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E-Copy Received Feb 6, 2014 12:03 PM
IN THE DISTRICT COURT OF APPEAL
FOURTH DISTRICT OF FLORIDA
CASE NO. 4D13-1594
L.T. CASE NO. 08-62407 (07)
MYD MARINE DISTRIBUTOR, INC.,
etc., et al.
Appellants,
v.
INTERNATIONAL PAINT, LTD., et al.
Appellees.
/
AMENDED ANSWER BRIEF OF APPELLEES INTERNATIONAL PAINT,
LTD. AND INTERNATIONAL PAINT, LLC
On Appeal from a Final Order of the Seventeenth Judicial Circuit,
In and For Broward County, Florida
GIBSON DUNN & CRUTCHER, LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Telephone: (213) 229-7430
Facsimile: (213) 229-6430
By: DANIEL G. SWANSON
Pro Hac Vice No. 65592
Lindsey Blenkhorn Haswell
Pro Hac Vice No. 95017
CARLTON FIELDS JORDEN BURT, P.A.
Miami Tower
100 SE Second Street, Suite 4200
Miami, FL 33131
Telephone: (305) 530-0050
Facsimile: (305) 530-0055
By: CHARLES M. ROSENBERG
Florida Bar No. 279064
CRISTINA ALONSO
Florida Bar No. 327580
AARON S. WEISS
Florida Bar No. 48813
Counsel for Appellees International Paint, Ltd. and
International Paint, LLC
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ................................................................................ iii
STATEMENT OF THE CASE ...............................................................................1
A.
Overview ............................................................................................1
B.
Procedural History ..............................................................................3
SUMMARY OF THE ARGUMENT ......................................................................3
ARGUMENT..........................................................................................................8
I.
THE TRIAL COURT DID NOT ERR IN GRANTING SUMMARY
JUDGMENT FOR DEFENDANTS AND SHOULD BE AFFIRMED .........8
A.
Standard of Review .............................................................................8
B.
The Trial Court Applied The Correct Legal Standard .........................8
C.
1.
The Correct Summary Judgment Procedure Was
Followed ...................................................................................8
2.
The Correct Substantive Antitrust Law Was Applied ................9
3.
Law Of The Case Did Not Bar Summary Judgment ................ 14
Three Independent Grounds Compelled Summary Judgment ............ 15
1.
International Paint’s Independent Business Reasons ............... 16
2.
MYD’s Discredited Conspiracy Theory .................................. 22
3.
(a)
The Boat Show Allegations .......................................... 22
(b)
The Training Seminar Allegations ................................ 32
(c)
The Price-Fixing Allegations ........................................ 34
(d)
Economic Implausibility ............................................... 38
MYD’s Failure of Proof Under The Rule of Reason ............... 40
i
TABLE OF CONTENTS
(continued)
Page
II.
MYD’S REASSIGNMENT REQUEST IS WITHOUT MERIT ................. 50
CONCLUSION .................................................................................................... 50
CERTIFICATE OF SERVICE.............................................................................. 51
CERTIFICATE OF COMPLIANCE..................................................................... 51
ii
TABLE OF AUTHORITIES
Page(s)
Cases
Am. Chiropractic Ass’n v. Trigon Healthcare, Inc.,
367 F.3d 212 (4th Cir. 2004) .......................................................................13
Am. Key Corp. v. Cole Nat’l Corp.,
762 F.2d 1569 (11th Cir. 1985) ...................................................................47
Am. Tobacco Co. v. United States,
328 U.S. 781 (1946) ....................................................................................24
Anti-Monopoly, Inc. v. Hasbro, Inc.,
958 F. Supp. 895 (S.D.N.Y. 1997) ..............................................................49
Arenson v. Ford Motor Co.,
254 So. 2d 812 (Fla. 1st DCA 1971) ...........................................................15
Astro-Tel, Inc. v. Verizon Florida, LLC,
-- F. Supp. 2d --, 2013 WL 5781658 (M.D. Fla. Oct. 25, 2013) ..................48
Atlantic Richfield Co. v. USA Petroleum Co.,
495 U.S. 328 (1990) ....................................................................................46
Bailey’s, Inc. v. Windsor Am., Inc.,
948 F.2d 1018 (6th Cir. 1991) .....................................................................35
Bell Atlantic Corp. v. Twombly,
550 U.S. 554 (2007) .................................................................... 4, 13, 14, 38
Benitez v. Joseph Trucking, Inc.,
68 So. 3d 428 (2011)...................................................................................49
Big Apple BMW, Inc. v. BMW of North America, Inc.,
974 F.2d 1358 (3d Cir. 1992) ......................................................................36
Bus. Elecs. Corp. v. Sharp Elecs. Corp.,
485 U.S. 717 (1988) .............................................................................. 21, 49
Byrd v. Leach,
226 So. 2d 866 (Fla. 4th DCA 1969)............................................................ 9
iii
TABLE OF AUTHORITIES
Page(s)
Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc.
996 F.2d 537 (2d Cir. 1993) ........................................................................44
Carlson Mach. Tools, Inc. v. Am. Tool, Inc.,
678 F.2d 1253 (5th Cir. 1982) .....................................................................27
Castro v. Brazeau,
873 So. 2d 516 (Fla. 4th DCA 2004)............................................................ 9
Cnty. of Tuolumne v. Sonora Cmty. Hosp.,
236 F.3d 1148 (9th Cir. 2001) .....................................................................12
Colsa Corp. v. Martin Marietta Services, Inc.,
133 F.3d 853 (11th Cir. 1998) .....................................................................48
Corner Pocket of Sioux Falls, Inc. v. Video Lottery Techs., Inc.,
123 F.3d 1107 (8th Cir. 1997) .....................................................................11
Dep’t of Legal Affairs v. Dist. Ct. of Appeal,
434 So. 2d 310 (Fla. 1983) ..........................................................................10
Dunnivant v. Bi-State Auto Parts,
851 F.2d 1575 (11th Cir. 1988) ............................................................. 12, 22
Eastman Kodak Co. v. Image Technical Servs., Inc.,
504 U.S. 451 (1992) ....................................................................................40
Edward J. Sweeney & Sons, Inc. v. Texaco, Inc.,
637 F.2d 105 (3d Cir. 1980) ........................................................................30
Erie Cnty., Ohio v. Morton Salt, Inc.,
702 F.3d 860 (6th Cir. 2012) .......................................................................15
Euromodas, Inc. v. Zanella, Ltd.,
368 F.3d 11 (1st Cir. 2004) ................................................................... 26, 38
Ezzo’s Investments, Inc. v. Royal Beauty Supply, Inc.,
94 F.3d 1032 (6th Cir. 1996) .......................................................................36
Filco v. Amana Refrigeration, Inc.,
709 F.2d 1257 (9th Cir. 1983) .....................................................................30
iv
TABLE OF AUTHORITIES
Page(s)
Florida Department of Transportation v. Juliano,
801 So. 2d 101 (Fla. 2001) ..........................................................................14
Garment Dist., Inc. v. Belk Stores Servs., Inc.,
799 F.2d 905 (4th Cir. 1986) ................................................................. 18, 35
Gatt Commc’ns v. PMC Assocs., L.L.C.,
711 F.3d 68 (2d Cir. 2013) .....................................................................2, 46
Gen. Indus. Corp. v. Hartz Mountain Corp.,
810 F.2d 795 (8th Cir. 1987) .......................................................................49
Greenberg v. Mount Sinai Med. Ctr.,
629 So. 2d 252 (Fla. 3d DCA 1993) ............................................................43
Gulf States Reorganization Grp. v. Nucor Corp.,
822 F. Supp. 2d 1201 (N.D. Ala. 2011).......................................................48
H.L. Moore Drug Exch. v. Eli Lilly & Co.,
662 F.2d 935 (2d Cir. 1981) .................................................................. 18, 30
Hampton v. Cale of Fort Myers, Inc.,
903 So. 2d 945 (Fla. 4th DCA 2005)............................................................ 9
Hampton v. Cale of Fort Myers, Inc.,
964 So. 2d 822 (Fla. 4th DCA 2007)....................................................passim
Hastings v. Demming,
682 So. 2d 1107 (Fla. 2d DCA 1996) ..........................................................15
Helicopter Support Systems, Inc. v. Hughes Helicopter, Inc.,
818 F.2d 1530 (11th Cir. 1987) ...................................................................36
Honchell v. State,
257 So. 2d 889 (Fla. 1971) ..........................................................................23
House of Materials, Inc. v. Simplicity Pattern Co.,
298 F.2d 867 (2d Cir. 1962) ........................................................................18
In re Baby Food Antitrust Litig.,
166 F.3d 112 (3d Cir. 1999) .................................................................. 10, 13
v
TABLE OF AUTHORITIES
Page(s)
In re Publication Paper Antitrust Litig.,
690 F.3d 51 (2d Cir. 2012) ..........................................................................13
Intergraph Corp. v. Intel Corp.,
195 F.3d 1346 (Fed. Cir. 1999) ...................................................................18
Isaksen v. Vermont Castings, Inc.,
825 F.2d 1158 (7th Cir. 1987) .....................................................................30
Jeanery, Inc. v. James Jeans, Inc.,
849 F.2d 1148 (9th Cir. 1988) ................................................... 25, 26, 33, 34
Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
466 U.S. 2 (1984)........................................................................................44
Kentucky Speedway, LLC v. Nat’l Ass’n of Stock Car Auto Racing, Inc.,
588 F.3d 908 (6th Cir. 2009) .......................................................................48
Kozich v. DeBrino,
837 So. 2d 1041 (Fla. 4th DCA 2002) .........................................................15
Lantec, Inc. v. Novell, Inc.,
146 F. Supp. 2d 1140 (D. Utah 2001) .........................................................49
Lantec, Inc. v. Novell, Inc.,
306 F.3d 1003 (10th Cir. 2002) ...................................................................42
Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,
551 U.S. 877 (2007) .................................................................. 21, 39, 46, 49
Matsushita Elec. Industrial Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986) .............................................................................passim
Mayor & City Council of Balt., Md. v. Citigroup, Inc.,
709 F.3d 129 (2d Cir. 2013) ........................................................................13
McCabe’s Furniture, Inc. v. La-Z-Boy Chair Co.,
798 F.2d 323 (8th Cir. 1986) .......................................................................19
Miles Distribs., Inc. v. Specialty Constr. Brands, Inc.,
476 F.3d 442 (7th Cir 2007) .................................................................. 21, 34
vi
TABLE OF AUTHORITIES
Page(s)
Monsanto Co. v. Spray-Rite Serv. Corp.,
465 U.S. 752 (1984) .............................................................................passim
MYD Marine Distrib., Inc. v. Int’l Paint Ltd.,
76 So. 3d 42 (Fla. 4th DCA 2011) ........................................................passim
Nat’l Marine Elec. Distribs., Inc. v. Raytheon Co.,
778 F.2d 190 (4th Cir. 1985) ........................................................... 34, 35, 44
Newcal Indus., Inc. v. Ikon Office Solution,
513 F.3d 1038 (9th Cir. 2008) .....................................................................41
O.S.C. Corp. v. Apple Computer, Inc.,
792 F.2d 1464 (9th Cir. 1986) .....................................................................33
Oreck Corp. v. Whirlpool Corp.,
639 F.2d 75 (2d Cir. 1980) ..........................................................................23
Pac. Bell Tel. Co. v. LinkLine Commc’ns, Inc.,
555 U.S. 438 (2009) ..................................................................................... 1
Parkway Gallery Furniture, Inc. v. Kittinger/Pa. House Grp., Inc.,
878 F.2d 801 (4th Cir. 1989) .......................................................................26
Parts Depot Co., L.P. v. Fla. Auto Supply, Inc.,
669 So. 2d 321 (Fla. 4th DCA 1996)....................................................passim
Petruzzi’s IGA Supermarkets v. Darling-Delaware Co.,
998 F.2d 1224 (3d Cir. 1993) ......................................................................39
Pumps & Power Co. v. So. States Indus., Inc.,
787 F.2d 1252 (8th Cir. 1986) .....................................................................21
Robin Roshkind, P.A. v. Machiela,
45 So. 3d 480 (Fla. 4th DCA 2010).............................................................49
Saudi Arabian Airlines Corp. v. Dunn,
438 So. 2d 116 (Fla. 1st DCA 1983) ...........................................................15
Seagood Trading Corp. v. Jerrico, Inc.,
924 F.2d 1555 (11th Cir. 1991) ...................................................................12
vii
TABLE OF AUTHORITIES
Page(s)
Time Ins. Co. v. Burger,
712 So. 2d 389 (Fla. 1998) ..........................................................................49
Todorov v. DCH Healthcare Auth.,
921 F.2d 1438 (11th Cir. 1991) ...................................................................12
Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc.,
530 F.3d 204 (3d Cir. 2008) ........................................................................37
Toscano v. Prof’l Golfers’ Ass’n,
258 F.3d 978 (9th Cir. 2001) .......................................................................12
U.S. Anchor Mfg. Co. v. Rule Indus., Inc.,
7 F.3d 986 (11th Cir. 1993) .........................................................................42
United States v. E.I. Du Pont de Nemours & Co.,
118 F. Supp. 41 (D. Del. 1953) .....................................................................49
Valley Liquors, Inc. v. Renfield Importers, Ltd.,
822 F.2d 656 (7th Cir. 1987) ................................................................. 18, 19
Volusia Cnty. v. Aberdeen at Ormond Beach, L.P.,
760 So. 2d 126 (Fla. 2000) ........................................................................... 8
Williamson Oil Co. v. Philip Morris USA,
346 F.3d 1287 (11th Cir. 2003) ............................................................. 10, 12
Winn v. Edna Hibel Corp.,
858 F.2d 1517 (11th Cir. 1988) ...................................................................30
Zoslaw v. MCA Distrib. Corp.,
693 F.2d 870 (9th Cir. 1982) .......................................................................18
Statutory Authorities
§ 542.32, Fla. Stat. ................................................................................................11
§ 90.803(18)(e), Fla. Stat. .....................................................................................23
viii
TABLE OF AUTHORITIES
Page(s)
Other Authorities
Jonathan B. Baker, Market Definition: An Analytical Overview,
74 ANTITRUST L.J. 129 (2007) ....................................................................42
ix
STATEMENT OF THE CASE
A.
