Court Opinion

ID: 41542
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:06:44+00
Date Added: 2024-06-11T17:16:43.951031
License: Public Domain

United States Court of Appeals
                                                                   Fifth Circuit
                                                                F I L E D
                     UNITED STATES COURT OF APPEALS
                              FIFTH CIRCUIT                     March 20, 2006

                                                            Charles R. Fulbruge III
                                                                    Clerk
                              No. 04-41243

   PSKS, INC., doing business as Kay’s Kloset ... Kay’s Shoes;
          TONI COCHRAN L.L.C., doing business as Toni’s,

                                                Plaintiffs-Appellees,

                                 versus

                LEEGIN CREATIVE LEATHER PRODUCTS, INC.,

                                                 Defendant-Appellant.

           Appeal from the United States District Court
                 for the Eastern District of Texas
                         (2:03-CV-107-TJW)

Before BARKSDALE and CLEMENT, Circuit Judges, and ENGELHARDT,

District Judge*.

PER CURIAM:**

     Leegin Creative Leather Products, Inc., primarily challenges

application of the antitrust per se rule to its imposing a vertical

minimum price-fixing agreement on its retailer, PSKS, Inc., doing

business as Kay’s Kloset ... Kay’s Shoes.      Among other issues is

the awarded damages’ evidentiary basis.      AFFIRMED.

     *
      District Judge of the Eastern District of Louisiana, sitting
by designation.
     **
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                                    I.

     In 1995, Leegin, manufacturer of Brighton women’s accessories,

began   selling   its   products   to    PSKS,   a   women’s   clothing   and

accessories specialty store.       PSKS invested heavily in advertising

and promoting the Brighton brand; by 1999, Brighton was PSKS’ best-

selling and most profitable line.

     In 1997, Leegin instituted the “Brighton Retail Pricing and

Promotion Policy”, stating it would do business only with retailers

following its suggested retail prices for Brighton products.              In

doing so, Leegin made clear it would not do business with retailers

who engaged in discounting Brighton products they intended to

reorder.

     Leegin subsequently introduced the “Heart Store Program”, a

new marketing initiative designed to provide incentives to certain

Brighton retailers to promote the brand within a separate section

of their stores.    To become a Brighton Heart Store, retailers had

to pledge to “[f]ollow the Brighton Suggested Pricing Policy at all

times”.

     In late 2002, after learning PSKS had violated Leegin’s

pricing policy by placing PSKS’ entire line of Brighton products on

sale, Leegin suspended all shipments of Brighton products to PSKS.

As a result, its sales and profits decreased substantially.

     PSKS filed this action against Leegin under § 1 of the Sherman

Antitrust Act, 15 U.S.C. § 1:      (1) claiming it entered into illegal

agreements with retailers to fix Brighton products’ prices and

                                     2
terminated PSKS as a result of those agreements; and (2) seeking

future-lost-profits damages.          (Co-plaintiff Toni Cochran, L.L.C.’s

claims   were   dismissed      at   the     close    of    plaintiffs’     evidence.

Cochran did not appeal.)

     The jury found:       Leegin and its retailers agreed to fix the

retail prices of Brighton products; this caused PSKS to suffer

antitrust injury; and PSKS was entitled to damages of $1.2 million.

Pursuant to 15 U.S.C. § 15(a), the district court trebled the

damages and awarded attorney’s fees. Post-judgment, Leegin renewed

its motion for judgment as a matter of law and moved for a new

trial.   The motions were denied.

                                       II.

     Leegin does not challenge the jury’s finding it entered into

price-fixing agreements.         Instead, it challenges, inter alia, the

application of the per se rule and the damages’ evidentiary basis.

                                          A.

     Leegin     claims   the   rule    of      reason     should   apply   to   PSKS’

antitrust   claims.       This      issue      of   law   is   reviewed    de   novo.

Craftsmen Limousine, Inc. v. Ford Motor Co., 363 F.3d 761, 772 (8th

Cir. 2004) (“[A]lthough a court’s determination that the per se

rule applies might involve many fact questions, the selection of a

mode [of analysis] is entirely a question of law.”) (alteration in

original; internal citation and quotation marks omitted).                    Each of

the following three challenges fails.

                                          3
                                     1.

     Leegin asserts:      although the Supreme Court first applied the

per se rule to vertical price fixing in Dr. Miles Medical Co. v.

