

Appeal s from the United States District Court for the Southern District of Texas

Before BENAVIDES, CLEMENT, an d HIGGINSON, Circuit Judges

. STEPHEN A. HIGGINSON, Circuit Judge: This case concerns the Gulf Coast dom estic steel industry. In 2011 , two longtime steel industry salesmen open ed a new steel distributor, MM Steel , L.P. (“MM”) . MM quickly found it difficult to survive because certain steel manufacturers , including Nucor Corporation (“Nucor”) and JSW Steel (USA), Inc. (“JSW”) , refused to sell them steel . Shortly before MM closed , MM sued the manufacturers and MM ’ s competing distributors , cl aiming that the distributor s formed an illegal conspiracy to deprive MM of steel and that the manufacturers knowingly joined the conspiracy. After a six

- week trial, a jury found the defendants per se liable under S ec tion 1 of the Sherman Act, 15 U.S.C. § 1 . The district court trebled the damages to more tha n $150 million. United States Court of Appeals Fifth Circuit 

### FILED November 25, 2015 Lyle W. Cayce Clerk Case: 14-20267 Document: 00513285667 Page: 1 Date Filed: 11/25/2015No. 14

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2 The defendant s timely appealed, but the distributors and one manufacture r settled and dismissed their appeals , leaving JSW and Nucor as the only

a ppellants

. Finding , inter alia , insubstantial evidence that Nucor joined this conspiracy, w e REVER SE the judgment as to Nucor, but we AFFIRM the judgment as to JSW. BACKGROUND I. I n the Gulf Coast domestic steel industry, steel manufacturers sell approximately half of their steel plate to end users, including companies such as Wal

- Mart, Exxon, and General Motors, and sell the other half to distrib utors who then sell the plate to end users

. To be profitable, t he distributors rely on their supply agreements with the manufacturers. Plaintiff MM is a distribution company that was founded by two steel distributor salesmen

— Matt Schultz and Mike Hume. Defendants Nucor and JSW are two major steel manufacturers in the Gulf Co ast region

. The recor d sup ports the following facts. Schultz and Hume worked together as salesmen at American Alloy (“A mAlloy”), a steel distributor , un til they left in 1999 to open an office in Houston for another distributor, C hapel. In spring 2011, Schultz and Hume began plann ing to leave Chapel to open their own distribution company, MM

. As part of their preparation, they met with JSW, from whom they had purcha sed steel at Chapel. On August 2, 2011, MM and JSW signed a one

- year supply agreement for MM to purchase a certain a mount of steel plate per month from JSW

. MM received a $750,000 line of credit from Wells Fargo , and JSW agre ed to extend an additional line of credit for double that amount. On September 1, without providing notice, Schultz, Hume , and two other top Chap el salesmen resigned from Chapel , and officially opened MM. Case: 14-20267 Document: 00513285667 Page: 2 Date Filed: 11/25/2015No. 14

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3 Chapel and AmAlloy were not pleased that Schultz and Hume had left to open MM. On September 3, AmAlloy executives discussed “do[ing] all we can to help [Chapel] in going after [MM]

. ” Chapel ’ s president , Stan Altman, was overheard telling a Chapel salesman “[i]f you don ’ t have any steel, you

can ’ t sell any steel.” On September 8, Altman met with Arthur Moore, AmAlloy ’ s president , and u pon leaving the meeting, Moore said “[d]on ’ t worry,

we ’ re go ing to get them.” Chapel informed Moore that Chapel “plan[s] on taking all available courses of actions, legally and otherwise, including notifying any mill that is selling [to MM], that they can no longer expect any futur e business from Chapel.” As desc ribed in more detail below, Chapel and AmAlloy went forward with plans to threaten manufacturers to not sell steel to MM

. II. On September 15, 2011, Chapel filed a lawsuit against MM and its founders alleging that MM had violated a non

- compe te agreement. The next day, MM told JSW to hold off on shipmen ts u ntil further notice. O n September 20, MM met with JSW. MM informed JSW that the lawsuit prompted their request to stop shipments and raised the possibility of having to return some steel that JSW had ma nufactured f or MM. The day before the meeting between MM and JSW , JSW executives met with AmAlloy ’ s Moore , at Moore ’ s invitation. Moore told JSW ’ s repres entatives that JSW had a choice to make : “The choice was to do business with American Alloy or to do business with MM Steel

. ” Later, o n September 29, Moore emailed Chapel ’ s Altman about JSW ’ s “ridiculously low” sales prices to MM and said he hoped Chapel would be

success ful in shutting MM down. On October 4, Chapel and JSW met , and Chapel gave JSW a choice to do business with Chapel or with MM. Around October 14 , Chapel and MM settled the lawsuit over the non

compete agreement

. The settlement prohibited MM from contacting and Case: 14-20267 Document: 00513285667 Page: 3 Date Filed: 11/25/2015No. 14

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4 selling to certain custo mers for six months. MM then told JSW the lawsuit had been resolved and asked for a quote. On October 20, JSW ’ s p resident, Mike Fitch, told MM that it would not be doing business with MM going forward and that it “understood the gravit y of t he situation.” The day before JSW told MM it was ending their relationship, JSW emailed Chapel wanting to see “if JSW and Chapel Steel could step up business for [Chapel ’ s] Houston [office] and other locations

. ” Chapel then internally commented on the “[i ]nteresting timi ng” of JSW ’ s approach to “step up business

. ” III. Nucor and Chapel ’ s re lationship dates back to 2000. Nucor supplies seventy

- five percent of Chapel ’ s steel , and Chapel is Nucor ’ s largest external
customer

