Court Opinion

ID: 9478647
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:53:48.646383+00
Date Added: 2024-06-11T17:46:32.122105
License: Public Domain

POSNER, Circuit Judge,
dissenting.
The decision to affirm this antitrust judgment for $3.7 million (exclusive of interest, which has been accumulating since 1985, and attorney’s fees) ratifies a miscarriage of justice. There was no antitrust violation, and the defendant has been denied its right of appellate review.
P & E, the plaintiff, is a wholesale distributor of industrial motors and parts for motors, while Sterling, the defendant, is a small manufacturer of such motors — the judgment is equal to between a third and a half of Sterling’s entire annual revenues. The practice in the motor industry is that each manufacturer makes the replacement parts for its own motors. These replacement parts are not interchangeable; so only Sterling makes replacement parts for Sterling motors. Sterling offered P & E and its other distributors (none of whom distributes Sterling motors exclusively — all carry other motors as well) a discount on replacement parts if they would promote Sterling motors vigorously. The theory of the lawsuit is that Sterling tied its motors to its replacement parts — over which it has a “monopoly” — by conditioning P & E’s right to buy the replacement parts on P & E’s agreeing to buy more motors than it wanted. The replacement parts are thus the tying product, and the motors the tied product.
P & E, skillfully represented, won from a jury the damages award that this court upholds today. But Judge Holderman granted Sterling judgment notwithstanding the verdict. Sterling had moved in the alternative for a new trial, and the judge granted that motion, too (conditionally, of *235course — see Fed.R.Civ.P. 50(c)(1)). The only ground for the judge’s action either in granting judgment n.o.v. or granting a new trial was that P & E had failed to prove that Sterling had any market power in the market for industrial motors — the tied market. Sterling’s share of that market is one-tenth of one percent. Since the objective of the tying doctrine is to protect competition in the tied market, the plaintiff must show that the defendant has enough market power, present or prospective, in that market to make the tie-in a threat to competition. See Will v. Comprehensive Accounting Corp., 776 F.2d 665, 674 (7th Cir.1985); Carl Sandburg Village Condominium Ass’n No. 1 v. First Condominium Development Co., 758 F.2d 203, 210-11 (7th Cir.1985); Wells Real Estate, Inc. v. Greater Lowell Bd. of Realtors, 850 F.2d 803, 815 (1st Cir.1988); Hand v. Central Transport, Inc., 779 F.2d 8, 11 (6th Cir.1985) (per curiam).
P & E appealed, and this court reversed, 826 F.2d 712 (7th Cir.1987), holding that Sterling had forfeited the argument that it lacked market power in the motors market by failing to make the argument in its motion for a directed verdict. Grounds not advanced in that motion cannot be advanced in the motion for judgment notwithstanding the verdict. Kinzenbaw v. Deere & Co., 741 F.2d 383, 387 (Fed.Cir.1984).
Sterling argued that the grant of its motion for judgment notwithstanding the verdict could be upheld on alternative grounds, not reached by the district court: that there was no basis for the jury’s finding that it had market power in the tying market (replacement parts), and that there was no basis for the finding that it had conditioned P & E’s right to purchase replacement parts on P & E’s agreeing to buy more motors (without such a condition, there would be no tie-in). We held that there was sufficient evidence on both points to defeat judgment n.o.v.
The court also had before it the district judge’s alternative ruling that Sterling was entitled to a new trial. That ruling could not stand on the only ground that the judge had offered for it — the absence of market power in the motors market — because Sterling had waived that ground by failing to advance it during the trial. The court then considered whether there might be an alternative basis for granting Sterling’s motion for a new trial. It said, “While the record contains too much support for P & E’s claims to justify a judgment n.o.v., we are not now in a position to say that P & E’s proof was too strong for the district court to have concluded that the manifest weight of the evidence favored Sterling.” 826 F.2d at 721. Therefore, “the district court should have the first opportunity to rule on” the question. Id. at 722. We were dubious that the district judge would find that the verdict had been against the manifest weight of the evidence, because, we said, “the record, viewed from our comparatively remote vantage point, reveals no such imbalance. Nevertheless, we are reluctant to ignore the possibility that the district court perceived such an imbalance but declined to discuss it in the belief that Sterling’s tied market power argument obviated the need to elaborate on these ‘other things.’ We will therefore remand the retrial order for clarification on this point.” Id.
