Opinion ID: 167915
Heading Depth: 3
Heading Rank: 1

Heading: Evidence of an Agreem ent

Text: Champagne attempted to show that a conspiracy existed through both direct and indirect evidence. In granting the Established Distributors’ motions for summary judgment, the district court ruled that none of Champagne’s proffered evidence was sufficient to demonstrate a conspiracy. It found that none of the statements offered as direct evidence clearly indicated an agreement and, thus, that a jury could not reasonably find a conspiracy based on the statements alone. Then, after noting that the range of permissible inferences that may be drawn from circumstantial evidence “w ill depend on the plausibility of a plaintiff’s economic theory,” and after finding that Champagne’s theory of collusion was, at best, plausible but weak, the district court concluded that the evidence did not tend to support concerted action. - 15 - As we conclude that Champagne did adduce direct evidence of a conspiracy, and as we find that the district court erred in its analysis of the plausibility of Champagne’s economic theory and thus erred in its consideration of Champagne’s circumstantial evidence, we reverse the decision of the district court on Champagne’s federal antitrust claim. 7
Champagne offered three statements made by various representatives of the Established Distributors as direct evidence of a conspiracy. On appeal, Champagne focuses primarily on a statement by Phil W iley of A FCO, Ryerson’s 7 Champagne also argues that the district court should have been “even more cautious” in drawing inferences against Champagne from the record because the court limited the amount of depositions Champagne could take in the case. Champagne cites no authority for its claim that the discovery limitation has an effect on the review of the evidence, and thus we need not even consider the argument. See Eateries, Inc. v. J.R. Simplot Co., 346 F.3d 1225, 1232 (10th Cir. 2003) (“A party forfeits an issue it does not support with legal authority or argument.”) (quotations omitted). In any event, we review rulings relating to discovery for abuse of discretion. See The Procter & Gamble C o. v. Haugen, 427 F.3d 727, 742-43 (10th Cir. 2005). At the start of discovery, Champagne was allowed twenty-five depositions, which w as the number it initially requested. The district court subsequently entertained a motion by Champagne to re-open discovery and conduct nine additional depositions. It granted the request for eight of the nine and only denied the request to depose Ken-M ac’s Larry Parsons; it did so because Champagne had not offered any justification for waiting “until the twilight of discovery” to request the deposition. See Smith v. United States, 834 F.2d 166, 169 (10th Cir. 1987) (noting that “w hether the moving party was diligent in obtaining discovery” is a factor in considering whether to re-open discovery). Champagne points to no other instances in which it requested additional depositions. Under these circumstances, we do not think that the district court abused its discretion in “limiting” discovery. - 16 - predecessor, to M att Zundel, a Commonwealth employee. 8 Zundel 8 Champagne also pointed to statements by Larry Parsons, president of Ken- M ac M etals, and Debbie Veal, a buyer for Jorgensen. During a negotiation for the purchase of Champagne by Ken-M ac, M ichael Champagne testified that he and Parsons were talking about Champagne M etals’ inability to purchase aluminum from the mills. W e discussed the fact that [Jorgensen] and some of the other service centers had gotten together and the resulting problems my company had experienced being recognized by Commonwealth. M r. Parsons made the comment that he would have gotten it done, meaning kept Commonwealth from selling to Champagne M etals. . . . M r. Parsons further stated that Champagne M etals w as the biggest mistake in his career, and that if he would have known about Champagne M etals, it would have been stopped. M r. Parsons implied that the other service centers had messed up, but he could get everyone together to make it happen. Further, Bill Thomas, a sales representative for Commonwealth, stated that Veal said she wished Commonwealth would not recognize Champagne, and that she had been in touch with her counterparts, who were part of the N ational Association of Aluminum Distributors group . . . , and that they were not at all happy about it, and they had more clout and [Commonwealth] probably w ould listen— would be— would have to listen to them. As to the Parsons’ statement, we first note that the district court excluded the portion of Champagne’s affidavit referring to Jorgensen and other service centers getting together as inconsistent with Champagne’s deposition testimony, and it is not clear that Champagne appeals that decision. In any event, the statement at best showed that Parsons “implied” that there would be collective action. Direct evidence “is explicit and requires no inferences” to