. On September 1, 2011 , Hume lef t Nucor ’ s Jeff Whiteman a voicemail saying that Hume had left Chapel to start MM and that MM hoped to sell Nucor steel to a l ongt ime Chapel customer. In response, Whiteman immediately emailed Chapel ’ s presid ent to pledge his “full es support. ” Following that email , Chapel executives informed Nucor that MM had partnered with JSW, and Nucor reiterated its support of Chapel by instructing its employees that Nucor would not be quoting MM but “will continue to support our existing customers

. ” Around September 2, MM ’ s Hume reached out to three separate Nucor employees, including Nucor ’ s President Whiteman, and each employee declined to quote or discuss a potential sale with Hume. The jury received evidence, which Nucor contests a s inadmissible, alluding to a th reat allegedly made by Chapel to Nucor b efore September 5. On S eptember 5, John Sergovic, the p res ident of ArcelorMittal USA , another steel manufacturer not included in this lawsuit, sent an internal email stating that he had been threate ne d by Chapel ’ s A ltman to not sell to MM and that “Stan [Altman] said he made the same comment to Jeff Whi teman at Nucor.” Case: 14-20267 Document: 00513285667 Page: 4 Date Filed: 11/25/2015No. 14

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5 In early October , Nucor employees dined with Chapel employees in connection with a retirem ent party. Nucor denies that MM was discu ssed at this dinner. On October 26, MM asked Nucor for a quote , and Nucor did not respond. Later, on January 5, 2012, after Nucor got a quote request from a similarly named “M and M Steel,” Nucor emailed Chapel asking, “Are these our boys?” Chapel respo nded, “No our boys are MM Steel but I appreciate you keeping an eye out for them.” After JS W decided to stop supplying MM , MM began buying steel from North Shore, another distributor and customer of Nucor

. North Shore began placing o rders on MM ’ s b ehalf f rom Nucor. Nucor was not happy to learn about this arrangement because it allowed MM to circumvent Nucor ’ s “ practice ” of not accepting business that conflicts with the business of a current client in order to “stick with [the original] supply chain ”

— what Nucor referred to as its incumbency practice

. Nucor told North Shore it would be a problem to ship steel to MM, and North Shore stopped ordering steel for delivery to MM. On March 19, 2012 , Hume and Schultz secretly taped North Shore ’ s Byron Cooper telli ng them that Nucor ’ s Whiteman told Cooper that “there ’ s a lot of pressure on the mills to not support [MM] from their biggest customers” and also that Whiteman stated “[t] here ’ s a mandate at Nucor that ’ s against supporting [] MM Steel.” MM closed and officially stopped doing business in August 2013. IV. On April 29, 2012, MM sued Nucor, JSW, Chapel, Reliance, AmAlloy, AmAlloy ’ s Moore , and SSAB (an additional manufacturer) in federal court alleging, inter alia , an illegal group boycott in violation of § 1 of the Sherman Act , 15 U.S.C. § 1

. MM also brought a claim again st JSW for breach of contract. The district court denied defendants ’ motions to dismiss and motions for summary judgment. SSAB settled before tr ial for $2.5 million. The remaining Case: 14-20267 Document: 00513285667 Page: 5 Date Filed: 11/25/2015No. 14

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6 d efendants proceeded to trial. MM ’ s sole theory of liability was that defendants w ere per se liable for joinin g a horizontal group boycott. As illustrated in the jury ’ s answer to Interrogatory Number 1, t he jury found that the distributors “ conspire [ d ] to persuade , induce, or coerce any steel m ill not to sell steel plate to MM.” Under Interrogatory Number 3 , the jury found that Nucor and JSW both “ knowingly join [ ed ] the conspiracy ” (emphasis added). T his finding resulted in a per se violation of § 1 of the Sherman Act and an award of $52 million

. 1 The jury also found JSW liable for breaching its agreement to supply MM and awarded damage s of $2 million for this breach

. The district court denied various motions for judgment as a matter of la w and for new trials . MM elected to recover on its antitrust claims , foreclosing recovery on its contract claim, and the district court trebled the damages, entering a final judgment holding all defendants jointly and severally liable. Defendants timely appeale d, but the distributor defendants (Reliance, Chapel, AmAlloy, and Moore) settled for undisclosed terms and dismissed their appeals. Nucor and JSW are the remaining defendants on appeal. Nucor and JSW appeal the antitrust liability finding and award of da mages. In the alternative, JSW also appeals the breach of contract award. Nucor also appeals the district court ’ s denial of its motions for a new trial due to the court ’ s exclusion of expert testimony , flawed jury instructions, the admittance of inadmiss ible hearsay , and MM ’ s impr oper closing arguments. JSW appeals the district court ’ s denial of its motion for a new trial due to the admission of MM ’ s “patently unreliable” damages expert. Because we affirm the antitrust judgment as to JSW and reverse the judgment as to Nucor, we will not address

1 Interrogatory Number 4 asked, “Did one or more steel mills refuse to sell steel plate to MM Steel as a result of the conspiracy thereby denying it access to a su pply of steel plate necessary for it to compete effectively?” Although the jury answer ed in t he affirmative, bec ause this question did not specifically ask the jury to consider each manufacturer separately (as Interrogatory Number 3 did), c larity is lacking. Case: 14-20267 Document: 00513285667 Page: 6 Date Filed: 11/25/2015No. 14

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7 Nucor ’ s evidentiary claims, nor will we address JSW ’ s appeal of the breach of contract award. DISCUSSION I. We first consider whether there was substantial evidence to conclude that Nucor and JSW entered into a horizontal conspiracy with the distrib utors to refuse to deal with MM