Overview
This Answer Brief is filed on behalf of Defendants-Appellees, International
Paint Ltd. and International Paint LLC (collectively, “International Paint”), in
support of the trial court’s April 10, 2013 order granting summary judgment. See
Appendix (“App.”) A, at R.10:1947-56.1 In late 2008, International Paint
terminated Plaintiff MYD, an at-will distributor of Awlgrip-brand marine paint, in
reliance on one of the most basic tenets of American law — that “businesses are
free to choose the parties with whom they will deal.” Pac. Bell Tel. Co. v. LinkLine
Commc’ns, Inc., 555 U.S. 438, 448 (2009). Despite having no contractual right to
continue selling Awlgrip-brand paint, MYD immediately sued International Paint
under the antitrust laws to recoup its alleged lost distributorship profits, a figure
that actually grew over the course of the litigation from less than $3 million (in
2010 per the “final” report of MYD’s damages expert) to over $21 million (in the
expert’s 2012 post-remand “update” report), a staggering and inexplicable sevenfold increase. S.R.Exh. F; R.3:502-03. Since damages under the antitrust laws are
trebled, MYD was seeking over $60 million for its termination even though “dealer
terminations lie far from the core [antitrust] violations that are likely to give rise to
1
References to the Record will be designated as: R.Volume:Page Number.
References to the supplemental records attached to the motion to supplement filed
by International Paint will be designated as: S.R.Exhibit Number.
1
antitrust injury.” Gatt Commc’ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 77 (2d
Cir. 2013).
International Paint manufactures Awlgrip-brand marine paints, which are
sold in North America to yacht builders, boatyards, marine painting contractors
and other customers through a network of more than three dozen distributors,
including Co-Defendants-Appellees Donovan Marine, Inc. (“Donovan”) and East
Coast Marine Distributors, Inc. (“Gold Coast”). R.1:189-90 at ¶ 1. PlaintiffsAppellants MYD Marine Distributor, Inc., a Florida corporation, MYD Marine
Distributor, Inc., a former California corporation, and MYD Mid Atlantic, Inc., a
former Maryland corporation (collectively, “MYD”) are former Awlgrip
distributors that were terminated by International Paint effective November 10,
2008. R.2:201 at ¶ 28. MYD filed suit one month later, on December 19, 2008.2
MYD alleged that its termination in 2008 was the result of a “conspiracy to
fix the price of topside yacht paint” (R.1:189 at ¶ 1) by International Paint,
Donovan and Gold Coast, who allegedly conspired at the Fort Lauderdale Boat
Show in violation of the antitrust laws of Florida, California and Maryland. These
laws “are, in relevant part, substantially similar to the Florida antitrust law and to
2
Two additional Awlgrip distributors, Land ‘N’ Sea Distributing and Merritt
Marine Supply, were also sued by MYD, but they successfully moved to dismiss
and MYD dismissed them with prejudice. R.1:176-83.
2
the equivalent § 1 of the federal Sherman Act.” MYD Marine Distrib., Inc. v. Int’l
Paint Ltd., 76 So. 3d 42, 46 n.3 (Fla. 4th DCA 2011) (hereafter, “MYD”).
B.
Procedural History
On May 15, 2009, Defendants moved to dismiss MYD’s original complaint
for failure to plead an antitrust claim. R.1:90-95; R.10:1982-2000; R.11:2001-19.
On February 8, 2010, the trial court granted the motion with leave to amend.
R.1:187-88. Defendants’ motion to dismiss the amended complaint was granted on
June 11, 2010. R.2:214-44; R.3:422-23. MYD appealed, and on December 14,
2011, this Court reversed and remanded the case. MYD, 76 So. 3d at 44.
On remand, the parties completed extensive fact and expert discovery. On
January 10, 2013, International Paint, Gold Coast and Donovan moved for
summary judgment. R.4:673-95, 708-800; R.5:801-1000; R.6:1001-50. The trial
court heard those motions on February 15, 2013, and entered summary judgment in
favor of International Paint, Gold Coast and Donovan on April 10, 2013. App. 1,
at R.10:1947-56; R.15:2320-416. This appeal followed.
SUMMARY OF THE ARGUMENT
MYD prevailed upon this Court to allow its case to proceed past the
pleading stage on the strength of allegations that International Paint’s actions
resulted from a conspiracy to restrain retail price competition that was formed with
two distributors at the Fort Lauderdale Boat Show — allegations that led this Court
3
to “reasonabl[y] expect[] that discovery will reveal evidence of illegal agreement.”
Bell Atl. Corp. v. Twombly, 550 U.S. 554, 556 (2007) (emphasis added). But after
years of litigation and discovery, MYD did not substantiate its allegations. Indeed,
as the trial court found: “the facts adduced in discovery do not support MYD’s
version” of events. App. 1, at R.10:1951 (emphasis added).
As this Court held, in a terminated-distributor antitrust case like this one, a
plaintiff must satisfy the standard of Monsanto Co. v. Spray-Rite Service Corp.,
465 U.S. 752 (1984), to defeat summary judgment. See Hampton v. Cale of Fort
Myers, Inc., 964 So. 2d 822, 824 (Fla. 4th DCA 2007). Under the Monsanto
standard, MYD must have admissible evidence that its termination was more
consistent with conspiracy than with International Paint’s unilateral business
interests, because summary judgment must be granted when conduct is merely “as
consistent with permissible competition as with illegal conspiracy,” as such
evidence “does not, standing alone, support an inference of antitrust conspiracy.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986)
(citing Monsanto). Thus, “at the summary judgment stage a § 1 plaintiff’s offer of
conspiracy evidence must tend to rule out the possibility that the defendants were
acting independently.” Twombly, 550 U.S. at 554 (citing Matsushita).
MYD did not satisfy this Monsanto standard.
The facts revealed by
discovery showed that MYD’s termination was far more consistent with
4
independent business decision-making than with alleged conspiracy. In 2008,
International Paint was embarked for competitive reasons on revamping its
Awlgrip business and strengthening its brand in North America, and had
introduced a new distributor program and associated new distributor contract
focusing on service quality and product promotion within — not outside — North
America. See I.C.1, below. MYD was the sole Awlgrip distributor that point blank
spurned the new contract and business model while pursuing exports outside North
America to the point of threatening foreign litigation against Awlgrip (in New
Zealand) for “blocking” such exports. See id. As the trial court noted, MYD
offered “no admissible evidence” that “‘tends to exclude the possibility’ that
International Paint acted independently” in terminating MYD in this factual
context. App. 1, at R.10:1951 (citations omitted).
MYD’s explanation for its 2008 termination — as set forth in its Amended
Complaint — was that a price-fixing conspiracy was formed at the 2004 Fort
Lauderdale Boat Show where distributors Gold Coast and Donovan “jointly asked”
International Paint’s General Manager, Mr. Hickling, “to force MYD to raise its
prices and to terminate MYD as an Awlgrip distributor if MYD refused.” MYD, 76
So. 3d at 47. This story collapsed in discovery. MYD’s Amended Complaint did
not allege what Mr. Hickling actually said — much less his “exact words” — in
response to the alleged “joint” request, merely that “Mr. Hickling agreed.”
5
R.1:195 at ¶ 22(a). In fact, MYD’s supposed eyewitness testimony showed no
“conscious commitment to a common scheme designed to achieve an unlawful
objective,” Monsanto, 465 U.S. at 768, but rather noncommittal responses by Mr.
Hickling (International Paint was going to “look into it and see what can be done
and what can’t be done,” (MYD Initial Brief (“IB”) at 11)), designed to mollify
angry customers. See I.C.1, below. Court after court has held that efforts of this
kind to calm distributors who are angry about discounting rivals do not constitute a
conspiracy. See id. Complaints about discounters “are natural — and from the
manufacturer’s perspective, unavoidable — reactions by distributors to the
activities of their rivals.” Monsanto, 465 U.S. at 763 (quotation marks omitted);
accord Hampton, 964 So. 2d at 824 (“It is common for jobbers to complain about
price-cutters.”). Accordingly, “something more than evidence of complaints is
needed” to prove a conspiracy, even when termination follows such complaints.
Monsanto, 465 U.S. at 764 (emphasis added); accord MYD, 76 So. 3d at 46-47.
Effectively acknowledging its failure of proof, MYD now says it is “not
required to prove that International Paint made a commitment to terminate MYD,
either at the Boat Show or anywhere else.” IB at 3. But this is not the law. “To
survive [defendants’] motion for summary judgment, [plaintiffs] must establish
that there is a genuine issue of material fact as to whether [defendants] entered into
an illegal conspiracy that caused [plaintiffs] to suffer a cognizable injury.”
6
Matsushita, 475 U.S. at 585-86 (emphasis added; citations and footnote omitted).
MYD’s claim of injury is based on its termination, and it must prove a conspiracy
to inflict that claimed injury. Id. at 586 (“alleged conspiracies [that] could not have
caused [plaintiffs] to suffer an ‘antitrust injury’” do not prevent summary judgment
(citations omitted)).
MYD certainly cannot claim injury from an alleged conspiracy “to fix,
maintain, stabilize and raise the price of topside yacht paint sold at the distributor
level” (R.2:204-06 at ¶¶ 38, 44, 50), since MYD now admits there was no such
price fixing. IB at 4. Awlgrip distributors at all times set their prices independently,
as did MYD itself. See IB at 8 (any and all attempts “to pressure MYD to raise its
prices” were “unsuccessful[]”). This too is fatal to MYD’s case. See I.C.2.c, below.
