Court Opinion

ID: 3023372
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:28:50.085478+00
Date Added: 2024-06-11T12:12:06.522329
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                 _____________

                                 No. 98-2687NE
                                 _____________

Mostly Media, Inc., a Nebraska           *
Corporation; Pixel Image                 *
Transformatte, Inc., a Nebraska          *
Corporation; and Imageware, Inc.,        *
a Nebraska Corporation, doing            *
business as Cottonwood                   *
Communications, Inc.,                    *
                                         *
              Appellants,                *
                                         *
      v.                                 *
                                         *
U.S. West Communications; U.S.           *
Marketing Resources Group, Inc.,         *   On Appeal from the United
doing business as U.S. West Direct;      *   States District Court
U.S. West; U.S. West Communications *        for the District of
Group, Inc.; Interactive Video           *   Nebraska.
Enterprises, Inc.; U.S. West Interactive *
Services, Inc.; U.S. West Multimedia     *
Communications, Inc.; U.S. West          *
Multimedia Services Group, Inc.;         *
U.S. West Advanced Technologies, Inc.; *
U.S. West Business Resources, Inc.,      *
Colorado Corporations; U.S. West         *
Enhanced Services, Inc., a Washington *
Corporation; and U.S. West Multimedia *
Services of Omaha, Inc.,                 *
                                         *
              Appellees.                 *
                                     ___________

                                Submitted: April 21, 1999
                                    Filed: August 6, 1999
                                     ___________

Before RICHARD S. ARNOLD and WOLLMAN,1 Circuit Judges, and WOLLE,2
      District Judge.
                           ___________

RICHARD S. ARNOLD, Circuit Judge.

       This appeal arises from a lawsuit brought in 1994 against U.S. West and several
of its affiliates. The appellants, Mostly Media, Inc., Pixel Transformatte, Inc., and
Imageware, Inc., allege that U.S. West violated antitrust laws, discriminated against
them in violation of the Federal Communications Act of 1934, and negligently
manipulated their telephone lines. The District Court3 granted U.S. West's motion for
summary judgment on the antitrust claims, and the remaining claims were tried to a
jury. At the conclusion of the plaintiffs' case, U.S. West moved for judgment as a
matter of law, and the District Court granted the motion. We affirm.

        1
            The Hon. Roger L. Wollman became Chief Judge of this Court on April 24,
1999.
        2
         The Hon. Charles R. Wolle, United States District Judge for the Southern
District of Iowa, sitting by designation.
        3
       The Hon. Thomas M. Shanahan, United States District Judge for the District
of Nebraska.
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                                           I.

       We review briefly the events at the center of this dispute. Mostly Media and the
other appellant corporations sought to participate in a video dialtone trial conducted by
U.S. West in Omaha, Nebraska, in 1995 and 1996. The trial was the result of a
decision by the Federal Communications Commission to allow telephone companies
to provide interactive television programming to consumers' homes. Mostly Media, a
company that produces television programming, alleges that U.S. West excluded it
from the trial by refusing to provide technical information and by requiring a $100,000
letter of credit, and that U.S. West discriminated against it in favor of a U.S. West
partner. See 47 C.F.R. § 64.702 (1998). Mostly Media also claims that U.S. West
violated the Sherman Antitrust Act by monopolizing an essential facility. See 15
U.S.C. § 2 (1994). Finally, Mostly Media alleges that U.S. West acted negligently in
providing its telephone service. Specifically, Mostly Media claims incoming calls
rolled over to an unknown destination when its telephone lines were busy or went
unanswered, and that this went on for 18 months, causing significant injury to its
business.

                                           II.

       We have examined carefully the issue of damages in this case, and we conclude,
as the District Court did, that Mostly Media cannot prevail because it did not establish
sufficient proof of its damages. With respect to the allegations concerning antitrust
violations and the video dialtone trial, Mostly Media must have been able to prove, to
a reasonable degree of certainty, that its involvement in the trial would have been
profitable. Although inferences may be used to establish the precise amount of injury,
speculation is not permitted.

      Mostly Media presented several theories to prove its injuries. First, Laurie
Dahlgren, an owner of one of the plaintiff corporations, testified that Mostly Media

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projected revenues of more than $4.4 million in the first year of operating one of three
digital channels it had proposed, $2.4 million of which represented profit. Her
testimony was supported, in the main, by Dr. Jerome Sherman, an economist who
testified on behalf of the plaintiffs, although Dr. Sherman estimated the profit at $1.7
million.

