Court Opinion

ID: 2965757
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:44:33.568141+00
Date Added: 2024-06-11T15:01:33.474063
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<pre>          <br>                  United States Court of Appeals <br>                      For the First Circuit <br> <br>                       ____________________ <br> <br>No. 98-1652 <br> <br>               COASTAL FUELS OF PUERTO RICO, INC., <br> <br>                       Plaintiff, Appellee, <br> <br>                                v. <br> <br>                 CARIBBEAN PETROLEUM CORPORATION, <br> <br>                      Defendant, Appellant. <br> <br>                       ____________________ <br> <br>           APPEAL FROM THE UNITED STATES DISTRICT COURT <br> <br>                FOR THE DISTRICT OF PUERTO RICO <br>                                 <br>       [Hon. Juan M. Prez-Gimnez, U.S. District Judge] <br>                       ____________________ <br> <br>                             Before <br>                                 <br>                     Lynch, Circuit Judge, <br>                                 <br>Hall, Senior Circuit Judge, <br> <br>and Lipez, Circuit Judge. <br> <br>                       ____________________ <br> <br>     William L. Patton, with whom Steven A. Kaufman, Jane E. <br>Willis, Ropes & Gray, John M. Garcia, and Garcia & Fernandez were <br>on brief, for appellant. <br>     Michael S. Yauch, with whom Roberto Boneta, Munoz Boneta <br>Gonzales Arbona Benitez & Peral, Mark E. Haddad, and Sidley & <br>Austin were on brief, for appellee. <br>                       ____________________ <br> <br>                         April 14, 1999 <br>                       ____________________ <br>     LYNCH, Circuit Judge.  In its third visit to this court, <br>this antitrust price-discrimination case raises a number of <br>important damages issues. <br>     After the first trial in this case, this court upheld a <br>finding of antitrust liability against Caribbean Petroleum <br>Corporation ("CAPECO") on a Puerto Rican law price-discrimination <br>theory and a tort verdict of $500,000, but reversed a finding of <br>monopolization in violation of the Sherman Act.  We vacated the <br>jury verdict of $1.5 million in single antitrust damages (tripled, <br>to $4.5 million) and remanded for further proceedings.  We did so <br>because the antitrust verdict may have included damages for the <br>monopolization claim, on which we had reversed.  Thus, there was a <br>reasonable possibility the jury had awarded plaintiff too much.  <br>Because we were remanding for a new trial on damages, we did not <br>reach a number of CAPECO's specific challenges to damages evidence <br>presented by plaintiff Coastal Fuels of Puerto Rico ("Coastal"). SeeCoastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 79 <br>F.3d 182, 186, 200-01 (1st Cir.), cert. denied, 519 U.S. 927 <br>(1996). <br>     This appeal stems from those further proceedings.  <br>Eventually, the entire price-discrimination damages case was <br>retried and the second jury returned a verdict on the price- <br>discrimination claim which was three times larger ($4.5 million <br>before trebling) than the initial verdict.  Of this $4.5 million, <br>$2 million was for going-concern damages.  The district court <br>denied CAPECO's motions for a judgment as a matter of law, for a <br>new trial, or for remittitur of damages.  See Coastal Fuels of <br>Puerto Rico, Inc. v. Caribbean Petroleum Corp., Civ. No. 92-1584, <br>slip op. at 1 (D.P.R. Apr. 23, 1998) ("April 23, 1998 slip op."). <br>     CAPECO, the party for whose benefit the remand supposedly <br>operated, appeals from the damages retrial and verdict, raising a <br>myriad of issues.  Treating Puerto Rican price discrimination law <br>as largely equivalent to federal price discrimination law, seeCoastal Fuels, 79 F.3d at 190, as the parties have agreed, and thus <br>analyzing the case under the Robinson-Patman Act, we reverse and <br>remand.  We also confront and reject a number of CAPECO's other <br>claims, both to guide further proceedings in this case and to <br>emphasize our rejection of CAPECO's claim that judgment should <br>enter in its favor.   <br>                                I <br>     We set forth the basic facts which frame the dispute; <br>fuller details may be found in our earlier opinions.  CAPECO <br>operated a refinery in San Juan, Puerto Rico.  The refinery's <br>products included fuel appropriate for marine engines.  Resellers <br>purchased such fuel, sometimes called bunker fuel, and sold it to <br>cruise ships and other ocean-going vessels.  CAPECO's refinery was <br>the only one nearby; CAPECO was the only local source of bunker <br>fuel.  While a reseller could import fuel from another port, <br>prohibitive transportation costs made the practice uneconomical.  <br>CAPECO was, in effect, San Juan's only supplier of bunker fuel.  <br>CAPECO sold primarily to its two major long-standing customers, <br>Harbor Fuel Services, Inc. ("Harbor") and Caribbean Fuel Oil <br>Trading, Inc. ("Caribbean").  While Coastal's parent company, <br>Coastal Fuels Marketing, Inc. ("CFMI"), had operations elsewhere, <br>Coastal was a new entrant to the bunker-fuel market in San Juan.  <br>Coastal began doing business in Puerto Rico in October 1991.  It <br>looked to CAPECO to supply the needed fuel.  <br>     In September 1991, CAPECO agreed to sell to Coastal for <br>six months according to a price formula.  However, CAPECO sold to <br>two long-standing customers, Harbor and Caribbean, at a discount <br>from the price charged Coastal, the new entrant.  Harbor and <br>Caribbean in turn passed on most of this price advantage to their <br>customers.  In this court's opinion following the first trial we <br>found that "CAPECO's own expert witness quantified the total price <br>discrimination in favor of Caribbean and Harbor as $682,451.78 for <br>the period from October 1991 to April 1992."  Coastal Fuels, 79 <br>F.3d at 187.  Coastal was not profitable during this period. <br>     At the time of Coastal's entry into the San Juan market, <br>Harbor had 54% of the market, Caribbean had 40%, and Esso had 6%.  <br>Coastal's 1991 business plan projected it would gain a significant <br>foothold in the San Juan market within the first year of operation.  <br>Coastal estimated that it would be able to sell 100,000 barrels of <br>fuel per month, or more than a million barrels a year.  The total <br>size of the San Juan market, Coastal estimated, was between 2.5 and <br>4.0 million barrels per year.  During the first five months of <br>Coastal's operation, the actual average price advantage given by <br>CAPECO to Coastal's competitors was $.48 per barrel in favor of <br>Harbor and $.37 per barrel in favor of Caribbean.  During Coastal's <br>remaining thirteen months of operation, the price differential <br>varied, averaging about a $.07 per barrel disadvantage to Coastal.  <br>The cost of marine fuel oil sold by CAPECO during this eighteen <br>month period varied from $8 to $13 per barrel. <br>     In May 1992 Coastal filed this action and sought to <br>enjoin CAPECO from future price discrimination.  The district court <br>denied the injunction, and this court affirmed.  See Coastal Fuels <br>of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25 (1st <br>Cir. 1993).  After Coastal filed suit, CAPECO made a take-it-or- <br>leave-it price offer to Coastal, which Coastal took.  Coastal still <br>paid more for CAPECO's product than did Coastal's competitors.  <br>CAPECO cut off supply to Coastal completely on March 31, 1993, and <br>Coastal went out of business shortly thereafter.  Coastal never <br>became a profitable business; it lost almost $2 million during its <br>eighteen months in operation. <br>     In July 1992, Puerto Rico imposed an excise tax of $.84 <br>per barrel on the resale of bunker fuel in Puerto Rico.  The tax <br>hurt the total sales of bunker fuel in San Juan Harbor.  The <br>ultimate market voted with its fleet, as cruise boats chose to fill <br>up at other ports not subject to the tax.  The tax was repealed in <br>December 1993, eight months after Coastal had gone out of business.  <br>The excise tax reduced sales volumes in Puerto Rico by roughly 37%, <br>from about 3.8 million barrels in 1992 to about 2.4 million barrels <br>in 1993.  After the repeal of the excise tax in December 1993, the <br>San Juan sales volume started to climb back up, reaching 3.1 <br>million barrels in 1994.  After Coastal went out of business, one <br>of Coastal's competitors, Caribbean, also left the market, in the <br>fall of 1993.  The other major reseller, Harbor, thus enjoyed a <br>greater share of the market, although it faced new competition over <br>time. <br>     CAPECO itself closed down its refinery in April 1995.  In <br>1996, total San Juan Harbor sales volume was less than 2 million <br>barrels.  When CAPECO closed its refinery, Coastal had already been <br>out of business for more than two years.  At the time CAPECO <br>closed, it stated that its closing was temporary.  But it has <br>apparently not reopened its refinery.  As a result, bunker fuel <br>resellers in San Juan Harbor must import fuel from elsewhere. <br>                                II <br>     Our 1996 decision upheld a finding of liability on a <br>price-discrimination claim based on Puerto Rican law against <br>defendant CAPECO, reversed the claim under the federal Clayton Act, <br>as amended by the Robinson-Patman Act, because no discriminatory <br>transaction crossed a state line, and reversed a Sherman Act <br>monopolization claim.  The jury had awarded $1.5 million in single <br>antitrust damages (combining both the monopolization and price- <br>discrimination theories) and $500,000 for the tort claim.  The $1.5 <br>million was trebled and the $500,000 added.  The tort verdict is no <br>longer in dispute.  This court vacated the antitrust damages <br>verdict, saying the $1.5 million was most likely excessive because <br>it may well have included damages stemming from harms associated <br>with monopolization but not with price discrimination.  <br>     We found that CAPECO had waived any argument that this <br>was a "primary line" price-discrimination case and we analyzed it <br>as a case of "secondary line" discrimination:  "Thus, the theory of <br>injury is that CAPECO sold bunker fuel to Coastal at an unfavorable <br>price relative to Harbor and Caribbean, and consequently, <br>competition between Coastal, Harbor and Caribbean was thereby <br>injured."  Coastal Fuels, 79 F.3d at 189.  In secondary line cases, <br>plaintiffs usually allege that discriminatory pricing (here, by <br>CAPECO) gave favored purchasers (here, Harbor and Caribbean) an <br>advantage that caused injury through loss of business.  Typically, <br>Robinson-Patman plaintiffs show lost sales or lost profits or both. <br>     Once substantial price discrimination was shown, under <br>the Morton Salt rule, see FTC v. Morton Salt Co., 334 U.S. 37 <br>(1948), we held there was a prima facie case of injury to <br>competition, see Coastal Fuels, 79 F.3d at 191-93.  Recognizing <br>that the Robinson-Patman Act, unlike the Sherman Act, was meant <br>less to protect consumer welfare than to protect small merchants, <br>this court rejected CAPECO's arguments that changes in the law on <br>primary line price discrimination, more akin to the Sherman Act, <br>meant that the Morton Salt rule could no longer be applied to <br>secondary-line Robinson-Patman cases.  See id. at 191-93. <br>     Because the jury necessarily concluded that CAPECO's <br>evidence was insufficient to overcome the prima facie case plus <br>other evidence offered by Coastal, this court examined whether <br>CAPECO's evidence was so strong as to compel the conclusion that <br>there was no causal connection between the price differential and <br>Coastal's lost sales and profits.  We held that CAPECO's evidence <br>was not sufficient to conclude there was no causal relationship to <br>Coastal's lost sales or profits.  Thus, we found no basis to <br>reverse the jury's implicit finding of actual injury to <br>competition.  We stated: <br>     [R]egardless of whether these costs were factored <br>     directly into the prices that Coastal offered, or were <br>     later calculated into Coastal's bottom line, these costs <br>     affected Coastal's pricing.  Certainly, no argument can <br>     be made from this evidence alone that bunker fuel costs, <br>     no matter when accounted for, were not causally connected <br>     to Coastal's lost profits. <br> <br>Id. at 194. <br>     Our discussion of the damages awarded at the first trial <br>focused on only two issues, although others were raised.  The first <br>was whether Coastal, as a new market entrant, was required to use <br>the "yardstick" method as opposed to the "before and after method" <br>of calculating damages.  The second was the possibility of an <br>excessive recovery.  Because we were vacating and remanding for <br>further proceedings on the second issue, we did not decide the <br>first issue (the methodology for calculating damages) or any other <br>issues.  We did not reach CAPECO's challenges to Coastal's expert <br>testimony, in particular CAPECO's claim that Coastal's expert <br>should not have been permitted to calculate going-concern damages <br>as of 1996, rather than as of the date in 1993 that Coastal went <br>out of business.  See id. at 200-01. <br>                               III <br>A.   The Further Proceedings <br>     The parties disagreed about what should happen on remand.  <br>CAPECO argued for a new trial in order to reopen issues of injury <br>in fact and causation as well as to determine the appropriate <br>amount of damages.  