establish concerted action, thus this implication of collective action cannot suffice. See In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir. 1999). Similarly, Veal’s statement, while perhaps an admission that the service centers individually would attempt to force Commonwealth to stop dealing with Champagne, contains no suggestion of any agreement between the service centers. Thus w e agree with the district court that these statements “lack[] the requisite ‘clarity’ to constitute (continued...) - 17 - claimed that W iley told him that the relationship between Commonwealth and Champagne was damaging to the industry as a whole and that W iley felt that by our participation with Champagne M etals, that himself and other potential customers within the industry would find that Commonwealth selling to Champagne, they— they w ould find that as, again, not in the best interest of the industry, and would cause other distributors in that area of the country to source their metals from other mill sources, and that by developing a relationship with Champagne M etals, we would be putting other business with potential customers at risk. (Emphases added.) W e agree with Champagne that this statement is direct evidence of collusive action. 9 “Direct evidence in a Section 1 conspiracy must be evidence that is explicit and requires no inferences to establish the proposition or conclusion being asserted. . . . [W ]ith direct evidence the fact finder is not required to make inferences to establish facts.” In re Baby Food A ntitrust Litig., 166 F.3d at 118 (quotations omitted). Here, the statement is explicit— W iley claimed that “himself and other potential customers . . . would cause other” service centers to remove their business from Commonwealth if Commonwealth continued selling to 8 (...continued) direct evidence.” 9 Although it is possible to construct ambiguity in almost any statement, the Established Distributors do not offer us any other discrete interpretation of this statement that would move it into the category of circumstantial evidence. - 18 - Champagne. 10 Viewed in the light most favorable to Champagne, this statement indicates an agreement among service centers to take collective action. See Rossi v. Standard Roofing, Inc., 156 F.3d 452, 468-69 (3d Cir. 1998) (finding the plaintiff’s testimony that he was told by one of his competitors that “if [the plaintiff] went into business that [the competitor] and [another competitor] w ould do anything they could, stop supplies, cut the prices, whatever they had to do they were going to do to keep me out of business” to be direct evidence of concerted action). Our conclusion that Champagne has adduced some direct evidence, however, does not mean that Champagne has necessarily shown the existence of a genuine issue of fact, sufficient to survive summary judgment, as to whether the Established Distributors entered into an illegal agreement. Although “[t]he burden of showing the absence of a genuine issue of material fact . . . is upon the movant,” Palladium M usic, Inc. v. EatSleepM usic, Inc., 398 F.3d 1193, 1196 (10th Cir. 2005), the nonmovant “‘must do more than simply show that there is 10 Indeed, the district court’s example of group boycott mechanics, which it cites to show that there was not direct evidence of a conspiracy here, actually demonstrates that W iley’s statement was direct evidence. The district court, citing the Handbook of the Law of Antitrust, explained that in a group boycott [t]he boycotting members, in effect, say to their suppliers . . . , “If you don’t stop dealing with the non-group members, we will stop dealing with you.” If continued trade with group members is more important to a supplier . . . than is trading w ith non-group members, this threat will be effective. - 19 - some metaphysical doubt as to the material facts.’” Id. (quoting M atsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). Therefore, summary judgment is appropriate unless the nonmoving party “‘make[s] a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.’” Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). The nonmovant makes this show ing only by presenting “facts such that a reasonable jury could find in [its] favor.” Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005) (quoting Simms v. Okla. ex rel. Dep't of M ental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.1999)). W iley’s statement, alone, does not meet this burden. For example, it does not indicate which, if any, of the Established Distributors were among the “other customers” which were part of the agreement. W here, as here, a plaintiff adduces only weak direct evidence, which by itself is insufficient to defeat summary judgment, additional circumstantial evidence is required to overcome a motion for summary judgment. See Rossi, 156 F.3d at 469 (noting that plaintiff’s direct evidence of an agreement was not enough to survive summary judgment and looking to circumstantial evidence as well).