MYD further concedes, as it must, that the alleged Boat Show conspiracy
preceded MYD’s termination by four years, which is compelling proof that MYD
has not, and cannot, come forward with evidence that satisfies Monsanto and tends
to exclude the possibility that International Paint’s termination of MYD was the
result of contemporaneous business conditions in 2008 rather than stale events at a
trade show four years earlier. See I.C.2.a, below.
Finally, MYD defaulted on its burden of proving a restraint of trade under
the rule of reason, having no admissible evidence of what the law demands: “harm
to competition in general” through proof of the market-wide anti-competitive
7
effects of Defendants’ acts in “specifically defined” relevant markets. See Parts
Depot Co., L.P. v. Fla. Auto Supply, Inc., 669 So. 2d 321, 325-26 (Fla. 4th DCA
1996) (citation omitted). Despite retaining a damages expert to develop its
aggressive lost profits claim, MYD refused to retain an economic expert to address
the crucial economic elements of its case. This was doubtless because no
professional economist could honestly rebut the deeply-researched opinions of
International Paint’s expert, Dr. Pace, who established the defectiveness of MYD’s
market allegations and its claims of competitive harm. See I.C.3 below. For all
these reasons (and more), summary judgment against MYD was fully warranted
and should be affirmed.
ARGUMENT
I.
THE TRIAL COURT DID NOT ERR IN GRANTING SUMMARY
JUDGMENT FOR DEFENDANTS AND SHOULD BE AFFIRMED
A.
Standard of Review
An order granting summary judgment is reviewed de novo. Volusia Cnty. v.
Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000).
B.
The Trial Court Applied The Correct Legal Standard
1.
The Correct Summary Judgment Procedure Was Followed
MYD argues for reversal here by asserting that the trial court “misallocated
the burden of proof” on summary judgment. IB at 1, 27-30. Not so. In fact,
summary judgment procedure was followed scrupulously. As MYD acknowledges,
8
“the trial court found that Defendants had proven the absence of any genuine issue
for trial.” IB at 30 (emphasis omitted). Defendants factually supported their motion
for summary judgment by demonstrating the non-existence of any genuine issue of
material fact.3 R.6:1022-50; R.8:1491-1502. The burden then shifted to MYD to
come forward with counterevidence and “not merely assert that an issue does
exist.” Byrd v. Leach, 226 So. 2d 866, 868 (Fla. 4th DCA 1969); see also Castro
v. Brazeau, 873 So. 2d 516, 518 (Fla. 4th DCA 2004).
Contrary to MYD’s
contention (IB at 27-28), the trial court did not apply federal (as opposed to
Florida) procedural law or confuse a motion for summary judgment with a motion
for directed verdict.
At base, MYD’s dispute is not about whether the court
applied the correct procedure or burden of proof — its quarrel is with the trial
court’s application of substantive antitrust law, which was correctly applied.
2.
The Correct Substantive Antitrust Law Was Applied
As this Court held in a similar case, the “Monsanto standard” applies when a
plaintiff (like MYD) seeks to defeat summary judgment on an antitrust claim that a
manufacturer has conspired with one or more of its distributors to terminate the
plaintiff. See Hampton, 964 So. 2d at 824.4 Under Monsanto, in order to survive
3
MYD’s assertion that Defendants “failed to submit any evidence at all in support
of their position” under the rule of reason (IB at 29-30) is specious. See I.C.3,
below.
4
Hampton v. Cale of Fort Myers, Inc., 903 So. 2d 945 (Fla. 4th DCA 2005),
affirmed summary judgment on an antitrust conspiracy claim nearly identical to
9
summary judgment, “‘[t]here must be evidence that tends to exclude the possibility
that the manufacturer and nonterminated distributors were acting independently . . .
the antitrust plaintiff should present direct or circumstantial evidence that
reasonably tends to prove that the manufacturer and others had a conscious
commitment to a common scheme designed to achieve an unlawful objective.’”
Hampton, 964 So. 2d at 824 (quoting Monsanto, 465 U.S. at 764); see also
Matsushita, 475 U.S. at 588; Williamson Oil Co. v. Philip Morris USA, 346 F.3d
1287, 1300-01 (11th Cir. 2003).
The Monsanto standard is not a rule of federal summary judgment
procedure, as MYD claims, but rather a doctrine of substantive antitrust law,
which “limits the range of permissible inferences from ambiguous evidence”
because of the danger of mistaking legitimate conduct for a conspiracy.
Matsushita, 475 U.S. at 588; see also Monsanto, 465 U.S. at 763-64 (“[p]ermitting
an agreement to be inferred” from ambiguous evidence “could deter or penalize
perfectly legitimate conduct” and “create an irrational dislocation in the market”);
In re Baby Food Antitrust Litig., 166 F.3d 112, 124 (3d Cir. 1999) (“The extent of
that here. See R.9:1614-35. That decision supports affirmance. See Dep’t of Legal
Affairs v. Dist. Ct. of Appeal, 434 So. 2d 310, 313 (Fla. 1983) (affirmance without
opinion has no general precedential value, but “it would not be improper for
counsel, in an effort to persuade a court to adopt a certain position, to refer to such
a decision and thereby suggest to the court how it previously viewed the
proposition” given that the “court has the records of its own decisions”).
10
what constitutes a reasonable inference in the context of an antitrust case . . . is
somewhat different from cases in other branches of the law in that ‘antitrust law
limits the range of permissible inferences from ambiguous evidence in a § 1 case.’”
(quoting Matsushita, 475 U.S. at 588)).
As a matter of substantive law, therefore, “the court must necessarily weigh
the summary judgment evidence of both parties in determining whether plaintiffs’
evidence ‘tends to exclude the possibility that the alleged conspirators acted
independently.’” Corner Pocket of Sioux Falls, Inc. v. Video Lottery Techs., Inc.,
123 F.3d 1107, 1112 (8th Cir. 1997) (quoting Matsushita, 475 U.S. at 588). This
imperative of substantive law applies fully to Florida antitrust cases. As MYD
admits, “Florida courts are directed to follow substantive federal antitrust case law
in construing the Florida Antitrust Act.”5 IB at 2 (emphasis omitted). As such, this
Court “look[s] to federal cases to elucidate what is an agreement in restraint of
trade and what proof constitutes a conspiracy.” Parts Depot, 669 So. 2d at 324.
MYD appears to agree that Monsanto applies, but hints that the trial court
did not articulate “the correct [Monsanto] standard.” IB at 2 & n.1. This is not
correct. The trial court extensively quoted from and construed Monsanto and its
progeny, properly recognizing that “MYD cannot defeat summary judgment by
5
“[W]e have been instructed by our legislature to give ‘due consideration and
great weight . . . to the interpretations of the federal courts’ in interpreting Florida’s
antitrust statutes.” MYD, 76 So. 3d at 47 n.4 (quoting § 542.32, Fla. Stat.).
11
proffering evidence that is merely consistent with a conspiracy.” App. 1, at
R.10:1948-50, 1954-55. MYD — not the trial court — misreads Monsanto by
disputing this fundamental principle and by claiming that a plaintiff merely needs
to stitch together a “plausible” conspiracy theory.6 IB at 2, 34 n.18.
As the U.S. Supreme Court explained: “We do not imply that, if
[defendants] had had a plausible reason to conspire, ambiguous conduct could
suffice
to
create
a
triable
issue
of
conspiracy.
Our
decision
in
Monsanto . . . establishes that conduct that is as consistent with permissible
competition as with illegal conspiracy does not, without more, support even an
inference of conspiracy.” Matsushita, 475 U.S. at 597 n.21 (emphasis added); see
also, e.g., Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575, 1580 (11th Cir. 1988).
Accordingly, summary judgment is routinely affirmed when — as here — a
plaintiff proffers circumstantial evidence that is consistent with a conspiracy but
that does not tend to exclude the possibility of independent action.7
In a further effort to evade its burden, MYD argues the Monsanto standard
does “‘not apply at all when a plaintiff has produced unambiguous evidence of an
6
MYD has not even done this: its theory in fact makes no economic sense. See
I.C.2.d, below.
7
See, e.g., Williamson, 346 F.3d at 1300-03; Cnty. of Tuolumne v. Sonora Cmty.
Hosp., 236 F.3d 1148, 1156-57 (9th Cir. 2001); Toscano v. Prof’l Golfers’ Ass’n,
258 F.3d 978, 983-85 (9th Cir. 2001); Todorov v. DCH Healthcare Auth., 921 F.2d
1438, 1456 (11th Cir. 1991); Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d
1555, 1574-75 (11th Cir. 1991).
12
agreement to fix prices’” (IB at 34 (quoting In re Publ’n Paper Antitrust Litig., 690
F.3d 51, 63 (2d Cir. 2012) (emphasis in original))), claiming that MYD offered
unambiguous direct testimony that “[t]he trial court impermissibly disregarded.”8
IB at 3. But MYD had no such “smoking gun” evidence, which “is explicit and
requires no inferences to establish the proposition or conclusion being asserted,” In
re Baby Food, 166 F.3d at 118, like “a recorded phone call in which two
competitors agreed to fix prices at a certain level.” Mayor & City Council of Balt.,
Md. v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013). Accepting MYD’s
proffered testimony “as true,” the trial court properly held that it was “not direct or
circumstantial evidence of conspiracy.” App. 1, at R.10:1952-53 (citations
omitted). The trial court did not “require magic words”9 (IB at 36), but recognized
that the actual words on which MYD relies have been repeatedly branded by the
courts as insufficient to show conspiracy. See I.C.2.a & I.C.2.b, below.
8
Unambiguous “[d]irect evidence [of conspiracy] is extremely rare in antitrust
cases,” Am. Chiropractic Ass’n, Inc. v. Trigon Healthcare, Inc., 367 F.3d 212, 226
(4th Cir. 2004), especially where, as here, no price fixing claim remains. MYD
relies heavily on In re Publication Paper (see IB at 34, 36, 38), but that was a
price-fixing case where a co-conspirator who had immunity from criminal
prosecution testified that he “reached an ‘agreement’” to follow the other
conspirator’s price increase “to the fullest extent possible.” 690 F.3d at 64.
9
The U.S. Supreme Court made it clear, however, that “a court is not required to
accept” without question terms “like ‘conspiracy,’ or even ‘agreement.’”
Twombly, 550 U.S. at 557 (quotation marks and citation omitted).
13
In sum, the trial court properly recognized and applied the governing legal
rule that “at the summary judgment stage a § 1 plaintiff’s offer of conspiracy
evidence must tend to rule out the possibility that the defendants were acting
independently.” Twombly, 550 U.S. at 554 (citation omitted).
3.
Law Of The Case Did Not Bar Summary Judgment
MYD argues that because “this Court applied the Monsanto standard in 2011
and found it to be satisfied” by MYD’s Amended Complaint (IB at 2), the “law of
the case” doctrine immunized MYD from summary judgment. IB at 30, 46-47.
This argument verges on the frivolous.10 In 2011, this Court considered whether
the trial court erred in granting a motion to dismiss — a pleading question based on
allegations untested by any factual record. As this Court held, “Florida courts
should look to Twombly in determining whether an agreement in violation of the
Florida Antitrust law can be reasonably inferred from the alleged facts.” MYD, 76
So. 3d at 47 n.4 (emphasis omitted). In Twombly, the U.S. Supreme Court
explained that pleading “plausible grounds to infer an agreement . . . calls for
enough fact to raise a reasonable expectation that discovery will reveal evidence of
illegal agreement.” 550 U.S. at 556 (emphasis added). But as the trial court
recognized, discovery revealed “the facts . . . do not support MYD’s version” of
10
MYD’s sole authority is a single decision rejecting application of the law of the
case doctrine, Fla. Dep’t of Transp. v. Juliano, 801 So. 2d 101, 108 (Fla. 2001).