. We review jury verdicts deferential ly

. EEO C v. Boh Bros. Const r . Co. , 731 F.3d 444, 451 (5th Cir. 2013) . We review the denial of a judgment as a matter of law de novo , but we apply the district court’s standard: granting judgment as a matter of law only if the “ facts and inferences point ‘ so strongly a nd overwhelmingly in the movant’ s favor that reasonable jurors could not reach a contrary conclusion

. ’ ” Id. (citation omitted). We can reverse a denial of a motion for judgment as a matter of law only if “ the jury ’ s factual findings are not su pported by substantial evidence or if the legal conclusions implied from the jury ’ s verdict cannot in law be supported by those findi ngs.” Am. Home Assurance Co. v. United Space Alliance, LLC , 378 F.3d 482, 486

– 87 (5th Cir. 2004)

. Substantial evidence is something more than “ a scintilla of evidence

. ” Hunnicutt v. Wright , 986 F.2d 119, 122 (5th Cir. 1993)

. To establish liability under § 1 of the Sherman Act, 15 U.S.C. § 1 , a plaintiff must show that the defendants “(1) engaged in a conspiracy (2) that restrained trade (3) in a particular market.” Spectators ’ Commc ’ n Network Inc. v. Colonial Country Club , 253 F.3d 215, 220 (5th Cir. 2001). MM ’ s sole theory of liability for the manufacturers is that Nuco r and JSW joined a horizontal (i.e., between competitors) conspiracy between AmAlloy and Chape l , as explicitly found by the jury in Interrogatories Numbers 1 and 3

. Nucor and JSW do not challenge the jury ’ s finding that a horizontal conspiracy ex isted between the distributors, but rather, they argue that there was not substantial evidence for the jury to conclude that they joined the conspiracy. After a Case: 14-20267 Document: 00513285667 Page: 7 Date Filed: 11/25/2015No. 14

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8 searching review of the record that exceeds 30,000 pages, w e hold that there was not substantial evidence to conclude that Nucor joined the alleged conspiracy, but we affirm the finding as to JSW. Only a concerted refusal to deal is illegal; a manufacturer “generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently.” Monsanto Co. v. Spray

- Rite Serv. Corp. , 465 U.S. 752, 761 (1984). So that liability is not levied for independent refusals to deal, a plaintiff seeking to prove that a defendant joine d an antitrust conspiracy without direct evidence of the conspiracy must present evidence “that tends to exclude the possibility” of independent conduct. Id. at 764 ; see Insulate SB, Inc. v. Advanced Finishing Sys., Inc. , 797 F.3d 538, 545 (8th Cir. 2015) (“Under the

‘ Colgate doctrine, ’ ‘ [a] manufacturer .

. . generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently. ’ ” (citing United States v. Colgate & Co ., 250 U.S. 3 00, 307 (1919) ) ; see also Multiflex, Inc. v. Samuel Moore & Co. , 709 F.2d 980, 988 (5th Cir. 1983) (“An antitrust conspiracy is rarely shown by direct evidence, and usually is proved by inference and suspicion.” (citing United States v. Paramount Pictures, Inc. , 334 U.S. 131 (1948 ))). C ircumstantial e viden ce of a refusal to deal will not tend to exclude independent conduct unless refusing to deal is “inconsistent with [the manufacturer ’ s] independent self

- interest.” Viazis v. Am. Ass ’ n of Orthodontists , 3 14 F.3d 758, 763 (5th Cir. 2002). The jury was properly instructed that a single firm ’ s refusal to deal does not entail a conspiracy if it makes that decision independently. A plaintiff seeking to prove that a defendant joined a conspiracy must also pro vide evidence that the conspiring parties “had a conscious commitment to a common scheme designed to achieve an unlawful objective.” Monsanto , 465 U.S. at 764 (citation omitted). MM must have provided evidence showing Nucor and JSW knew “the essential nature and general scope” of the joint plan

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9 H & B Equip. Co. v. Int ’ l Harvester Co. , 577 F.2d 239, 245 (5th Cir. 1978) (citation omitted) . However, MM did not need to prove that Nucor and JSW orchestrated the plan. Rather, parties who k nowingly join an antit rust conspiracy, like any conspiracy, are liable to the same extent as other conspirators. See United States v. All Star Indus. , 962 F.2d 465, 478 (5th Cir. 1992) (“It is well

- established that, as a participant in [a bid

- rigging] con spiracy, MIA is legally liable for all the acts of its co

- conspirators in furtherance of this crime.”); Spectators ’ Commc ’ n Network , 253 F.3d at 220

- 21. The jury was also properly instructed that “[w]hat the evidence must show is that . . . each defendant knowingly became a member of the conspiracy.” The type of conspiracy that MM alleg ed and that the jury found Nucor and JSW to have joined is a group boycott

— here, and often, a concerted agreement among competitors to refuse to deal with a manufacturer unless the manufacturer refuse s to deal wit h an additional (typically new ) competitor. See Spectators ’ Commc ’ n Network , 253 F.3d at 221. MM ’ s sole theory of antitrust liability was that Nucor and JSW joined the group boycott by joining the horizontal conspiracy among the competitors, the distributors . For us to

a ffirm liability, a reasonable jury mu st have been able to conclude that Nucor and JS W knowingly joined the con spiracy between the distributors to refuse to deal with MM. Specifically, MM must have presented substantial evidence tending to exclude the possibility that JSW and Nucor each acted independent of the distributors ’ horizontal conspiracy

. See Viazis , 314 F.3d at 762. A

. JSW contends that there was not substantial evidence to conclude that JSW knowingl y joined the horizontal conspiracy between the distributors

. W e disagree

. We first summarize the evidence presented to the jury

. JSW originally agreed in writing to do substantial business with MM. JSW even extended a line of credit to the newly for med company. However, a fter meeting Case: 14-20267 Document: 00513285667 Page: 9 Date Filed: 11/25/2015No. 14