John D. Park & Sons Co., 220 U.S. 373 (1911), it has not applied

the rule consistently.        The cases cited by Leegin in which the

Court applied the rule of reason, however, did not involve a

vertical minimum price-fixing agreement.              See State Oil Co. v.

Khan, 522 U.S. 3 (1997) (considering the validity of the per se

rule against a vertical maximum price-fixing agreement); Bus.

Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717 (1988) (applying

the rule of reason to a vertical agreement that had the purpose and

effect of increasing retail prices, but without specifying the

price to be charged); Cont’l T. V., Inc. v. GTE Sylvania, Inc., 433
U.S. 36 (1977) (rejecting the per se rule for a vertical non-price

restriction).

     Because the Court has consistently applied the per se rule to

such agreements, we remain bound by its holding in Dr. Miles

Medical Co.      See also Simpson v. Union Oil Co. of Cal., 377 U.S.
13, 17 (1964) (“[A] supplier may not use coercion on its retail

outlets to achieve resale price maintenance”.); United States v.

Parke,   Davis     &   Co.,   362 U.S. 29,   44    (1960)   (“When   the

manufacturer’s actions ... go beyond mere announcement of his

policy and the simple refusal to deal, and he employs other means

                                      4
which effect adherence to his resale prices, ... he has put

together a combination in violation of the Sherman Act.”).                       In

Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 769 (1984)

(Brennan, J., concurring), Justice Brennan commented on the Court’s

continued      application   of   the       per   se   rule,    consistent   with

congressional intent, to distributor-termination cases in which

there is a concerted action to set prices:

              As the Court notes, the Solicitor General has
              filed a brief ... urging us to overrule the
              Court’s decision in Dr. Miles Medical Co. ....
              That decision has stood for 73 years, and
              Congress has certainly been aware of its
              existence throughout that time. Yet Congress
              has never enacted legislation to overrule the
              interpretation of the Sherman Act adopted in
              that case. Under these circumstances, I see
              no reason for us to depart from our
              longstanding interpretation of the Act.

                                     2.

     In the alternative, Leegin claims: its pricing policy did not

result   in    competitive   harm;      therefore,      it     qualifies   for   an

exception to the per se rule.            Leegin asserts both the Supreme

Court and this court have recognized exceptions to the rule’s

application in appropriate cases, citing Broadcast Music, Inc. v.

Columbia Broadcasting System, Inc., 441 U.S. 1 (1979); Abadir & Co.

v. First Mississippi Corp., 651 F.2d 422 (5th Cir. Unit A July

1981); and United States v. Realty Multi-List, Inc., 629 F.2d 1351

(5th Cir. 1980).

                                        5
     As before, none of these cases involved vertical minimum price

fixing.   Furthermore, each was decided before the Court reaffirmed

the per se rule’s application to vertical minimum price-fixing

agreements in Sharp Electronics Corp., Spray-Rite Service Corp.,

and Khan, as discussed supra.

                                       3.

     Leegin challenges the exclusion of its economic expert, who

opined:   (1) economic conditions did not dictate the per se rule’s

application;     and    (2)    Leegin’s     pricing    practices     were   pro-

competitive, justifying the rule of reason’s application.                     We

review for abuse of discretion.             Watkins v. Telsmith, Inc., 121
F.3d 984, 988 (5th Cir. 1997) (“District courts enjoy wide latitude

in determining the admissibility of expert testimony, and the

discretion of the trial judge and his or her decision will not be

disturbed   on   appeal       unless   manifestly     erroneous.”)    (internal

citations and quotation marks omitted).

     With the per se rule, expert testimony regarding economic

conditions and the pricing policy’s pro-competitive effects is not

relevant.   Viazis v. Am. Ass’n of Orthodontists, 314 F.3d 758, 765

(5th Cir. 2002) (“If application of the per se rule is appropriate,

competitive      harm    is     presumed,     and     further   analysis     is

unnecessary.”), cert. denied, 538 U.S. 1033 (2003); see also N.

Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958) (“[The]

principle of per se unreasonableness ... avoids the necessity for

                                        6
an incredibly complicated and prolonged economic investigation into

the entire history of the industry involved ... in an effort to

determine     ...    whether    a     particular      restraint   has        been

unreasonable”.)

                                      B.

     Leegin claims PSKS did not prove antitrust injury, maintaining

it is required under both the per se rule and the rule of reason.

Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 341-42

(1990).     Because antitrust injury vel non is a component of

standing, we review de novo.          DeLong Equip. Co. v. Wash. Mills

Electro Minerals Corp., 990 F.2d 1186, 1194 (11th Cir.), cert.

denied, 510 U.S. 1012 (1993); see also Doctor’s Hosp. of Jefferson,

Inc. v. Se. Med. Alliance, Inc., 123 F.3d 301, 305 (5th Cir. 1997)

(“Antitrust injury must be established for the plaintiff to have

standing under section 1 ... of the Sherman Act.”).

                                      1.

     Antitrust “injury ... [is what] the antitrust laws were

intended to prevent and ... flows from that which makes defendants’

acts unlawful”.     Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429
U.S. 477, 489 (1977).          “It ensures that the harm claimed ...

corresponds   to    the   rationale   for   finding    a   violation    of    the

antitrust laws in the first place.”         Atl. Richfield Co., 495 U.S.

at 342.

                                       7
     In Doctor’s Hospital of Jefferson, Inc., 123 F.3d at 305, our

court explained:   “[A]ntitrust injury for standing purposes should

be viewed from the perspective of the plaintiff’s position in the

marketplace, not from the merits-related perspective of the impact

of a defendant’s conduct on overall competition”.     Thus, antitrust

injury is distinct from injury to competition, “the latter of which

is often a component of substantive liability”.      Id.

     PSKS   suffered   antitrust   injury.   Its   refusal   to   follow

Leegin’s pricing policy resulted in inability to obtain its best-

selling and most profitable product line. See Pace Elecs., Inc. v.

Canon Computer Sys., Inc., 213 F.3d 118, 124 (3d Cir. 2000) (“[A]

dealer terminated for its refusal to abide by a vertical minimum

price fixing agreement suffers antitrust injury and may recover

losses flowing from that termination”.).

                                   2.

     In the alternative, Leegin claims the district court erred by

failing to instruct the jury on the definition of antitrust injury.

Because such injury is a component of standing for the court’s

determination, this claim necessarily fails. See Bell v. Dow Chem.

Co., 847 F.2d 1179, 1182 (5th Cir. 1988) (“Antitrust injury is a

component of the standing inquiry, not a separate qualification.”).

                                   C.

                                    8
       The jury awarded approximately 70 percent of the requested

damages:     $1.2, of the requested $1.7, million.                 Leegin contests

the damages’ evidentiary basis.               The jury’s award of antitrust

damages is reviewed under a relaxed standard.                  Bell Atl. Corp. v.

AT&T Corp., 339 F.3d 294, 303 (5th Cir. 2003) (“[T]he nature of an

antitrust claim means that some plaintiffs can only hypothesize

about what the state of their affairs would have been absent the

wrong ... and we have, therefore, declined to hold antitrust

plaintiffs to the same burden of proof of damages as demanded of

plaintiffs     in    other    civil     cases”.)       (internal    citations      and

quotation marks omitted); Park v. El Paso Bd. of Realtors, 764 F.2d
1053, 1067 (5th Cir. 1985) (“Once a plaintiff has proved by a

preponderance of the evidence the fact of injury, a jury may use

its discretion in determining the exact amount of damages resulting

from the antitrust violation.”), cert. denied, 474 U.S. 1102

(1986); Malcom v. Marathon Oil Co., 642 F.2d 845, 864 (5th Cir.

Unit    B   Apr.)    (“The    relaxation        of    standards    of    proof     are

particularly appropriate in cases where the finder of fact must

estimate lost future profits.”) (emphasis added), cert. denied, 454
U.S. 1125 (1981).

       In   calculating      damages,    PSKS’       expert   averaged    the    gross

profits     PSKS    earned    from    selling    Brighton      products    in     2000

($289,516), 2001 ($201,591), and 2002 ($141,458), concluding it

would lose an estimated $210,855 in gross profits each year.                      (The

                                          9
decline in gross profits during 2001 and 2002 was attributed to:

the 11 September 2001 terrorist attacks; and problems obtaining

Brighton products in 2002.) That amount was multiplied by ten, the

number of years PSKS’ co-owner estimated it would take PSKS to

recover from the termination of Brighton shipments, particularly

because of the line’s uniqueness. As discussed infra, PSKS offered

evidence that net profits were the same as gross profits; the total

was   discounted   to    present   value.     Leegin   did   not    offer    an

alternative method for calculating damages.            See Greene v. Gen.