In contrast, Coastal asked the court to enter <br>a verdict of $1.5 million (before trebling) under Federal Rule of <br>Civil Procedure 49(a) on the ground that there had been no <br>inclusion of monopolization damages in the verdict and therefore no <br>duplication in that sum. <br>     The district court rejected both CAPECO's and Coastal's <br>arguments.  With regard to CAPECO's arguments, the court stated <br>that CAPECO could not reopen the issue of price-discrimination <br>liability, because remand was for determination of damages only.  <br>See Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum <br>Corp., Civ. No. 92-1584, slip op. at 3-4 (D.P.R. Mar. 5, 1997).  <br>With regard to Coastal's request, the court stated that <br>"[c]onsideration of the flawed [monopolization] claim may have <br>affected the verdict, and it is impossible to tell whether or to <br>what extent it did."  Id. at 9.  The court thus ordered "a new <br>trial by jury to determine damages due solely to price <br>discrimination."  Id. at 10.  The court concluded that any <br>objection to the "before and after" methodology had been waived by <br>CAPECO.  It also concluded that "the methodology used is adequate, <br>particularly in light of the relatively relaxed standard for <br>establishing the amount of damages."  Id. at 11. <br>B.   Evidence at the Second Trial <br>     Executives at Coastal and its affiliated companies <br>testified they had prepared a business plan which projected that <br>Coastal would initially sell about 100,000 barrels a month.  The <br>prospective customers were expected largely to come from customers <br>who bought from Coastal's sister companies' operations at other <br>ports.  Coastal's plan called for a gross margin of $1.65 per <br>barrel (compared with Harbor and Caribbean's respective margins of <br>$1.79 and $1.83 per barrel).  Coastal's market share rose over its <br>first several months of operation, reaching 27% in December 1991.  <br>Its share thereafter dropped to 15% over 1992; Coastal claims that <br>this drop resulted from its competitors passing on CAPECO's <br>discriminatory discounts to their customers. <br>     Coastal's principal damages witness, Robert Sherwin, did <br>not use either a "yardstick" or a "before-and-after" methodology <br>but rather what Coastal calls a "but-for" methodology.  Sherwin's <br>choice of methodology was supported by the testimony of another <br>Coastal expert, Professor Bradford Cornell of UCLA.  Sherwin <br>calculated total damages near $8 million, roughly consisting of two <br>components.  He calculated lost profits from 1991 to 1996 at $3.475 <br>million.  This component in turn included actual lost profits from <br>1991 to 1993 and projected lost profits from 1993 through 1996.  As <br>in the first trial, he also calculated Coastal's going-concern <br>value.  In the first trial, Sherwin valued Coastal's going concern <br>value at $4.379 million as of the end of 1996.  At the second <br>trial, he valued Coastal's going concern value at $4.49 million as <br>of the end of 1996.  At the second trial, the choice of 1996 was <br>justified as the first date near which there was market stability.  <br>Although at the first trial Sherwin testified that Coastal's actual <br>damages were approximately $7 million, in the second trial he <br>apparently modified his analysis to take account of actual events <br>in 1994 and 1995, after the first trial.  It should also be noted <br>that the $7 million at the first trial also included monopolization <br>damages, but the $8 million damages estimate at the second trial <br>did not.  Sherwin did testify that the imposition of the tax on <br>bunker fuel in mid-1992 meant, apart from any price discrimination, <br>that Coastal would not have made its projected $200,000 profit for <br>that year.  Further, he testified that in 1993, due partially to <br>the excise tax, Coastal would have lost over $300,000. <br>     CAPECO's primary damages expert was Professor Jerry <br>Hausman of MIT.  For purposes of his analysis, he calculated what <br>Coastal's market share would have been, absent price <br>discrimination, and compared his results with what actually <br>happened.  Hausman testified that Coastal's market share, around <br>16%, would not have changed if there had been no price <br>discrimination, that Coastal lost no sales as a result of price <br>discrimination, and that at most it lost margin on sales actually <br>made.  He calculated these lost-margin damages at $106,000.  <br>However, his testimony on market share and his damages calculation <br>were stricken by the district court and the jury was told to <br>disregard his testimony.  Coastal characterizes this exclusion as <br>justifiably based on Daubert and Rule 26 grounds; CAPECO believes <br>that the court erred under Daubert and Rule 26.   <br>     Dr. Hausman also testified that Coastal would have gone <br>out of business in April 1993 even absent price discrimination and <br>so there was no basis for post-April 1993 damages.  This later <br>testimony was apparently also stricken.  After cross-examination, <br>the court instructed the jury to disregard Hausman's testimony, <br>stating:  <br>     I have excluded . . . all of Dr. Hausman's testimony <br>     concerning his damages report . . . .  That is no longer <br>     evidence. . . . It is not a fact in the case, and it <br>     should not enter into your considerations when you go to <br>     deliberate.  <br>  <br>CAPECO's other expert, Dr. Freyre, made no independent calculation <br>of damages, but testified that the excise tax had a bigger effect <br>on Coastal than the price discrimination and that Sherwin's market- <br>share analysis was based on unreasonable assumptions. <br>                                IV <br>A.   Damages Instructions <br>     The parties clash over whether the district court erred <br>in its instructions to the jury regarding damages and whether it <br>was permissible for the jury to award lost profits up to the time <br>of trial in 1998 and going-concern value as of that date.  We find <br>error.   <br>     The relevant portion of the court's instructions stated: <br>     Plaintiff claims it is entitled to recover any profits it <br>     lost as a result of the price discrimination caused by <br>     the defendant.  Profit in this sense is net profit, and <br>     simply means the amount by which plaintiff's gross <br>     revenues would have exceeded all of the costs and the <br>     expenses that would have been necessary to produce those <br>     revenues. <br>          Plaintiff also claims it is entitled to damages <br>     for future lost profits as a result of the price <br>     discrimination caused by the defendant.  If you find that <br>     defendant's price discrimination has caused plaintiff to <br>     lose profits it could otherwise reasonably expect to earn <br>     in the future, you may award plaintiff damages for those <br>     future lost profits. <br>          And in computing future profits, the law provides <br>     that the plaintiff may recover his lost profits from the <br>     date it cease[d] doing business [in 1993] until a date at <br>     or near trial, and in addition, its going-concern value <br>     as of that day.      <br> <br>No instructions were given as to the meaning of going-concern <br>value.  CAPECO preserved its objections relevant to this appeal, <br>and neither party claims that this issue was resolved by our prior <br>opinion in this case.   <br>     The trial court essentially set three damages periods: a) <br>damages until Coastal went out of business in 1993; b) damages from <br>1993 until the time of the 1998 trial; and c) Coastal's going- <br>concern value as of the 1998 trial.  For purposes of the verdict <br>form, damages from periods a) and b) together were given as a <br>single sum -- only going-concern damages were specifically <br>separated out on the verdict form.  These three periods differed <br>somewhat from the periods used by Sherwin, Coastal's damages <br>expert.  Sherwin broke the damages down into actual damages prior <br>to March 31, 1993, lost profits from that date until December 31, <br>1996, and going-concern damages as of the end of 1996.  We do not <br>know whether the jury estimated going-concern value as of December <br>31, 1996, as Sherwin testified, or as of a date closer to trial in <br>1998, as the court instructed.  In any event, whether the <br>calculation was done as of the end of 1996 or as of early 1998 <br>makes no difference to our finding that going-concern damages <br>should have been calculated as of early April 1993.  As explained <br>below, we think the calculation of going concern value should <br>normally be as of the date the company goes out of business.  Of <br>the various damages models available, that model is most likely to <br>be accurate.   <br>     CAPECO first attacks the latter two categories of the <br>district court's instructions -- lost profits and going-concern <br>value -- and of Sherwin's calculations.  CAPECO argues that the <br>court erred in instructing the jury that it should assess Coastal's <br>going-concern value (and consequently future lost profits) as of a <br>time near trial in 1998, not the time Coastal left the San Juan <br>market in April 1993.  We find that the court erred in its <br>instructions and that lost profits were limited to the period <br>Coastal was actually in business and going-concern value should <br>have been calculated as of the date Coastal went out of business.  <br>     The court did not instruct the jury that the jury could <br>find going-concern value as of some time between 1993 and the 1998 <br>trial date, or as of the time Coastal went out of business in 1993.  <br>Nor did it so instruct as to the calculation of lost future <br>profits.  Because of this lack of alternatives, the court's <br>instructions could effectively be understood to tell the jury that <br>if it awarded damages for future lost profits or for going-concern <br>value, it had to do so calculating those damages respectively to a <br>date at or near trial and as of a date at or near trial.  This was <br>error, because the court could not direct the jury to assume the <br>hypothesis was true that Coastal would have remained in business <br>until 1998.  But the instruction was also wrong for other, more <br>fundamental reasons. <br>     The parties' arguments help frame the problem.  CAPECO <br>contends that, as a matter of law under our decision in Farmington <br>Dowel Products Co. v. Forster Manufacturing Co., 421 F.2d 61 (1st <br>Cir. 1970), and as a matter of the facts of this case, there was no <br>basis to go beyond 1993 as to either going-concern value or lost <br>profits.  It says Sherwin's estimate of going-concern value was <br>excessively speculative because the estimate was based on <br>assumptions that CAPECO would not have terminated its relationship <br>with Coastal, regardless of price discrimination, that Coastal <br>would have nonetheless remained in business beyond 1993, and that <br>Coastal would have remained and enjoyed a permanent advantage in <br>the San Juan market once CAPECO closed its refinery in 1995.  <br>According to CAPECO, the difference in the choice of date at which <br>to make a calculation of going-concern value is significant because <br>in 1993 Coastal was unprofitable, had no likelihood of becoming <br>profitable, and thus had no going-concern value, due both to the <br>tax and to Coastal's lack of a local supplier of bunker oil. <br>     Coastal, in turn, contends that assessing market <br>conditions as of 1993 would have been inappropriate because market <br>conditions were "abnormal" due to the combination of the excise tax <br>and the price discrimination.  Market conditions, it says, were <br>much more stable by the end of 1996, thus permitting a more <br>accurate evaluation of Coastal's going-concern value. <br>     The principle that an antitrust plaintiff may recover <br>both actual lost profits and diminution in the value of its <br>business is well established.  See Story Parchment Co. v. Paterson <br>Parchment Paper Co., 282 U.S. 555, 561-67 (1931).  Where plaintiff <br>has been forced out of business, however, it is awarded its going- <br>concern value or its projected future lost profits, but not both.  <br>Usually courts follow the Farmington Dowel model and award going- <br>concern value for a company which is no longer in business.  See  <br>Farmington Dowel, 421 F.2d at 81; 2 P. Areeda & H. Hovenkamp, <br>Antitrust Law  365b4, at 243 (rev. ed. 1995) (stating that damages <br>for a plaintiff who is forced out of business "would ordinarily be <br>measured by its capital value: the price at which he could <br>reasonably have sold the business as a going concern").  The choice <br>of date on which going-concern damages should be evaluated has <br>appropriately focused on whether a particular means of evaluating <br>a firm's going-concern value would be excessively speculative.   <br>     In Farmington Dowel, this court required that plaintiff's <br>damages be calculated as of the date plaintiff went out of <br>business, as opposed to a date close to trial, some ten years <br>later.  See Farmington Dowel, 421 F.2d at 81.  Farmington rejected <br>the method urged by plaintiff because it  <br>     would have required an estimate of profits for a period <br>     of some ten years during which the company neither <br>     existed nor made profits, plus an estimate of the going <br>     concern value . . . of a company which had ceased being <br>     a going concern over ten years before, which estimate <br>     would have involved a further estimate of profits for a <br>     more remote future period.   <br> <br>Id.  Substitute "four years" for the "ten years" in Farmington <br>Dowel and we have the same situation here.   <br>     In Farmington Dowel, we noted that evaluating going- <br>concern value at a date "long after the company ceased to be a going <br>concern" relied "too heavily on speculation and conjecture."  Id.  <br>A number of other circuits similarly have estimated going-concern <br>values as of the date the plaintiff ceased doing business.  See,e.g., Heatransfer Corp. v. Volkswagenwerk, A.G., 553 F.2d 964, 986 <br>n.20 (5th Cir. 1977) ("Lost capital value is to be determined at the <br>date that a business ceases to do business."); Albrecht v. Herald <br>Co., 452 F.2d 124, 130-31 (8th Cir. 1971), abrogated on other <br>grounds by State Oil Co. v. Kahn, 522 U.S. 3 (1997).  But seeSouthern Pines Chrysler-Plymouth, Inc. v. Chrysler Corp., 826 F.2d <br>1360, 1363-64 (4th Cir. 1987).  In addition, we have remanded or <br>reversed antitrust cases where we have found that significant error <br>by the trial court may have contributed to the jury award.  See, <br>e.g., Sullivan v. National Football League, 34 F.3d 1091, 1106-1113 <br>(1st Cir. 1994) (invalidating a $51 million jury verdict for <br>antitrust damages due to trial court error in jury instructions). <br>     Coastal contends that its facts are different from those <br>in Farmington Dowel, and in particular that the length of time <br>between the date Coastal was forced out of business and the date of <br>the second damages trial (more than four years later) was not so <br>long as to render a date near trial excessively speculative.  <br>Coastal also contends that going-concern value is best estimated <br>given reasonably normal business conditions, a general proposition <br>with which Dr. Freyre, one of CAPECO's experts, agreed.  Coastal <br>then argues that such conditions only existed after the tax was <br>repealed.  <br>     We conclude that the Farmington Dowel framework -- that <br>going-concern value should be evaluated as of the time plaintiff <br>goes out of business and actual lost profits awarded only up to that <br>date -- is and should be the norm.  It may be that in some <br>situations the difference between the date the company went out of <br>business and the date of trial is not great and the issue does not <br>arise in any significant sense.  But here, more than four years had <br>passed.  We do not adopt a per se rule that four years is inherently <br>too great a gap, but we think it raises such risks of speculative <br>evidence that the Farmington Dowel framework presumptively applies. <br>     There are significant differences between the methodology <br>followed by Coastal's expert and the trial court instructions on the <br>one hand, and the Farmington Dowel framework on the other.  The <br>trial court's instructions effectively assumed that Coastal would <br>have existed four years longer than it did, and thus deserved any <br>lost profits for that period.  In addition, the jury was asked to <br>give additional damages for going-concern value as of 1998.  The <br>Farmington Dowel framework, in contrast, asks what a reasonable <br>buyer would have paid for Coastal in 1993 (rather than in 1998, <br>where any going-concern value assumes Coastal survives until 1998).  <br>That is a very different question. <br>     The burden is on the plaintiff to show circumstances which <br>warrant choice of some date other than the date the company went out <br>of business and that the evidence proffered is not speculative.  <br>Coastal has not made that showing and is thus bound by the <br>Farmington Dowel framework. <br>     Coastal contends that it is excused from using the date <br>the company went out of business because going-concern damages <br>should be considered only at a time of market stability.  There are <br>several responses.  First, whether that proposition is true depends <br>upon context.  Inherent instability in a market (for reasons other <br>than defendant's violation of law) hardly warrants building in an <br>assumption that the company would have survived such instability.  <br>Second, given the facts of this case, this is a hollow argument.  <br>Although the Puerto Rico excise tax may have made the market <br>unstable, this market appears to have been inherently unstable: <br>numerous competitors entered and exited the San Juan market during <br>the period this dispute covers and the price of bunker fuel <br>fluctuated widely.  There is little reason to suggest that the <br>market was more stable as of the date of trial -- when CAPECO had <br>actually shut its refinery several years earlier.  It may be that <br>in certain cases temporary market instability will provide a ground <br>for departing from the rule we articulate here, but this is not such <br>a case.   <br>     The third response is that market stability four or ten <br>years later does not mean that the exercise of estimating lost <br>profits or going-concern damages over that intervening period is not <br>speculative.  That Coastal's choice of date on which to calculate <br>its going-concern damages was arbitrary, and thus speculative, is <br>highlighted by the fact that the district court and Sherwin actually <br>selected different dates on which the going-concern valuation should <br>be made -- Sherwin argued that the calculation should be done as of <br>the end of 1996, while the court instructed the jury to perform the <br>calculation as of a date near the February 1998 trial.  This in turn <br>raises the prospect that there may have been an additional error in <br>an impermissible overlap of fourteen months in the awards of lost <br>profits and going-concern value if the jury used Coastal's expert's <br>date and calculations to determine going-concern value and the <br>district court's date to calculate lost profits. <br>     The use of a date more than four years after the actual <br>events, on the facts of this case, strikes us as a speculative <br>enterprise, and Coastal's justification does not suffice.  In <br>Sullivan v. Tagliabue, 25 F.3d 43 (1st Cir. 1994), we commented that <br>damages were likely speculative where "the asserted harm . . . is <br>indirect, and likely the result, at least in part, of independent <br>intervening factors" and where damages are difficult to calculate.  <br>Id. at 52.  In Associated General Contractors of California, Inc.v. California State Council of Carpenters, 459 U.S. 519 (1983), the <br>Supreme Court commented that an antitrust damage claim was highly <br>speculative where harm was "indirect" and "may have been produced <br>by independent factors."  Id. at 542. <br>     Further, our sense that Coastal's methodology is very <br>speculative is confirmed by what actually happened.  Here, because <br>of the lapse of time, we have some information about later market <br>conditions.  That information confirms our earlier judgment that <br>this case requires adherence to the Farmington Dowel format.  