Opinion ID: 480588
Heading Depth: 2
Heading Rank: 2

Heading: Appropriateness of the Yardstick Measure of Damages

Text: 117 We note at the outset that our review of the district court's damages calculation must be deferential. An antitrust plaintiff does not bear as onerous a burden in proving the dollar amount of his damages as he does in showing the fact of his antitrust injury. MCI, 708 F.2d at 1161; see also Blanton, 721 F.2d at 1215; Multiflex, Inc. v. Samuel Moore & Co., 709 F.2d 980, 995 (5th Cir.1983), cert. denied, 465 U.S. 1100, 104 S.Ct. 1594, 80 L.Ed.2d 126 (1984). This is because an antitrust plaintiff is given an exceedingly difficult task: quantifying the difference between what actually happened and what would have happened in a hypothetical free market. Also, defendants, whose illegal conduct kept IBI from winning the Bulls, should not benefit because their wrongdoing made it difficult to establish the exact amount of injury. The need to tolerate a degree of imprecision in the plaintiffs' proof of damages implies that the district court has a degree of leeway in its damages calculation. Thus, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 250, 75 L.Ed. 544 (1931). Accord MCI, 708 F.2d at 1161. 118 It is well settled that an antitrust plaintiff is entitled to recover in full for the preventable and established loss sustained by reason of tortious or proscribed acts. Albrecht v. Herald Co., 452 F.2d 124, 128 (8th Cir.1971). See also Lehrman v. Gulf Oil Corp., 464 F.2d 26, 47 (5th Cir.), cert. denied, 409 U.S. 1077, 93 S.Ct. 687, 34 L.Ed.2d 665 (1972) (proper measure of damages when business is destroyed by antitrust violation is what financial advantage would the plaintiff have gained but for the actions of the defendant?). The concept of a yardstick measure of damages, that is, linking the plaintiff's experience in a hypothetical free market to the experience of a comparable firm in an actual free market, is also well accepted. See, e.g., Bigelow v. RKO Radio Pictures, 327 U.S. 251, 257-58, 66 S.Ct. 574, 576, 90 L.Ed. 652 (1946); Dolphin Tours, Inc. v. Pacifico Creative Service, Inc., 773 F.2d 1506, 1511 (9th Cir.1985); Lehrman, 464 F.2d at 42; Milwaukee Towne Corp. v. Loew's, Inc., 190 F.2d 561, 566 (7th Cir.1951), cert. denied, 342 U.S. 909, 72 S.Ct. 303, 96 L.Ed. 680 (1952). The yardstick is usually used to calculate either lost future profits or lost going-concern value of a business damaged, destroyed or never started because of an antitrust violation, see Rulon, Proof of Damages for Terminated or Precluded Plaintiffs, 49 Antitrust L.J. 152 (1980) (collecting cases). We see no reason why the plaintiffs in this case, who lost the opportunity to buy an ongoing business to the defendants because of the latter's illegal conduct, may not seek to prove lost total financial gain if they can make the required showing. The law has not set down any mechanical test or formula as regards the required proof. Locklin v. Day-Glo Color Corp., 429 F.2d 873, 880 (7th Cir.1970) (citation omitted), cert. denied, 400 U.S. 1020, 91 S.Ct. 582, 27 L.Ed.2d 632 (1971). A plaintiff can use a method of proof 'specially tailored' to the individual case [although] he cannot engage in pure speculation. Park v. El Paso Board of Realtors, 764 F.2d 1053, 1068 (5th Cir.1985), cert. denied, 474 U.S. ----, 106 S.Ct. 884, 88 L.Ed.2d 919 (1986), quoting Lehrman v. Gulf Oil Corp., 500 F.2d 659, 668 (5th Cir.1974). We must affirm the district court unless we are left with the definite and firm conviction that a mistake has been committed. Locklin, 429 F.2d at 880, quoting United States v. United States Gypsum Co., 333 U.S. 364, 369, 68 S.Ct. 525, 529, 92 L.Ed. 746 (1948). Here, we agree generally with the district court that plaintiffs' lost appreciation in value theory provides one acceptable basis for estimating the financial advantage that IBI would have enjoyed: the net gain to be realized from owning the Bulls for ten years. We think, however, that the district court's methodology requires substantial revision in several aspects. 119 In this connection, defendants first object to the district court's approach by arguing that damages must be computed as of the date of the injury--in this case, as of July 1972. While this rule may generally govern simple contract damages, it is not necessarily controlling in cases such as the one before us where the injury is continuing or where damages from the injury continue to accrue. The defendants' wrongful conduct deprived IBI of the benefits derived from operating the Bulls for ten years. For example, in Farmington Dowel Products Co. v. Forster Manufacturing Co., 421 F.2d 61 (1st Cir.1969), the plaintiff's business had been destroyed by the defendant's antitrust violation, and plaintiff asked for damages representing his lost profits from the first date of injury to trial plus a hypothetical lost going-concern value of his business as of the date of trial. The court rejected this measure of damages, not because it did not plausibly delineate plaintiff's damages in the abstract,id. at 82 n. 47, but rather because the court thought that it was too speculative to try to calculate the going-concern value of a firm ten years after it had ceased to exist. Id. at 80-81. 