Opinion ID: 805979
Heading Depth: 3
Heading Rank: 3

Heading: The February 2003 Price Increase

Text: On February 3, 2003, executives at IP decided at an internal meeting to increase the price of their grade 5 publication paper, subject to final approval by senior IP officials. Three days later, on February 6, Korhonen called Tynkkynen. Each man asserts that he does not remember exactly what was discussed during the call, which lasted approximately five minutes.6 6 The parties dispute whether, when they spoke, either Korhonen or Tynkkynen (or both) were aware of IP’s possible price increase. Asked at SENA’s criminal trial what prompted him to call Tynkkynen, Korhonen testified that he did not have a “specific recollection” of the phone call, but that it “c[ould] be related to” IP’s price increase. Trial Tr. at 308. In a subsequent declaration, however, Korhonen asserted that during the February 6 phone call he did not discuss with Tynkkynen “any specific price increase or a possible price increase.” Decl. of Kai Korhonen in Supp. of Defs. SEO and SENA’s Mot. for Summ. J. ¶ 39. Tynkkynen contends that Tynkkynen first learned 9 On February 10, IP publicly announced a $3 per cwt. price increase for grade 5 publication paper effective April 1, 2003. The following morning, on February 11, Korhonen called Tynkkynen and left a message requesting that Tynkkynen return his call. That afternoon, Tynkkynen called Korhonen, and the two men spoke for four minutes. During the call, Korhonen told Tynkkynen, “IP’s out and [SENA] will match and follow.” Id. at 84. Tynkkynen understood “match and follow” to mean that SENA would follow IP’s price increase and also would “implement [the price increase] seriously” at the customer end—in other words, that SENA would hold a hard line in negotiating with customers. Id. Tynkkynen informed Korhonen that UPM had notified some of its customers of its intention to match IP’s price increase. Approximately one halfhour after the men’s phone call, SENA e-mailed and faxed a brief letter to its customers announcing a $3 per cwt. price increase for grade 5 paper, coated grade 4 paper, and supercalendered products. That same afternoon, UPM mailed a bulletin to its customers in which it, too, announced a $3 per cwt. price increase for grade 5 publication paper. Both price increases were to take effect April 1. After Korhonen and Tynkkynen’s conversation on February 11, Tynkkynen advised Kevin Lyden, President of UPM’s North American subsidiary, that he thought SENA was “going to be tough on the price increase” it had announced. Dep. of Peter Littley, Feb. 18, 2010, at 14. Lyden understood Tynkkynen’s statement to of IP’s plan to raise its prices on February 8, two days after the phone call. 10 mean that SENA would stand firm on its price increase when negotiating contracts with its customers. According to Lyden, Tynkkynen’s assessment of how aggressively SENA would implement the price increase was based, in part, on his February 11 phone call with Korhonen. D. The Department of Justice Investigation and SENA’s Criminal Trial In 2004, the United States Department of Justice (“DOJ”) launched a criminal antitrust investigation into the publication paper industry. In July 2004, after learning that government investigators sought to interview him in relation to the investigation, Tynkkynen called Korhonen from a public telephone booth. Tynkkynen concedes that he used a public telephone in order to ensure that he “ha[d] a clean line”—i.e., a phone line that was not being “followed or taped” by law enforcement authorities. Dep. of Markku Tynkkynen, Jan. 22, 2009, at 136. During their conversation, Tynkkynen proposed that he and Korhonen develop a “joint story” concerning what they had discussed during their private phone calls and meetings. Trial Tr. at 133. Korhonen concurred that developing a “joint story” was “a good idea.” Id. They decided that if interviewed, they would tell law enforcement officials that in their conversations in 2002 and 2003 they discussed railroad fees, timber swaps, and the Finnish Paper Engineers Association. Pricing was not among those topics that they agreed to identify as having been discussed. (Later, in an August 2004 phone call, Tynkkynen told Korhonen that he intended to tell the government “everything” that he remembered about their meetings, rather than the “joint story” they had discussed in July. Id. at 135-36.) 