Opinion ID: 4076467
Heading Depth: 1
Heading Rank: 4

Heading: TLI’s Cross-Appeals

Text: Having resolved Avaya’s appeals, we turn now to TLI’s cross-appeals. It challenges the District Court’s grant of summary judgment against two of its tort counterclaims and against one of its antitrust counterclaims. It also challenges the District Court’s decision under the NoerrPennington doctrine that TLI could not use Avaya’s litigation conduct as evidence of anticompetitive behavior. All of those rulings are sound, and TLI’s arguments are not.54
Claims We begin with the District Court’s grant of summary judgment against TLI’s counterclaims for trade libel and for tortious interference with prospective economic advantage. Both claims were based on the so-called FUD letters that Avaya sent to existing and prospective TLI customers. The tortious interference claim was also based on Avaya’s we decline to address it. The question may be considered afresh, if necessary, following retrial. 54 Our review of a district court’s grant of summary judgment is plenary. Boyle v. Cty. of Allegheny Pa., 139 F.3d 386, 393 (3d Cir. 1998). “[S]ummary judgment may be granted if the movant shows that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party. All facts and inferences are construed in the light most favorable to the non[]moving party.” Id. (internal citation and quotation marks omitted). 109 deactivation of TLI customers’ MSPs. The District Court granted summary judgment against TLI on those claims on the ground that TLI did not present sufficient evidence to create a dispute of material fact over whether Avaya’s conduct actually caused TLI any loss in business.55 55 The parties dispute whether the District Court applied the correct legal standards for the tort claims. For tortious interference, “New Jersey law requires that a plaintiff ... present proof that but for the acts of the defendant, the plaintiff would have received the anticipated economic benefits.” Lightning Lube, 4 F.3d at 1168 (internal quotation marks omitted). TLI disputes whether the District Court actually applied that “but for” test, suggesting that it improperly demanded that TLI prove that Avaya’s actions were the sole cause of injury. Despite some potentially confusing language, the District Court’s opinion did apply the “but for” test as explicated in Lightning Lube. TLI also argues that the District Court should have instead applied a test evaluating whether Avaya’s conduct was a “substantial factor” in causing TLI’s injury. See Verdicchio v. Ricca, 843 A.2d 1042, 1056 (N.J. 2004) (applying the “substantial factor” test in a medical malpractice case). Because a “substantial factor” causation test would not have altered the result, we need not consider whether it was more appropriate. With regard to the legal standard for trade libel, both parties agree that TLI had to prove special damages. TLI wanted the Court to apply a “material and substantial part” test for causation of those damage, see Patel v. Soriano, 848 A.2d 803, 835 (N.J. Super. Ct. App. Div. 2004), whereas Avaya supports the “natural and direct result” standard that the District Court did apply, see Mayflower Transit, LLC v. Prince, 314 F. Supp. 2d 362, 378 (D.N.J. 2004). Again, we 110 The District Court provided a detailed explanation of the deficiency of the evidence before it. As to the MSP deactivations, the Court observed that MSP access was not required to provide maintenance, citing TLI’s own interrogatory responses about alternative methods that it in fact used to provide service to customers. As the Court explained, TLI “used ... default passwords or hired a third party to determine active passwords,” so that “whether MSPs were activated had little bearing on whether [TLI] could provide maintenance to customers.” (J.A. 105.)56 Those alternative methods were sufficiently successful, in fact, that they led Avaya to bring suit against TLI, alleging that they were unlawful and resulted in the loss to Avaya of significant business. As to the FUD letters, the District Court decided that TLI had not “come forth with sufficient evidence that the Avaya letters were the de facto cause of the loss of current and prospective maintenance contracts.” (J.A. 105.) TLI’s examples of lost contracts were not at all persuasive. For instance, TLI suggested that the State of Michigan was one such lost contract, but an employee of that state testified that there were “numerous reasons” not to use TLI – unrelated to need not resolve which standard is correct because the outcome is the same under either. 