See IB at 30, 47.
14
events. App. 1, at R.10:1951; see also, e.g., Erie Cnty., Ohio v. Morton Salt, Inc.,
702 F.3d 860, 869 (6th Cir. 2012) (“The ‘plausibly suggesting’ threshold for a
conspiracy complaint remains considerably less than the ‘tends to rule out the
possibility’ standard for summary judgment.” (emphasis added; citation omitted)).
In such circumstances, courts uniformly reject “law of the case” arguments of the
sort MYD advances.11 Since “this court’s prior decision was determined on the
basis of allegations and not proof, the law of the case doctrine does not bar this
court’s review of the proof presented.” See Saudi Arabian Airlines, 438 So. 2d at
123 n.9.
C.
Three Independent Grounds Compelled Summary Judgment
Summary judgment was granted on three separate grounds:
(1) the
possibility that International Paint terminated MYD for its own independent
11
See, e.g., Arenson v. Ford Motor Co., 254 So. 2d 812, 813 (Fla. 1st DCA 1971)
(affirming summary judgment and finding “appellant’s allegation concerning the
‘law of the case’ with regard to our previous denial of appellee’s motion to dismiss
which was based upon the same ground as was its additional defense below . . . to
be substantially without merit”); Kozich v. DeBrino, 837 So. 2d 1041, 1043-44
(Fla. 4th DCA 2002) (prior affirmance of temporary injunction was not “law of the
case” requiring dismissal of counterclaim); Hastings v. Demming, 682 So. 2d 1107,
1114 (Fla. 2d DCA 1996) (“[D]enial of a motion for summary judgment involving
‘unresolved factual questions’ does not establish the law of the case. It merely
defers the matter until a final hearing, even when an appellate court has affirmed
the denial.” (citation omitted)); Saudi Arabian Airlines Corp. v. Dunn, 438 So. 2d
116, 123 n.9 (Fla. 1st DCA 1983) (“this court’s prior decision . . . does not
preclude it from considering those facts which were previously unavailable to it
when its review . . . was limited to allegations and not proof”).
15
business reasons, which MYD’s evidence did not tend to disprove (see App. 1, at
R.10:1948-51); (2) the absence of evidence supporting MYD’s conspiracy theories,
(id. at R.10:1948, 1951-55); and (3) the absence of evidence of a restraint of trade
under the rule of reason (id. at R.10:1949, 1955-56). Although, as discussed
below, the trial court correctly relied on each of these grounds, the judgment below
must be affirmed if any ground is sustained by the record.
1.
International Paint’s Independent Business Reasons
MYD argues that the trial court “accepted International Paint’s
‘independent’ justifications for terminating MYD” (IB at 45), but that
mischaracterizes the trial court’s ruling and ignores that MYD failed to present
countervailing evidence.
The trial court actually held that “the evidence of
independent decision-making by International Paint” with respect to MYD’s
termination “is significant,” and that MYD offered “no admissible evidence of any
kind that ‘tends to exclude the possibility’ that International Paint acted
independently.” App. 1, at R.10:1950-51 (quoting Matsushita, 475 U.S. at 588;
Monsanto, 465 U.S. at 764). This determination was correct and should be upheld.
First, MYD does not dispute the trial court’s review of the factual context in
which MYD was terminated in 2008. See App. 1, at R.10:1950-51. For example,
MYD nowhere disputes that International Paint concluded in 2007 “that it needed
to revamp its Awlgrip business and strengthen its brand” for competitive reasons,
16
that as part of that effort it “developed a new Awlplus distributor program and
associated new distributor contract,” that it “began introducing” the new program
in late 2007, that the new program “focused on service quality and product
promotion,” and that in November 2007 “MYD ‘point blank’ refused to sign” up
for it.12 See App. 1, at R.10:1950-51; R.4:746-47, 749, 751-55, 757, 763-67, 77071, 777-80, 782-87; R.18:2580, 2582-86, 2588-98; R.4:793-94; R.5:829, 835-36,
863-64, 867.
Nor does MYD dispute that “MYD was emphasizing the pursuit of foreign
sales,” that the new distributor contract (rejected by MYD) ruled out such exports
and “limited distributors to sales in North America,” and that MYD’s continued
overseas expansion lead to a threat in May 2008 “to initiate legal proceedings in
New Zealand against International Paint’s parent company Akzo Nobel over its
policies regarding exports.” App. 1, at R.10:1950-51; R.4:774, 786-87; R.18:258898, 2610-13; R.4:793; R.5:810-11, 831, 834, 839-40, 849-50, 860, 869-70.
12
MYD asserts Mr. Hickling “was not able to explain the new ‘business model’”
to which MYD did not conform, (IB at 21-22), but he in fact testified that: “We
were very keen to have a distribution setup which was congruent with our goal as a
business. We were experiencing increased competition. We needed to … up our
game. And we were looking at a number of aspects of our business model to see
how we could provide better service, better standards of support, and availability,
and a whole bunch of other things surrounding the product. We … felt … that we
could improve the performance of ourselves as a company, as a brand, and as a
business. And it was because of that, we were reviewing our distribution situation,
and one of the conclusions that came out of that was that we would terminate
MYD.” R.4:752-53.
17
These are manifestly valid reasons for a manufacturer to terminate an at-will
distributor. See, e.g., Valley Liquors, Inc. v. Renfield Imps., Ltd., 822 F.2d 656,
663-64 (7th Cir. 1987). Threatened litigation alone repeatedly has been held in the
antitrust context to be a strong ground for distributor termination.13 MYD does not
argue to the contrary, suggesting only that these might somehow be “after-the-fact”
or “pretextual” justifications. IB at 21, 45. But arguing the possibility of pretext
does not tend to exclude the possibility of independent action as required by the
Monsanto standard.
“[T]he mere fact that a business reason advanced by a
defendant for its cut-off of a customer is undermined does not, by itself justify the
inference that the conduct was therefore the result of a conspiracy.” H.L. Moore
Drug Exch. v. Eli Lilly & Co., 662 F.2d 935, 941 (2d Cir. 1981) (citations omitted);
accord Parts Depot, 669 So.2d at 325 (“even if the business reason given for
terminating the appellee was undermined, it still does not justify an inference that a
conspiracy occurred” (citation omitted)); Garment Dist., Inc. v. Belk Stores Servs.,
Inc., 799 F.2d 905, 910-11 (4th Cir. 1986) (“even if [defendant’s] concern about
13
See, e.g., Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1358 (Fed. Cir. 1999)
(finding no “case where refusal to deal in response to a customer’s suit against a
manufacturer has been deemed an unreasonable restraint of trade” (citation
omitted)); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 890 (9th Cir. 1982)
(“avoiding future litigation . . . qualified as a legitimate business reason for
refusing to deal” (citation omitted)); House of Materials, Inc. v. Simplicity Pattern
Co., 298 F.2d 867, 871 (2d Cir. 1962) (litigation by a customer “provide[d] a
sound business reason for the manufacturer to terminate their relations” (citation
omitted)).
18
[plaintiff’s] image was pretextual, it still had a legitimate, independent reason to
terminate their relationship”); McCabe’s Furniture, Inc. v. La-Z-Boy Chair Co.,
798 F.2d 323, 330 (8th Cir. 1986) (“The evidence which the jury could have relied
upon to discard [defendant’s] nonprice justifications as pre-textual is precisely the
kind of ‘highly ambiguous evidence’ that Monsanto warns must not be considered
by the jury” (internal citation omitted)); Valley Liquors, 822 F.2d at 664 (defendant
“does not have to prove that it actually had an independent reason”).
MYD’s claim of pretext is fallacious in any event. MYD admits it “was
given the opportunity to sign the new distribution agreement” and concedes it “did
decline to sign it.”14 IB at 22 & n.12. While MYD complains that it was “singled
out” as “only 16 of approximately 40 Awlgrip distributors had signed the new
agreement” when it was terminated (IB at 22), MYD in fact was “the only
distributor who point blank refused to sign” while International Paint remained “in
negotiation” with “the distributors who hadn’t signed . . . to work towards an
agreement.” See App. 1, at R.10:1951; R.4:780-81 (emphasis added); R.18:263637, 2700; R.8:1546-47.
14
MYD refused this opportunity in late 2007. MYD argues it should have been
given yet another “opportunity to conform” after the termination decision was
made in 2008, (IB at 22) but, as Mr. Hickling testified, it was too late: “We had
been working with them over the years and had our own view as to their
capabilities and the approach that MYD had in working with us and, and with the
marketplace.” R.4:754.
19
MYD also ignores that its rejection of International Paint’s new distributor
program was driven by a steadfast refusal to make North America its singular
focus — as required by the new agreement — and to drop its pursuit of foreign
sales. R.5:810-11, 831, 834, 839-40; R.18:2588-98. MYD’s “diversion of effort
from the North American sales territory” was prominently listed in the “sworn
[International Paint] interrogatory answer” on which MYD places great weight in
discerning International Paint’s true motives. IB at 22-23 (quoting R.7:1337). And
MYD’s May 2008 litigation threat over New Zealand exports was just such a
“diversion of effort from the North American sales territory.” R.5:869-70;
R.18:2610-13. MYD’s threat letter was sent directly to International Paint via email by MYD’s founder and principal, Mr. Del Monico, because “Awlgrip was
trying to block” MYD’s New Zealand activities.15 R.5:848-50, 869-70; R.18:261013. Far from being pretextually “singled out” (IB at 22), the record shows that
MYD was the sole distributor that spurned International Paint’s new contract and
business model and pursued foreign exports to the point of litigation against the
owner of the brand.
Finally, MYD misstates the law when it argues that any evidence that “MYD
was terminated because of its discount pricing” excludes the possibility of
15
MYD misleadingly asserts that the litigation threat “was not mentioned by
Mr. Hickling during his deposition,” (IB at 22), but that is because MYD did not
ask about it. See generally R.4:739-81.
20
independent conduct. IB at 45-46; see also id. at 21 n.11. To the contrary, “the
Supreme Court has already said that manufacturers can legitimately terminate
distributors based on price complaints.” Miles Distribs., Inc. v. Specialty Constr.
Brands, Inc., 476 F.3d 442, 450-52 (7th Cir. 2007) (citing generally to Monsanto,
465 at 763-64). Thus, “an unlawful agreement cannot be inferred” from the
termination of a distributor “in response to” complaints about price-cutting.
Hampton, 964 So. 2d at 824. “[T]he existence of dealer complaints, even when
coupled with manufacturer action in response to the information originating in the
complaints, does not indicate the kind of commitment to a common scheme
required by section 1 of the Sherman Act.” Pumps & Power Co. v. So. States
Indus., Inc., 787 F.2d 1252, 1257 (8th Cir. 1986).
Indeed, this point counsels strongly for summary judgment given that MYD
does not dispute that International Paint “was concerned that MYD’s prices in the
Pacific Northwest were below sustainable levels and incompatible with the
investments Awlgrip wanted its distributors to make in providing quality service
and promoting its products.” See App. 1, at R.10:1951; IB at 9, 21 n.11, 29.
Antitrust law validates a manufacturer’s concern for its distributors’ ability to
afford investments in quality and service. See Bus. Elecs. Corp. v. Sharp Elecs.
Corp., 485 U.S. 717, 727-28 (1988) (“price cutting and some measure of service
cutting usually go hand in hand”); Leegin Creative Leather Prods., Inc. v. PSKS,
21
Inc., 551 U.S. 877, 891 (2007) (if a consumer can “buy the product from a retailer
that discounts because it has not spent capital providing services or developing a
quality reputation, the high-service retailer will lose sales to the discounter, forcing
it to cut back its services to a level lower than consumers would otherwise prefer”);
Dunnivant, 851 F.2d at 1583 (“[S]uppliers have a legitimate business interest to
ensure that [their] retailers are competent and willing to promote their products.”).