On remand, Judge Holderman stated the issue to be whether he “perceived that the jury’s verdict, when assessed against the instructions that guided the jury’s deliberations, was contrary to the manifest weight of the evidence.” He concluded not, without elaboration, and entered judgment for P & E. Sterling appealed — that is the appeal decided today — contending that even with the issue of market power with respect to the tied product out of the case, the verdict was. against “the manifest weight of the evidence,” which is the accepted standard for ordering a new trial. This court refuses to consider the merits of the appeal, on the ground that our remand was for the sole purpose of obtaining clarification from Judge Holderman.
Our previous opinion is not clear, but, read as the present panel reads it, denies Sterling its right to appellate review of the order on remand refusing to grant a new trial. For the previous panel never did decide whether the verdict was against the *236manifest weight of the evidence, though it offered a tentative view that it was not. The previous panel applied a very harsh standard of procedural default to deprive Sterling of its judgment n.o.v. The present panel construes the previous panel’s opinion as adversely as possible to Sterling’s right of appellate review of Judge Holder-man’s order on remand denying Sterling’s motion for a new trial. The result of all this strictissimi juris is to uphold a jury verdict that is based on a cockeyed view of law and fact, resulting in a windfall for P & E that is both sizeable and undeserved.
A tie-in agreement does not violate the antitrust laws unless the seller has market power. Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 17-18, 104 S.Ct. 1551, 1560-61, 80 L.Ed.2d 2 (1984); Will v. Comprehensive Accounting Corp., supra, 776 F.2d at 670-74; Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792 (1st Cir.1988); Mozart Co. v. Mercedes-Benz of North America, Inc., 833 F.2d 1342, 1345 (9th Cir.1987); A.I. Root Co. v. Computer/Dynamics, Inc., 806 F.2d 673 (6th Cir.1986). Since Sterling sells only one-tenth of one percent of all industrial motors sold in the United States, it is a reasonable guess that it sells no more than one-tenth of one percent of the replacement parts for industrial motors. Industrial motors are not patented, and there is no evidence that Sterling motors are superior to those of competing manufacturers or fit a special niche in the market not served by competitors. The “physical uniqueness” of Sterling motors, of which P & E makes much, consists simply in the fact that replacement parts made for other motors won’t fit Sterling motors, and vice versa.
One-tenth of one percent is no one’s idea of market power, so P & E argues that Sterling has a monopoly of replacement parts for Sterling motors. This is true in the trivial sense that only Sterling manufactures parts usable in those motors. But it would be absurd to infer from this, as the jury benightedly did, that Sterling has market power, that is, the power to raise the price of its parts above the price that a competitive market would charge, without losing so many sales as to make the price increase unprofitable. Ball Memorial Hospital, Inc. v. Mutual Hospital Ins., Inc., 784 F.2d 1325, 1335 (7th Cir.1986); Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370, 373 (7th Cir.1986). This sort of argument is regularly rejected, see, e.g., Grappone, Inc. v. Subaru of New England, Inc., supra, 858 F.2d at 797; Neumann v. Reinforced Earth Co., 786 F.2d 424, 428-30 (D.C.Cir.1986); Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 488-89 (5th Cir.1984); General Business Systems v. North American Philips Corp., 699 F.2d 965, 972-75 (9th Cir.1983). Sterling could in principle exploit its “monopoly” by setting its price for replacement parts just below the point at which owners of Sterling motors would decide to scrap the motors rather than pay an exorbitant price for the parts necessary to keep them in service. But this would be a short-run game, since as soon as word got out no one would buy Sterling motors. As there is no evidence that Sterling ever played or contemplated playing this suicidal game, the jury’s verdict cannot be upheld on this ground. Even if Sterling had played this game, the result would have been a brief perturbation in competitive conditions — not the sort of thing the antitrust laws do or should worry about. Cf. International Distribution Centers, Inc. v. Walsh Trucking Co., 812 F.2d 786, 792 (2d Cir.1987); United States v. Waste Management, Inc., 743 F.2d 976, 982 (2d Cir.1984).
The jury’s verdict was against the manifest weight of the evidence on an essential element of the tie-in offense — that the seller have market power in the market for the tying product. In fact, the verdict was irrational, a distressingly frequent occurrence in complex commercial cases, where the issues are remote from the experience and understanding of jurors. So clear is the verdict’s unreasonableness that we can order a new trial even though Judge Hold-erman, perhaps out of pique at our decision reversing him, refused to do so. See Rascon v. Hardiman, 803 F.2d 269, 273 (7th Cir.1986). Sterling’s procedural defaults denied Sterling the judgment n.o.v. that, as *237a matter of substantive justice, it richly deserved. There is no basis for denying it the new trial that it deserves even more clearly.