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10 with executives from both AmAlloy and Chapel , and receiving independent threats from two distributors , JSW decided to no longer do business with MM. When ending their relationship, JSW told MM that it understood the “ gravity of the circumstan ce. ” The day before JSW ended its relationship with MM, JSW contacted Chap el to expand th eir business with C h apel , including its Houston office

. Although evidence of mere compla ints from a distributor to a manufacturer would not be sufficient evidence to establish a conspiracy or that a manufacturer joined a conspiracy, see Viazis , 314 F.3d at 763 , evidence that a manufacturer responded to a distributors ’ actual threat can show concerted action that is not independent conduct

. Id. at 763

– 64; s ee Monsanto , 465 U.S.
at 767

– 68 (holding that evidence of specifi c threats to refuse to deal was probative of concerted action). JSW received actual threats in the form of ultimat ums to refuse to deal with MM from AmAlloy and Chapel , both of who m had already formed a horizontal conspiracy

. 2 The fact that both companies made these threats within several weeks of each other was sufficient evidence for a reasonable juror to conclude that JSW was aware of the horizontal conspiracy to exclude MM from the market. A reasonable juror also could have conclude d that JSW ’ s abrupt decision to no longer deal with M M following these threats and JSW ’ s statements regarding that decision tended to exclude the possibility of conduct that was independent of the distributors ’ conspiracy. JSW contends that it made an independent decision to no longer deal with MM after learning of Chapel ’ s lawsuit against MM and after MM asked JSW to postpone shipme nt s. A reasonable juror could have conclude d that

2 AmAlloy threatened JSW on September 19, 2011 , and Chapel threatened JSW on October 4

. T he horizontal conspiracy and group boycott between the se distributors was confected at the meeting between AmAlloy and JSW on Septembe r 8, 2011 ; as described in MM’s brief to this court, “ the first business between the companies since Matt and Mike left Am Alloy in 1999, [signaling] a wholesale change in their relationship

. ” Case: 14-20267 Document: 00513285667 Page: 10 Date Filed: 11/25/2015No. 14

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11 these reasons were pretextual and that instead, JSW ’ s refusal to deal was a response to the two threats from the distributor s
. See Rossi v. Standard Roofing, Inc. , 156 F.3d 452, 478 (3d Cir. 1998) (holding that pretextual excuses to explain a refusal to deal can be circumstantial evidence of a conspiracy); DeLong Equip. Co. v. Washington Mills Electro Minerals Corp. , 990 F.2d 1186,
1195

– 96 (11th Cir. 1993) (same). A t the time JSW ended its relationship with MM, Chapel and AmAlloy had already threatened JSW , and MM had already settled the lawsuit with Chapel. In ad dition, JSW risked a breach of contract claim by ending this relationship. A reasonable juror could h ave con c l uded that JSW ’ s explanation for its supposedly independent refusal to deal was pretextual. Because there was substantial evidence that te nded to exclude the possibility that JSW acted indepen dent of the horizontal conspiracy between the distribut ors when it refused to deal with JSW, we affirm the jury ’ s finding that JSW joined the horizontal conspiracy between the distributors. See Monsanto Co. , 465 U.S. at 761. B

. Nucor also argues that there was not substantial evidence to conclude that it jo ined the horizontal conspiracy between the distributors . W e agree. For us to affirm the finding that Nucor joined the horizontal conspiracy, a reasonable juror must have been able to conclude from the evidence that Nucor knew “the essential nature and general scope” of the joint plan and joined it

. See H & B Equip. Co. , 577 F.2d at 245

. MM needed to provide substantial evidenc e that tended to exclude the possibility that Nucor ’ s three refusals to deal (Septembe r 2, 20 11, October 26, 2011, and March 20 12) with MM were made independent of the existing horizontal conspiracy between the distributors. See Viazis , 314 F.3d at 762. After our searching review of the record, we conclude that MM did not provide such evidence

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12 On September 1, 2011, Nucor was first approached by MM ’ s Hume, who let Nucor know that he had left Cha pel and started MM. Nucor ’ s President Whiteman immediately email ed Chapel ’ s Altman to let him know that they were aware of this development and would continue support ing Chapel. 3 Nucor then first refused to quote MM on September 2, 2011. On September 5, 2011, John Sergovic, the p resident of ArcelorMittal , sent an internal email, which Nucor contests on appeal, s tating that Nucor was threatened by Chapel to not deal with MM before that date

. Although Nucor ’ s initial email of support to Chapel does not reference this threat or suggest knowledge of this threat, a reasonable juror could have credited Sergovic ’ s email as evidence that Nucor received a threat from Chapel to not deal wit h MM before committing to its

own decision to refuse to deal with MM

. 4 Nucor assert s that each time it refused to deal with MM, it was acting in accord ance with its “incumbency practice ,” where Nucor remain s loyal to established customers, such as Chapel , in order to maintain its original supply chain

. Even if the jury did not credit this practice , MM did not provide evidence showing that when Nucor first refused to quote MM, Nucor was aware of an agreement between the distributors to foreclose MM from the market . MM failed to provide evidence that tended to exclude the possibilit y that Nucor acted independent of such a conspiracy

. In fact, at the time Nucor first refused to quote MM , Nucor believed that JSW , its competitor, was supplying MM

. H ence Nucor w o uld not have perceive d that its refusal to deal (a decision e ither

3 Earlier that d ay, a Chapel representative visited Nucor with another customer, and according to Nucor ’ s Whiteman, the representative was busy with phone calls due to a development at Chapel ’ s Houston office. That interaction led Whiteman to refer to MM ’ s formation as “the crisis” in hi s email to Altman. MM did not present any evidence showing that the Chapel representative discussed MM during the visit on September 1.
4 Notably, th e cross
- examination of JSW ’ s President Fitch elicited knowledge of raw threats from both Chapel and AmAlloy. The cross