       Mostly Media sought to compare itself to RSVP Information, Inc., a company
that entered into a joint venture with U.S. West. According to Mostly Media, RSVP
participated in the video dialtone trial in a manner substantially similar to the manner
in which it would have participated, had U.S. West not acted illegally in excluding it.
The plaintiffs introduced a preliminary business plan prepared for RSVP. Dr. Sherman,
who reviewed the plan, testified that the estimated value of the joint venture was more
than $8.5 million. In addition, Dr. Sherman testified that RSVP realized an immediate
benefit of $505,000 from the joint venture. This theory is based upon evidence that
U.S. West, which invested more than $252,000 in the joint venture, owned a third of
the business, while RSVP, which invested about $35,000, owned two-thirds of the
business. Assuming a third of the joint venture was worth more than $252,000,
Dr. Sherman testified, two-thirds would be worth about $505,000. We would
characterize this sort of reasoning as mathematical alchemy.

       Mostly Media also introduced evidence that Interface Communications earned
$6 million as a result of its participation in the trial. This amount, however, represents
the sale of assets (a subscriber base and programming rights) that remained at the
conclusion of the trial. According to U.S. West, in addition, there are important
differences between Mostly Media and Interface Communications, namely that
Interface provided analog cable television programming, while Mostly Media did not.

      With respect to damages caused by the allegedly negligent provision of
telephone services, Ms. Dahlgren estimated that Mostly Media sustained a loss of
more than $1.4 million. This figure was arrived at by projecting a constant rate of

                                           -4-
growth, and subtracting from that number the amount of actual sales. Dr. Sherman
testified that declining revenues resulted in a loss to the company of about $317,000,
although he testified that he did not know whether telephone problems actually caused
the loss.

       Ruling from the bench at the close of the plaintiffs' case, the District Court held
that there was insufficient proof of damages. Concerning Mostly Media's claim that it
lost profits as the result of inadequate telephone service, the Court said that it "is
speculation and conjecture and I cannot see that the plaintiffs have provided . . .
concrete evidence . . . that profits lost by the plaintiffs were the direct result of the
conduct on the part of U.S. West or the defendants. . .." Trial Tr. at 1001.

       Regarding the video dialtone trial and Mostly Media's claim that RSVP occupied
a place in the trial comparable to one it could have occupied, the District Court
disagreed, saying that "the comparison . . . falls short because the approach . . . that
was used by Dr. Sherman is not based on sufficient evidence to show that there was a
comparable basis. . .. I do not believe that Dr. Sherman nor the evidence have
established that there was sufficient similarity between RSVP and the plaintiffs so that
we have an adequate basis for comparison . . .." Trial Tr. at 1007. In addition, we note
that Dr. Sherman testified that the joint venture, which never operated, projected a first-
year loss of $545,000.

      With respect to Mostly Media's other theory of lost profits, which was based
upon its own business plan, the Court held that "the whole approach . . . is just fraught
with speculation." Id. at 1007-8. The Court said that it had not "heard anything that
indicates . . . there was any revenue generated . . . during this . . . video dialtone trial
period," and that "merely relying upon this expected or anticipated profit of business
without any underlying supportive data [was not] sufficient." Id. at 1008. The Court
concluded that it "would not, under the circumstances, submit the question of damages

                                            -5-
. . . as it's my conclusion that the plaintiffs' evidence regarding damages is much too
speculative to justify or otherwise support a jury's finding . . .." Id.

       We agree with the District Court that the proof of damages was too speculative.
The burden of proof required of a plaintiff in a lost-profits case is admittedly heavy, and
the plaintiffs in this case have not met it. The evidence with respect to the allegations
of inadequate telephone service is simply not sufficient. The video dialtone trial was
a new and unproved business opportunity. No one knew whether it would work, and,
in fact, it did not. The business plans developed by Mostly Media and RSVP were
nothing more than optimistic projections for an enterprise that never got off the ground,
and the money that Interface Communications earned was for selling U.S. West assets
that remained after the trial.

      Accordingly, we affirm, substantially for the reasons given by the District Court.

      A true copy.

             Attest:

                  CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT

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