Again, “conduct that is as consistent with permissible competition as with illegal
conspiracy does not, without more, support even an inference of conspiracy.”
Matsushita, 475 U.S. at 597 n.21. Summary judgment was thus fully warranted.
2.
MYD’s Discredited Conspiracy Theory
MYD needed a theory of conspiracy in order to argue that its termination in
2008 was more consistent with collusion than independent action. MYD’s
Amended Complaint set forth a theory of conspiracy to restrain price competition
that was formed at the Fort Lauderdale Boat Show. As discussed below, however,
every element of that theory was discredited by discovery.
(a)
The Boat Show Allegations
MYD’s claim that its termination in 2008 was conspiratorial rests most
pivotally on its story about the Fort Lauderdale Boat Show that occurred four years
earlier. MYD relies on “the testimony of two percipient witnesses in support of
[its] allegations regarding the Boat Show: Tom Phelps, a former Awlgrip sales
22
representative; and [MYD’s owner] Dan Del Monico.”16 IB at 10. MYD proclaims
this testimony is “exactly the same” as “in [its] complaint — the same events and
conversations, by the same people, in the same words.” IB at 1 (emphasis omitted).
As discussed below, however, the trial court reviewed this testimony and correctly
held that “the facts adduced in discovery do not support MYD’s version of the
alleged Boat Show events” and that “MYD’s purported evidence of the conspiracy
at the 2004 Boat Show does not support an inference of a ‘conscious commitment’
to a common multi-year scheme to terminate MYD.” See App. 1, at R.10:1951-52.
Commencing its analysis with this Court’s 2011 decision, the trial court
observed that “[i]n holding that MYD had pled a vertical agreement between
International Paint and the two defendant distributors, the Fourth District Court of
16
MYD also cites “inferential” testimony (IB at 38 n.22) regarding alleged
statements by Donovan and Gold Coast employees that supposedly are linked to
the Boat Show conspiracy, (see IB at 20-21), but absent independent evidence of
that conspiracy, hearsay testimony from employees of Donovan and Gold Coast is
inadmissible against International Paint. See § 90.803(18)(e), Fla. Stat. (for hearsay
testimony by alleged co-conspirator to be admissible against a party, “the
conspiracy itself and each member’s participation in it must be established by
independent evidence”); Honchell v. State, 257 So. 2d 889, 890 (Fla. 1971)
(“before the ‘co-conspirator rule’ may be invoked there must first be independent
evidence of the existence of a conspiracy, and of the objecting party’s participation
in it”); Oreck Corp. v. Whirlpool Corp., 639 F.2d 75, 80 (2d Cir. 1980) (applying
federal equivalent of section 90.803(18)(e), stating “[h]earsay statements of a
purported conspirator are not admissible against a co-defendant unless there is
independent, non-hearsay evidence that establishes the declarant’s participation in
the conspiracy” (citations omitted)). MYD’s remaining “inferential” testimony is
speculation stoked by distributor complaints. See, e.g., R.7:1316.
23
Appeal relied on allegations relating to the Fort Lauderdale Boat Show, the ‘exact
place where the conspiracy was formed.’” App. 1, at R.10:1951 (quoting MYD, 76
So. 3d at 47). For International Paint to have conspired at the Boat Show, however,
the evidence “must reveal” that Mr. Hickling, its representative, had “‘a unity of
purpose or a common design and understanding, or a meeting of minds in an
unlawful arrangement.’” See Monsanto, 465 U.S. at 764 (quoting Am. Tobacco Co.
v. United States, 328 U.S. 781, 810 (1946)). But MYD’s Amended Complaint did
not allege any words — much less the “exact words” — spoken by Mr. Hickling,
merely that “Mr. Hickling agreed to” Donovan’s and Gold Coast’s “joint” request,
“thereby forming a three-way agreement.” MYD, 76 So. 3d at 45 (quoting MYD’s
complaint). In fact, discovery showed that Mr. Hickling did not “agree to” any
joint request. To the contrary, the testimony relied on by MYD demonstrates the
absence of a conspiratorial commitment by Mr. Hickling.
Mr. Phelps’ Testimony. As MYD is compelled to concede, Mr. Phelps, the
former International Paint employee, testified that the “‘gist of the conversation’”
at the Boat Show was distributor complaints: “‘everybody had a beef about pricing,
competition and margins and . . . they’re all concerned about MYD.” IB at 11
(quoting R.7:1230). But “an unlawful agreement cannot be inferred solely from the
existence of complaints.” Hampton, 964 So. 2d at 824. According to Mr. Phelps,
Mr. Hickling made no commitments in response to the complaints: International
24
Paint was “just going to look into it and see what can be done and what can’t be
done” and was “going to meet with all the other operational line[s] of Awlgrip and
see can they come up with a situation to where everybody is going to be happy.”
IB at 11; R.7:1234-35; R.8:1527-28. This is “smoking gun” evidence of the
absence of conspiracy by Mr. Hickling.
Mr. Del Monico’s Testimony. So too is the testimony of Mr. Del Monico,
which the trial court assumed was true (rather than “disregarding” it, as MYD
asserts (IB at 3, 33-35)).17 See App. 1, at R.10:1952-53. Mr. Del Monico testified
that “‘what I specifically recall’ of the Boat Show conversation” (that supposedly
occurred in his presence) “is ‘that it was ‘get him to raise his prices,’ and they used
an expletive, ‘get rid of the guy,’ and Hickling would just kind of nod and say,
‘Gentlemen, it will be taken care of.’ Like almost that’s enough, I get the point, I
get the point.’” Id.; IB at 13; R.5:806-07. But as the trial court noted, the same
language — the problem “will be taken care of” — has been rejected again and
again as a basis for inferring conspiracy since such statements “‘reflect[] nothing
more than an effort by a manufacturer to calm an angry customer.’” App. 1, at
R.10:1953 (quoting Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1158 (9th
Cir. 1988)). “[T]he vague statement . . . that he would ‘take care of things’ falls far
17
MYD cites the “consistent” testimony of other witnesses to whom Mr. Del Monico
allegedly confided his Boat Show recollections, (see IB at 15), but this is inadmissible
hearsay, and it depicts no conspiracy by Mr. Hickling.
25
short of establishing an agreement to fix prices between the manufacturer and the
complaining retailer. Neither does it tend to prove an agreement to terminate a
retailer who has failed to follow the alleged resale price maintenance scheme.”
Jeanery, 849 F.2d at 1158 (emphasis added); see also Euromodas, Inc. v. Zanella,
Ltd., 368 F.3d 11, 19 (1st Cir. 2004) (rejecting plaintiff’s supposed “‘smoking gun’
testimony” that a rival retailer “complained bitterly to [the manufacturer] about the
plaintiff’s low prices, and that [the manufacturer] reassured [the retailer] that it
would, in some unarticulated manner, ‘take care of’ the situation (i.e., the pricecutting issue)” (emphasis added)). Inferring conspiracy from assurances that “the
problem has been taken care of” or “corrective action has been taken” is simply
inconsistent with the Monsanto standard. See Parkway Gallery Furniture, Inc. v.
Kittinger/Pa. House Grp., Inc., 878 F.2d 801, 806 n.4 (4th Cir. 1989).
MYD, moreover, ignores the further testimony of Mr. Del Monico
confirming that such ambiguous statements do not tend to exclude the possibility
of independent action. For example, Mr. Del Monico himself admitted that he did
not believe that “anything” (i.e., including termination) “was going to come from”
what he heard Mr. Hickling say. R.5:814. As Mr. Del Monico testified: “I think
[Hickling] would try to appease, he was a politician, maybe, and figure something
out that I hadn’t thought of. I never thought what would happen over the next four
years was going to happen, never.” Id. This is a far cry from claiming that
26
Mr. Hickling caved in to distributor pressure at the Boat Show and made a
conscious commitment to a common scheme. Mr. Del Monico himself perceived
no such commitment: “I never thought [International Paint] would buckle, never.”
R.5:817-18 (“I promise you that I never thought in a million years that Awlgrip
would cave in on distributor pressures about our low pricing.”).
Alleged Discussion of Margins. This lack of factual substantiation for
MYD’s allegation that “Mr. Hickling agreed to” Donovan’s and Gold Coast’s
“joint” request at the Boat Show (see R.1:193 at ¶ 14(b); R.1:195 at ¶ 22(a)),
places a different light on Mr. Hickling’s supposed urging of Mr. Del Monico at
the Boat Show to raise MYD’s profit margins. Mr. Hickling’s discussion with Mr.
Del Monico did not follow a “joint” agreement with MYD’s rivals, and there was
nothing unlawful about Mr. Hickling discussing pricing and margins with MYD,
even to the point of “exposition, persuasion, argument, or pressure.”18 Carlson
Mach. Tools, Inc. v. Am. Tool, Inc., 678 F.2d 1253, 1261 (5th Cir. 1982); see also
Monsanto, 465 U.S. at 762-63 (“the fact that a manufacturer and its distributors are
in constant communication about prices and marketing strategy does not alone
show that the distributors are not making independent pricing decisions,” even in
18
MYD agrees that “‘[i]mposing’ a minimum resale price on a distributor is not
illegal. What is (potentially) illegal is a distributor agreeing to charge a minimum
resale price.” IB at 4 n.2 (emphasis added). But MYD always asserted there was no
risk Mr. Del Monico would ever agree to charge a minimum resale price.
27
cases where the manufacturer expresses “strongly felt concern about resale prices”
(emphases added)).
Even if Mr. Hickling was motivated by price complaints from Donovan,
Gold Coast or other distributors, this would not “permit the inference of concerted
action.” See Monsanto, 465 U.S. at 764 (law does not “bar a manufacturer from
acting solely because the information upon which it acts originated as a price
complaint” (quotation marks and citations omitted). As the U.S. Supreme Court
explained, “[a] manufacturer and its distributors have legitimate reasons to
exchange information about the prices and the reception of their products in the
market.” Id. at 762.
Thus, when Mr. Del Monico allegedly asserted “‘I don’t even think we are
supposed to be talking about this, I think it’s against the law’” in response to Mr.
Hickling’s alleged statement that “‘everybody’s complained about you [and] has
said you’re the low guy in the industry,’” (IB at 15 (quoting R.7:1208-11)), Mr.
Del Monico was in error since such a discussion was not “against the law.”
Moreover, Mr. Del Monico’s testimony diverges from the sequence set forth in
MYD’s Amended Complaint, which asserted that “Mr. Hickling . . . asked Mr. Del
Monico to raise MYD’s profit margins to at least 25%. Mr. Del Monico stated that
Mr. Hickling’s request was against U.S. law, to which Mr. Hickling replied: ‘Well,
I’m not an American, am I?’” R.1:195 at ¶ 22(a). Mr. Del Monico’s actual
28
testimony said nothing about the alleged 25% margin request,19 and made it clear
that Mr. Hickling was offering (according to Mr. Del Monico’s characterization)
“‘some kind of snippy comment’” in response to a provocative accusation rather
than making a serious admission that he was not bound by American law. See IB
at 15 (quoting R.7:1208-11). Contrary to MYD’s claim (IB at 37-38), this episode
does not tend to exclude the possibility of independent conduct.
Four-Year Time Lag.
MYD also argues that “[a] party who ‘merely
grunts, but complies,’ can be found to be a conspirator” (IB at 36-37), but the
evidence showed that Mr. Hickling did not “grunt, but comply” at the Boat Show.
This is another material divergence from MYD’s Amended Complaint, which
alleged that “Mr. Hickling agreed to comply, and shortly thereafter did comply,
with” the distributors’ alleged request “either to pressure MYD into raising its
prices or, failing that, to terminate MYD as an Awlgrip distributor.” R.1:193 at ¶
14(b) (emphases added). Mr. Hickling plainly did not “grunt, but comply shortly
thereafter” by terminating MYD when Mr. Del Monico refused to increase his
margins (“‘I’m not going to do it’” (IB at 15 (quoting R.7:1208-11))).