- examination of Nucor’s President Whiteman did not reveal any knowledge of t he alleged threat from Chapel. Case: 14-20267 Document: 00513285667 Page: 12 Date Filed: 11/25/2015No. 14

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13 made independently or even with Chapel) would help foreclose MM from the market

. In addition, as MM contends , the horizontal agreement between the two distributors was not confected unt il September 8, 2012 , the first date that AmAlloy and Chapel met following the establishment of MM

. 5 Nucor ’ s decision
not to deal with MM took place on September 2, 2012 , without knowledge of a horizontal conspiracy between Chapel and AmAlloy, and without knowledge of

a concerted purpose to rid MM from the market. Although Nucor ’ s decision to n ot dea l with MM was consi stent with the purpose of the group boycott, Nucor ’ s decision does not tend to exclude the possibility th at it was made independent of the group boycott

. The Supreme Court has held that “conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 588 (1986). The evidenc e establishes only that Nucor ’ s decision to support Chapel and not deal with MM was either consi stent with its incumbency practice , or at most, consistent wi th a vertical agreement with Chapel, its long standing customer

. Without knowing that another distributor

was threatening manufact urers, or that other manufacturers were refusing to deal with MM, Nucor could not consciously commit to a common scheme to foreclose MM from the market

. See Monsanto , 465 U.S. at 764 . A re asonable juror could not have found that Nucor ’ s original September 2 decision to not deal with MM, made in favor of a longstanding customer , tended to exclude conduct independent of the horizontal conspiracy between the distributors

. 6

5 MM did not present any evide nce showing that Chapel and AmAlloy communicated regarding MM before this meeting.
6 Again, MM ’ s sole theory of liability was that Nucor joined the horizontal conspiracy and was thus per se liable for antitrust violations. We do not address whether this e vidence would be sufficient to establish that Nucor and Chapel entered into a vertical refusal to deal agreement that could be held unlawful under the rule of reason. See NYNEX Corp. v. Discon, Case: 14-20267 Document: 00513285667 Page: 13 Date Filed: 11/25/2015No. 14

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14 MM has not identifie d any record evidence showing that Nucor was approached by any distributor o ther than Chapel seeking concerted action against MM

. In fact, t he onl y evidence that could lead a reasonable juror to conclude that Nucor became aware of an agreement between the distributors was the statement made by North Shore ’ s Cooper to Hume and Schultz that MM recorded on March 19, 2012

. Cooper stated that Nucor ’ s President Whiteman told Cooper, “So there ’ s a lot of pressure on the mills to not support you from their bigges t customers

. ” Before Cooper made this statement, Nucor had refused to do business with North Shore when North Shore s old its steel to MM. Even if a reasonable jur or could infer that when Nucor refused to deal with North Shore when selling to MM , Nucor was aware of the agreement between the distributors, W h iteman ’ s statement does not tend to exclude the possibility that Nucor acted independent of the horizontal conspiracy between the distributors

. Nucor ’ s decision to not do business with North Sh ore when North Shore was selling to MM was consistent with its original decision not to deal with MM , which was made on September 2, 2011 , without knowledge of the conspiracy between the distributors

. S ee also Southway Theatres, Inc. v. Georgia Theatre Co

. , 672 F.2d 485, 494 (5th Cir. 1982) ( recognizing this court ’ s consistent enforcement of the rule that “inference of a conspiracy is always unreasonable when it is based solely on parallel behavior that can be explained as the result of the independent bus iness judgment of the defendants”)

. We hold that MM did not present substantial evidenc e from which a reasonable jur or could conclude that Nucor ’ s unwavering refusal to deal with MM in favor of its longstanding relationship with Chapel tended to exclude t he possibility

Inc. , 525 U.S. 128, 136 (1998); see also In re Ins. Brokerage Antitrust Litig ., 618 F.3d 300, 317 (3d Cir. 2010) (“ While pleading exclusively per se violations can lighten a plaintiff ’ s litigation burdens, it is not a riskless strategy. If the court determines that the restraint at issue is sufficiently different from the per se archetypes to require application of the rule of reason, the plaintiff ’ s claims will be dismissed. ”)

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15 that Nucor ’ s actions were made independent of the horizontal co nspiracy between AmAlloy and Chapel and joined by JSW

. For that reason, we reverse the judgment as to Nucor. II. We next conside r whether the district court erred in instructin g the jury that if it found that Nucor and JSW joined the conspiracy between the distributors, Nucor and JSW would be per se liable under § 1 of the Sherman Act. The decision to analyze the conspiracy under a per se theory of liability is a question o f la w that we review de novo. See Craftsmen Limousine, Inc. v. Ford Motor Co. , 363 F.3d 761, 772 (8th Cir. 2004). Having reversed t he verdict as to Nucor, we address only JSW ’ s arguments. JSW argues (1) that the per se rule does not apply and (2) in the alt ernative, “the case should be remanded for a new trial because the district court failed to properly submit the Tunica factors to the jury.” A. Whether a restraint on trade is per se illegal or is analyzed under the rule of reason is a key distinction in antitrust law. Although § 1 proscribes “[e]very contract, combination

