Opinion ID: 489290
Heading Depth: 3
Heading Rank: 2

Heading: Evidence of Comparability.

Text: 33 Home Placement has attempted to prove lost profits by identifying the Homefinders franchisee located in Nashville, Tennessee as the appropriate yardstick for its own rental referral business in Rhode Island. 8 The only evidence in the record, however, consists of testimony from the earlier Homefinders trial that was designed to provide a basis for the district court's comparison of the Providence and Nashville Homefinders offices. Despite the fact that there had yet to be a determination as to whether even the two Homefinders franchisees were sufficiently comparable, no additional evidence directly bearing on the issue of whether Nashville Homefinders was sufficiently comparable to Home Placement was introduced at the Home Placement trial. Home Placement apparently believed that it could sit back at trial and rely solely on the original Homefinders record to satisfy its burden of presenting evidence from which the trier of fact could determine the amount of damages sustained. See Bigelow, 327 U.S. at 251, 66 S.Ct. at 574; Ford Motor Co. v. Webster's Auto Sales, Inc., 361 F.2d 874, 885-86 (1st Cir.1966). As we shall explain, however, this was an ill-conceived strategy. 34 The crux of Home Placement's comparability evidence was the testimony at the Homefinders trial of Vincente Garcia, a certified public accountant and former employee of Homefinders. Garcia prepared a study comparing the Providence and Nashville Homefinders offices in an attempt to buttress Providence Homefinders' damage claim against the Journal. On the stand, he was questioned as to the relevant criteria that influenced his decision to choose the Nashville franchisee as the appropriate yardstick firm. His testimony focused on a series of factors such as the vacancy rate, the population, the total number of housing units, the total number of rental units, and the total number of available rental units in each of the relevant markets. Although these factors were not identical for Providence and Nashville, 9 Garcia testified that, of all the Homefinders franchisees in the country, the Nashville office operated in the market that was most comparable to that of the Providence office. Garcia also thought it relevant that both the Nashville and Providence agencies began to operate during the late summer and early autumn. This enhanced comparability of the data, according to Garcia, because the rental referral business to a certain extent is very seasonal. Appendix at 813. 35 Aside from Garcia's less than illuminating testimony, the brief trial testimony of Home Placement's president, Muschiano, produced the only other evidence relied upon by Home Placement to support comparability in this case. Muschiano testified that he opened Home Placement as a rental referral agency in 1973 at the end of March or beginning of April. He also stated that, like Providence Homefinders, Home Placement charged an initial $20 fee to prospective tenants. According to Muschiano, Home Placement operated as planned for less than a month, because the Journal sent Muschiano a letter on April 13 informing him that it would no longer accept advertising for rental referral firms that required prospective tenants to pay an up-front fee. Muschiano claimed that Home Placement continued to operate, but had to abandon its practice of charging a fee so as not to jeopardize its opportunity to advertise in the Journal. This method of operation proved unworkable, however, and the business began to suffer severe cash flow problems. Muschiano testified that Home Placement finally closed its doors at the end of 1973 or the beginning of 1974. 36 After reviewing the sparse testimony regarding comparability in the record of this case, we cannot say that Home Placement has met its burden of introducing evidence sufficient to permit a trier of fact to ascertain the amount of damages by just and reasonable inference. First, while a close question, we doubt whether the testimony from the Homefinders trial purporting to establish the comparability of the two Homefinders franchisees is itself legally sufficient. The plaintiff in that case seems to have overlooked or simply omitted several factors relevant to a determination of market comparability. As defendant pointed out on cross-examination, plaintiff's witness, Garcia, did not consider the impact of industry, rental patterns, unemployment, summer rentals, and colleges when assessing the comparability of the two markets. There was also no mention of the relative competition in the rental referral industry in each market. It is at least conceivable that Providence Homefinders and Nashville Homefinders would have enjoyed different shares of their respective markets, especially given the entry of firms like Home Placement into the rental referral business in Rhode Island. 37 While the Journal could have aided its own cause significantly by offering evidence tending to establish relevant differences between the Providence and Nashville markets, the lack of contrary evidence does not necessarily establish that the two markets are comparable. The burden of proving comparability, while not particularly onerous, rests with the plaintiff and does not shift to the defendant after the plaintiff has offered some bits of evidence arguably tending to support comparability. Although we need not decide in the context of this appeal whether Nashville Homefinders was an appropriate yardstick for the case brought by Providence Homefinders against the Journal, we do note that there are sufficient gaps in the proof regarding the respective markets to cast considerable doubt on whether the issue should be resolved in favor of comparability. 38 To this doubt, we add the inexplicable failure of Home Placement to introduce any evidence establishing its comparability with either Providence Homefinders or Nashville Homefinders. Even adopting the dubious assumption that the markets served by Home Placement and Nashville Homefinders are sufficiently comparable, we are further troubled by the dearth of evidence permitting a closer comparison of the two firms. 