Opinion ID: 805979
Heading Depth: 3
Heading Rank: 1

Heading: The Scope of Matsushita

Text: In concluding that summary judgment was appropriate in this case, the district court cited extensively to the Supreme Court’s decision in Matsushita. Acknowledging that “the evidence as a whole arguably could support an inference of illegal collusive behavior,” the district court nonetheless determined that plaintiffs “failed to offer sufficient evidence to dispel the possibility” that SENA acted independently. Publication Paper, 2010 WL 5253364, at , . The parties dispute the extent to which the “tends to exclude” formulation articulated in Matsushita, 475 U.S. at 588 (“To survive a motion for summary judgment . . . a plaintiff seeking damages for a violation of § 1 must present evidence that ‘tends to exclude the possibility’ that the alleged conspirators acted independently.”), applies under the circumstances presented here. We take this opportunity to clarify the application of the standards established in that case. In Matsushita, the plaintiffs alleged that Japanese television manufacturers had engaged in a longstanding and wide-ranging conspiracy to fix prices in the United States below the level that their costs and market conditions made 18 reasonable. According to the plaintiffs’ theory, the defendants’ predatory prices would eventually force competitors to leave the market, at which point the defendants would raise prices to monopoly levels. The Court observed that, as a general matter, “predatory pricing schemes are rarely tried, and even more rarely successful.” Id. at 589. Indeed, the conspiracy alleged in Matsushita had spanned 20 years without achieving the putatively desired monopoly. Because it found both that the plaintiffs’ theory of conspiracy was implausible and that the defendants’ price-cutting conduct could as readily be explained as legitimate competitive behavior, the Court required the plaintiffs to “come forward with more persuasive evidence to support their claim than would otherwise be necessary” to withstand summary judgment. Id. at 587. Matsushita, then, stands for the proposition that substantive “antitrust law limits the range of permissible inferences” that may be drawn from ambiguous evidence. Id. at 588; accord In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 654, 661-62 (7th Cir. 2002) (Posner, J.). It further holds that the range of inferences that may be draw from such evidence depends on the plausibility of the plaintiff’s theory. See Matsushita, 475 U.S. at 588; Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984); Apex, 822 F.2d at 253. Thus, where a plaintiff’s theory of recovery is implausible, it takes “strong direct or circumstantial evidence” to satisfy Matsushita’s “tends to exclude” standard. Apex, 822 F.2d at 253. By contrast, broader inferences are permitted, and the “tends to exclude” standard is more easily satisfied, when the conspiracy is economically sensible for 19 the alleged conspirators to undertake and “the challenged activities could not reasonably be perceived as procompetitive.” Flat Glass, 385 F.3d at 358; cf. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 468 (1992) (“Matsushita demands only that the nonmoving party’s inferences be reasonable in order to reach the jury, a requirement that was not invented, but merely articulated, in that decision.”). At several points in its opinion, intermingled with its use of the “tends to exclude” standard, the district court stated that plaintiffs were required to “exclude” or “dispel” the possibility that defendants acted independently. Publication Paper, 2010 WL 5253364, at -11, -14. Requiring a plaintiff to “exclude” or “dispel” the possibility of independent action places too heavy a burden on the plaintiff. Rather, if a plaintiff relies on ambiguous evidence to prove its claim, the existence of a conspiracy must be a reasonable inference that the jury could draw from that evidence; it need not be the sole inference. As Professors Areeda and Hovenkamp have advised: It is important not to be misled by Matsushita’s statement . . . that the plaintiff’s evidence, if it is to prevail, must “tend . . . to exclude the possibility that the alleged conspirators acted independently.” The Court surely did not mean that the plaintiff must disprove all nonconspiratorial explanations for the defendants’ conduct. Not only did the court use the word “tend,” but the context made clear that the Court was simply requiring sufficient evidence to allow a reasonable fact finder to infer that the conspiratorial explanation is more likely than not. Phillip E. Areeda and Herbert Hovenkamp, Fundamentals of Antitrust Law, § 14.03(b), at 14-25 (4th ed. 2011) (footnotes omitted). 20 Of course, the standards established in Matsushita do not apply at all when a plaintiff has produced unambiguous evidence of an agreement to fix prices. As such, “an admission by the defendants that they agreed to fix their prices is all the proof a plaintiff needs.” Corn Syrup, 295 F.3d at 654. Thus, at least three of our sister circuits have held that summary judgment is generally not appropriate where a plaintiff has produced direct, as opposed to circumstantial, evidence of an agreement to fix prices. See Williamson Oil Co., Inc. v. Philip Morris USA, 346 F.3d 1287, 1300 (11th Cir. 2003); Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1233 (3d Cir. 1993); In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 906 F.2d 432, 441 (9th Cir. 1990); see also R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 58 (2d Cir. 1997) (quoting, in dicta, Ninth Circuit decision drawing distinction between direct and circumstantial antitrust evidence). Some courts have reached this conclusion by reasoning that “direct evidence . . . requires no inferences to establish the proposition or conclusion being asserted.” In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir. 1999). Neither party in this case questions this evidentiary distinction. Nevertheless, we do not think it necessary to draw bright lines to decide this case. See Corn Syrup, 295 F.3d at 661-62. All evidence, including direct evidence, can sometimes require a factfinder to draw inferences to reach a particular conclusion, though “[p]erhaps on average circumstantial evidence requires a longer chain of inferences.” Sylvester v. SOS Children’s Vills. Ill., Inc., 453 F.3d 900 (7th Cir. 2006) (Posner, J.). Here, the totality of the evidence, viewed in the light most favorable to 21 plaintiffs and with proper regard for the Matsushita standards, could support a reasonable inference of illegal collusive behavior. 