Opinion ID: 368855
Heading Depth: 2
Heading Rank: 6

Heading: the peck incident

Text: 196 The lengthy proceedings below were unfortunately marred by a bizarre series of events in the closing days of the trial on liability. Berkey charged that one of Kodak's attorneys had joined forces with an important witness to destroy or conceal evidence unfavorable to the defense. As the facts unfolded at several side bar conferences, the district judge granted Berkey permission to attempt to impeach the witness by cross-examining him concerning the alleged concealment. Kodak challenges this ruling, asserting irreparable prejudice in the eyes of the jury due to the tale that ultimately unfolded from the witness stand. In addition, also on grounds of prejudice, it attacks Judge Frankel's decision to admit into evidence a 1915 decision entered against Kodak in a Government antitrust suit. To explain why we believe the district judge did not abuse his broad discretion in ruling on these matters, we must set forth the events in greater detail. 197 Professor Merton J. Peck, a former chairman of the Yale Economics Department, was Kodak's sole expert witness. His task was to explain Kodak's view of the relevant markets and the reasons for Kodak's persistently high market shares. In April 1977, several weeks before the trial began, Berkey availed itself of the right to depose its adversary's expert witness under Fed.R.Civ.P. 26(b) (4). Pursuant to a ruling by Magistrate Sol Schreiber, Mahlon Perkins, a Kodak attorney, furnished Berkey with several documents before the deposition commenced. These consisted of interim reports that Peck had drafted, along with Peck's appointment book for the first four months of 1977, the time sheets he kept while working as a consultant to Kodak, and a three-page summary of the materials supplied by Kodak that Peck had reviewed in preparing for his testimony. At the deposition, which was held at the offices of Berkey's counsel, Perkins represented in Peck's presence that all of the information and data upon which the witness had relied was now available to Berkey, and that there was no record of those documents Peck had read but did not utilize. 198 In the course of the deposition it came to light that Peck had periodically forwarded all his own notes and papers to Donovan Leisure Newton & Irvine, the law firm then representing Kodak. He explained that he had done so because the materials were covered by a confidentiality order and because he lacked the requisite storage space. Perkins then represented to Berkey that all of these documents had been destroyed evidently before the magistrate's order under his personal supervision. Peck averred that he could not recall when he first became aware that the documents were being destroyed, but that he continued to return material to Perkins's firm after learning that it was not being retained. 199 In another pretrial maneuver, Berkey sought an advisory ruling as to the admissibility of the district court opinion in United States v. Eastman Kodak Co., 226 F. 62 (W.D.N.Y.1915), Appeal dismissed, 255 U.S. 578, 41 S.Ct. 321, 65 L.Ed. 795 (1921). In that decision, somewhat inaccurately referred to throughout this litigation as the 1915 decree, Kodak was found to have monopolized the amateur camera, film, and paper industries through acquisitions and other exclusionary practices. Judge Frankel ruled that the decree was too ancient to be probative of the current structure of the relevant markets, and that its value would be outweighed by the danger that the jury would give excessive weight to a judicial holding. See Fed.R.Evid. 403. The judge indicated, however, that he would reassess this decision should Kodak raise the defense that monopoly power had been thrust upon it. 200 Peck took the stand as the final witness for Kodak at the liability trial. When John Doar, lead trial counsel for Kodak and a man of national repute, asked him to explain how Kodak had obtained its market power, Alvin Stein, who has represented Berkey from the inception of this litigation, immediately asked for a conference at side bar. He argued that if Peck were allowed to testify that Kodak's strength was drawn from its innovative capacities, Berkey should be permitted to introduce the 1915 decree, both as substantive rebuttal evidence and to impeach Peck. Judge Frankel twice offered to permit Mr. Doar to withdraw the question. When Kodak's counsel declined the invitation, the court ruled that the 1915 decree could be admitted as background only, representing one source, though it is far in the past, of Kodak's power over the years. But, as Mr. Stein commenced his cross-examination of Peck, Judge Frankel reversed his course, deciding that, even considering the need to impeach Peck, the prejudicial potential of the decree overwhelmed its probative value. 