Champagne argues that the district court erroneously devalued its circumstantial evidence by concluding that the economic theory underlying Champagne’s claim made little to no economic sense. - 20 - The district court began by noting that the range of inferences that can be drawn from circumstantial evidence varies with the strength of the proffered economic theory— the more economically rational a conspiracy is in a given situation, the broader the range of inferences than can be drawn from the evidence. This maxim is undoubtedly true when a plaintiff makes out a case based only on circumstantial evidence. See, e.g., IV Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 71 (2d ed. 2003) [hereinafter Areeda & Hovenkamp] (“The Supreme Court [in M atsushita] held that no conspiracy may be inferred from merely circumstantial evidence in the absence of a plausible motive to conspire.”) (emphasis added). Champagne also correctly notes that “concerns over the reasonableness of inferences” do not apply to direct evidence of an agreement. Rossi, 156 F.3d at 466. In other words, when evaluating direct evidence of an agreement, we need not worry whether such an agreement would have been a rational one to enter into; antitrust law “do[es] not . . . save defendants who have clearly, though foolishly, conspired.” II Areeda & Hovenkamp 101. The more difficult question, we think— and a question that the parties do not squarely address— is w hether, when direct evidence has been introduced, we must still evaluate the economic rationality of the alleged conspiracy when considering the accompanying circumstantial evidence. Some courts have held that economic rationality is inapplicable in a case with direct and circumstantial - 21 - evidence. See Rossi, 156 F.3d at 466 (“[T]he M atsushita standard only applies when the plaintiff has failed to put forth direct evidence of conspiracy.”); In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 906 F.2d 432, 441 (9th Cir. 1990) (“[T]he M atsushita standards do not apply when the plaintiff has offered direct evidence of conspiracy.”); see also II Areeda & Hovenkamp 104 (“[S]everal courts have indicated that M atsushita standards do not apply when the plaintiff has offered direct evidence of conspiracy.”) (quotations omitted). Given that the parties do not brief this issue on appeal, and given our conclusion, below, that the alleged conspiracy is economically rational such that restrictions on the inferences drawn from Champagne’s circumstantial evidence are not warranted, we do not decide whether Champagne’s weak direct evidence suffices by itself to remove this case from the M atsushita framework. The district court determined that Champagne’s economic theory was, at best, “plausible but weak,” and that therefore the range of permissible inferences to be drawn from the circumstantial evidence was limited. 11 W e disagree. As we have explained, 11 The district court actually found that Champagne’s theory made no economic sense at all and that it “w ould have no qualms granting summary judgment” on this ground alone. However, the court was willing, “for the purpose of testing [Champagne’s] economic evidence, to assume that the theory makes ‘some’ sense.” - 22 - [c]ircumstantial evidence may support the existence of an illegal § 1 agreement. However, on summary judgm ent, antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case. To survive a motion for summary judgment, a plaintiff seeking damages for a violation of § 1 must present evidence that tends to exclude the possibility that the alleged conspirators acted independently. Thus, the acceptable inferences which we can draw from circumstantial evidence vary with the plausibility of the plaintiffs’ theory and the danger associated with such inferences. M itchael, 179 F.3d at 858 (alterations, citations, quotations omitted). Below, the Established Distributors argued that they had no motive to engage in a group boycott because they did not have the power to raise prices or decrease output. Champagne countered that the Established Distributors were not boycotting in order to establish or maintain supracompetitive prices but instead were acting to avoid price cutting and to maintain market share. The district court expressed considerable doubt about Champagne’s theory. It noted that, although Champagne alleged that the boycott was to preserve the market and price structure of the industry, Champagne did not claim that there was any separate price-fixing or market-allocation agreement, 12 nor was there any 12 To the extent that this is a suggestion that a group boycott cannot be a violation of the antitrust laws without a concomitant price-fixing or market allocation agreement, the district court is incorrect. Exclusionary group boycotts and collusive agreements to set price or market share are two different theories of antitrust liability. See, e.g., Kenneth L. Glazer, Concerted Refusals To Deal Under Section 1 Of The Sherman Act, 70 Antitrust L.J. 1, 4-5 (2002) (“‘[C]ollusive’ agreements are agreements aimed directly at improving the terms (price or non-price) on which suppliers deal with their customers . . . [W ]hen firms act in a ‘collusive’ manner, they aim to replicate the pricing and other conduct of a single-firm monopolist by exercising joint monopoly power. . . . (continued...) - 23 - evidence of collusion on price or supply. To the contrary, the