Recognizing this gaping hole in its case, MYD now claims it “did not” allege a
19
As discussed below in I.C.2.c, MYD abandoned its previously-alleged theory
that Mr. Hickling “agreed to set a minimum resale price (gross profit margins of at
least 25% which is a 33% markup) in order to help the horizontal cartel to increase
average retail prices of Awlgrip paint.” MYD, 76 So. 3d at 49.
29
conspiracy to terminate (IB at 47-48) and has no obligation “to prove that
International Paint made a commitment to terminate MYD, either at the Boat Show
or anywhere else.” IB at 3 (emphasis added). But this remarkable – even
breathtaking – retreat extinguishes rather than saves MYD’s case.
Moreover, as the trial court noted, “one undisputed fact stands out: the Boat
Show in question occurred four years before MYD was terminated.” App. 1, at
R.10:1952. Recognizing that numerous courts have found that a time lag between
the formation of an alleged conspiracy and termination renders independent action
a more likely cause of termination than conspiracy,20 MYD went to great lengths to
hide the date of the Boat Show from judicial scrutiny, including from this Court in
2011. As the trial court observed, “[i]n both of its complaints, MYD omitted the
20
See, e.g., Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 114
(3d Cir. 1980) (a long time lag “militate[s] strongly against a causal relation
between the complaints and [defendant’s] actions”); Filco v. Amana Refrigeration,
Inc., 709 F.2d 1257, 1265 (9th Cir. 1983) (“the long time gap, at least seven to nine
months, between the time dealers first complained to [the manufacturer] and the
time that [plaintiff] was terminated suggests that [plaintiff’s] termination was not
caused by the complaints”); Winn v. Edna Hibel Corp., 858 F.2d 1517, 1520 & n.4
(11th Cir. 1988) (“termination came years after [dealer] complaints began, further
weakening the link between the two actions”); H.L. Moore, 662 F.2d at 944 (“[t]he
evidence cannot reasonably support an inference of a conspiracy and, in any event,
there is no connection between the events in 1974 and [the manufacturer’s]
termination of [plaintiff] two years later”). MYD cites Isaksen v. Vermont
Castings, Inc., 825 F.2d 1158 (7th Cir. 1987) (IB at 48), but that decision
recognized that a one-year time lag “casts serious doubt on the existence of a
causal relationship between the threat and the raising of prices.” id. at 1163
(denying JNOV despite time lag because plaintiff expressly testified that defendant
coerced it to agree to raise prices).
30
date of the Boat Show.” Id. While MYD now seeks to minimize this intentional
exclusion, (see IB at 10 n.8), it vigorously disputed there was any time lag below,
even representing that “Plaintiffs could prove, consistently with the allegations of
the Amended Complaint, that [the Boat Show] occurred in 2005, 2006, 2007 or
2008.”21 R.5:962-63.
MYD now argues that this Court “implicitly” rejected the time lag issue in
2011, (IB at 47), but MYD then pressed for reversal on the ground that there was
no time lag issue since the fact that “the Boat Show conversation occurred in
2004 . . . does not appear in the Amended Complaint.” R.5:906-07. As the trial
court recognized, this Court “faced a factual vacuum created by MYD in a context
where MYD enjoyed the benefit of inferences being drawn in the light most
favorable to it (e.g., that ‘Plaintiffs could prove, consistently with the allegations of
the Amended Complaint, that [the Boat Show] occurred in 2005, 2006, 2007 or
2008’).” App. 1, at R.10:1952. On summary judgment, however, MYD cannot
evade the undisputed fact of this four year time lag.22 As the trial court rightly
21
When the trial court expressed concern and admonished MYD “to
address . . . the lag time argument,” MYD responded, “it’s not in the complaint.
That is something that [Defendants] came up with.” R.14:2306.
22
MYD argues that International Paint was “willing to wait a considerable length
of time for its distributors to do what it wants,” based on the length of time that
International Paint dealt with a number of its distributors over the new Awlplus
distributorship agreement, (IB at 48-49), but those were ongoing negotiations. By
contrast, MYD asserts that it flatly refused in 2004 at the Boat Show to raise
31
held, “[t]here can be no genuine dispute that the evidence about th[e] Boat Show as
disclosed in discovery does not tend to exclude the possibility that International
Paint made an independent decision four years later to terminate MYD.” App. 1,
at R.10:1953-54.
(b)
The Training Seminar Allegations
Although this Court reversed the dismissal of MYD’s Amended Complaint
because it pled the “exact place where the conspiracy was formed and the actual
representatives from each of the defendants who participated in the agreement,”
MYD, 76 So. 3d at 47, MYD now relies on an alternative conspiracy theory: a
“second explicitly conspiratorial meeting” that occurred in 2007, three years after
the Boat Show, and involved a different representative of International Paint
(David Halcomb) attending a different event (a training seminar) at a different
place (Waukegan, Illinois) with different complaining distributors (Donovan and
Gold Coast not among them). See IB at 15-19. MYD characterizes its alternative
conspiracy theory as involving a “similar conversation” as the Boat Show (IB at
38), but this is true only in the sense that both events involved complaining
distributors and neither involved a conspiracy by International Paint.
MYD accuses the trial court of not mentioning this alternative theory in its
order (IB at 38), but in fact this Court never held that the theory even stated a
margins and never entertained the option thereafter.
32
claim. MYD’s alternative theory was set forth in paragraph 22(b) of its Amended
Complaint, alleging that a few distributor employees who were gathered together
at an Awlgrip technical training seminar in 2007 spontaneously complained about
MYD’s pricing — “MYD’s low prices were ‘killing’ them and that they ‘could not
make any money’” — and were told in turn “that International Paint was ‘working
on the problem’ and that they could expect a ‘favorable outcome.’” R.1:196. But
as already established, (see I.C.1, above), a manufacturer delivering pacifying
words (e.g., the problem would be taken care of) in “an effort . . . to calm an angry
customer,” Jeanery, 849 F.2d at 1158, is not evidence of a conspiracy.23 A story of
“complaints to the manufacturer by competing dealers” is “insufficient to create a
‘reasonable inference’ of a conspiracy” even if “followed by termination of a
discounter.”24 MYD, 76 So. 3d at 47. Indeed, these alleged statements in 2007
23
The testimony MYD cites about the Waukegan training seminar (IB at 16-19)
adds nothing of significance to the allegations in MYD’s Amended Complaint.
MYD unsurprisingly omits the full testimony of Mr. Keener, who when asked
whether he understood the statement that “they were working on it” to mean that
International Paint was “taking steps to ensure either that MYD raised its prices or
that MYD would no longer be distributing Awlgrip paint,” replied that he was “not
sure that [he] took it either way.” R.7:1287-88. MYD instead relies on Mr.
Keener’s “yes” response to an improper, leading question about his understanding
to which International Paint timely objected; indeed, MYD deleted the objection
from its quotation (see IB at 18-19 (acknowledging “objections omitted”)).
R.7:1288-89.
24
This is so even assuming every one of International Paint’s distributors
complained about MYD’s pricing. See, e.g., O.S.C. Corp. v. Apple Computer, Inc.,
792 F.2d 1464, 1468 (9th Cir. 1986) (“Virtually every dealer . . . submitted
33
were not followed by MYD’s termination. To the contrary, International Paint
gave MYD the opportunity to sign the new Awlgrip distributorship agreement one
day after the training seminar in Waukegan (see R.1:196 at ¶ 22(b) (alleging
seminar occurred on November 12-14, 2007); R.18:2588-98 (distributorship
agreement was sent to MYD on November 15, 2007)), conduct that is wholly
inconsistent with a conspiracy to terminate. See Matsushita, 475 U.S. at 588.
(c)
The Price-Fixing Allegations
The crux of MYD’s antitrust claim is that International Paint’s actions with
respect to MYD were the result of a conspiracy with a few distributors to restrain
retail price competition. “But in order to conspire to restrain retail price
competition there must be some agreement to set, control, fix, maintain, or
stabilize prices.” Nat’l Marine Elec. Distribs., Inc. v. Raytheon Co., 778 F.2d 190,
193 (4th Cir. 1985). Of course, this is exactly what MYD alleged: “Defendants
have engaged in an ongoing contract, combination and conspiracy, with one
complaints to Apple. Such communication alone cannot support a finding of an
antitrust conspiracy.” (citations omitted)); Miles Distribs., 476 F.3d at 449 (fact
that “all of the competing TEC distributors complained to TEC about [plaintiff's]
prices” was “insufficient”). “[T]he volume and frequency of competitor complaints
does not affect [the Monsanto] analysis; ‘something more’ still must be shown by
the plaintiff.” Jeanery, 849 F.2d at 1158 (citation omitted). In fact, that “all” of
International Paint’s distributors supposedly complained about MYD’s pricing (IB
at 7-8, 14-15) confirms that complaints are no sign of conspiracy, since MYD
alleges that only a small fraction of the more than three dozen Awlgrip distributors
conspired with International Paint. Indeed, two large distributors were dismissed
at the very outset of this case for lack of proof of conspiracy. See p. 1 n.2, above.
34
another and with others, to fix, maintain, stabilize and raise the price of topside
yacht paint.” R.2:204-06 at ¶¶ 38, 44, 50. As the trial court put it, a “key predicate
of MYD’s theory of the case was the formation of an ongoing price-fixing
scheme.” App. 1, at R.10:1953. But discovery exposed MYD’s price fixing
allegations as pure fiction: “MYD has no evidence that International Paint imposed
a minimum resale price on any distributor and has effectively abandoned its pricefixing claims.”25 Id.
This is a compelling reason for affirming summary judgment. “In Monsanto,
the allegation of wrongdoing was conspiracy to set resale prices. Here [plaintiff]
alleges a conspiracy to restrain retail price competition. But in order to conspire to
restrain retail price competition there must be some agreement to set, control, fix,
maintain, or stabilize prices. Here there was no agreement. Each dealer, including
[plaintiff], set its own prices. Under these circumstances, whether one chooses to
allege that the restraint is vertical or horizontal, the lack of a conspiracy to restrain
prices leads to the same result. Monsanto bars [plaintiff’s] claim.” Nat’l Marine,
778 F.2d at 193; see also, e.g., Bailey’s, Inc. v. Windsor Am., Inc., 948 F.2d 1018,
1029-30 (6th Cir. 1991) (collecting decisions that “read Monsanto the same way”);
Garment Dist., 799 F.2d at 910 (“[T]he critical element in the Monsanto analysis is
25
The court also noted, “[t]he absence of any indication of price fixing is further
confirmed by the unrebutted expert report of Dr. Pace.” App. 1, at R.10:1953.
35
not what motivates the distributors to complain, but rather what motivates the
manufacturer to terminate discounters in response to these complaints. Here, [the
manufacturer] acted without exacting an agreement from the remaining dealers to
maintain prices.”).
MYD strains credulity by arguing that “[t]here was no . . . allegation” of
price-fixing in its Amended Complaint “and therefore nothing to ‘abandon.’” IB at
4. The record demonstrates that MYD insisted this was a price-fixing case in
numerous pleadings and filings in this Court and in the trial court.26 MYD still
relies overwhelmingly on price-fixing cases.27 And while MYD claims that this
26
See, e.g., R.5:882 (case alleged “a conspiracy to . . . maintain resale prices of
Awlgrip paint”); R.5:911 (“International Paint and its distributors entered into an
explicit agreement on the subject of resale prices.”); R.1:189 at ¶ 1 (“This is a civil
action challenging an unlawful horizontal conspiracy to fix the price of topside
yacht . . . .”); R.2:204-06 at ¶¶ 38, 44, 50 (“Defendants have engaged in an ongoing
contract, combination and conspiracy . . . to fix, maintain, stabilize and raise the
price of topside yacht paint . . . .”); R.2:204-07 at ¶¶ 39, 45, 51 (“Defendants’
horizontal price-fixing conspiracy is a per se violation”).