. . . , or conspiracy

. . . in restraint of trade or commerce,” 15 U.S.C. § 1, it is well

- established that only unreasonable

re straints on trade actually violate the Sherman Act. NYNEX Corp. v. Discon, Inc. , 525 U.S. 128, 133 (1998). To determine whether a restraint is unreasonable, courts use o ne of two methods of analysis. Most agreements are analyzed under the rule of reason , whereby a court “must decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors, including specific information about the relevant business, its condition before and after the restra int was imposed, and the restraint ’ s history, nature, and effect.” State Oil Co. v. Khan , 522 U.S. 3, 10 (1997). But, c ertain agreements “because of their pernicious effect on Case: 14-20267 Document: 00513285667 Page: 15 Date Filed: 11/25/2015No. 14

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16 competition and lack of any redeeming virtue are conclusively presumed to be

u nreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use. ” United States v. Gen. Motors Corp. , 384 U.S. 127, 146 (1966) (citation omitted). G roup boycotts to foreclose an en trant from the market are of this latter character. Id. The Supreme Court has consistently held that the per se rule is applicable to group boycotts identical to the boycott alleged in this case

. See NYNEX , 525 U.S. at 135. The Supreme Court has regularly applied per se liability to agreements describe d as “either directly denying or persuading or coercing suppliers or customers to deny relationships the competitors n eed in the competitive struggle. ” Nw. Wholesale Stationers, Inc. v. Pac. Station ery & Printing Co ., 472 U.S. 284, 294 (1985) (citation omitted). 7 The Court enforces the per se rule to these group boycotts because “ the likelihood of anticompetitive effects is clear and the possibility of countervailing procompetitive effects is remote

. ” Id. In Klor ’ s, Inc. v. Broadway

- Hale Stores, Inc. , the Court found it per se unlawful for manufacturers, distributors, and a retailer to agree to refuse to deal with another competing retailer. 359 U.S. 207, 209

– 10 (1959). In United States v. Genera l Motors Corp. , the Court held it per se unlawful for an automobile manufacturer to agree with automobile dealers to boycott other dealers that were di scounting cars. 384 U.S. at 145

. Th ese cases , and many more, illustrate that group boycotts involving a horizontal conspiracy to foreclose a market participant are considered per se violation s of § 1

. See Gen. Motors Corp. , 384 U.S. at 146.

7 That a group boycott organized by a cooperative or professional organization is analyzed under the rule of reason unless the plaintiff c an show that the cooperative or professional organization possessed “market power or exclusive access to an element
ess ential to effective competition ” has no bearing on this case as it does not involve a cooperative or a professional organization. See Nw . Wholesale , 472 U.S. at 296 ; see also F.T.C. v. Indiana Fed ’ n of Dentists, 476 U.S. 447, 458

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17 JSW contends that the Supreme Court limited the application of per se liability to group boycotts in Leegin Creative Leather Prods., Inc. v. PSKS, Inc. , 551 U.S. 877, 893 (2007). In antitrust law, a distinction exists between agreements that are made between competitors (horizontal agreements) and agreements between manufacturers and customers (vertical agreements). I n Leegin , the Supreme Court held that the per s e rule is inapplicable to price

- setting vertical agreements, adding in dicta that this holding would extend to vertical agreements that facilitate horizontal conspiracies to increase prices. Id. (“To the exte nt a vertical agreement setting minimum resale prices is entered upon to facilitate [horizontal cartels that decrease output or reduce competition to increase prices], it, too, would need to be held unlawful under the rule of reason.” (emphasis added)). Long before Leegin , settled Supreme Court case law held that purely vertical agreements to refuse to deal are not per se unlawful. NYNEX , 525 U.S. at 135. Purely vertical refusals to deal, often referred to as exclusive dealing agreements, frequently hav e procompetitive justifications, such as limiting free riding and increasing specialization. See Richard Posner, Antitrust Law 253 (2d ed. 2001). However, the crux of the group boycotts at issue in the cases in which per se liability has always applied i s that members of a horizontal conspiracy use vertical agreements anticompetitively to foreclose a competitor from the market. See NYNEX , 525 U.S. at 135 (“The agreement in Fashion Originators’ Guild involved what may be called a group boycott in the stro ngest sense: A group of competitors threatened to withhold business from third parties unless those third parties would help them injure their directly competing rivals.” (describing Fashion Originators’ Guild of Am. v. Fed. Trade Comm’n , 312 U.S. 457, 461

– 63 (1941)); Klor’s, Inc. , 359 U.S. at
208

– 09. In these cases, the vertical participants, the manufacturers, actually join the horizontal conspiracy. See United States v. MMR Corp. (LA) , 907 F.2d Case: 14-20267 Document: 00513285667 Page: 17 Date Filed: 11/25/2015No. 14

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18 489, 498 (5th Cir. 1990) (holding that a non

- competitor pa rticipant in a horizontal conspiracy was per se liable because “[i]f there is a horizontal agreement between A and B, there is no reason why others joining that conspiracy must be competitors”); Spectators’ Commc’n Network , 253 F.3d at 223; see also Klor’s , Inc. , 359 U.S. at 212

– 13; Nw. Wholesale Stationers, Inc. , 472 U.S. at 294. Each court that has addressed the anticompetitive nature of these group boycotts was aware of the vertical components of the conspiracy and still applied per se liability to each member of the conspiracy. See, e.g., Klor’s, Inc. , 359 U.S. at 208

– 09. For example, in Klor’s , which remains controlling precedent, the Supreme Court applied per se liability to all of the participants in a group boycott that was arranged by only one co mpetitor because there was a horizontal agreement among those that carried out the boycott. Klor’s, 359 U.S. at 212

– 13. We decline to hold that the Supreme Court silently overruled this line of cases by stating that vertical agreements to regulate price s that facilitate horizontal agreements to regulate prices “too, would need to be held unlawful under the rule of reason.” Leegin , 551 U.S. at 893; see also Anderson News, LLC v. Am. Media, Inc. , 680 F.3d 162, 183 (2d Cir. 2012) (recognizing, post

