Opinion ID: 758041
Heading Depth: 1
Heading Rank: 7

Heading: proximate cause and antitrust injury

Text: 145 Having determined that Rossi has adduced sufficient evidence of a conspiracy to satisfy the first prong of the prima facie case with respect to the Standard defendants, the Arzee defendants, and GAF, we now consider whether Rossi has adduced sufficient evidence to satisfy the fourth prong, that the plaintiffs were injured as a proximate result of that conspiracy. Tunis Bros., 763 F.2d at 1489. 20 146 The district court concluded that even if Rossi had established the existence of an agreement, his claim still would fail because he had not established that the business losses he suffered were in any way related to that conspiracy. See Rossi v. Standard Roofing, Inc., 958 F.Supp. 976, 991 (D.N.J.1997). The court determined that Rossi's allegations--that the defendants prevented him from obtaining GAF and other roofing products he needed to compete and thereby stopped him from opening Rossi Florence and ultimately forced Rossi Roofing out of business--are unsupported in the record. The district court also concluded that Rossi's damages expert, Regan R. Rockhill, CPA, based his report upon unfounded assumptions that would force a trier of fact to use guesswork and speculation in determining what, if any, injury Rossi suffered as a result of the defendants' actions. See id. The court criticized the Rockhill Report for being nothing more than an impermissible but for damage model that erroneously ignored several important factors, including failing: (1) to consider that Rossi had no experience running his own business; (2) to analyze specifically what products were needed to assure a successful distributorship; and (3) to engage in any analysis of what harm, if any, was caused by the alleged antitrust violations as opposed to other factors, such as Rossi's management style or general business conditions. See id. 147 The district court accordingly held that Rossi had not presented sufficient evidence of damages such that a reasonable inference could be made connecting the injury with the defendants' conduct. For the reasons we will explain, we disagree with the court's conclusion that Rossi has not identified a genuine issue of material fact with regard to the proximate cause and damages element of his prima facie case. 148 To recover damages, an antitrust plaintiff must prove causation, described in our jurisprudence as fact of damage or injury. See Danny Kresky Enters. Corp. v. Magid, 716 F.2d 206, 209 (3d Cir.1983). It is not necessary to show with total certainty the amount of damages sustained, just that the antitrust violation caused the antitrust injury suffered by the plaintiff. See Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1493 (8th Cir.1992); Danny Kresky, 716 F.2d at 211 (the standard of causation requires only that plaintiff prove that defendant's illegal conduct was a material cause of its injury). As the Supreme Court explained in Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969) (citations omitted) (emphasis in original): 149 [Plaintiff's] burden of proving the fact of damage under § 4 of the Clayton Act is satisfied by its proof of some damage flowing from the unlawful conspiracy; inquiry beyond this minimum point goes only to the amount and not the fact of damages. It is enough that the illegality is shown to be a material cause of the injury; a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensable injury under § 4. 150 Once causation is established, the jury is permitted to calculate the actual damages suffered using a  'reasonable estimate, as long as the jury verdict is not the product of speculation or guess work.'  In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1176 (3d Cir.1993) (citing MCI Communications Corp. v. American Tel. & Tel. Co., 708 F.2d 1081, 1161 (7th Cir.1983)) (other citations omitted). Thus, in antitrust cases, there are ultimately two related, but distinct, inquiries to establish antitrust injury. First, the plaintiff must prove the fact of antitrust injury, as part of his prima facie case; then, he must make a showing regarding the amount of damages, in order to justify an award by the trier of fact. Concerning the former, courts apply the ordinary standard of proof, but with respect to the latter, the standard is somewhat relaxed. See In re Lower Lake Erie Iron Ore, 998 F.2d at 1176 ([t]he relaxed measure of proof is afforded to the amount, not the causation of loss--the nexus between the defendant's illegal activity and the injuries suffered must be reasonably proven.) (citations omitted); see also Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264-65, 66 S.Ct. 574, 90 L.Ed. 652 (1946) (holding that when the plaintiff cannot prove his damages by precise computation, the jury may make a just and reasonable estimate of the damage based on relevant data, and render its verdict accordingly). 151 Under these standards, Rossi's antitrust claim does not suffer from the infirmities claimed by the district court. At the threshold, it is important to note that we need only concern ourselves with the first element of antitrust injury, causation. At this procedural juncture, reviewing the district court's grant of the defendants' motions for summary judgment, we are not, as we would be upon reviewing a jury verdict, determining whether a plaintiff has brought forth sufficient evidence to justify the actual damages awarded. Rather, here, all we are concerned with is whether Rossi has established that the defendants' illegal conduct was a material cause of [his] injury. Danny Kresky, 716 F.2d at 211; see also Zenith Radio, 395 U.S. at 114 n. 9, 89 S.Ct. 1562. 