CAPECO <br>argues that awarding damages to Coastal as if it had remained in <br>business involves assuming too many links in the causal chain: that <br>Coastal would have stayed in business despite the tax, that Coastal <br>would then have been well-positioned to reap the benefits of the <br>repeal of the tax, and that Coastal would have survived the closing <br>of the CAPECO refinery and would have been even better placed to <br>take advantage of CAPECO's closing of its refinery.  <br>     These links are sufficiently questionable as to reinforce <br>the use of the Farmington Dowel methodology.  Coastal's San Juan <br>business was not profitable during the short time it was in <br>business.  It lost over $2 million in eighteen months.  Indeed <br>Coastal's own expert said that Coastal would have lost $300,000 in <br>1993.  But while Coastal presented evidence regarding the profits <br>it might have earned had it still been competing in San Juan after <br>1996, it presented little evidence regarding its ability to become <br>profitable and remain in San Juan up until that date.  For example, <br>Coastal presented little evidence showing why it was more akin to <br>Harbor, a competitor with a San Juan market share ranging from 71% <br>to 100% between 1994 and 1996, than to other suppliers that failed <br>to survive.  In addition to the assumption that Coastal would have <br>survived in what was by all accounts a very competitive market, <br>there is also the assumption that Coastal would have reaped a <br>windfall from CAPECO's 1995 cessation of refining operations.  <br>     At first blush it might seem odd that Coastal would claim <br>to receive a benefit from CAPECO's departure from the market in <br>1995.  CAPECO  was, after all, the sole supplier of both Coastal and <br>Coastal's competitors, and loss of a supplier who is a sole source <br>is not usually good news for a company.  But Coastal says it was <br>uniquely blessed -- it could have brought in supplies from other <br>Coastal operations elsewhere and thus would have gained market <br>share.  The argument proves too much.  Coastal did not reenter the <br>market when CAPECO closed its refinery in 1995 or any time <br>thereafter, despite the potential profits to be made.  It is simply <br>too speculative to build in an assumption that Coastal certainly <br>would have been able to rely on imports from elsewhere in a <br>hypothetical world.  Thus, this case is governed by the Farmington <br>Dowel rule that going-concern value is determined as of the date <br>Coastal went out of business. <br>     Farmington Dowel also governs a related aspect of damages.  <br>Farmington Dowel held that the district court correctly confined <br>plaintiff to the lost profits up until the date the plaintiff went <br>out of business plus the going-concern value on that date.  SeeFarmington Dowel, 421 F.2d at 80-82.  It follows that lost profits <br>beyond 1993 -- the profits Coastal claims that it would have <br>received from the date it went out of business until the second <br>trial in 1998 -- cannot be awarded separately.  Projected future <br>profits may be factored into the going-concern value of the firm at <br>the time it went out of business.  Coastal may recover actual <br>damages until it went out of business.  It may also recover its <br>going-concern value as of that date.  But it may not recover both <br>going-concern value and lost profits after that date.  As this court <br>said in Farmington: <br>     To do so would result in a clear duplication: [the <br>     plaintiff] would get its present value as a going concern <br>     plus its future profits, but the latter figure would be <br>     a major element in determining the former figure. <br> <br>Id. at 82; see also 2 Areeda & Hovenkamp  365b4, at 244 ("Of <br>course, both future profits and going-concern value may not be <br>granted in a given case, for that would be double counting.  <br>Furthermore, any such damages must be reduced by revenues made <br>possible by the termination." (footnote omitted)).   <br>     We know that the second verdict assigned $2 million to the <br>going-concern value, a value instructed to be calculated as of 1998.  <br>This means that the jury assigned $2.5 million to the remaining <br>damages -- that is, damages from Coastal's inception until Coastal <br>went out of business in 1993 plus damages from 1993 until 1998.  <br>Because we are unable to assign a portion of the damages to the <br>losses Coastal suffered prior to March 1993, we cannot save any <br>portion of the verdict.  Thus, if the parties are unable to resolve <br>the matter, it must go back for yet another damages trial. <br>     At that trial Coastal is confined to its actual lost <br>profits as of the date it went out of business in 1993, plus its <br>going-concern value calculated as of that date but for CAPECO's <br>price discrimination.  This means what a willing buyer would have <br>paid for Coastal in early April 1993.  We emphasize that the going- <br>concern value is not necessarily zero.  The mere fact that Coastal <br>had never earned profit to that point does not mean it had no value <br>as a going concern.  See Heatransfer Corp., 553 F.2d at 986 n.20 <br>("[T]he Court does not believe that a going concern, which is the <br>victim of an anti-competitive practice, must forego damages for <br>sales it would have made as the result of the natural expansion of <br>its business simply because it was victimized early in its existence <br>before its attempts to expand could ripen into evidence of <br>preparedness and intent to increase its output."); Terrell v. <br>Household Goods Carriers' Bureau, 494 F.2d 16, 23 n.12 (5th Cir. <br>1974) (rejecting an argument that a business that was not profitable <br>as of the time it went out of business should be valued at zero, and <br>commenting that "[t]o deny recovery to a businessman who has <br>struggled to establish a business in the face of wrongful conduct <br>by a competitor simply because he never managed to escape from the <br>quicksand of red ink to the dry land of profitable enterprise would <br>make a mockery of the private antitrust remedy"). <br>B.   CAPECO's Argument Against Any Going-Concern Value <br>     CAPECO makes two other arguments which it says mean that <br>the jury could not even consider whether to award going-concern <br>damages at all: CAPECO contends that its refusal to deal with <br>Coastal after March 1993 was completely legal and therefore no <br>antitrust damages could lie after the termination, and that awarding <br>damages after that date would constitute a duplicative recovery.  <br>These arguments are different from its argument that Farmington <br>Dowel must apply.  The logic of these arguments would require entry <br>of a verdict in CAPECO's favor on all claims except claims for the <br>actual damages Coastal suffered prior to CAPECO's cessation of <br>business on March 31, 1993.  We reject both arguments.  