2. Plaintiffs’ Evidence of an Agreement to Fix Prices In this case, the district court concluded that “[n]othing in the record concerning the February 2003 price increase suggests that Tynkkynen or Korhonen had an agreement to follow the IP increase.” Publication Paper, 2010 WL 5253364, at . We disagree. As previously discussed, Tynkkynen testified during SENA’s criminal trial that he and Korhonen reached an “agreement” that UPM and SENA would follow IP’s February 2003 price increase and that they would implement that price increase on the customer end “seriously,” i.e., to the fullest extent possible. Whether or not this testimony—a co-conspirator’s acknowledgment that he understood his numerous communications with Korhonen to reflect a price-fixing agreement—admits any ambiguity as to Korhonen’s parallel understanding of the same communications, the testimony is surely strong evidence of a collusive scheme between UPM and SENA. That would be sufficient to satisfy Matsushita’s “tends to exclude” standard even if plaintiffs’ theory were implausible, which it is not. See Apex, 822 F.2d at 253.8 The district court considered Tynkkynen’s testimony to be of limited value, in part, because, as the court explained and is not disputed, “English is not the native language of Tynkkynen and Korhonen.” Publication Paper, 2010 WL 5253364, at . Any notion that Tynkkynen did not understand the meaning of “agreement” in 8 Any questions of Tynkkynen’s credibility, perception, or memory are, of course, for the jury. On this appeal, we must assume they will be answered in favor of plaintiffs. 22 English or the import of his testimony, however, is belied by the record. Tynkkynen repeatedly explained in court that he and Korhonen had a “common understanding,” and that the substance of that “understanding” was that “both companies are matching . . . [IP’s] coated #5 price increase and will seriously implement the price increase. So it was a common understanding, and, thus, [an] agreement.” Trial Tr. at 247-48. Moreover, defendants conceded at oral argument before this Court that translation and language were not an issue. Oral Arg. Tr. at 23. Although an “understanding” might in some contexts be intended to signal an “expectation” rather than “agreement,” the substance of Tynkkynen’s testimony and the context of the events he describes fully support the conclusion that when he said “understanding”—as when he said “agreement”—he meant “agreement.” Plaintiffs have provided additional evidence to support a reasonable finding that SENA and UPM engaged in price fixing. The district court found, and defendants do not contest, that the publication paper industry is conducive to collusion: publication paper is a commodity product with few substitutes; the market is controlled by a limited number of sellers (principally, IP, SENA, and UPM); and high capital investment costs limit the entry of new market players. See Corn Syrup, 295 F.3d at 656-57 (describing characteristics that make a market susceptible to collusion). Furthermore, during the class period, the publication paper industry suffered from excess capacity and historically low prices, conditions that make “price competition more than usually risky and collusion more than usually attractive.” Id. at 657. Finally, there is ample evidence of conspiratorial 23 behavior. Most notably, it is undisputed that in private phone calls and meetings—for which no social or personal purpose has been persuasively identified—Tynkkynen shared UPM’s pricing strategies with Korhonen and both men disclosed to each other their companies’ intentions to increase prices before those decisions had been publicly announced. Tynkkynen and Korhonen also developed a “joint story” to conceal from the government the true nature of their communications—behavior from which a jury could infer that both men were aware that their communications and related actions regarding publication paper pricing violated the law. We recognize that despite the strength of plaintiffs’ evidence of an agreement, the totality of the evidence admits of alternative interpretations— namely, that SENA as a corporation acted independently of UPM in deciding to increase its prices and that the price increases each company announced were the product of certain characteristics of the industry and not any agreement between Korhonen and Tynkkynen. But it is the province of the jury to determine how much weight to accord Tynkkynen’s testimony and the other relevant evidence. We believe that, on the basis of Tynkkynen’s testimony alone, a jury could reasonably find that SENA and UPM made an agreement to fix the prices at which their companies sold publication paper in the latter part of 2002 and early 2003. Plaintiffs’ other evidence provides additional support for the theory that, as early as August 2002, Korhonen and Tynkkynen reached an agreement to follow price increases announced by their competitors. In sum, unlike in Matsushita, the record 24 in this case presents strong, if not irrefutable, evidence of a conspiracy in a context where the conspiracy’s goals were aligned with the conspirators’ economic interests.