152 We find two sources of evidence sufficient for Rossi to demonstrate fact of injury or causation: (1) evidence of specific lost transactions based upon Rossi's inability to purchase product; and (2) the Rockhill Damage Report. We discuss these in turn. 153 We have already explained that there is ample evidence in the record that Standard, Arzee, and GAF conspired to deny Rossi access to GAF product and prevent him from competing in the roofing and siding business in northern New Jersey. See supra § II.B.2.a & b. Also, there is evidence that, with a few exceptions, the defendants successfully prevented Rossi from obtaining GAF product. See id. Moreover, there is evidence that GAF product was highly desirable, if not critical, to Rossi's target customers. See supra § II.B.2.b(1). Finally, several of Rossi's former customers from his Standard days, including Sean Coffey, Francis Doherty, John Feher, Albert Logan, and Melvin Stanley, have testified that they would have done business with Rossi Roofing if he had access to the necessary products, primarily GAF product. 154 This evidence is enough by itself to satisfy Rossi's burden on causation for the purposes of summary judgment. Rossi has put forth evidence that the defendants' alleged conspiracy unlawfully prevented him from obtaining GAF product, and that he lost multiple sales as a result. Thus, if Rossi can successfully prove the existence of the conspiracy, he will have proved fact of injury. The case before us is not analogous to Van Dyk Research Corp. v. Xerox Corp., 478 F.Supp. 1268 (D.N.J.1979), a case upon which the district court relied, where the plaintiff failed to prove fact of injury primarily because it could not show that it lost even a single contract based upon the alleged unlawful practices of the defendant. See 478 F.Supp. at 1327. 155 In the same vein, Amerinet is not availing to the defendants either. In Amerinet, the Eighth Circuit concluded that the plaintiff had not shown antitrust injury or causation in large part because statements and assertions by its own damage expert strongly suggest[ed] ... that [plaintiff's] decline was caused at least partly by, if not substantially or mainly by, other factors than [defendant's] alleged antitrust violations. Amerinet, 972 F.2d at 1495 (noting that the plaintiff's damage expert admitted that the plaintiff was in a period of decline prior to the defendant's alleged antitrust violations). In addition, the plaintiff in Amerinet was only able to show that, at most, the allegedly illegal activity was one factor among many, and not a controlling or major factor in specific potential clients' decisions not to purchase from the plaintiff. Id. at 1497. Therefore, the Eighth Circuit held that the plaintiff had not adduced sufficient evidence of element of causation to enable it to withstand summary judgment. 156 Here, Rossi's evidence is more substantial than in either Van Dyk Research or Amerinet. Rossi has proffered evidence from five specific customers that they would have purchased GAF product from Rossi if he had been able to sell it to them, and Rossi's inability to consummate those sales (leading to a loss of business and therefore injury) is a direct result of the alleged antitrust violation--the group boycott. In addition, Richard Droesch, Rossi's partner in the failed Rossi Florence venture, backed out of that venture at least in part based upon his understanding that the company would not be able to get the products it needed, particularly GAF product, to compete successfully in the market. For all these reasons, we believe that the record supports Rossi's allegations that he suffered antitrust injury, and that it was caused by the defendant's allegedly unlawful actions. 157 The district court also utterly rejected Rossi's damage expert, holding that his report was nothing more than a but for damage model that failed as a matter of law to support Rossi's damage allegations. We believe, however, that the Rockhill Report, when combined with the testimony concerning the five lost sales, is indicative of a larger pattern of loss and helps Rossi demonstrate causation. Thus, while the other damage evidence is enough alone to satisfy Rossi's summary judgment burden, for the guidance of the district court on remand, we nonetheless consider the Rockhill Report. 158 A typical but for damage model, like the one in Southern Pacific Com. Co. v. American Tel. & Tel. Co., 556 F.Supp. 825 (D.D.C.1982), aggregates the defendant's alleged violations and creates a hypothetical calculation projecting the plaintiff's profits and losses but for the defendant's antitrust violations. In Van Dyk Research, for example, this estimate was based upon an internal task force report created by the plaintiff projecting its own future performance. See 478 F.Supp. at 1327. The plaintiff then compares this hypothetical figure with its actual performance to calculate its damages. Courts usually highlight two problems with models created using this methodology. 159 First, they do not attempt to measure the particularized effects of any specific alleged illegal practices, but rather rely on an aggregation of injury from all factors. See Southern Pacific, 556 F.Supp. at 1092. Second, their hypothetical but for calculations usually rely upon unrealistic ex ante assumptions about the business environment, such as assumptions of perfect knowledge of future demand, future prices, and future costs that tend to overstate the plaintiff's damage claim. See id. at 1092-93 (pointing out many difficulties not caused by the defendants that negatively impacted plaintiff's profitability yet were not accounted for in the but for damage model). Thus, using a but for damage model arguably makes it impossible for the trier of fact to determine what, if any, injury derived from the defendant's antitrust violations as opposed to other factors, and courts sometimes reject such models as the basis of either causation or amount of injury. See Southern Pacific, 556 F.Supp. at 1090, 1098; Van Dyk Research, 478 F.Supp. at 1327. 