Court Opinion

ID: 6982313
Source: CourtListenerOpinion
Date Created: 2022-07-24 02:30:19.83556+00
Date Added: 2024-06-11T16:09:15.722675
License: Public Domain

BEAM, Circuit Judge,
dissenting.
In this Sherman Act case, the court applies its own brand of market-place justice through the use of a newly minted, but flawed summary judgment standard. In so doing, the court disregards well-established Supreme Court precedent, ignores the well-defined law of this circuit and wrongly applies portions of an inapposite Supreme Court opinion. I dissent.
I. BACKGROUND
This dispute involves the production and sale of potash, a mineral essential to plant growth and therefore used in fertilizer. I will not attempt to restate the exhaustive *1073evidence thoroughly discussed by the magistrate judge, but will merely summarize the relevant facts and restate specific evidence as reasonably necessary for a rational discussion of the issues.
Both parties, and the court, agree that the North American potash industry is an oligopoly.18 Prices in an oligopolistic market tend to be higher than those in a purely competitive-market, and will fluctuate independently of supply and demand. See Enrico Adriano Raffaelli, Oligopolies and Antitrust Law, 19 Fordham Int’l. L.J. 915, 916 (1996). Furthermore, “price uniformity is normal in a market with few sellers and homogeneous products.” E.I. du Pont De Nemours & Co. v. Federal Trade Comm’n, 729 F.2d 128, 139 (2d Cir.1984). This is because all producers in an oligopoly must charge roughly the same price or risk losing market share.
The Canadian province of Saskatchewan is the source of most potash consumed in the United States. The Potash Corporation of Saskatchewan (PCS), founded by the province and a defendant in this litigation, holds thirty-eight percent of the North American potash production capacity. As a governmental enterprise, PCS had no mandate to maximize profits and was not accountable to private owners. Instead, the company was primarily concerned with maintaining employment and generating money for the local economy. Not surprisingly, PCS endured huge losses as it mined potash in quantities that far outstripped global demand. These policies impacted the entire potash industry: during the 1980’s, the price of potash fell to an historic low. In 1986, Saskatchewan voters elected a provincial government which had promised to privatize PCS. New management was appointed to PCS after the elections. Thereafter, PCS significantly reduced its output and raised its prices.
Also in 1986, New Mexico Potash Corporation (NMPC) and another American potash producer (who is not a named defendant) filed a complaint with the United States Department of Commerce. Frustrated with low potash prices, the petitioners alleged that Canadian producers had been dumping their product in the United States at prices below fair market value. In 1987, the Department issued a preliminary determination that the Canadian producers were dumping potash and ordered the companies to post bonds on all exports to the United States. These bonds were set according to each firm’s calculated “dumping margin.” Eventually, the Department negotiated a Suspension Agreement with each of the Canadian producers. The agreement raised the price of Canadian potash in the United States by setting a minimum price at which each Canadian producer could sell in this country.19 This agreement remains in effect today. When the Canadian producers entered into the Suspension Agreement, PCS announced that it was raising its prices by eighteen dollars per ton. Other producers quickly approximated the higher price. The price of potash has remained markedly higher after the Suspension Agreement.
The class alleges that between April 1987 and July 1994 the named defendants20 (collectively, “the producers”) col*1074luded to increase and stabilize the price of potash in violation of section 1 of the Sherman Act. The class proceeds under the price fixing theory of conscious parallelism. The producers, in turn, maintain that prices were the product of the interdependent nature of the industry and its reaction to significant external forces. The district court granted the producers’ motions for summary judgment and the class appeals.
II. DISCUSSION
The class asserts that if we affirm the district court, we will “stand alone in holding that circumstantial evidence, even if overwhelming, cannot be used to defeat a summary judgment motion in anti-trust cases.” We would make no such legal history here, however, because the class’s proffered evidence, far from overwhelming, fails to establish the elements of a prima facie case. The court reverses the district court but in the process makes two critical errors: (1) it incorrectly states the standard for summary judgment and (2) it incorrectly applies the standard.
A. Summary Judgment Standard
The Supreme Court in Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 & 768, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984) and Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), provided the standard used to determine whether the plaintiffs’ evidence of a section 1 violation survives a summary judgment motion. We are among the majority of circuits to apply Monsanto and Matsushi-ta broadly in section 1 price fixing cases such as the one before us. See Corner Pocket of Sioux Falls, Inc. v. Video Lottery Technologies, Inc., 123 F.3d 1107, 1109 (8th Cir.1997), cert. denied, — U.S. -, 118 S.Ct. 1054, 140 L.Ed.2d 116 (1998). In order to withstand summary judgment, plaintiffs must present evidence that “tends to exclude the possibility of independent action” by the defendants. Monsanto, 465 U.S. at 764 & 768. This means that conduct that is “as consistent with permissible [activity] as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.” Matsushita, 475 U.S. at 588. Applied in this case, the standard requires that from the evidence, if it is as reasonable to infer a price-fixing conspiracy as it is to infer permissible activity, then the plaintiffs’ claim, without more, fails on summary judgment.