10 For instance, while Homefinders agencies were required to maintain a substantial reserve of working capital, see Walker v. Providence Journal Co., 493 F.2d 82, 86 (1st Cir.1974), there is absolutely no mention of Home Placement's capital structure beyond Muschiano's statement that he originally invested $8000 or $10,000 in the venture. Nor is there any evidence comparing the organization and resources of the two firms, one of which was the franchisee of a national business operation and the other an independent, local agency. The lack of evidence on both of these points invites the trier of fact to speculate as to important indicia of comparability rather than draw reasonable inferences from the available evidence. 11 39 Most significant in our view, however, is the complete lack of evidence supporting an inference that the two firms actually conducted business in a similar manner. It is not enough that Home Placement and Nashville Homefinders each offered rental referral services for a $20 fee unless there is some affirmative evidence to indicate that the two firms were administered and operated in the same way. This is critical because the Journal's antitrust liability in the instant case resulted from Home Placement's showing that, unlike Providence Homefinders, it did not resort to deceptive advertising practices to attract customers. See Home Placement I, 682 F.2d at 276. As we described in our original Homefinders opinion, Providence Homefinders routinely used false advertisements,  'calculated to attract an unusual degree of attention,'  as bait to lure unsuspecting consumers to the agency. Homefinders, 621 F.2d at 442 (quoting 471 F.Supp. at 420). Once on the hook, the prospective tenant would be told that the attractive property advertised in the paper was no longer on the market, but that the agency would provide a list of available properties, purportedly similar to the advertised property, in exchange for a $20 fee. Id. 40 According to Muschiano, Home Placement operated in a manner entirely different from Providence Homefinders and, unlike its competitor, was never the subject of customer complaints to the Journal. Despite this attempt to distance itself from the tactics employed by the local Homefinders office, Home Placement has presented no evidence suggesting that its chosen yardstick, Nashville Homefinders, also operated differently from the Homefinders office in Providence. Indeed, the only evidence on this issue we have been able to glean from the record--the testimony of Larry Glist, president of Homefinders of America, to the effect that Homefinders franchises operated identically in each geographical location--gives us every reason to believe that the Nashville Homefinders employed the same deceptive tactics to generate business as Providence Homefinders. Appendix at 303. Home Placement has even stated in its appellate brief that the two Homefinders franchises were interchangeably the same business operation. Appellant's Brief at 55. 41 Without some affirmative evidence in the record that a rental referral firm like Home Placement could have succeeded during the mid-1970s without engaging in deceptive business practices, we cannot say that Home Placement has satisfied its burden, however slight, of introducing evidence sufficient to permit an award of damages based on reasonable inferences. This fact alone distinguishes the instant case from those cited by Home Placement in which courts have employed an arguably more liberal standard when reviewing comparability evidence offered by unestablished businesses attempting to prove damages using the yardstick method. See Autowest Inc. v. Peugeot, Inc., 434 F.2d 556, 567 (2d Cir.1970) (evidence of increased sales of Volvos permitted to rebut contention that Peugeot distributor could not have been profitable); William Goldman Theatres, Inc. v. Loew's, Inc., 69 F.Supp. 103, 107-09 (E.D.Pa.1946), aff'd, 164 F.2d 1021, 1022 (3d Cir.1947), cert. denied, 334 U.S. 811, 68 S.Ct. 1016, 92 L.Ed. 1742 (1948) (evidence of profits earned by nearby movie theatre permitted to establish plaintiff's damages despite significant differences between two theatres); Wilko of Nashua, Inc. v. TAP Realty, Inc., 117 N.H. 843, 379 A.2d 798, 803 (1977) (evidence of profits earned by another local Kentucky Fried Chicken franchise permitted to establish lost profits of unestablished KFC franchise injured by breach of lease). 42 Accordingly, we believe that Home Placement's method of proving damages relies too heavily on speculation and conjecture, Farmington Dowel, 421 F.2d at 81, and is not sufficient to get the Court beyond the guessing stage. William Goldman Theatres, 69 F.Supp. at 106. For all the reasons elaborated above, we hold that Home Placement is entitled to no more than the nominal damages awarded by the district court on its claim for lost profits. 43 B. Evidence of Lost Investment. 44 In addition to its principal claim of lost profits, Home Placement seeks to recover Muschiano's $8000 to $10,000 start-up investment. For this, Home Placement relies upon Story Parchment, 282 U.S. at 555, 51 S.Ct. at 248, and Atlas Building Products Co. v. Diamond Block & Gravel Co., 269 F.2d 950 (10th Cir.1959), cert. denied, 363 U.S. 843, 80 S.Ct. 1608, 4 L.Ed.2d 1727 (1960), but both cases actually hold that recovery is proper only to the extent that a plaintiff can prove a diminution in the value of its initial investment. See Story Parchment, 282 U.S. at 567, 51 S.Ct. at 252; Atlas Building Products, 269 F.2d at 958-59 (instruction that jury might also consider as another element of damages the extent to which ... the net worth of [plaintiff's] assets had been diminished was proper). 45 Muschiano testified at trial that he spent between $8000 and $10,000 on furniture, equipment, and supplies for Home Placement's West Warwick office. There is no evidence in the record, however, that would indicate the impact of the antitrust violation on the value of this initial investment in the venture. Home Placement presumably used the equipment and supplies until it closed its doors at the end of 1973 or beginning of 1974, and then either sold these assets or converted them to some other use. As in the case of the lost profit evidence, the evidence of net lost investment is insufficient to permit a trier of fact to award damages without engaging in guesswork. We therefore decline to overturn the district court's decision to deny Home Placement's request for damages due to lost investment. 46