We also <br>reject CAPECO's argument that the jury was required to conclude that <br>Coastal suffered no damages before March 31, 1993 as a result of the <br>price discrimination. <br>     First, CAPECO argues that this court "held that CAPECO's <br>refusal to deal with Coastal after March 31, 1993 did not violate <br>the antitrust laws."  From this CAPECO argues that it cannot be <br>responsible for any damages stemming from Coastal's going out of <br>business or damages after that date.  Whether or not the syllogism <br>is sound, the premise is not.  This court did not hold that CAPECO's <br>refusal to deal was not illegal. <br>     Further, the evidence fully supported the district court's <br>finding that "there was sufficient evidence upon which the jury <br>could conclude that Coastal closed down its operations because of <br>the price discrimination."  April 23, 1998 slip op. at 4.  Coastal <br>presented testimony from Daniel Hill, the former chairman of Coastal <br>Fuels of Puerto Rico, that Coastal departed from the San Juan market <br>because of the price discrimination and refusal to deal.  As the <br>district court noted, "CAPECO had a full opportunity to cross- <br>examine Mr. Hill based on his 1994 testimony and did so.  Any <br>questions as to credibility were for the jury."  Id.  CAPECO's <br>refusal to deal was a direct result of Coastal's filing of this <br>lawsuit and thus of CAPECO's price discrimination.  We need not <br>determine whether CAPECO's price discrimination directly forced <br>Coastal out of business or whether price discrimination led to the <br>refusal to deal and thus Coastal's demise; in any event, sufficient <br>evidence was presented to the jury for it to find that Coastal's <br>going out of business was causally linked to CAPECO's illegal <br>behavior. <br>     In contrast to the evidence presented by Coastal that the <br>refusal to deal was a direct result of CAPECO's price <br>discrimination, CAPECO has cited no portion of the record that <br>supports its contention that it would have cut Coastal off absent <br>the price discrimination and ensuing lawsuit, apparently because <br>CAPECO did not introduce any such evidence.  See id. at 5 ("CAPECO <br>cites no authority to sustain its assertion that a defendant who is <br>engaging in price discrimination must be allowed to stop the accrual <br>of a plaintiff's damages by refusing to deal. . . . CAPECO presented <br>no testimony as to the refusal to deal and, in fact, never argued <br>to the jury that Coastal was not entitled to any future profits <br>because of the refusal to deal.").  Given this failure, we agree <br>with the district court's determination "that the jury had <br>sufficient evidence upon which it could have concluded that <br>Coastal's . . . decision to close operations [was] due to price <br>discrimination."  Id.  We consider this issue -- of whether damages <br>from Coastal's going out of business were causally related to the <br>price discrimination -- to have been resolved against CAPECO by at <br>least the second (and perhaps the first) jury, and CAPECO is not <br>free to argue otherwise on remand.  <br>C.   Duplication of Tort Recovery <br>     CAPECO's argument that the price-discrimination recovery <br>duplicated the tort recovery in the first trial fails.  CAPECO <br>contends that the tort award from the first trial was, in effect, <br>an award of lost profits for the period after 1993, and thus that <br>any post-1993 damages for price discrimination would constitute a <br>duplicative recovery.  The district court rejected this contention, <br>noting that "Coastal's expert testified only as to damages resulting <br>from price discrimination and CAPECO presented no evidence that any <br>part of Coastal's damages were occasioned by CAPECO's tortious <br>conduct."  Id. at 15.  In its brief to this court, CAPECO does not <br>point to evidence in the record that suggests otherwise.   <br>     More importantly, this court earlier found that CAPECO had <br>waived its duplicative recovery argument.  We explicitly rejected <br>CAPECO's claim that a new trial on liability or a remittitur was <br>required because an award of damages for price discrimination would <br>be duplicative of the tort award.  See Coastal Fuels, 79 F.3d at <br>201-02.  That issue was foreclosed, should not have been raised <br>here, and may not be raised again. <br>D.   Other Instructions <br>     There was another type of error in the jury instructions.  <br>That error has to do with the burden of proof.  The judge instructed <br>the jury that "Coastal is not required to prove the amount of its <br>damages with any certainty."  As stated, the instruction was <br>acceptable.  The court expressly instructed the jury that because <br>the first trial had determined that CAPECO's price discrimination <br>had caused injury to Coastal, the jury's only function was to <br>determine the amount of the damages.  Although the district court <br>was correct as to the scope of the remand -- to determine the amount <br>of damages -- in doing so the court went on to expressly instruct <br>the jury to disregard the preponderance-of-the-evidence standard and <br>to apply a lesser standard:  "At the beginning of the case I <br>mentioned to you preponderance of the evidence.  You must put that <br>out of your mind, because in a price discrimination case such as <br>this one, a lesser standard is applied."  That was error. <br>     The district court thought its instruction was required <br>by statements in our prior opinion.  See April 23, 1998 slip op. at <br>3, 8 (citing Coastal Fuels, 79 F.3d at 200).  The confusion in this <br>area starts with the language of the 1931 Supreme Court decision in <br>Story Parchment.  Story Parchment was a Sherman Act conspiracy-to- <br>monopolize case in which the three defendant companies conspired to <br>destroy the plaintiff company, a new entrant in the field, by so <br>cutting their previously stable prices that the prices fell first <br>below the point of fair profit and later below the costs of <br>production.  The jury awarded damages based on evidence comparing <br>the old prices, which were reasonable and which the jury found would <br>have been maintained but for the unlawful acts, with the prices <br>actually received.  The circuit court reversed the verdict, <br>concluding there was no basis for a reasonable inference that prices <br>in excess of those actually realized would have prevailed if there <br>had been no unlawful combination, and that in any event the damages <br>were based on speculation and conjecture.  The Supreme Court <br>disagreed and said, famously: <br>     Where the tort itself is of such a nature as to   preclude <br>     the ascertainment of the amount of damages with   certainty, it would be a perversion of fundamental     principles of justice to deny all relief to the injured <br>     person, and thereby relieve the wrongdoer from making any <br>     amend for his acts.  