The court, although reciting the Monsanto and Matsushita rule, disregards this clear standard by repeatedly citing from Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992), a wholly inapposite case. Eastman Kodak was not concerned with the sufficiency of evidence of conspiratorial acts, as we are here, but rather with whether Eastman Kodak possessed market power sufficient to be guilty of “tying.”21 Id. at 455 & 459. Eastman Kodak presented a unique factual situation totally distinct from the evidentiary underpinnings of this litigation.
The misuse of Eastman Kodak, and the damaging impact such misuse had on the court’s view of the summary judgment standard is clearly evident. The court, for instance, quotes Eastman Kodak as stating, “ ‘Matsushita demands only that the nonmoving party’s inferences be reasonable in order to reach the jury, a requirement that was not invented, but merely articulated, in that decision.”’ Ante at 1062 (quoting Eastman Kodak, 504 U.S. at 468). This quotation, of course, is misleading since any reasonable inference must still tend to exclude the possibility of independent action. Similarly, the court later states “[u]nder Eastman Kodak it is enough if the plaintiffs inference is rea*1075sonable.” Ante at 1070 (concluding that if the inference of conspiracy is reasonable, the class is entitled to the benefit of it). In view of the court’s mistaken approach, it cannot be overemphasized that the Supreme Court has rejected this particular summary judgment test and has clearly heightened the standard-the evidence must, as indicated, tend to exclude the “possibility” of independent action.
Interestingly, the court’s discussion draws near the proper standard but then, inexplicably, proceeds with an analysis that leads it far astray. Proper analysis demonstrates that the court has not adhered to the controlling precedent of Monsanto and Matsushita especially as this precedent has been broadly construed by this circuit in Comer Pocket.
B. Applying the Standard
The class’s price-fixing claim is based on a theory of conscious parallelism. Conscious parallelism is the process “not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their prices at a profit-maximizing, supracompetitive level by recognizing their shared economic interests.” Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). The class and the court point out that the producers’ prices were roughly equivalent during the alleged conspiracy, despite differing production costs. They further note that price changes by one producer were quickly met by the others. This establishes only that the producers consciously paralleled each other’s prices.
Evidence that a business consciously met the pricing of its competitors does not prove a violation of the antitrust laws. See Theatre Enter., Inc. v. Paramount Film Distrib., Corp., 346 U.S. 537, 540-41, 74 S.Ct. 257, 98 L.Ed. 273 (1954). Particularly when the product in question is fungible, as potash is, courts have given parallel pricing little probative weight. See Bendix Corp. v. Balax, Inc., 471 F.2d 149, 160 (7th Cir.1972). Even the court concedes that “parallel pricing [is] almost inevitable” in a market situation such as this. Ante at 1063. An agreement is properly inferred from conscious parallelism only when certain “plus factors” exist. See In re Baby Food Antitrust Litigation, 166 F.3d 112, 122 (3d Cir.1999); see, e.g., Admiral Theatre Corp. v. Douglas Theatre Co., 585 F.2d 877, 884 (8th Cir.1978) (requiring evidence that defendant acted contrary to self-interest in addition to evidence of conscious parallelism to establish antitrust violation). A plus factor refers to “ ‘the additional facts or factors required to be proved as a prerequisite to finding that parallel [price] action amounts to a conspiracy.’ ” In re Baby Food, 166 F.3d at 122 (quoting 6 Phillip E. Areeda, Antitrust Law § 1433(e) (1986)).
The plaintiff has the burden to present evidence of consciously paralleled pricing supplemented with one or more plus factors. See Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1456 n. 30 (11th Cir.1991), However, even after carrying the initial burden, a court must still conclude, based upon all the evidence before it, that the plaintiffs evidence tends to exclude the possibility of independent action. See Monsanto, 465 U.S. at 764 & 768; Matsushita, 475 U.S. at 588; see also In re Baby Food, 166 F.3d at 122. As noted, the class identified parallel pricing. The class also asserts several possible plus factors. The court rejects all22 but one, *1076concluding that “we believe the evidence of price verification communications among competitors” constitutes a sufficient plus factor. Ante at 1065-66.