district court found ample evidence of competition between the Established Distributors. M oreover, the district court pointed out that there was no evidence of the Established Distributors’ market power and that it was unclear, based on the structure of the industry, whether a smaller, more strategically designed group of service centers could have been formed to accomplish the alleged goal. Finally, the district court noted that Champagne failed to support its theory with any evidence, particularly given the fact that the court had previously excluded Champagne’s economic expert’s report and testimony. Considering all of this, the district court concluded that there was “uncontroverted evidence that the benefits of collusion in this instance are outweighed by the risks” and thus Champagne’s theory did not make economic sense. W e disagree with the district court. The gravamen of Champagne’s theory is that the Established D istributors acted together to attempt to keep a new, aggressive entrant out of the market. There are several reasons why such behavior would be economically rational. For example, the established market participants could fear that an additional competitor w ould erode the profit margin available to the service centers. Or the established market participants 12 (...continued) Exclusionary conduct, on the other hand, is conduct ultimately designed to achieve that same goal, but it aims to do so by excluding competitors from the market.”). - 24 - might fear losing market share to the new market entrant, particularly an aggressive new entrant like Champagne. As one commentator has observed, “[w]here the ‘victim’ [of an exclusionary group boycott] is a competitor of the alleged conspirators, there is no mystery as to why the defendants w ould want to injure the rival. It is axiomatic that firms prefer to have few er rather than more rivals.” Glazer, supra, at 14. Such is the case here. Champagne introduced evidence that the Established Distributors saw Champagne as a price-cutting competitor who threatened their market share and profit margins. 13 For example, an Integris official complained to Commonwealth that, because of Champagne’s entrance and Commonwealth’s recognition of Champagne as a distributor, “prices had come down in the marketplace” and “there wasn’t nearly the profit level there used to be.” Similarly, there were complaints that Champagne “sold things too cheap” and that “adding another distributor would dilute market share, dilute market pricing.” One service center felt that “Champagne M etals’ activities in the marketplace were going to be detrimental to the industry as a whole” and that “the price that Champagne M etals would take to the marketplace would be such that margins as a 13 The Established Distributors argue that, because Champagne alleges the boycott began as soon as it entered the market, there was no point at w hich it could have developed a reputation as an aggressive, price-cutting competitor. However, Champagne’s founder had a long-standing relationship with many customers due to his previous employment by one of the Established Distributors. M oreover, the Established Distributors’ own statements demonstrate that they viewed Champagne as such a competitor. - 25 - whole for everyone that needed to compete at that price would compress to such a price that it would be . . . impossible to compete and still make a profit.” Simply put, Champagne’s theory makes sense— it is certainly economically rational for a group of established firms to attempt to keep an aggressive competitor out of the market, whether they are doing so to protect profits or simply to guard market share. In light of this, the district court erred in drawing such limited inferences from Champagne’s circumstantial evidence. 14 14 The Established Distributors make much of the fact that Champagne’s own economic expert seems to have admitted that a boycott would be economically irrational without a corollary price-fixing agreement. In the expert’s deposition, the following exchange occurred: Q. If you assumed hypothetically that some of the defendants got together and kept some mills from supplying som e service centers, say M ike C hampagne and two of his friends, and maybe stopped some entry hypothetically, given these markets with hundreds of service centers . . . [and the] competitive pricing in both purchasing and selling, absent collusion on price, they’re never going to achieve any sustained benefit from such actions, correct? A. If you apply a, which I think you are, a strict theoretical microeconomic interpretation of competition in relationships to market, then that’s – that would be a correct conclusion. W e first note that the district court excluded Champagne’s expert’s report and testimony— a ruling which we affirmed. Given this, the value of any argument based on this deposition testimony is little to none. M oreover, we refuse to be bound by such a “strict theoretical microeconomic interpretation” of competition. “[N]o real-world market is ever perfectly competitive.” Alan J. Daskin & Lawrence W u, Observations on the M ultiple Dimensions of M arket Pow er, 19 A ntitrust 53, 54 (Summer 2005). M oreover, the Established Distributors’ own statements indicate that they thought there were profits to be protected by the exclusion of Champagne. W hile w e acknowledge that antitrust law is strongly (continued...) - 26 -