27 We are not, of course, concerned about over-speculative damages in the instant case. The Bulls did not go out of business but instead continued in business in the hands of CPSC, giving the court, as we have noted, an exceptionally helpful guide to IBI's damages. 120 Defendants argue that the going-concern value of the Bulls in July 1972 represents a full recovery for IBI because that going-concern value--that is, what a willing buyer given all available information would have paid for the team in 1972--is by definition a future income stream discounted to present value. The district court's valuation, on the other hand, is based on actual gain experienced by the Bulls over ten years. (The 1972 going-concern value was affected by a number of ex ante predictions, which were proved either true or false and were reflected in the 1982 value). We do not understand defendants' objection to using this adjusted value (which is not speculative, cf. Farmington Dowel Products, 421 F.2d 61) because we know of no case that suggests that a value based on expectation of gain is more relevant and reliable than one derived from actual gain. To correct uncertain prophecies ... is not to charge the offender with elements of value non-existent at the time of his offense. It is to bring out and expose to light the elements of value that were there from the beginning. Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698, 53 S.Ct. 736, 739, 77 L.Ed. 1449 (1933) (citations omitted); see also A.C. Becken Co. v. Gemex Corp., 314 F.2d 839, 840 (7th Cir.), cert. denied, 375 U.S. 816, 84 S.Ct. 49, 11 L.Ed.2d 51 (1963) (a forecast of tomorrow's weather is always subject to confirmation or modification by tomorrow's observation ) (emphasis in original); Twentieth Century-Fox Film Corp. v. Brookside Theatre Corp., 194 F.2d 846, 856 (8th Cir.), cert. denied, 343 U.S. 942, 72 S.Ct. 1035, 96 L.Ed. 1348 (1952) (passage of time permits better proof of extent of harm). 121 We know of no requirement that damages must always be computed as of the time of the injury or, if not, reduced by some appropriate discount rate to produce a value as of that date. Cf. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 339, 91 S.Ct. 795, 806, 28 L.Ed.2d 77 (1971) (Thus, if a plaintiff feels the adverse impact of an antitrust conspiracy on a particular date, a cause of action immediately accrues to him to recover all damages incurred by that date and all provable damages that will flow in the future from the acts of the conspirators on that date.); Fontana Aviation, Inc. v. Beech Aircraft Corp., 432 F.2d 1080, 1087 (7th Cir.1970), cert. denied, 401 U.S. 923, 91 S.Ct. 872, 27 L.Ed.2d 923 (1971) (Where the alleged damages are the result of acts occurring prior to the filing of the complaint, there can be no doubt that they may be recovered even though they may have accrued following such filing.). 122 Finally, there is an important reason for not limiting a plaintiff's damages to the presumed present value of a future loss as of the date of the injury. Defendants argue that IBI's loss is the difference between the fair market value of the Bulls in July 1972 (which they peg at CPSC's offer, $3.35 million) 28 and the $3.3 million that IBI contracted to pay for the franchise. But this approach is premised on the assumption that a competitor is always free to acquire an asset by illegal means because the victim is similarly free to go spend its money elsewhere. 29 However, if a victim is deprived of what may turn out to be an unusually successful investment, his damages should reflect that fact. 30 123 Like the defendants, the dissent argues that the plaintiffs should be limited to the difference between the price at which the plaintiffs contracted to buy the Bulls and the price paid for the franchise by CPSC; the dissent's analysis, however, differs in form, if not in fundamental substance, from that of the defendants. Essentially, the dissent argues that IBI could have covered once it was foreclosed from buying the Bulls by the defendants' illegal conduct. While IBI lost one business opportunity, it could go out and invest in the next best business opportunity. IBI should thus be awarded only the bargain element of its contract with Rich, i.e., the amount at which IBI would have been able to buy the Bulls below their market price. Infra p. 579. 124 We find the dissent's analysis unpersuasive insofar as it may suggest that IBI should have invested promptly in another basketball team. Infra pp. 579-80. The dissent seems to treat basketball teams as fungible commodities. But the record does not disclose that there is anything like an auction market in basketball teams. As far as we know, the law imposes no duty on a buyer who has been unlawfully done out of a purchase of the Bulls to cover immediately with the Bucks, the Celtics or the Lakers. The record does not disclose that these teams were either fungible or available. 