Opinion ID: 4076467
Heading Depth: 3
Heading Rank: 1

Heading: General Prejudice to Avaya’s

Text: Antitrust Defense All of the antitrust counterclaims against Avaya were presented under the “rule of reason,” which gives effect to the analysis of the District Court’s error speak for itself as a response to that portion of the Dissent. 68 Supreme Court’s instruction that the Sherman Act “only means to declare illegal any [restraint] which is in unreasonable restraint of trade.” United States v. TransMissouri Freight Ass’n, 166 U.S. 290, 327 (1897) (emphasis added). “Under this rule, the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.” Cont’l T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977). Therefore, limitations on Avaya’s ability to explain the reasonableness of its actions had the potential to harm its defense. For the Sherman Act § 2 monopolization claims, for example, TLI had to establish that Avaya’s allegedly predatory conduct was performed with monopolistic intent. “To prevail on an attempted monopolization claim under § 2 of the Sherman Act, a plaintiff must prove that the defendant (1) engaged in predatory or anticompetitive conduct with (2) specific intent to monopolize and with (3) a dangerous probability of achieving monopoly power.” Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 442 (3d Cir. 1997) (emphasis added) (internal quotation marks omitted). “Liability turns ... on whether valid business reasons can explain [a defendant’s] actions.” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 483 (1992) (internal quotation marks omitted). As the District Court instructed the jury, “acts or practices that result in the acquisition or maintenance of monopoly power must represent something more than the conduct of business that is part of the normal competitive process” and must be actions that are “taken for no legitimate business reasons.” (J.A. 621.) Insofar as Avaya was limited in explaining why its 69 actions were not predatory or lacked a monopolistic intent, those limitations would of course harm its defense.36 The District Court’s instructions in light of its erroneous Rule 50 decision on the common law claims may well have affected the jury’s assessment of the reasonableness and purpose of Avaya’s actions. The jury was prevented from deciding the antitrust claims and the common law claims in concert and from evaluating whether TLI’s allegedly tortious conduct provided a legitimate business justification for the things Avaya’s did. Specifically, the Court instructed the jury that Avaya’s claim[s] against TLI[] ... have been resolved and are no longer before you. ... In Avaya’s direct claims against all the defendants, Avaya asserted that [TLI’s] use of 36 Moreover, as we explain in more detail below, under the specific theory of antitrust liability pressed by TLI, if Avaya’s sales contracts had established that using independent service providers was prohibited, then any remedy to infirmities in that arrangement would lie “in contract, not under the antitrust laws.” Queen City Pizza, 124 F.3d at 441. Therefore, to the extent that Avaya’s interpretation of its customer contracts was correct, that would have added a very potent weapon to Avaya’s arsenal to combat the specific theory of antitrust liability argued by TLI. But Avaya was precluded from making that argument because the District Court erroneously adopted a definitive construction of those contracts, as a matter of law, in service of its Rule 50 decision. 70 and access to the maintenance software embedded in the Avaya PBXs and PDSs, such as the on-demand maintenance commands, was, for a variety of reasons, unlawful. I now instruct you that [TLI’s] use of and access to such maintenance software may not be considered by you as unlawful when deciding [TLI’s] claims against Avaya asserted in the counterclaim. To the extent Avaya has alleged that TLI[] engaged in illegal or unlawful conduct, in connection with its business operations, such allegations should be disregarded. (J.A. 4739 (emphasis added).) Not only did the District Court so instruct the jury, but TLI itself repeatedly emphasized that instruction in its closing argument in order to undercut Avaya’s defense that there was a reasonable business justification for its actions. Consider this passage from TLI’s summation: When TLI started to compete with Avaya, it had the right to do so; and, yes, [the District Court] will instruct you tomorrow, you should not consider TLI’s ... use of and access to the maintenance software that’s embedded in these Avaya PBX systems and dialers, do not consider it in any way unlawful. And this is critically important for you to understand. You are not to consider TLI’s actions in that regard unlawful. 71 (J.A. 4732.)37 The District Court’s erroneous instruction, combined with TLI’s repeated hammering of the point, highlights how important the lawfulness or unlawfulness of TLI’s actions could have been to the jury’s deliberations. Avaya’s entire affirmative case alleged that TLI’s conduct was tortious and in breach of contractual obligations. If true, Avaya’s defensive response could be seen as substantially more reasonable, and its intentions substantially less predatory. By instructing the jury that it could not consider TLI’s conduct to be unlawful – an instruction premised on the flawed grant of judgment as a matter of law – the District Court improperly prevented the jury from weighing Avaya’s defenses in light of the rule of reason standard for both the § 1 and § 2 Sherman Act claims.38 37 At least twice more, TLI strongly emphasized the importance of the District Court’s jury instructions. For instance, it told the jury that “[w]hen TLI started to compete with Avaya, it had every right to do so. TLI’s use and access to maintenance software that’s embedded in these systems, you should not consider to be unlawful. You will hear that instruction from the judge tomorrow.” (J.A. 4733.) Later, it reminded the jury: “Again, you will be instructed by the Court tomorrow, that you are not to consider TLI’s access to or use of the maintenance software, including MSPs and ODMs, called ODMCs and maintenance software permissions, as in any way unlawful use of that maintenance software.” (J.A. 4734.) 38 As we read the Dissent, its objection to our conclusion comes down to its premise that “Avaya had ample 72 opportunity to present the jury with legitimate and procompetitive defenses for its actions.” (Dissenting Op. at 10.) To be sure, Avaya mounted a vigorous defense notwithstanding the limitations it faced as a result of the Rule 50 ruling, but we lack the Dissent’s confidence that it is “highly probable that the error did not affect the outcome of the case.” Glass v. Phila. Elec. Co., 34 F.3d 188, 191 (3d Cir. 1994) (quotation marks and citation omitted). A jury may well have evaluated Avaya’s conduct differently if Avaya were simply enforcing its contractual rights or combating tortious activity, as TLI itself recognized by its repeated emphasis in its summation that its actions could not be considered unlawful. The Dissent betrays the importance of the lawfulness determination when it says that Avaya’s “defenses did not depend on whether TLI’s conduct was so egregious as to be against the law.” (Id.) The special egregiousness of unlawful conduct is precisely the argument that Avaya wanted to make – and was deprived from making – to the jury. This is also where the Dissent’s “David and Goliath” analogy breaks down. Avaya was certainly the bigger competitor, but TLI was no plucky little company armed only with the business equivalent of a sling and a few stones. It was a sophisticated and aggressive company, which, at least according to Avaya and a great deal of the evidence at trial, was prepared to, and did, engage in what even the Dissent acknowledges were “deceitful and/or unethical” business methods. (Id. at 2.) Since those methods were such that the jury could have found them unlawful, the Rule 50 error was not harmless. 73