In such case, while the damages may <br>     not be determined by mere speculation or guess, it will <br>     be enough if the evidence show the extent of the damages <br>     as a matter of just and reasonable inference, although <br>     the result be only approximate. <br> <br>Story Parchment, 282 U.S. at 563.  It was from this language that <br>the district court picked up its "just and reasonable inference" <br>language, and it is presumably on this same language that the court <br>based its instruction that plaintiff bore a burden of proof of less <br>than a preponderance of the evidence.  We read Story Parchment to <br>hold that the amount of damages is an issue on which reasonable <br>estimates based on inferences are permissible.  But this does not <br>mean that the jury is free to act on less than a preponderance of <br>the evidence.  See generally Story Parchment, 282 U.S. 555; see alsoJ. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 568 <br>(1981); Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. <br>359, 378-79 (1927).  In Story Parchment, the Court distinguished <br>between two different situations involving uncertain damages: one, <br>where uncertain damages are not recoverable because they are not the <br>certain result of the harm; the other, where damages are recoverable <br>because the fact of damage is "definitely attributable to the wrong <br>and only uncertain in respect of [the] amount."  Story Parchment, <br>282 U.S. at 562. <br>     The district court used the well-worn phrase from Story <br>Parchment outside of its normal context -- a trial encompassing both <br>liability and damages -- where the phrase is usually thought to mean <br>only that an antitrust plaintiff need not "establish the amount of <br>damages with mathematical precision."  ABA Section of Antitrust Law, <br>Antitrust Law Developments 785 (4th ed. 1997).  Its use was <br>inappropriate here. <br>     The greater flexibility described in Story Parchment  <br>recognizes the difficult task of "quantifying the difference between <br>what actually happened and what would have happened in a <br>hypothetical free market."  Fishman v. Estate of Wirtz, 807 F.2d <br>520, 550 (7th Cir. 1986).  It is one thing to say there needs to be <br>some flexibility in proving the amount of damages relating to  <br>hypothetical events.  Such flexibility is needed both in practical <br>terms given the nature of the proof, and to avoid rewarding a <br>wrongdoer for its misconduct.  It is quite another thing to suggest <br>that an antitrust plaintiff does not need to show probability that <br>the damages caused by the wrongdoer's misconduct fall within a <br>reasonably estimated range of damages. <br>                                 V <br>A.   Expert Testimony <br>     Some issues which may come up at retrial deserve brief <br>attention.  First, CAPECO complains about the exclusion of most of <br>the testimony of Dr. Hausman, its expert.  We review a district <br>court's decision to admit or exclude expert testimony for abuse of <br>discretion.  See Kumho Tire Co. v. Carmichael, No. 97-1709, slip op. <br>at 2 (U.S. Mar. 23, 1999); General Elec. Co. v. Joiner, 118 S. Ct. <br>512, 517 (1997); Licciardi v. TIG Ins. Group, 140 F.3d 357, 362-63 <br>(1st Cir. 1998); Newell Puerto Rico, Ltd. v. Rubbermaid Inc., 20 <br>F.3d 15, 20 (1st Cir. 1994).  <br>     CAPECO argues that the court excluded Dr. Hausman's <br>testimony because it erroneously found his economic oligopoly theory <br>unacceptable.  If that was what had happened, we would have <br>considerable sympathy for CAPECO's argument.  Cf. Daubert v. Merrell <br>Dow Pharmaceuticals, Inc., 509 U.S. 579, 594-95 (1993); Ruiz-Trochev. Pepsi Cola of Puerto Rico Bottling Co., 161 F.3d 77, 85 (1st Cir. <br>1998) (stating that Daubert requires "that the proponent of the <br>evidence show that the expert's conclusion has been arrived at in <br>a scientifically sound and methodologically reliable fashion").   <br>     But our reading of the record is that the more likely <br>basis for the exclusion was the district court's belief that there <br>was considerable and unjustified variance between the expert's Rule <br>26 report and his testimony, and that the district court found that <br>Hausman had unintentionally misled the court into believing that he <br>had performed certain crucial calculations when he had not in fact <br>done them.  Such a ruling would hardly be an abuse of discretion. <br>See Licciardi, 140 F.3d at 364 (stating that expert testimony should <br>have been excluded where such testimony went "far beyond the scope <br>of [the expert's] report"); cf. Eastern Auto Distribs., Inc. v. <br>Peugeot Motors of America, Inc., 795 F.2d 329, 338 (4th Cir. 1986); <br>American Key Corp. v. Cole Nat'l Corp., 762 F.2d 1569, 1580-81 (11th <br>Cir. 1985); Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666, 672- <br>73 (D.C. Cir. 1977).  At any damages retrial there will be new <br>expert testimony and such a problem should not recur.  <br>B.   Damages Calculation Methodology <br>     Separate from its array of other challenges, CAPECO argues <br>that the district court should have compelled the parties to use the <br>"yardstick" method for calculating damages, rather than the "before <br>and after" method.  CAPECO contends that the yardstick method is <br>mandated by this court's opinion in Home Placement Service, Inc. v. <br>Providence Journal Co., 819 F.2d 1199 (1st Cir. 1987).  We <br>considered this precise issue in our review of the first trial.  We <br>decided that "[u]ltimately, the proper method should be determined <br>by the district court in accord with the facts of the situation.  <br>In this case, the district court will have exactly that opportunity <br>[on remand] . . . ."  Coastal Fuels, 79 F.3d at 200.   <br>     In its brief, CAPECO contends that Coastal's "undisputed <br>[lack of a] track record in San Juan" (emphasis omitted) should have <br>mandated the use of the yardstick method, but fails to address the <br>district court's finding that this issue had been waived.  CAPECO <br>has waived its argument that the yardstick method is required, and <br>is foreclosed from raising it again. <br>                                VI <br>     Given our holdings, we need not reach the myriad of other <br>claims CAPECO has raised.  Our disposition means that this matter <br>must be remanded and there will be, sadly, yet a third trial <br>(although quite limited) in this case.  We are distressed to remand <br>for a new damages trial when two juries have already spoken.  It <br>would seem in the interests of both parties to reach an agreement <br>resolving the issue of the damages to be paid for CAPECO'S price <br>discrimination.   <br>     The case is remanded for a new trial on damages on the <br>price discrimination claim in accordance with this opinion. <br>     No costs are awarded.</pre>

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