27
For example, in Monsanto, cited in IB at 2, 4 n.2, 33-36, the Supreme Court
found “substantial direct evidence of agreements to maintain prices” based on
testimony from a Monsanto employee that distributors agreed to maintain resale
prices in exchange for continuing to receive Monsanto’s product. 465 U.S. at 765
(emphasis in original). In Ezzo’s Invs., Inc. v. Royal Beauty Supply, Inc., 94 F.3d
1032, 1035 (6th Cir. 1996), cited at IB at 37 n.21, there was “solid, independent
evidence” of coerced agreement on specific prices. Likewise, in Helicopter
Support Sys., Inc. v. Hughes Helicopter, Inc., 818 F.2d 1530, 1535-36 (11th Cir.
1987), cited in IB at 37 n.21, “the record . . . include[d] direct evidence of an
agreement between [defendant] and its foreign distributors to maintain resale
prices.” In Big Apple BMW, Inc. v. BMW of North Am., Inc., 974 F.2d 1358, 1375
(3d Cir. 1992), cited in IB at 46 n.26, there was “evidence from which a factfinder
36
Court’s “2011 ruling could not have been based” on allegations of price fixing (IB
at 4), the truth is plain to see. This Court highlighted MYD’s claim that at the Boat
Show, Mr. Hickling “agreed to set a minimum resale price (gross profit margins of
at least 25% which is a 33% markup) in order to help the horizontal
[conspirators],” and “immediately after the meeting with the competing
distributors,” asked Mr. Del Monico “to raise MYD’s profit margins to at least
25%.”28 MYD, 76 So. 3d at 47, 49.
If anything, MYD fought hard to avoid conceding that Awlgrip prices were
set independently and not by conspiracy. MYD had to be compelled by the trial
court to provide a full response to an interrogatory asking whether it contended that
International Paint engaged in price-fixing.29 R.5:974-75, 985-86; S.R.Exhs. B, C.
Only after years of litigation did MYD finally admit in opposing International
Paint’s summary judgment motion that the retail prices of Gold Coast and
could infer[] that [the manufacturer] and its dealers have tacitly fixed prices.” In
Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204, 220-22 (3d
Cir. 2008), cited at IB, 37 n.21, there was “direct evidence” that the dealers had
conspired not to compete on price and that the manufacturer had agreed to support
their scheme.
28
Shortly before summary judgment was granted, MYD was still asserting that
one of the key issues for trial was: “Whether International Paint agreed at the 2004
Fort Lauderdale Boat Show to the alleged requests of Donovan and Gold Coast,
and set a minimum resale price in order to help all distributors increase the average
retail prices of Awlgrip paint . . . .” S.R.Exh. E.
29
The trial court cited the compelled response in its order. App. 1, at R.10:1953.
37
Donovan differed significantly. See R.8:1467, 1479-80; R.15:2380-81 (“we’re not
saying that [Donovan and Gold Coast] agreed to charge the same prices”).
As one appellate court said in rejecting a terminated (price-discounting)
distributor’s claim that a manufacturer conspired with a rival distributor to
maintain high retail prices: “The plaintiff has charged price-fixing, impure and
simple—and the utter absence of meaningful evidence of concerted action dooms
the plaintiff’s case.” Euromodas, 368 F.3d at 21. The same is true here.
(d)
Economic Implausibility
The trial court recognized the facts unearthed in discovery “render[ed]
MYD’s conspiracy story highly implausible in reality.” App. 1, at R.10:1948.
MYD acknowledges, “Matsushita requires heightened scrutiny of conspiracy
allegations when . . . ‘the plaintiffs’ theory of conspiracy [is economically]
implausible’” but attempts to evade this mandate by asserting the plausibility of its
conspiracy theory in just six words: “Plaintiffs’ theory ‘makes perfect economic
sense.’” IB at 34-35 n.18 (citations omitted). MYD’s bare conclusion is
unsupported by any evidence or analysis and contradicted by unrebutted expert
evidence.
MYD’s contention that “this Court has already held that Plaintiffs’
allegations are plausible,” (IB at 34-35 n.18), confuses the plausibility standard of
pleading required in Twombly with economic plausibility as a matter of fact. MYD
38
never came forward with a factual explanation for why International Paint, as a
manufacturer, would have an economic interest in colluding to promote
uncompetitively high prices for Awlgrip paint.
As the U.S. Supreme Court
recognized in Leegin, “in general, the interests of manufacturers and consumers are
aligned with respect to retailer profit margins.” 551 U.S. at 896. “A manufacturer
has no incentive to overcompensate retailers with unjustified margins. The
retailers, not the manufacturer, gain from higher retail prices.” Id. Such is the case
here.
International Paint profits when it makes a sale to a distributor at the
wholesale level; a distributor’s decision to discount Awlgrip product prices to
customers in a subsequent sale does not therefore reduce International Paint’s
profits. Consequently, there is no obvious economic incentive for International
Paint to desire retail margins higher than necessary to justify quality service.
MYD’s conspiracy theory therefore implausibly posits that International
Paint conspired to terminate its largest distributor pursuant to a multi-year scheme
from which it would not benefit.30 This theory defies both economic logic and
common sense, and is easily distinguishable from cartel cases like Petruzzi’s IGA
Supermarkets v. Darling-Delaware Co., 998 F.2d 1224 (3d Cir. 1993), cited by
30
MYD alleges no economic coercion of International Paint by Gold Coast or
Donovan, nor does it explain how two distributors making just 16.2% of Awlgrip
sales between them (in 2004) could credibly strong-arm their supplier. R.18:2645;
R.8:1546-47.
39
MYD to support its argument that its theory “makes perfect economic sense.” IB at
34-35 n.18. Terminating a distributor to enforce a price fixing cartel does make
economic sense, but MYD admits this is not a cartel case. The U.S. Supreme Court
made clear that “if [the defendants] had no rational economic motive to conspire,
and if their conduct is consistent with other, equally plausible explanations, the
conduct does not give rise to an inference of conspiracy.” Matsushita, 475 U.S. at
596-97 (citation omitted). When, as here, “the plaintiff’s theory is economically
senseless, no reasonable jury could find in its favor, and summary judgment should
be granted.” Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451,
468-69 (1992).
3.
MYD’s Failure of Proof Under The Rule of Reason
Even assuming a conspiracy, MYD has no case unless it can prove that the
alleged conduct restrained trade in the relevant market under the rule of reason,
inflicting injury on the process of competition — not just that the alleged conduct
caused pecuniary harm to MYD. MYD, 76 So. 3d at 48-49; Parts Depot, 669 So.
2d at 325-26 (rule of reason requires evidence of “harm to competition in general”
through proof of the market-wide anti-competitive effects of defendant’s acts in
“specifically defined” relevant markets). Based on the summary judgment record,
however, the trial court found an “absence of [] proof” on the elements of the rule
40
of reason test, and further found that this deficiency was “confirmed” by the
unrebutted expert opinion of Dr. Pace. App. 1, at R.10:1955.
MYD contends that the trial court “disregarded this Court’s rulings
concerning the rule of reason,” (IB at 38), but a plaintiff’s ability to plead the
elements of a rule of reason claim does not bar summary judgment if it fails to
prove all of those elements. See, e.g., Newcal Indus., Inc. v. Ikon Office Solution,
513 F.3d 1038, 1051 (9th Cir. 2008) (rule of reason issues “remain open for
resolution—either for or against [plaintiff]—upon remand, and all of these
questions are appropriate matters for resolution on summary judgment if [plaintiff]
fails to discover and present evidence to support its allegations”).
Specifically, MYD had the burden of coming forward with evidence in
support of three elements: (1) the existence of “a specifically defined relevant
market”; (2) the possession of market power “to affect price or output” on the part
of the defendants; and (3) anticompetitive effects of the defendants’ conduct on the
relevant market. MYD, 76 So. 3d at 49; App. 1, at R.10:1955. Contrary to MYD’s
assertions, International Paint did not concede any of these elements. The trial
court properly found that MYD’s “absence of [] proof” on these elements
warranted summary judgment. App. 1, at R.10:1955.
Relevant Markets. “Market definition is often the most critical step in
evaluating market power and determining whether business conduct has or likely
41
will have anticompetitive effects.”
Jonathan B. Baker, Market Definition: An
Analytical Overview, 74 ANTITRUST L.J. 129, 129 (2007); U.S. Anchor Mfg. Co. v.
Rule Indus., Inc., 7 F.3d 986, 994 (11th Cir. 1993) (“[d]efining the market is a
necessary step in any analysis of market power”). In its Amended Complaint,
MYD defined the relevant product as topside yacht paint and alleged it was sold in
six geographic markets, varying according to the size of the customer, including
the United States (at the broadest), and narrower “regional” markets in “South
Florida, the mid-Atlantic, Southern California, Northern California, and the Pacific
Northwest.” MYD, 76 So. 3d at 49; R.2:203 ¶¶ 33-34. MYD misleadingly claims
that “International Paint’s economist was instructed to assume the validity of
Plaintiffs’ market definition allegations,” (IB at 40; see also id. at 24), but Dr.
Pace assumed only that the relevant product was topside yacht paint. R.18:2625;
R.6:1109-11; R.8:1546-47. As MYD concedes, a fully defined relevant market
requires both geographic and product dimensions. See IB at 39; Lantec, Inc. v.
Novell, Inc., 306 F.3d 1003, 1026-27 (10th Cir. 2002) (affirming summary
judgment because “proof of relevant market requires evidence of both a product
market and a geographic market,” and plaintiff failed to establish alleged
geographic market).
And, as noted, no determination of market conditions,
42
barriers to market entry or market power can logically be made absent proper
definition of the market in which to make those assessments.31
Dr. Pace found that MYD’s market allegations were unsupported, and
expressed the “opinion that the plaintiffs have not properly defined their markets or
analyzed them.” R.8:1546-47; R.18:2625. Specifically:
MYD does not identify the markets it names with any precision or
analyze the structure of any of the claimed markets. MYD does not
identify the specific customers or customer characteristics that elicit
nationwide competition. It fails to specify the geographic boundaries
of any of the five regional markets it claims exists, or identify the
distributors competing or potentially competing in those markets.
Beyond this, MYD does not quantify the sales it made in each of the
claimed markets, calculate distributor market shares in any regional
market, or discuss entry conditions in any such market. Finally,
plaintiffs do not show how their termination as an Awlgrip distributor
affected each market MYD identifies as relevant in this case.
R.18:2625; R.8:1546-47.
MYD had no admissible evidence to rebut these
conclusions, a failure which, as discussed more fully below at pages 45-49, is fatal.
Harm to Competition. To prove a rule of reason case, MYD must present
evidence of “harm to competition in general” through proof of the market-wide
anti-competitive effects of defendant’s acts in “specifically defined” relevant
markets. See Parts Depot, 669 So. 2d at 325-26; Greenberg v. Mount Sinai Med.
31
The deposition questions put to Dr. Pace about “presumptions” (IB at 44)
improperly assume away these matters of economic proof. See, e.g., R.6:1107
(“assuming that the market has been defined properly and that market share has
been measured properly . . .”; “If there were entry barriers and you’ve defined the
market properly . . .”); R.6:1108 (“if the jury finds that . . . there are entry
barriers . . .”).
43
Ctr., 629 So. 2d 252, 257 (Fla. 3d DCA 1993); Jefferson Parish Hosp. Dist. No. 2
v. Hyde, 466 U.S. 2, 31 (1984) (rule of reason requires “showing that the market as
a whole has been affected”) (abrogated on other grounds); Capital Imaging
Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc., 996 F.2d 537, 543 (2d Cir.