In my view, the class’s price verification evidence is far too ambiguous to constitute a plus factor that supports an inference of conspiracy. Cf. Corner Pocket, 123 F.3d at 1112 (finding a letter to be too ambiguous to help the plaintiffs defeat summary judgment). In any event, considering the evidence as a whole, the price verification evidence does not tend to exclude the possibility of independent action, as required under Monsanto and Matsushita, since other significant events strongly suggest independent action. The fundamental difficulty with the class’s argument regarding price verifications is that it assumes a conspiracy first, and then sets out to “prove” it. And the court has apparently adopted this approach. However, a litigant may not proceed by first assuming a conspiracy and then explaining the evidence accordingly.
The class’s evidence shows that possibly several dozen price verifications occurred between employees, including high-level sales employees, of different companies,23 over at least a seven-year period. These contacts involved the verification of “prices they had charged on particular sales.” Ante at 1067 (emphasis added). The downfall of this circumstantial evidence of an agreement to fix prices is that it bears no relationship to the price increases most in question because it lacks the logical link necessary to infer such a relationship.
The class alleges that the price-fixing conspiracy began “at least as early as April, 1987.” Complaint at 11. In 1987, the price for potash was at historically low levels, such that producers were losing millions of dollars. Then, a sudden and dramatic increase in price by PCS occurred on September 4, 1987, and approximately a week later the remaining producers followed suit.24 The class and the court argue that the large and parallel price rises which were nearly simultaneous combine with the price verifications to create an inference sufficient to survive summary judgment.
The problem with this theory is that the price verification evidence only applied to prices already charged on particular sales, not to future broad market prices. The court overlooks a critical causal link in this: there is no evidence to support the inference that the price verifications had an impact on price increases. The only evidence is that prices were possibly cut as a result. “[T]o survive summary judgment, there must be evidence that the exchanges of information had an impact on pricing decisions.” In re Baby Food, 166 F.3d at 125 (citing Krehl v. Baskin-Robbins Ice Cream Co., 664 F.2d 1348, 1357 (9th Cir.1982)). There is no evidence here that price increases resulted from any price verification or any particular communication of any kind. How can subsequent price verification evidence on particular sales support a conspiracy for the setting of a broad market price on September 4, 1987? It cannot.
Even if we find the price verification evidence relevant, when considered with all the facts, it does not tend to exclude the possibility of independent action. To the contrary, there is strong evidence of independent action. Just before and concurrent with the suspect price increases, the following occurred: the price of potash was at historic lows and the produc*1077ers were losing millions; potash companies in the United States complained to the United States Department of Commerce that the Canadian producers were dumping potash at well-below market value; the Department of Commerce made a preliminary determination that the Canadian producers were dumping and required expensive bonds for all imports; the industry leader, the government founded PCS, hired new management and began privatization with the goal of becoming profitable; legislation was passed in the province of Saskatchewan-the source of nearly all U.S. potash-that provides for the setting and prorating.of potash production; potash producers reached a Suspension Agreement with the Department of Commerce that sets price floors for potash; and PCS was finally privatized and significantly reduced its output. In the face of these circumstances and with the price leadership of PCS in this oligopolistic industry, it would be ridiculous to think that the remaining companies would not also raise their prices in a parallel fashion. The class’s weak circumstantial evidence that the dramatic increases were the result of a price-fixing agreement is hot sufficient to survive summary judgment. This leaves only the question whether there is sufficient evidence to support an agreement to stabilize and maintain prices in violation of section 1 of the Sherman Act.
The court’s evidence of an agreement to maintain the price of potash at an artificially high level after the initial price increases is again the parallel pricing and price verifications. Parallel pricing is conceded, leaving the burden once again on the price verifications. It is common sense to think that a conspiracy to fix a price involves a company that communicates with another company before the price quotation to the customer. Here, in every instance, we have communications to verify a price on a completed sale. To escape this logical conclusion, the court makes several unconvincing arguments.
The court points to a statement by one witness, that he made verification calls in part to see if he could “[m]eet a competitive price if that opportunity was available.” Ante at 1067. This sounds strangely like competition since the participants are lowering prices to compete. In response to this argument, the court contends that although in the short-term the prices are lowered, the long-term effect is to maintain artificially high prices.25 However, the class’s own evidence establishes that there was a continual decline in the price for potash over the years in question. Appellants’ Appendix at 1422-29.