Foods Corp., 517 F.2d 635, 665 (5th Cir. 1975) (noting defendant’s

failure “to demonstrate any better method of lost future profits

that could have been applied to the available data”), cert. denied,

424 U.S. 942 (1976).

      Obviously, it is impossible to prove PSKS’ exact profits had

Leegin not terminated its Brighton shipments.                Instead, PSKS

presented   expert      testimony,   which    “provide[d]    a     ‘just    and

reasonable estimate of the damage based on relevant data’”.                Bell

Atl. Corp., 339 F.3d at 303 (quoting Bigelow v. RKO Radio Pictures,

Inc., 327 U.S. 251, 264 (1946)).            Accordingly, pursuant to our

relaxed standard of review, each of the following four challenges

fails.

                                     1.

                                     10
     Leegin challenges the ten-year future-damages period.              The

expert relied on the above-referenced testimony that: it took PSKS

ten years to find Brighton; the business grew very fast once that

line was incorporated; and ten years was the absolute minimum it

would take PSKS to recover from the line’s termination.                This

testimony by PSKS’ co-owner was based on his 17-years experience

building a profitable business.

     The damages period is an issue for the jury.         Lehrman v. Gulf

Oil Corp., 464 F.2d 26, 47 (5th Cir.) (“The duration of the period

during which plaintiff might be expected to profit will vary from

case to case; it is susceptible of no precise formulation, and must

be left to the processes of the jury informed by the presentation

of conflicting evidence.”), cert. denied, 409 U.S. 1077 (1972).

                                  2.

     Leegin claims insufficient evidence for the lost net-profits

calculation.    In this regard, PSKS utilizes a point-of-sale system

to track the direct costs and selling price of its inventory,

allowing it to access information by an individual product or

product line.      PSKS’   co-owner    used   this   system   to   determine

Brighton’s contribution to PSKS’ net profits during the three years

prior to the termination, basing his projections on the average net

profits during those three years.       In doing so, he did not project

any sales growth, despite testimony that the retail stores to which

Leegin sold in 2003 experienced a 16-percent increase in revenues.

                                  11
Also, he did not consider profits from cross sales to customers who

came   to   the   store   to    purchase     Brighton      goods.      Further,   he

testified gross and net profits were the same in this instance,

because PSKS did not save costs as a result of its loss of the

Brighton line.

       Our court has approved future-profits estimates based on

averages of past history.            See Malcom, 642 F.2d at 859-60.              As

noted, although PSKS’ average profits from Brighton declined during

the three years considered, this decline was attributed to the

events of 11 September 2001 and PSKS’ difficulty in obtaining

Brighton products in 2002.

                                       3.

       Leegin maintains the damages model failed to account for

mitigation of damages.         It asserts PSKS profitably sold substitute

products shortly      after     it   lost    the    Brighton    line.     Leegin’s

representative, however, testified that, as early as 1998, she saw

lines of handbags, shoes, and belts that competed with Brighton

products.

       The mere presence of competing products does not show they

were   substitutes    for      the   Brighton      line,   or   that    their   sale

mitigated PSKS’ loss.          Its continued business of selling women’s

clothing and accessories, some of which are similar to the Brighton

line, does not negate the lost profits incurred from its inability

to sell Brighton products.           See Bhan v. NME Hosps., Inc., 669 F.
12
Supp. 998, 1014 (E.D. Cal. 1987) (recognizing that providing an

antitrust   violator       with    immunity    simply      because      the   victim

mitigated    damages   would        contravene       the    goal     of   limiting

anticompetitive conduct), aff’d, 929 F.2d 1404 (9th Cir.), cert.

denied, 502 U.S. 994 (1991).

                                       4.

     Finally,     Leegin     claims    the    damages      model     impermissibly

utilized a risk-free discount rate for the present-value award.

“[T]he selection of a discount factor is a question of fact to be

determined by the trier of fact”.             Bridas S.A.P.I.C. v. Gov’t of

Turkmenistan, 345 F.3d 347, 364 (5th Cir. 2003) (internal citations

and quotation marks omitted), cert. denied, 541 U.S. 937 (2004).

     The jury was properly instructed to award only the present

value of future damages.          It heard testimony, including on cross-

examination, regarding the rate utilized.

                                      III.

     For    the   foregoing       reasons,     the    judgment     is     AFFIRMED;

attorney’s fees and expenses incurred for this appeal are AWARDED

PSKS, pursuant to 15 U.S.C. § 15(a).                 This case is REMANDED to

determine that amount.

                              AFFIRMED; ATTORNEY’S FEES and EXPENSES

                                             AWARDED FOR APPEAL; REMANDED

                                       13