Opinion ID: 805979
Heading Depth: 3
Heading Rank: 2

Heading: The Strength of the Evidence

Text: As applied here, we consider the causal link between an agreement to raise prices and a subsequent price increase. Price-fixing agreements are “conclusively presumed to be unreasonable and therefore illegal” precisely because of their “pernicious effect on competition” and lack of any redeeming virtue, N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958)—i.e., because such agreements are so likely to result in artificially higher prices being charged to consumers without accomplishing any legitimate business purpose. Therefore, the demonstrable existence of an agreement between Korhonen and Tynkkynen to follow price 27 increases announced by competitors, if proven, constitutes strong evidence that the alleged agreement caused at least some element of the subsequent price increases (e.g., amount or effective date), or, at a minimum, the inability of plaintiffs to negotiate below the list price. Furthermore, the causal link is presumed to be particularly strong when, as alleged here, the agreement is between executives at rival companies, each of whom has final pricing authority. Compare Flat Glass, 385 F.3d at 368-69 (evidence of “upper level executives hav[ing] secret conversations about price” has more probative weight than “price discussion[s] among low level sales people”), with Baby Food, 166 F.3d at 125 (“Evidence of sporadic exchanges of shop talk among field sales representatives who lack pricing authority is insufficient to survive summary judgment.”). Defendants contend, and the district court concluded, that even if Korhonen and Tynkkynen entered into an illegal agreement, the record provides an inadequate basis on which a jury could find that the agreement caused plaintiffs’ complained-of injuries. They so reason from the record’s reflection that employees in SENA’s sales and marketing department initiated, recommended, and implemented pricing decisions during the class period. Defendants maintain that these lower-level employees—not Korhonen—independently decided that SENA should follow price increases announced by competitors because doing so made economic sense and was consistent with SENA’s pricing philosophy to be a market follower rather than a market leader. Defendants further assert that Korhonen never altered or vetoed these employees’ pricing recommendations. Accordingly, 28 they urge that the district court properly concluded as a matter of law that even if Korhonen and Tynkkynen reached a price-fixing agreement, it had no effect on SENA’s pricing decisions. Although defendants’ argument has some force, and might well persuade a jury, we are not convinced that it so conclusively rebuts plaintiffs’ strong evidence that the alleged agreement was both a material and but-for cause of the price increases as to permit an award of summary judgment for defendants. Even if other SENA employees had day-to-day responsibility for pricing strategy and implementation, it is undisputed that Korhonen, as President of SENA, had the final say on all pricing decisions. Defendants emphasize that Korhonen never told other SENA employees about his communications with Tynkkynen. But there was no reason for him to do so, and indeed there were strong reasons for him to remain silent on this score. Korhonen’s decisions on pricing were final and, as Korhonen himself has admitted, he knew, at a minimum, that his communications with Tynkkynen violated SENA’s internal antitrust policy, which prohibited “sett[ing] prices or verify[ing] the activities of [SENA’s] competitors by calling competitors,” Defs.’ Resp. to Pls.’ Local Rule 56(a)(2) Statement ¶ 499. Moreover, one component of the alleged pricing agreement was holding firm with customers as to price—an arrangement that Korhonen was in a position to enforce strictly or variably. In addition, there is scant evidence in the record to support defendants’ assertion that SENA has historically been a market follower rather than a market leader, and that any agreement was therefore of no effect. Defendants cite only 29 Korhonen’s qualified statement, made in a declaration filed in the course of this litigation, that “SENA usually did not initiate a price increase on its own, but rather would respond to (and normally match) price increases initiated by other paper manufacturers.” Decl. of Kai Korhonen in Supp. of Defs. SEO and SENA’s Mot. for Summ. J. ¶ 15 (emphasis added). We are aware of no specific information regarding SENA’s pricing decisions outside of the class period in the record on summary judgment. Even during the class period, SENA did not uniformly follow the pricing decisions announced by other publication paper manufacturers: for example, SENA did not match Mead’s price increase on all products in November 2002 and led price increases in February 2003 for coated grade 4 paper and supercalendered paper—products that were not covered by IP’s price announcement. In any event, the mere fact that following price increases announced by competitors may have been consistent with SENA’s overall pricing strategy does not immunize SENA from liability if it had an illegal agreement with UPM to adhere to that strategy. Defendants conceded as much at oral argument before this Court. Oral Arg. Tr. at 21-22. Finally, the alleged agreement between Korhonen and Tynkkynen would have been valuable to SENA because it significantly reduced SENA’s risk: by coordinating with UPM in advance, SENA could follow competitors’ price increases secure in the knowledge that UPM, one of its biggest competitors, would not undercut SENA. Without an advance agreement, SENA ran the risk that UPM would hold its prices steady, thereby spiriting away SENA’s customers and eating 30 into SENA’s market share. For these reasons, a jury could reasonably conclude that even if other SENA employees, based on their own independent business judgments, recommended matching competitors’ price increases, Korhonen would neither have approved those blanket price increases nor enforced them strictly, absent assurances from Tynkkynen that UPM would do likewise.11 Defendants also argue that any agreement reached by Korhonen and Tynkkynen during their phone conversation on February 11, 2003, had no effect on pricing because, by that point, SENA had already decided to follow IP’s price increase. But defendants do not dispute that SENA’s decision to follow IP’s price increase was not actually reached until February 11, the day of the phone call. Moreover, when the call was made, neither UPM nor SENA had publicly announced or implemented any price increase. Indeed, SENA sent its price increase announcement to customers approximately one half-hour after Korhonen and Tynkkynen’s conversation, and UPM had not finished compiling its list of customer contacts or mailed out its price announcement letter until the afternoon of February 11. It therefore would be reasonable to infer that Korhonen required assurance from Tynkkynen as to UPM’s plans before SENA would go forward as it did with its price increase and with its efforts to implement that price increase with 11 During SENA’s criminal trial, Korhonen testified that even if UPM had not followed IP’s price increase in February 2003, SENA would still have increased its prices. Korhonen conceded, however, that notes taken by an investigator during Korhonen’s earlier interview with the DOJ reflected that Korhonen told the government that he would not have allowed SENA to raise its prices had Tynkkynen informed him that UPM would not match IP. Although Korhonen testified that he did not have a specific recollection of making this statement, he did not deny making it. 31 customers to the fullest extent possible.12 See Flat Glass, 385 F.3d at 369 (concluding that exchanges of pricing information that are “tightly linked” with subsequent parallel price increases permit the inference that “the exchanges of information had an impact on pricing decisions”). Based on the foregoing, we conclude that the evidence regarding causation presents a genuine dispute of material fact: that is, whether Korhonen and Tynkkynen’s agreement, if proven, was both a material and but-for cause of the price increases. The question of causation is therefore a jury question.13