160 The Rockhill Report is in many respects a but for damage model because it does not deal with the particularized effects of specific injuries, but rather aggregates all of Rossi's damages into one figure. Relying on Van Dyk Research and Southern Pacific, defendants argue that all but for models should be precluded as a matter of law from serving as a basis for antitrust causation and damage calculation. We do not agree with the defendants' reading of these cases (and, at all events, are not bound by them), which we conclude only stand for the proposition that some, not all, but for models are too speculative and must be precluded as a matter of law. The Rockhill Report, as we shall see, is much less speculative and does not suffer from many of the flaws in the damage models discussed in Van Dyk Research and Southern Pacific, and thus it is not comparable with them. 161 Rockhill made two major assumptions in calculating the damages Rossi suffered because of his inability to procure products. First, he estimated that Rossi Florence and/or Rossi Roofing would have achieved the same pattern of sales revenues (and revenue growth) beginning in 1989 and extending to 2008 that ABC's Morristown sales branch actually achieved from 1990-1993, operating out of the same location, with Rossi as branch manager. Rossi makes a strong argument that this estimate took into account the poor general business conditions that existed at the time, as well as any other extrinsic factors not related to the defendants' alleged boycott, because Rockhill based his estimate upon actual sales figures Rossi was able to achieve competing against the same firms, selling the same products at the same location to the same customers under the actual business conditions that existed at the time. 21 The second major assumption in the Rockhill Report is that Rossi would have been able to manage Rossi Florence and Rossi Roofing in the manner that he had run Standard's Morristown branch from 1974-1987. Rockhill used Standard's Morristown branch financial statements to develop 14-year averages for cost of sales, payroll expenses, equipment expenses, and administrative expenses (as a percentage of total sales) and applied them to the sales estimate. This kind of estimate, while perhaps not one upon which we would base our own personal investment decisions, nevertheless is sufficient to establish causation (especially when considered in conjunction with the five lost transactions). 22 162 On the subject of the Rockhill Report, we add that the defendants' criticism that the report is flawed as a matter of law because it improperly mixes data using a variety of sources including the historic operations of Standard; ABC actual data; input from Mr. Rossi; and judgment is unavailing. Rockhill used actual data to support his estimates, and thus they are based upon a reasonable foundation. See Danny Kresky, 716 F.2d at 213. We do not suggest that Standard's problems with the report are baseless, only that they constitute genuine issues of material fact and should also be argued before the trier of fact. 163 Finally, the defendants attack the evidence supporting Rossi's assertion of damages on several other bases. Defendants submit that Rossi Florence and Rossi Roofing failed because: (1) they were start-up operations, (2) they were founded during one of the worst recessions ever to hit the New Jersey housing market, (3) Rossi, as a manager, failed to control his costs, and/or (4) Rossi worked on other ventures to the detriment and ultimate failure of both companies. One or more of these reasons, particularly the theory that it was the recession, not a conspiracy, which mortally wounded Rossi's business efforts, might explain Rossi's failure in the roofing and siding business in northern New Jersey, and could conceivably result in a verdict for the defendants at trial. They are, however, unavailing to the defendants at this stage of the case because they all involve factual disputes that need to be resolved by the trier of fact, not by this court on a motion for summary judgment. 164 Standard also argues that Rossi failed to establish causation because an essential element in causation involves proving that there are no comparable substitutes for the desired product--here, GAF product. See Elder-Beerman Stores Corp. v. Federated Dep't Stores, Inc., 459 F.2d 138, 148 (6th Cir.1972). This is another factual issue that Standard may argue to the jury. As we have explained above, we are satisfied that Rossi's own testimony and that of several of his witnesses are sufficient to establish that GAF product was, for practical purposes, unique and highly desired in this market. See supra § II.B.2.b(1). 165 In sum, Rossi has established a prima facie case of antitrust injury with respect to Standard, Arzee, and GAF. He has adduced evidence of specific lost transactions showing causation or fact of injury, which is bolstered by an expert damage report that is not overly speculative as a matter of law. The combination of this evidence, while not conclusive, provides enough of a foundation that an eventual finder of fact would be justified in making a just and reasonable inference of the damages Rossi may have suffered as a result of the defendants' allegedly unlawful activities. 166