201 On Friday, January 6, the 109th day of trial, Mr. Doar requested a ruling as to the scope of the cross-examination concerning the nonproduction and purported destruction of Peck's work papers. Judge Frankel responded by noting that it was irrelevant to Peck's credibility whether Kodak documents that the expert had testified he merely studied and returned to defense counsel had been destroyed. The court ruled, however, that if Peck had yielded his own papers to counsel with knowledge that they might be destroyed, this fact would certainly bear on the weight of his testimony. Stein was admonished to be low key, brief, and to the point on cross-examination. 202 Mr. Stein then began to question Peck about his preparation of a memorandum dated April 21, 1975, the earliest report over his name that had been produced at the deposition. When Stein inquired if this was the earliest writing Peck had prepared for Kodak, the economist replied in the negative. The jury was excused as Kodak for the first time produced a letter dated November 25, 1974, from Peck to a member of the team of Kodak attorneys. The contents of the document, marked as PX 666, were stunning, for in it Peck admitted that he had not yet formulated a fully persuasive answer to two questions: 203 1. On what economic grounds can the 1915 court decision be rejected as irrelevant to the present situation? 204 2. On what economic grounds can the argument that Kodak's dominant position since 1915 is not based on superior skills be rejected? 205 In short, the missive, which examined various aspects of the 1915 decree, conceded that the anticompetitive conduct found in the court's opinion could not be ruled out as at least a partial explanation of Kodak's present market position. Attempting to explain why this explosive document had not been produced earlier, Doar stated that he did not believe it was within the scope of Magistrate Schreiber's order. Kodak had therefore never acknowledged that the letter existed. 206 Mr. Stein, of course, immediately requested permission to delve into Peck's knowledge of the circumstances surrounding the concealment and sudden appearance of the letter. Counsel also renewed his request that the 1915 decree itself be admitted into evidence to rebut Peck's assertions. Since Kodak's own expert had indicated that it might be relevant to the present day market, Judge Frankel admitted portions of the decree and ruled that Stein could inquire of Peck how it had come about that he had overlooked PX 666 when he stated in his deposition that he did not recall having written any letters prior to April 1975. Peck replied that he had forgotten that the letter existed. Stein then read excerpts from Peck's deposition testimony, establishing before the jury that Peck continued to send materials to Donovan Leisure after learning that they were not being preserved. 207 But the most striking revelation of all was still to come. Judge Frankel asked Kodak's counsel to search its files over the weekend of January 7-8 for any other relevant documents. On Monday morning, out of the presence of the jury, Mr. Doar made known his discovery that in fact all the documents that Perkins told Berkey had been destroyed still existed. Moreover, Peck, who had steadfastly maintained that his own files on the case were empty, discovered during the weekend copies of two documents including PX 666 that he had forwarded to Kodak's attorneys. Expressing his concern over the delicate and troublesome issues raised by these disclosures, Judge Frankel advised the attorneys that he believed the incident bore on Peck's credibility. Accordingly, he ruled that Mr. Stein should now be permitted to cross-examine Peck on his relations with Perkins. 208 Stein questioned Peck in some detail. Although the economist steadfastly denied he had deliberately concealed the fact that he had studied the 1915 decision, he conceded that Berkey was kept in ignorance of the fact. Peck agreed that a Kodak attorney had probably shown him the three-page summary of the documents on which he relied before it was submitted to Berkey at his deposition. The 1915 decree was not on the list. At the time of Peck's deposition, Stein pointed out, the professor had failed to recall the existence of PX 666 and had denied retaining copies of any of his working papers although his weekend search had uncovered a copy of the letter, which referred throughout to the Western District decision. 209 Stein also inquired into the circumstances of Peck's delivery of his papers to Perkins, and established that the material was sent to Perkins with impending discovery proceedings in mind, rather than merely because of the confidential nature of the documents. Additionally, Stein established that, although Peck had stated in his deposition of April 1977 that he did not recall when he first learned that documents were being destroyed, in fact he had discovered this fact only weeks before he was deposed. Counsel then went on to question Peck about the decree and its bearing on his testimony concerning the origins of Kodak's market position. 