- Leegin , that, under Klor’s , per se liability applies to group boycotts with horizontal and vertical components). But cf. Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc. , 530 F.3d 204, 225 (3d Cir. 2008) (holding that under Leegin per se liability did not apply to vertical agreements between manufacturers and distributors to refuse to deal with distributors that were not part of a horizontal price

- fixing conspiracy, but not finding that the manufacturers joined a horizontal group b oycott). The district court did not err when it instructed the jury that if they found that the manufacturers joined the conspiracy between the distributors, the manufacturers were per se liable for a § 1 violation. Case: 14-20267 Document: 00513285667 Page: 18 Date Filed: 11/25/2015No. 14

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19 B. JSW also argues that in the alterna tive scenario where this court does not outright apply the rule of reason to determin e the legality of the alleged conspiracy, we should order a new trial because the jury was not instruct ed to consider the factors discussed in Tunica Web Advertising v. Tu nica Casino Operators Ass ’ n, Inc. , 496 F.3d 403, 414

– 15 (5th Cir. 2007). The Tunica decision does not affect our above holding that the per se rule applies to the group boycott alleged in this case . In stead, Tunica potentially expand ed per se liability. I n Tunica , this court reversed summary judgment where the district court conc luded that the per se rule appl ies only to group boycott cases “where one of the conspirators is a direct competitor of the victim.” Id. at 414. This court recognized ( post

- Leegin ) that per se liability applies to group boycotts where there is a horizontal agreement to foreclose a competitor from the market, but we also held that th e per se rule is not limited to group boycotts where the horizontal agreement is among competitors. Id. at 413

– 14. The Tunica court then instructed the district court to consider three factors on remand to determine w hether per se liability applies. 8 Id

. at 414. Even if the Tunica court did not intend to expand per se liability, the application of the three factors was li mited to the specific facts of that case. See id. at 414. The dis trict court did not err by not applying these factors or instructin g the jury to consider them before applying per se liability. II I

. Finally, we address JSW ’ s argument that the jury ’ s damages findings were fatally defective because MM ’ s damages expert, Stephen P. Mage e,

8 These factors we re: “(1) whether the casinos hold a dominant position in the relevant market; (2) whether the casinos control access to an element ne cessary to en able TWA to compete; and ( 3) whether there exist plausible arguments concerning pro

- competitive effects.” Id. at 414

– 15. In light of our description of the alleged conspiracy, each of these factors would likely be met in this case

. Case: 14-20267 Document: 00513285667 Page: 19 Date Filed: 11/25/2015No. 14

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20 should have been excluded

. Before trial, JSW filed a Daubert motion to exclude Magee ’ s testimony as unreliable. The district court denied the motion. JSW renewed the same objection s at trial , in motions for judgment as a matter of law p ost

- trial , and in a moti on for a new trial , a ll of which the district cour t denied. JSW raises the same arguments on appeal. We review “the district court ’ s determination of admissibility of expert evidence under Daubert for abuse of discretion.” Knight v. Kirby Inland Marine Inc. , 482 F.3d 347, 35 1 (5th Cir. 2007) (referencing Daubert v. Merrell Dow Pharms., Inc. , 509 U.S. 579 (1993)). Under Daubert , “[t]he proponent need not prove to the judge that the expert ’ s testimony is correct, but she must prove by a preponderance of the evidence that the t estimony is reliable.” Moore v. Ashland Chem. Inc., 15 1 F.3d 269, 276 (5th Cir. 1998). The Daubert inquiry is flexible, but the proponent must establish reliability by showing that the
t estimony is based on reasoning or methodology that is “scientifically valid. ” Id. JSW contends that there are four problems with Magee ’ s testimony and with the jury ’ s damages award. In so arguing, JSW asserts that the existence of any of these problems individual ly, or all cumulatively, requires a new trial or remittitu r. JSW contends that when using the yardstick model of damages, Magee (1) relied on an invalid comparator, (2) used the wrong time period for comparison , (3) “assumed a gross

- profit margin that, in disputably, no company achieved during the alleged damage period,” and (4) failed to take into account MM ’ s settlement with Chapel that reduced its customer pool for the first six months of operation

. We find no abuse of discretion in the district court ’ s admission of M agee ’ s testimony

. JSW ’ s asserted fatal flaws all relate to the expert ’ s use of the yardstick model. We have described this model as follows: Case: 14-20267 Document: 00513285667 Page: 20 Date Filed: 11/25/2015No. 14

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21 There are two generally recognized methods of proving lost profits: (1) the before and after theor y; and (2) the yardstick test. The before and after theory compares the plaintiff ’ s profit record prior to the violation with that subsequent to it. The before and after theory is not easily adaptable to a plaintiff who is driven out of business before h e is able to compile an earnings record sufficient to allow estimation of lost profits. Therefore, the yardstick test is sometimes employed. It consists of a study of the profits of business operations that are closely comparable to the plaintiff ’ s. Alt hough allowances can be made for differences between the firms, the business used as a standard must be as nearly identical to the plaintiff ’ s as possible. Lehrman v. Gulf Oil Corp. , 500 F.2d 659, 667 (5th Cir. 1974). Because MM was newly formed at the ti me the alleged conspir acy began, it had no financial performance to use as the “before” in the before and after test. Thus, Magee used the yardstick approach. As a comparator, Magee chose the first twelve years of operation at Chapel ’ s Houston office, which Schultz and Hume had opened and ran until they left to start MM. He excluded an outlier year in which Chap el ’ s performance was extraordinary