Further detrimental to the court’s theory are its own statements that companies seldom received the listed price for the product and “continued to undercut each other in privately negotiated deals.” Ante at 1066. I suppose that the court is arguing, without evidence one way or the other, that the slow decline in price was not a fast enough decline. This seems to be getting into the very ambiguous and speculative territory the Supreme Court has sought to avoid in section 1 claims. See Monsanto, 465 U.S. at 762-64; Matsushita, 475 U.S. at 594. The Supreme Court has held that when circumstantial evidence is ambiguous, summary judgment should be granted to the defendants. See Monsanto, 465 U.S. at 763-64.
The price verifications relied upon were also sporadic and testimony suggests that price verifications were not always given. The fact that there were several dozen communications is not so significant considering the communications occurred over at least a seven-year period, a period in which there may have been tens of thousands of transactions. Furthermore, you *1078would expect companies to verify prices considering this is an oligopoly and accounts are very large. These facts further undermine the already speculative assertions of the court. The evidence falls far short of excluding the possibility of independent action.
A recent case that demonstrates the frailty of the court’s analysis is In re Baby Food Antitrust Litigation, 166 F.3d 112 (3d Cir.1999). The defendants, nationally prominent corporations with 98% of the baby food business, were Gerber, H.J. Heinz, and Beech-Nut. The numerous in-tercompany pricing communications found by the Third Circuit to be insufficient to support a section 1 violation are tersely dismissed by the court as “price discussions among low level employees.” Ante at 1066. However, the deposition testimony revealed that district sales employees and district sales managers of Heinz, one of the alleged conspirators, “were required to submit competitive activity reports to their superiors concerning baby food sales from information they picked up from competitor sales representatives.” In re Baby Food, 166 F.3d at 118-19. This same line of testimony revealed that supervising managers for Heinz informed district managers “on a regular basis before any announcement to the trade as to when Heinz’s competitors were going to increase [their] wholesale list prices.” Id. at 119. The president of Beech-Nut, another alleged conspirator, “testified that it was [Beech-Nut’s] policy for sales representatives to gather and report pricing information of [Beech-Nut’s] competitors.” Id. (emphasis added). Indeed, the In re Baby Food case is replete with evidence that pricing information was systematically obtained and directed to high-level executives of Gerber (including Gerber’s vice president of sales), Beech-nut and Heinz, the principal national competitors in the baby food industry. So, for the court to disregard the holding in In re Baby Food because “ ‘[n]o evidence ... shows that any executive of any defendant [Gerber, Beech-Nut and Heinz] exchanged price or market information ivith any other executive,”’ Ante at 1066 (quoting In re Baby Food, 166 F.3d at 135) (emphasis added), is to blithely ignore the fact that a carefully conceived and effective system of price information gathering for the benefit of corporate executives was at all relevant times alive and well in the baby food industry.26
Notwithstanding communications that far surpassed any information exchanges established in this case, the Third Circuit correctly applied Matsushita and granted summary judgment to the defendants. In doing so, the Third Circuit aptly noted that “to survive summary judgment [on the basis of exchanged pricing information] there must be evidence that the exchanges *1079of information had an impact on pricing decisions.” In re Baby Food, 166 F.3d at 125 (citing Krehl, 664 F.2d at 1357). As earlier stated, there is absolutely no such evidence in this litigation, only speculation.
Finally, the class argues, in a last ditch effort, that its expert’s econometric model provided crucial confirmation that the prevailing potash prices during the alleged conspiracy were above those expected in the absence of collusion. Cf. Id. (rejecting a similar argument). We need not decide whether such evidence, in a proper case, could constitute a plus factor, because the report in this case is not probative of collusion.
The class’s expert evidence is lacking in two crucial respects. First, the expert admits that his model fails to take into account the dramatic events surrounding the price increases: namely the privatization of PCS and the anti-dumping proceedings. Second, the expert’s report, as the magistrate judge noted, relies almost exclusively on evidence (such as the producers’ common membership in trade associations and their publication of price lists to customers) that is not probative of collusion as a matter of law. The expert’s model is fundamentally unreliable because of heavy (if not exclusive) reliance on evidence that is not probative of conspiracy, coupled with his failure to consider significant external forces that unquestionably served to raise the price of potash. See Loudermill v. Dow Chem. Co., 863 F.2d 566, 570 (8th Cir.1988).
III. CONCLUSION
The class has failed to present evidence of collusion sufficient to preclude summary judgment under Monsanto and Matsushi-ta. The producers are therefore entitled to summary judgment. For the foregoing reasons, the decision of the district court should be affirmed. I dissent from the court’s holding to the contrary.