210 Kodak argues that Judge Frankel committed prejudicial error in allowing even limited reference to the 1915 court decree, and A fortiori in permitting cross-examination of Peck on the subject of the alleged destruction of documents. But because the scope of cross-examination, especially when it pertains to the credibility of witnesses, is peculiarly within the province of the trial court, See Lewis v. Baker, 526 F.2d 470, 475 (2d Cir. 1975), and in light of the exceptional circumstances we have recited, we cannot say that Judge Frankel's rulings constituted an abuse of discretion. 211 As the trial court's continuing efforts to reassess the balance of prejudice and probative value of the 1915 decree attest, this question was not susceptible of facile resolution. But we think it clear that when PX 666 came to light the scales were decidedly tipped in favor of the limited admissibility that he approved. The Peck letter demonstrated that Kodak's lone expert witness had seriously considered the relevance of the market activities described in the 1915 decree to the present market structure of the industry, and that he had serious doubts whether the violations found there could be safely characterized as irrelevant to Kodak's current power in the marketplace. 212 We are also of the view that the cross-examination of Peck remained within permissible channels, particularly in light of the extraordinary revelations that preceded it. Peck conceded at his deposition that he continued to forward research materials to Kodak's lawyers after learning they were destroyed upon receipt, thereby providing more than a sufficient threshold showing of relevance to permit further inquiry on cross-examination. Suspicion could only have been increased by the sudden appearance of PX 666, a letter of great importance to Berkey's efforts to impeach Peck, which the writer claimed to have forgotten existed. And when Peck revealed on Monday that his files had contained a copy of this letter from the outset, deeper inquiry was certainly justified. As each new fact came to light, Judge Frankel carefully reassessed its relevance to Peck's credibility and gradually enlarged the scope of permissible inquiry into the witness's actions. 213 Mr. Stein's questions, therefore, far from consisting of the mere compendium of inflammatory rhetoric that Kodak describes, were legitimate challenges to Peck's credibility and to the independence of his judgment. 70 Indeed, Judge Frankel, who throughout the unusual disclosures described here maintained an attitude of cautious restraint, noted in a colloquy with the attorneys that Peck's credibility had, in his judgment, been destroyed on the witness stand. To be sure, the jury need not have believed Berkey's argument that Peck had deliberately collaborated with Perkins in an effort to destroy or conceal documents unfavorable to Kodak's cause. But there was certainly more than an adequate basis to permit Berkey to contend that this inference was justified, and that, at best, Peck was a willing tool of Kodak. 214 We are not unmindful that the incidents described, as presented to the jury, led to the unfortunate consequence of casting Kodak's attorneys, and the defendant itself, in a highly unfavorable light. It is no less true, however, that the cross-examination elicited information that was highly relevant to an assessment of the independence of judgment and probity of one of Kodak's principal witnesses. 71 Where the trial judge has taken great care to balance the probative value of the evidence against the prejudice that may accrue from its introduction, we think it inappropriate to substitute our judgment for his. See Perel v. Vanderford, 547 F.2d 278 (5th Cir. 1977); Hood v. United States, 125 U.S.App.D.C. 16, 365 F.2d 949, 951-52 (1966). 72 VII. ATTORNEYS' FEES AND COSTS 215 Under Section 4 of the Clayton Act, 15 U.S.C. § 15, the successful plaintiff in a suit for treble damages may be awarded reasonable attorneys' fees. Judge Frankel awarded $5.3 million in counsel fees, calculated essentially on the hourly rate at which counsel agreed to bill their client. Berkey, which had asked for a fee of over $30 million, contends that because the trial court failed to take into account the difficulty of the litigation, the employment opportunities foregone by counsel, and the result achieved, the reduction of its request was arbitrary and must be reconsidered by this court. Judge Frankel's computation appears to be in conformity with the agreement between Berkey and Parker Chapin Flattau & Klimpl, its principal counsel in this case. 73 And were it not for our holdings on appeal we would be inclined not to disturb this award. 74 But inasmuch as we have reversed the judgment for Berkey on its single most significant claim, and have remanded other claims for a new trial, it is plain that the award of attorneys' fees must be vacated for reconsideration by the district court. 75