. M agee imported the average
gross
- profit margin from this comparator and projected profit s, assuming that MM would have kept operat ing for ten years. We find no abuse of discretion in allowing Mag ee to testify according to this approach. JSW as s erts that Chapel ’ s Houston office was too different from MM to be a reliable comparator in the yar dstick model. An antitrust plaintiff must “demonstrate the reasonable similarity of the business whose earning experience he would borrow.” Eleven Line, Inc. v. N. Tex. State Soccer Ass ’ n, Inc. , 213 F.3d 198, 208 (5th Cir. 2000). MM has adequately done so here. Chapel ’ s Houston office is not nearly as dissimilar as other comparators this court has found to be improper yardsticks. See El Aguila Food Prods., Inc. v. Gruma Corp. , 131 F. App ’ x 450, 453 (5th Cir. 2005) ( where an expert “made no effort to de monstrate the reasonable similarity of the plaintiffs ’ firms and the businesses whose earnings data he relied on as a benchmark”); Eleven Line, Case: 14-20267 Document: 00513285667 Page: 21 Date Filed: 11/25/2015No. 14

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22 Inc. , 213 F.3d at 208 ( where the expert ’ s yardstick was not nearly identical and he offered no evidence of the comparators ’ geographic location, size, market served, or costs of operation). Magee ’ s yardstick was “as nearl y identical to [MM] as possible. ” Leh r man , 500 F.2d at 667; cf. J. Truett Payne Co. v. Chrysler Motors Corp. , 451 U.S. 557, 566 (1981) ( noting that courts are willing to accept some uncertainty in antitrust damages estimates because the “vagaries of the marketplace usually deny us sure knowledge of what plaintiff ’ s situation would have been in the absence of the defe ndant ’ s antitrust violation”). Therefore, the district court did not abuse its discretion by

co ncluding that Magee ’ s comparator was reliable. Similarly, JSW contend s that Magee should have used the years 2011

– 2013 as his benchmark period i nstead of 200 1

– 2011

. JSW contends that 2 001

– 2011 were “some of the best years for the steel industry” and are not representative of the industry ’ s future performance. As support, JSW cites weakn ess es in the steel market in 2011

– 2013. JSW has not shown that Magee ’ s u se of 2001

– 2011 data was unreasonable or unsupported. Magee excluded one extraordinary year (2004) , and his benchmark period included six years of re cession. The defendants had the opportunity to show w hether the benchmark period was correct on cross exa mination. See Daubert , 509 U.S. at
596 (“ Vigorous cross

- examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence .”). W e find no abu se of discretion as to this point. JSW also assert s that Magee ’ s model is unreliable because no actual competitor achieved the gross

- profit margin tha t his model projected for MM. This criticism is related to the previous two criticisms; Magee used the gross
profit margin achieved by Chapel ’ s Houston office between 2001 and 2011 (excl uding 2004). JSW contends that Chapel ’ s Houston office from 2012

– 2013, Case: 14-20267 Document: 00513285667 Page: 22 Date Filed: 11/25/2015No. 14

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23 or MM acting as a broker in 2011, is the proper comparator for gross

- profit margin

. Magee ’ s assumpti on that MM would achieve better margins than its competitors was reasonable based on evidence that MM ’ s leadership was simpl y better than that of its competitors. While at Chapel, MM ’ s founders had achieved a twenty percent profit margin in a year so bad for the steel industry that a nother distributor had its first negative year in forty years. Magee ’ s projections were perhaps rosy, but they were not unreliable. In addition, JSW ’ s competing expert adequate ly aired his disagreement. I t was not an abuse o f discretion to allow MM ’ s expert to provide his own model reaching a different projected gross

- profit margin. See Pipitone v. Biomatrix, Inc. , 288 F.3d 239, 250 (5th Cir. 2002) (“ The fact

- finde r is entitled to hear [the expert ’ s] testimony and decide whe ther it should accept or reject that testimony after considering all factors that weigh on credibility, including whether the p redicate facts on which [the expert] relied are accurate. ” ). Lastly, JSW argues that Magee failed to consider the fact that for t he first six months of operation, MM was prohibited from doing busine ss with approximately 190 of Chapel ’ s former customers. Magee ’ s testimony shows that he consider ed this limitation but ultimately decided the limitation was temporary and would not affect MM ’ s sal es potential. This decision did not make Magee ’ s testimony unreliable. Because the district court did not abuse its discretion by admitting the testimony of MM ’ s damages expert, Magee, the district court correct ly denied JSW ’ s motion for a new trial. See Munn v. Algee , 924 F.2d 568, 575 (5th Cir. 1991) (“When reviewing the disposition of a new trial motion, we normally reverse the judgment only for an abuse of discretion.” )

. CONCLUSION Following a six

- week jury trial, the district court entered judgment for MM on its claim under § 1 of the Sherman Act alleging an illegal conspiracy Case: 14-20267 Document: 00513285667 Page: 23 Date Filed: 11/25/2015No. 14

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24 between the distributors and manufacturers of the Gulf Coast domestic steel industry. MM alleged that Nucor and JSW, steel manufactu rers, joined the h orizontal conspiracy between MM ’ s competing distrib utors to refuse to deal with MM

. The jury was correctly instructed to apply per se liability if they found t hat the manufacturers joined the conspiracy

. The jury, finding that the manuf acturers j oined the conspiracy , awarded MM damages of $52 million , which the court trebled

. We hold , among other things, that t here was substantial evidence for the j ury to conclude that JSW joined the conspiracy between the distributors. However, there was not substantial evidence, direct or circumstantial, to conclude that Nucor joined the horizontal conspirac y between the distributors

— MM ’ s only theory of § 1 liability

. We REVERSE the judgment as to Nucor and AFFIRM the judgment as to JSW. Case: 14-20267 Document: 00513285667 Page: 24 Date Filed: 11/25/2015