. An oligopoly is an "[ejconomic condition where only a few companies sell substantially similar or standardized products.” Black’s Law Dictionary 1086 (6th ed.1990).

. Under the agreement, each firm could sell potash in the United States at less than fair market value by an amount equal to 15% of its preliminary dumping margin.

. The class named six Canadian potash producers: (1) Potash Corporation of Saskatchewan, Inc. and Potash Corporation of Saskatchewan Sales, Ltd. (collectively "PCS”); (2) Comineo, Ltd. and Comineo American, Inc. (collectively "Comineo”); (3) IMC Global, Inc.; (4) Kalium Chemicals, Ltd., Kalium Canada, Ltd. and its former owner and operator, PPG Industries, Inc. and PPG Canada, Ltd. (collectively "Kali-um”); (5) Noranda Mineral, Inc., Noranda Sales Corporation Ltd. and Central Canada Potash Co. (collectively "Noranda”); and (6) Potash Corporation of America, Inc. and its owner Rio Algom, Ltd. (collectively "PCA”). The American potash producers named as defendants are New Mexico Potash Corporation (NMPC) and its affiliate Eddy Potash Inc. (Eddy).

. A classic lie-in occurs when a seller conditions the sale of product A on purchase of product B. Tying arrangements violate section 1 of the Sherman Act if the seller (Eastman Kodak) has appreciable market power in the lying product and if the arrangement affects a substantial volume of commerce in the tied product. Eastman Kodak, 504 U.S. at 461-62.

. The court extensively reviews the class’s allegations that motive to conspire, opportunity to conspire, solicitation, a high level of interfirm communications, and certain alleged actions against self-interest constitute plus factors. These are all either completely rejected or given insignificant weight as "background facts, which ... do not suffice to prove a conspiracy.” Ante at 1064. For example, the class asserts evidence that the producers acted against their self-interests by participating in the Suspension Agreement. See, e.g., Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1243-45 (3d Cir.1993) (denying defendants’ motion for summary judgment where defendants refrained from bidding aggressively on accounts already serviced by other defendants). The court summarily rejected this contention. *1076Ante at 1065 n. 12. Thus, the information is generally gratuitous and irrelevant.

. It is noteworthy that the court cites price communications involving defendant companies that it subsequently finds not to have participated in the alleged conspiracy (Noran-da and NMPC/Eddy). See, e.g., Ante at 1066 & 1071-72.

. This price increase was rescinded in the wake of the Suspension Agreement. In its place came a much smaller increase on January 11, 1988 by PCS-three days after the Suspension Agreement created a price floor-which was followed thereafter by the remaining producers.

. The Supreme Court has also noted that:
The exchange of price data and other information among competitors does not invariably have anticompetitive effects; indeed such practices can in certain circumstances increase economic efficiency and render markets more, rather than less, competitive.
United States v. United States Gypsum Co., 438 U.S. 422, 441 n. 16, 98 S.Ct. 2864, 57 L.Ed.2d 854 (1978).

. In its footnote 14, the court purports to find a difference in price discussions where one purported conspirator gathers information and another purported conspirator gives the information. This difficult to understand argument makes nothing more than a distinction without a difference, especially here where there is clearly no evidence connecting any price discussions with the fixing, increasing or maintaining of a price level. See In re Baby Food, 166 F.3d at 125. The only evidence is to the contrary and dramatizes the court's flawed reasoning. When price verifications were made, there was no evidence that the companies increased prices or even held the line on prices. Instead, the court itself depicts producers cutting prices in response to confirmed price cuts by another producer on a particular sale. In one instance, the producer who verified a price was then underbid and lost the order. Ante at 1067-68. It is difficult to understand the reasoning that, on this evidence, transforms this from an obviously competitive market to a collusive agreement to fix prices. What the court has done, contrary to its own admoni- . tion, is view the price verifications in isolation without considering their actual results or attempting to make a connection with the fixing of prices. See Ante at 1062 (“In applying the Monsanto standard, we must view the evidence as a whole, rather than asking whether each item of evidence viewed in isolation meets the standard.” (citing In re Workers’ Compensation Ins. Antitrust Lit., 867 F.2d 1552, 1563 (8th Cir.1989); City of Tuscaloosa v. Horcros Chems., Inc., 158 F.3d 548, 565 (11th Cir.1998); Apex Oil Co. v. DiMauro, 822 F.2d 246, 254-55 (2d Cir.1987))).