11 In February 2006, the DOJ granted conditional full immunity to UPM in return for the company’s cooperation in the price-fixing investigation. In December 2006, a grand jury issued a one-count indictment against SENA charging that from August 2002 through June 2003, SENA and others entered into a conspiracy to fix the price at which the companies sold publication paper to customers in the United States, in violation of section 1 of the Sherman Act. The case against SENA was tried to a jury in the U.S. District Court for the District of Connecticut (Christopher F. Droney, J.) in July 2007. United States v. Stora Enso N. Am. Corp., No. 3:06-cr323. During the criminal trial, Tynkkynen testified, inter alia, that during their phone conversation on February 11, 2003, he and Korhonen reached an “agreement” that UPM and SENA would “match[ ]” IP’s February 2003 price increase for coated grade 5 paper and that both firms would “seriously implement” that price increase with their customers. Trial Tr. at 88, 247-48. For his part, Korhonen testified that at the time of the November 6, 2002 meeting, he understood Tynkkynen to be trying to “initiate something to get the prices improved.” Id. at 281. Korhonen further testified that after the November 6 meeting, “some phone calls” occurred between him and Tynkkynen during which “intentions were exchanged about [publication] paper price increases,” and that, during their February 11, 2003 phone conversation in particular, Korhonen told Tynkkynen what SENA was “going to do,” and, likewise, Tynkkynen told Korhonen what UPM was “going to do.” Id. at 282, 28485. After both parties presented their evidence, SENA unsuccessfully moved for 12 acquittal. On July 19, 2007, in a general verdict, the jury acquitted SENA of criminal antitrust violations. E. Procedural History After the DOJ’s investigation became public, individual plaintiffs brought nine separate actions against various manufacturers of publication paper in federal district courts across the country, alleging price fixing in the U.S. market for publication paper. In November 2004, the Judicial Panel on Multidistrict Litigation (“MDL”) consolidated and transferred these actions to the U.S. District Court for the District of Connecticut, thereby creating MDL 1631, In re Publication Paper Antitrust Litigation. Additional suits were filed over the course of the following year. They, too, were consolidated with MDL 1631. In their fifth and final amended complaint, filed in March 2008, plaintiffs brought claims under section 1 of the Sherman Act, 15 U.S.C. § 1, and sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, seeking treble damages and alleging that from October 1, 2002, to May 31, 2004, SENA, SEO, and UPM conspired to fix the prices of coated paper grades 3, 4, and 5. In April 2008, the district court approved plaintiffs’ settlement with UPM, leaving only SENA and SEO as defendants in the MDL proceedings. In May 2009, the district court certified the plaintiff class as “[a]ll persons . . . who directly purchased Publication Paper for delivery in the United States from [SENA or SEO] . . . at any time during the period from October 1, 2002 to and including September 30, 2003” (the “class period”). Order Granting Class Certification, D. Ct. Dkt. No. 470. After the close of 13 discovery, defendants moved for summary judgment, and the district court granted defendants’ motion. Publication Paper, 2010 WL 5253364, at . In its decision, the district court rejected plaintiffs’ argument that Tynkkynen’s testimony that he and Korhonen reached an “agreement” on pricing in February 2003 constituted sufficient “direct evidence” of price fixing to withstand defendants’ motion for summary judgment. Id. at . As to plaintiffs’ other evidence, the court acknowledged that SENA and UPM’s three price increases constituted parallel conduct; that the publication paper industry was conducive to collusion; and that the communications between Tynkkynen and Korhonen supported the existence of a conspiracy. Nevertheless, the court determined that plaintiffs’ evidence did not sufficiently “exclude the possibility that SENA acted independently in raising the prices charged for publication paper” and that, in any event, “even if Tynkkynen and Korhonen agreed that UPM and SENA would follow rivals’ future price increases,” plaintiffs had not demonstrated that such an agreement “had some effect on future price increases announced by SENA.” Id. at -14. The district court also concluded that plaintiffs failed to show that defendants conspired to reduce the supply of publication paper by closing certain of their paper mills, and ruled that plaintiffs offered “virtually no evidence” demonstrating that SEO played a role in the alleged price-fixing scheme. Id. at . This appeal followed. On appeal, plaintiffs contend that the district court made several factual and legal errors that require us to reverse the judgment entered for defendants. In 14 particular, they maintain that the district court improperly discounted direct evidence of a price-fixing agreement; improperly failed to draw reasonable inferences in their favor; and erred in concluding as a matter of law that the alleged agreement between Korhonen and Tynkkynen had no effect on SENA’s pricing decisions.7 Our task is to determine whether, on the evidence presented, a jury could reasonably conclude that defendants reached an agreement “for the purpose and with the effect of raising . . . the price of” publication paper. United States v. Socony Vacuum Oil Co., 310 U.S. 150, 223 (1940); accord Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 336 (2d Cir. 2008). This requires evidence sufficient to permit a preponderance finding that “higher prices came about as a result of [the agreement], rather than through independent action of the defendants.” Apex Oil Co. v. DiMauro, 822 F.2d 246, 253 (2d Cir. 1987).