Opinion ID: 795341
Heading Depth: 2
Heading Rank: 2

Heading: Federal Antitrust Claim

Text: 21 The essence of a claim of violation of Section 1 of the Sherman Act is the agreement itself. See, e.g., Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 330, 111 S.Ct. 1842, 114 L.Ed.2d 366 (1991). Only after an agreement is established will a court consider whether the agreement constituted an unreasonable restraint of trade. AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 232 (2d Cir.1999); see also Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984) (Section 1 of the Sherman Act requires that there be a `contract, combination ... or conspiracy' ... in order to establish a violation. Independent action is not proscribed.) (citation omitted). Thus, to survive [a] motion for summary judgment, the plaintiff[] must first demonstrate the existence of an agreement, whether by direct or by circumstantial evidence. Mitchael v. Intracorp, Inc., 179 F.3d 847, 856-57 (10th Cir.1999).
22 Champagne attempted to show that a conspiracy existed through both direct and indirect evidence. In granting the Established Distributors' motions for summary judgment, the district court ruled that none of Champagne's proffered evidence was sufficient to demonstrate a conspiracy. It found that none of the statements offered as direct evidence clearly indicated an agreement and, thus, that a jury could not reasonably find a conspiracy based on the statements alone. Then, after noting that the range of permissible inferences that may be drawn from circumstantial evidence will depend on the plausibility of a plaintiff's economic theory, and after finding that Champagne's theory of collusion was, at best, plausible but weak, the district court concluded that the evidence did not tend to support concerted action. 23 As we conclude that Champagne did adduce direct evidence of a conspiracy, and as we find that the district court erred in its analysis of the plausibility of Champagne's economic theory and thus erred in its consideration of Champagne's circumstantial evidence, we reverse the decision of the district court on Champagne's federal antitrust claim. 7
24 Champagne offered three statements made by various representatives of the Established Distributors as direct evidence of a conspiracy. On appeal, Champagne focuses primarily on a statement by Phil Wiley of AFCO, Ryerson's predecessor, to Matt Zundel, a Commonwealth employee. 8 Zundel claimed that Wiley told him that the relationship between Commonwealth and Champagne was damaging to the industry as a whole and that Wiley 25 felt that by our participation with Champagne Metals, that himself and other potential customers within the industry would find that Commonwealth selling to Champagne, they — they would find that as, again, not in the best interest of the industry, and would cause other distributors in that area of the country to source their metals from other mill sources, and that by developing a relationship with Champagne Metals, we would be putting other business with potential customers at risk. 26 (Emphases added.) We agree with Champagne that this statement is direct evidence of collusive action. 9 27 Direct evidence in a Section 1 conspiracy must be evidence that is explicit and requires no inferences to establish the proposition or conclusion being asserted.... [W]ith direct evidence the fact finder is not required to make inferences to establish facts. In re Baby Food Antitrust Litig., 166 F.3d at 118 (quotations omitted). Here, the statement is explicit—Wiley claimed that himself and other potential customers ... would cause other service centers to remove their business from Commonwealth if Commonwealth continued selling to Champagne. 10 Viewed in the light most favorable to Champagne, this statement indicates an agreement among service centers to take collective action. See Rossi v. Standard Roofing, Inc., 156 F.3d 452, 468-69 (3d Cir.1998) (finding the plaintiff's testimony that he was told by one of his competitors that if [the plaintiff] went into business that [the competitor] and [another competitor] would do anything they could, stop supplies, cut the prices, whatever they had to do they were going to do to keep me out of business to be direct evidence of concerted action). 28 Our conclusion that Champagne has adduced some direct evidence, however, does not mean that Champagne has necessarily shown the existence of a genuine issue of fact, sufficient to survive summary judgment, as to whether the Established Distributors entered into an illegal agreement. Although [t]he burden of showing the absence of a genuine issue of material fact ... is upon the movant, Palladium Music, Inc. v. EatSleepMusic, Inc., 398 F.3d 1193, 1196 (10th Cir.2005), the nonmovant `must do more than simply show that there is some metaphysical doubt as to the material facts.' Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). Therefore, summary judgment is appropriate unless the nonmoving party `make[s] a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.' Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The nonmovant makes this showing only by presenting facts such that a reasonable jury could find in [its] favor. Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005) (quoting Simms v. Okla. ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir. 1999)). Wiley's statement, alone, does not meet this burden. For example, it does not indicate which, if any, of the Established Distributors were among the other customers which were part of the agreement. Where, as here, a plaintiff adduces only weak direct evidence, which by itself is insufficient to defeat summary judgment, additional circumstantial evidence is required to overcome a motion for summary judgment. See Rossi, 156 F.3d at 469 (noting that plaintiff's direct evidence of an agreement was not enough to survive summary judgment and looking to circumstantial evidence as well).