31 125 Defendants also assail the district court's assets-based method of valuing the Bulls, arguing that it is inaccurate because: (1) different franchises own different assets; and (2) different franchises treat their assets differently for accounting purposes. As for the first objection, defendants mention only two instances of different assets--pay television interests and arena rights. The district court dealt adequately with both. Damages Opinion, 594 F.Supp. at 870-73. The second objection is rather more involved but perhaps comes to as little in the end. 126 Many NBA franchises list their player contracts as an asset on their balance sheets and also enter a corresponding liability for unearned deferred compensation, that is, the sums to be paid players in the future under those contracts. Others, including the Bulls, do not list either player contracts or unearned deferred compensation in their books. The only liability for deferred compensation that these teams carry (also carried by the franchises that enter unearned deferred compensation) is for earned deferred compensation, i.e., sums owed to players for services already rendered. The trial court did not distinguish between earned and unearned deferred compensation in its damages calculation. The defendants argue: 127 Because the trial court did not distinguish between earned and unearned deferred compensation, the comparable sales from which it derived the value of CPSC's basketball assets were not at all comparable. Some included an asset valuing the future services of the team's players, others did not. The calculation was further distorted when the court refused to deduct CPSC's actual liability for deferred compensation when no offsetting asset for player services existed. 128 Appellants' Brief at 86. 129 We do not believe that the district court's method was clearly erroneous; rather, we think that the defendants have mischaracterized it. The district court correctly held that an accurate sales price or fair market value would be equal to what a willing buyer would pay for the entire package, assets and liabilities. Assumed liabilities of any sort, earned or unearned, are part of that fair market value because the total of cash, notes and assumed liabilities represents the financial obligation a buyer would undertake to own a particular team. 32 This is the fallacy in the defendants' dramatic argument that the district court's method means that an NBA franchise escalates in value the more liabilities it has and the closer it approaches bankruptcy. Appellants' Reply Brief at 45-46 n. 31. If someone buys a franchise that has that many liabilities to be assumed, it must be because he values the purchase at least that highly. 130 Further, the fact that the Bulls list no asset in their books for player contracts or liabilities for unearned deferred compensation is in itself irrelevant. The district court was not valuing the teams according to how they appear on a balance sheet; rather, it was assessing how the market valued the teams' assets, in the layman's sense of that term. No one suggests that the Bulls had no player contracts in 1982. Conversely, if the Bulls had player contracts, they had incurred a liability to pay the athletes in the future, whether or not this was listed as a liability on the balance sheet. A prospective purchaser of any franchise--including the Bulls--would decide how much cash to offer by looking at the quality of the player contracts and the amount they were already paying for those contracts by assuming the owners' obligations to the players. Thus, the defendants are wrong to suggest that the Bulls' choice of accounting procedures somehow affects their comparability with other NBA franchises. The district court's method of computing a 1982 fair market value for the Bulls was reasonably accurate and not clearly erroneous. 131 As noted above, the district court saw a potential problem with its valuation method, and it adjusted the calculation to account for this. Based on its finding (not clearly erroneous) that the lengths of a team's player contracts leave the value of the team unaffected, 33 it decided not to add to the comparable fair market value the liabilities for deferred compensation and correspondingly declined to subtract the Bulls' actual liabilities for deferred compensation in reaching its net value. This resulted in a relatively accurate and workable method of finding a net value for the Bulls. Since, however, the district court did not separately treat CPSC's actual liability for earned deferred compensation, it may reconsider this issue on remand, in accordance with the discussion in footnote 33, supra. We emphasize, however, that defendants have not pointed to any reason to expect a disparity in earned deferred compensation between the Bulls and the comparable teams.