56 At trial, Scott Graham validated the District Court’s conclusion when he testified that he was “[n]ot ... aware of” a case in which TLI was not able to get “into the maintenance software” of a prospective customer. (J.A. 2443.) In fact, it is “[c]orrect” that TLI was “always successful.” (Id.) 111 Avaya, and some directly caused by TLI – and that she was not under any “impression that Avaya would sue the State of Michigan if it awarded the contract to [TLI].” (J.A. 106.)57 The only specific example TLI provided of a customer who declined its services because of a FUD letter was substantiated only by an email – inadmissible as hearsay – sent by a TLI employee complaining about the lost contract. Finally, the Court refused to draw any inferences from the report of TLI’s damages expert on the grounds that it was “not supported ... by affidavits or any other evidence that would be admissible at trial.” (J.A. 108.) In this appeal, TLI relies principally upon that expert report and contests the District Court’s characterization of it, arguing vaguely that the report was based on “business records [and] excerpts from depositions of customers and TLI[] employees.” (Answering Br. at 93.) In support of that contention, TLI cites the expert’s certification, in which he declared that he “relied upon facts, data and work typically relied upon by experts in the economic/accounting industry.” (Suppl. App. 10.) TLI also cites 93 pages of inscrutable spreadsheets in which the expert – without explanation – assigned various damages to contracts that TLI allegedly lost due to Avaya’s conduct. 57 Other examples provided by TLI were similarly unimpressive. For instance, TLI relied on a cease and desist letter that it sent to Avaya in 2010. The District Court concluded that the mere existence of such a letter “is no more helpful to the Court on summary judgment than ... pleadings,” without additional “evidence sufficient to prove that the allegations made in the ... letter are in fact true.” (J.A. 107.) 112 The District Court’s rejection of TLI’s argument was thoroughly justified. The evidence TLI offered in opposing summary judgment consisted of naked accusations that Avaya’s conduct cost it business. That the allegations were recited by an expert witness or by TLI employees does not bolster them.58 See Advo, Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191, 1198 (3d Cir. 1995) (“[E]xpert testimony without ... a factual foundation cannot defeat a motion for summary judgment.”). Even now on appeal, after a decade of litigation, TLI cannot point to one specific example where it has credible evidence that Avaya’s allegedly tortious conduct harmed its business. We therefore agree with the District Court that TLI failed to present sufficient evidence to create a material dispute of fact about whether Avaya’s MSP deactivations or FUD letters caused injury to TLI. Summary judgment was appropriate on both the tortious interference and the trade libel claims.
Claim The jury rejected TLI’s § 1 tying claim for the PBX market and found that there was no relevant antitrust aftermarket for PBX patches, but TLI nonetheless asks us to revive a separate § 1 tying claim. It appeals the District 58 The expert’s credibility is further undermined by the fact that at a subsequent Daubert hearing, the District Court determined that he was “‘[c]learly ... not competent’ to testify about an individual customer’s motivations.” (Third Step Br. at 62 (alteration and omission in original) (quoting J.A. 4071).) 113 Court’s grant of summary judgment against its claim that Avaya unlawfully tied PBX upgrades and maintenance. Before addressing the reasoning of the District Court, we note that, in light of our already-set-forth explanation of Kodak-style tying claims, we are skeptical of the tying claim regarding PBX upgrades, especially given the jury’s rejection of the tying claim related to PBX software patches. Upgrading a PBX system requires a customer to step back into the competitive primary PBX market, thereby at least partially ameliorating any lock-in concern and making it less likely that Avaya could dissociate the primary market from an aftermarket. We acknowledge that in the PBX upgrade market there may still be some reliance on past investments in an old Avaya system, but if the jury rejected the notion that PBX patches satisfied the Kodak theory – when patches are strictly aftermarket products – we doubt that it would have been more sympathetic to an argument that upgrades were unlawfully used as a tie. Antitrust theory aside, the District Court granted summary judgment for the simple reason that TLI had failed to present any substantial evidence that Avaya’s alleged threats to withhold upgrades had actually affected “a substantial amount of interstate commerce,” as required to make out a § 1 claim. (J.A. 165.) It characterized TLI’s proffered evidence as consisting of “little more than assertions,” which the “Court [found] insufficient.” (Id.) That evidence – which TLI presses upon us anew on appeal – again consists of expert reports arguing that Avaya used upgrades as part of a scheme to foreclose competition in the maintenance market. Avaya defends the District Court by 114 arguing that that “evidence” was merely unsupported assertions filtered through TLI’s experts. Reviewing the record ourselves, and drawing all reasonable inferences in favor of TLI, we find ourselves in agreement with Avaya and the District Court. In opposing summary judgment, TLI presented no evidence to raise an issue of material fact about whether Avaya was able to harm TLI by using PBX upgrades to restrain competition in the maintenance market. We will therefore also affirm that aspect of the District Court’s summary judgment order. 59