29 Champagne argues that the district court erroneously devalued its circumstantial evidence by concluding that the economic theory underlying Champagne's claim made little to no economic sense. 30 The district court began by noting that the range of inferences that can be drawn from circumstantial evidence varies with the strength of the proffered economic theory—the more economically rational a conspiracy is in a given situation, the broader the range of inferences than can be drawn from the evidence. This maxim is undoubtedly true when a plaintiff makes out a case based only on circumstantial evidence. See, e.g., IV Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 71 (2d ed.2003) [hereinafter Areeda & Hovenkamp] (The Supreme Court [in Matsushita ] held that no conspiracy may be inferred from merely circumstantial evidence in the absence of a plausible motive to conspire.) (emphasis added). Champagne also correctly notes that concerns over the reasonableness of inferences do not apply to direct evidence of an agreement. Rossi, 156 F.3d at 466. In other words, when evaluating direct evidence of an agreement, we need not worry whether such an agreement would have been a rational one to enter into; antitrust law do[es] not ... save defendants who have clearly, though foolishly, conspired. II Areeda & Hovenkamp 101. 31 The more difficult question, we think— and a question that the parties do not squarely address—is whether, when direct evidence has been introduced, we must still evaluate the economic rationality of the alleged conspiracy when considering the accompanying circumstantial evidence. Some courts have held that economic rationality is inapplicable in a case with direct and circumstantial evidence. See Rossi, 156 F.3d at 466 ([T]he Matsushita standard only applies when the plaintiff has failed to put forth direct evidence of conspiracy.); In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 906 F.2d 432, 441 (9th Cir.1990) ([T]he Matsushita standards do not apply when the plaintiff has offered direct evidence of conspiracy.); see also II Areeda & Hovenkamp 104 ([S]everal courts have indicated that Matsushita standards do not apply when the plaintiff has offered direct evidence of conspiracy.) (quotations omitted). 32 Given that the parties do not brief this issue on appeal, and given our conclusion, below, that the alleged conspiracy is economically rational such that restrictions on the inferences drawn from Champagne's circumstantial evidence are not warranted, we do not decide whether Champagne's weak direct evidence suffices by itself to remove this case from the Matsushita framework. 33 The district court determined that Champagne's economic theory was, at best, plausible but weak, and that therefore the range of permissible inferences to be drawn from the circumstantial evidence was limited. 11 We disagree. 34 As we have explained, 35 [c]ircumstantial evidence may support the existence of an illegal § 1 agreement. However, on summary judgment, antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case. 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. Thus, the acceptable inferences which we can draw from circumstantial evidence vary with the plausibility of the plaintiffs' theory and the danger associated with such inferences. 36 Mitchael, 179 F.3d at 858 (alterations, citations, quotations omitted). 37 Below, the Established Distributors argued that they had no motive to engage in a group boycott because they did not have the power to raise prices or decrease output. Champagne countered that the Established Distributors were not boycotting in order to establish or maintain supracompetitive prices but instead were acting to avoid price cutting and to maintain market share. 38 The district court expressed considerable doubt about Champagne's theory. It noted that, although Champagne alleged that the boycott was to preserve the market and price structure of the industry, Champagne did not claim that there was any separate price-fixing or market-allocation agreement, 12 nor was there any evidence of collusion on price or supply. To the contrary, the district court found ample evidence of competition between the Established Distributors. Moreover, the district court pointed out that there was no evidence of the Established Distributors' market power and that it was unclear, based on the structure of the industry, whether a smaller, more strategically designed group of service centers could have been formed to accomplish the alleged goal. Finally, the district court noted that Champagne failed to support its theory with any evidence, particularly given the fact that the court had previously excluded Champagne's economic expert's report and testimony. Considering all of this, the district court concluded that there was uncontroverted evidence that the benefits of collusion in this instance are outweighed by the risks and thus Champagne's theory did not make economic sense. 39 We disagree with the district court. The gravamen of Champagne's theory is that the Established Distributors acted together to attempt to keep a new, aggressive entrant out of the market. There are several reasons why such behavior would be economically rational. For example, the established market participants could fear that an additional competitor would erode the profit margin available to the service centers. Or the established market participants might fear losing market share to the new market entrant, particularly an aggressive new entrant like Champagne. As one commentator has observed, [w]here the `victim' [of an exclusionary group boycott] is a competitor of the alleged conspirators, there is no mystery as to why the defendants would want to injure the rival. It is axiomatic that firms prefer to have fewer rather than more rivals. Glazer, supra, at 14. 40 Such is the case here. Champagne introduced evidence that the Established Distributors saw Champagne as a price-cutting competitor who threatened their market share and profit margins. 13 For example, an Integris official complained to Commonwealth that, because of Champagne's entrance and Commonwealth's recognition of Champagne as a distributor, prices had come down in the marketplace and there wasn't nearly the profit level there used to be. Similarly, there were complaints that Champagne sold things too cheap and that adding another distributor would dilute market share, dilute market pricing. One service center felt that Champagne Metals' activities in the marketplace were going to be detrimental to the industry as a whole and that the price that Champagne Metals would take to the marketplace would be such that margins as a whole for everyone that needed to compete at that price would compress to such a price that it would be ... impossible to compete and still make a profit. 41 Simply put, Champagne's theory makes sense—it is certainly economically rational for a group of established firms to attempt to keep an aggressive competitor out of the market, whether they are doing so to protect profits or simply to guard market share. In light of this, the district court erred in drawing such limited inferences from Champagne's circumstantial evidence. 14 42