The final issue we consider is TLI’s cross-appeal of the District Court’s ruling, under the Noerr-Pennington doctrine, that TLI could not present evidence at trial of Avaya’s litigation conduct as a basis for the accusation of monopolistic conduct. “Under the Noerr-Pennington doctrine – established by Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S. 657 (1965) – defendants are immune from antitrust liability for engaging in conduct (including litigation) aimed at influencing 59 We note, however, that insofar as TLI may have later developed more evidence on the use of upgrades to tie, that evidence remains relevant to TLI’s attempted monopolization claim. There is nothing to prevent TLI from presenting the upgrade tying theory to the jury as part of its surviving § 2 claim on remand, but that does not ameliorate the fact that its evidence at the summary judgment stage was so scant. 115 decisionmaking by the government.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1757 (2014) (citation omitted). In Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993), the Supreme Court explained that “sham” litigation – unlike ordinary litigation – is not off limits as a source of antitrust liability. The Court gave a two-part test for identifying a lawsuit as a sham: “First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. ... [S]econd[,] ... the baseless lawsuit conceals ‘an attempt to interfere directly with the business relationships of a competitor,’” id. at 60-61 (emphasis removed) (quoting Noerr, 365 U.S. at 144), “through the ‘use of the governmental process – as opposed to the outcome of that process – as an anticompetitive weapon,’” id. at 61 (alteration and emphases removed) (quoting City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 380 (1991)). TLI challenges the District Court’s contention that “the whole case has to be a sham” for the sham exception to apply. (Suppl. App. 190.) Instead, TLI argues, the sham exception should be applied on a claim-by-claim basis. Avaya responds by citing the language in Professional Real Estate that refers to a “lawsuit” rather than a claim, and which references the “governmental process” rather than any specific action in a suit. It also argues that, as a policy matter, adopting a claimby-claim “approach would introduce extraordinary complexity into jury deliberations” by forcing juries to not only decide the merits of each claim but also decide which are objectively reasonable or not. (Third Step Br. at 66.) As the District Court noted when ruling on the issue, cases often involve claims of varying degrees of merit, many of which 116 are weeded out pre-trial, and it would be impractical to run a litigation system that made those kinds of claims subject to antitrust suits. We agree with that conclusion. True, one might imagine a situation where a single claim, separated from an otherwise arguably meritorious suit, is so harmful and costly to a defendant that it might impose anticompetitive harm on the defendant in a way that triggers the sham litigation exception to Noerr-Pennington. But the Supreme Court’s elaboration of the “sham” exception suggests that we should not go hunting for that example, and this case is not it. Some of Avaya’s claims that were dismissed before trial may have been weak, but they were part and parcel of a course of litigation that proceeded to two months of substantial evidence and argument to a jury. We do not consider Avaya’s affirmative claims to be frivolous or unsubstantiated; in fact, we are vacating the Rule 50 judgment that was entered against them. TLI may consider Avaya’s litigation conduct vexatious – as the District Court did in awarding prejudgment interest – but its suit against TLI was not a “sham.”60 We therefore affirm the District Court’s ruling that Avaya’s litigation conduct was protected from antitrust liability by the Noerr-Pennington doctrine. 60 Which is not to say that we endorse the District Court’s determination that the award of prejudgment interest was appropriate in this case. Again, Avaya’s present challenge to that award has been mooted by our disposition with respect to the other claims presented. 117