1993) (plaintiffs must “show[] that the challenged action has had an actual adverse
effect on competition as a whole in the relevant market”). In its Amended
Complaint, MYD alleged a price-fixing theory and pled that its “termination as an
Awlgrip distributor was intended to affect, and did affect, the price and quantity of
goods sold in each of the relevant markets.”32 R.2:203 ¶ 36; see also R.2:204-06
¶¶ 38, 44, 50. The trial court, however, properly found that MYD did not present
evidence to support this point. The absence of such evidence was confirmed by
MYD’s admission that market prices were competitive, not fixed (see I.C.2.c,
above; Nat’l Marine, 778 F.2d at 193 (“Here there was no agreement. Each dealer,
including [plaintiff], set its own prices.”)), and by Dr. Pace’s conclusion that:
Plaintiffs have failed to show that the termination of MYD as an
Awlgrip distributor harmed competition in any of their claimed
relevant markets. For many of their claimed markets, they present no
evidence at all addressing this issue. My economic analysis considers
the structure of the claimed markets, as well as available data on
prices paid by various customers for Awlgrip before and after MYD’s
termination. I find the structure of the key distributor markets to
32
MYD purports to offer the same proof about market pricing as alleged in its
complaint, (IB at 5), but this is not possible since MYD abandoned the allegation
that Awlgrip prices were fixed at an uncompetitive level. See I.C.2.c, above.
44
be highly competitive, and I find that customers have continued to
benefit from competitive pricing of Awlgrip products since
MYD’s termination. Thus, I conclude that MYD’s termination did
not harm competition and that MYD has not suffered antitrust injury
as a result of its termination.
R.18:2623 (emphasis added); R.8:1546-47.
This opinion was unrebutted since, as with its market allegations, MYD
offered no evidence admissible to prove that any of its claimed relevant markets
suffered harm. See IB at 40-41. Instead of expert evidence, MYD attempted to
offer anecdotal lay testimony from a self-selected handful of customers. R.8:146768; IB at 45. Leaving aside for the moment that this type of evidence is legally
inadequate, see pages 45-49, below, evidence that some customers claim to have
paid more for Awlgrip after MYD’s termination as an Awlgrip distributor fell short
of proving the market-wide anti-competitive effects of defendant’s acts the law
requires.33 By contrast, Dr. Pace analyzed volumes of pricing data produced by
MYD, Donovan Marine and Gold Coast, as well as by third parties, and concluded
in his unrebutted expert report that “plaintiffs have failed to make out a case that
increased distributor margins caused customers generally to pay more for Awlgrip
products after MYD’s termination than they did while MYD was in business.”
R.18:2666; R.8:1546-47. He further concluded that:
33
Dr. Pace emphasized that “focusing on a very small subset of customers in an
alleged relevant market is not an economically sound methodology for determining
whether competition as a whole has been injured.” R.18:2664; R.8:1546-47.
45
My review of available pricing data before MYD was terminated
leads me to the conclusion that highly competitive pricing to relatively
large customers yielded gross margins in the 10 to 15 percent range,
and highly competitive pricing to medium size customers yielded
gross margins of around 20 percent. The evidence shows that
customers have continued to enjoy such pricing on Awlgrip products
since MYD’s exit.
R.18:2667-68; R.8:1546-47.
MYD’s case boils down to a grievance over losing an Awlgrip
distributorship. However, the law is clear that this sort of harm is not the type of
“antitrust injury” that the antitrust laws were designed to remedy. See Gatt
Commc’ns, 711 F.3d at 77 (“[Plaintiff’s] injuries flow from its participation and
then exclusion from a distribution network that, allegedly, featured intra-brand
price-fixing, and in which it had no right ab initio to participate. Even if the
antitrust laws seek to prevent [the purported co-conspirators’] alleged activities
because of resulting harms to competition, these laws are not concerned with
injuries to competitors such as [plaintiff] resulting from their participation in or
exile from such schemes.” (citation omitted)); Parts Depot, 669 So. 2d at 326
(“[T]here was no evidence from which a jury could find harm to the market. Harm
to [counter-claimant] Florida Auto Supply is not equated with harm to the market
actionable under the antitrust laws.”); Leegin, 551 U.S. at 906 (“The purpose of the
antitrust laws . . . is ‘the protection of competition, not competitors.”’ (quoting Atl.
Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338 (1990)).
46
Unrebutted Expert Evidence. Not only was MYD’s lay opinion evidence
insufficient as a matter of fact, it also was insufficient as a matter of law.
Summary judgment was appropriate because MYD offered no expert evidence
either to support a foundational relevant market definition or to prove broad harm
to competition in the defined markets.
Despite the fact that Defendants reminded MYD numerous times over the
course of this litigation that it was required to present expert evidence to prove
such critical elements as relevant markets, market power, and harm to competition,
MYD repeatedly proclaimed its intention not to provide any expert evidence on
those subjects (while investing its efforts in a damages expert who drove MYD’s
lost profits claim to sky high levels). See R.14:2300-01, 2303-04; R.3:492-93,
502-03; R.5:996; S.R.Exhs. E, F. Indeed, MYD invited Defendants to “move for
summary judgment” on the expert issue. R.14:2301 (“If they think that’s the basis
for blowing the case up, they can move for summary judgment.”).
MYD resolved to “prove a violation under the rule of reason . . . through the
testimony of fact witnesses.” See R.5:996. But as the trial court held (App. 1, at
R.10:1955-56), and as numerous courts in Florida and elsewhere have confirmed,
lay testimony cannot suffice to support a relevant market definition or market
power finding, much less prove broad harm to competition in the defined markets.
See, e.g., Am. Key Corp. v. Cole Nat’l Corp., 762 F.2d 1569, 1579 (11th Cir. 1985)
47
(“Construction of a relevant economic market or a showing of monopoly power in
that market cannot . . . be based upon lay opinion testimony.”); Astro Tel, Inc. v.
Verizon Fla., LLC, -- F. Supp. 2d --, 2013 WL 5781658, at *6 (M.D. Fla. Oct. 25,
2013) (summary judgment granted because “expert testimony is a necessity for
defining the relevant antitrust geographic and product markets”); Gulf States
Reorganization Grp. v. Nucor Corp., 822 F. Supp. 2d 1201, 1234 (N.D. Ala. 2011)
(summary judgment granted because “precedent requires an antitrust plaintiff to
proffer expert testimony to establish a relevant product market and a relevant
geographic market”), aff’d, 721 F.3d 1281 (11th Cir. 2013).
Courts have rejected precisely the type of evidence that MYD offered. In
Kentucky Speedway, LLC v. Nat’l Ass’n of Stock Car Auto Racing, Inc., 588 F.3d
908, 919 (6th Cir. 2009), the plaintiff sought to prove its claimed relevant markets
in the absence of expert testimony, using instead “lay testimony and internal
[defendant] marketing documents.” The court rejected this attempt, finding that
such evidence “does not provide a sound economic basis for assessing the market”
and affirming summary judgment based in part on plaintiff’s inability to define the
relevant market. Id. In Colsa Corp. v. Martin Marietta Servs., Inc., 133 F.3d 853,
855 n.4 (11th Cir. 1998), the court ruled that “the fact that two [non-expert]
witnesses provided testimony, in favor of [plaintiff], regarding the relevant market
cannot preclude summary judgment. . . . The issue in this case [] is the definition of
48
‘relevant market’—an antitrust term as defined by antitrust law. Therefore, the
witnesses could offer nothing more than lay opinion testimony.”
MYD finds it “anomalous” that expert economic evidence would be required
“in a field of law that has been around since 1890,” (IB at 41), but the Supreme
Court has repeatedly held that antitrust law is “dynamic” and is not “governed by
19th-century notions of reasonableness.” Bus. Elecs., 485 U.S. at 732. Instead,
restraints of trade are analyzed in conformance with “the principle that our antitrust
doctrines ‘evolv[e] with new circumstances and new wisdom.’” Leegin, 551 U.S.
at 905 (quoting Bus. Elecs., 485 U.S. at 732). And while MYD cites a handful of
cases, those cases either are not antitrust cases34 or do not hold that an antitrust
plaintiff may reach the jury without an expert when the defendant’s expert
evidence exposes the deficiencies of the plaintiff’s market claims.35 Summary
judgment should be affirmed.
34
See, e.g., Benitez v. Joseph Trucking, Inc., 68 So. 3d 428 (2011) (personal injury
case); Time Ins. Co. v. Burger, 712 So. 2d 389, 393 (Fla. 1998) (insurance
coverage case); Robin Roshkind, P.A. v. Machiela, 45 So. 3d 480, 482 (Fla. 4th
DCA 2010) (marriage dissolution).
35
U.S. v. E.I. Du Pont de Nemours & Co., 118 F. Supp. 41 (D. Del. 1953) (rejecting
market definition proffered – without expert testimony – by plaintiff); Gen. Indus.
Corp. v. Hartz Mountain Corp., 810 F.2d 795 (8th Cir. 1987) (appeal from jury
verdict on Sherman Act § 2 claim where parties agreed on geographic market);
Lantec, Inc. v. Novell, Inc., 146 F. Supp. 2d 1140 (D. Utah 2001) (granting
judgment as a matter of law where plaintiff failed to prove relevant market based
solely on lay evidence); Anti-Monopoly, Inc. v. Hasbro, Inc., 958 F. Supp. 895
(S.D.N.Y. 1997) (granting summary judgment because plaintiff failed to
49
II.
MYD’S REASSIGNMENT REQUEST IS WITHOUT MERIT
MYD requests that the Court “reassign this case to a different judge on
remand.” IB at 49.
This request should meet the same fate as the identical,
reflexive demand that MYD made in its last appeal, which this Court found to be
“without merit.” MYD, 76 So. 3d at 50.
CONCLUSION
For the foregoing reasons, Defendants/Appellees respectfully request that
this Court affirm the judgment below.
Daniel G. Swanson
PHV No. 65592
Gibson Dunn & Crutcher, LLP
333 S. Grand Avenue
Suite 4600
Los Angeles, CA 90071-3197
E-mail:
[email protected]
Sec. E-mail:
[email protected]
Lindsey Blenkhorn Haswell
PHV No. 95017
Gibson Dunn & Crutcher, LLP
555 Mission Street
Suite 3000
San Francisco, CA 94105-2933
E-mail: [email protected]
Sec. E-mail:
[email protected]
CARLTON FIELDS JORDEN BURT, P.A.
Miami Tower
100 SE Second Street, Suite 4200
Miami, Florida 33131
Telephone: (305) 530-0050
Facsimile: (305) 530-0055
By: /s/ Cristina Alonso
CRISTINA ALONSO
Florida Bar No. 327580
E-mail: [email protected]
Sec. E-mail: [email protected]
Sec. E-mail: [email protected]
CHARLES M. ROSENBERG
Florida Bar No. 279064
E-mail: [email protected]
Sec. E-mail: [email protected]
AARON S. WEISS
Florida Bar No. 48813
E-mail: [email protected]
Sec. E-mail: [email protected]
Counsel for Appellees International Paint Ltd. and International Paint, LLC
demonstrate antitrust injury, even though both parties put forth expert evidence on
the relevant market).
50
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing was
served by e-mail on this 6th February, 2014 to:
Scott E. Perwin
Kenny Nachwalter, P.A.
100 Miami Center
201 S. Biscayne Boulevard
Miami, FL 33131-3427
E-mail: [email protected]
Sec. E-mail: [email protected]
Counsel for Appellants
A. Rodger Traynor, Jr.
Lawrence D. Silverman
Akerman Senterfitt
One Southeast Third Avenue
Suite 2500
Miami, FL 33131-1714
E-mail: [email protected]
Sec. E-mail:
[email protected]
Counsel for Appellee
Donovan Marine, Inc.
Charles A. Morehead, III
Moody, Jones, Ingino & Morehead, P.A.
1333 S. University Drive, Suite 201
Plantation, FL 33324
E-mail: [email protected]
Counsel for Appellee
East Coast Marine Distributors, Inc.
/s/ Cristina Alonso
CRISTINA ALONSO
Florida Bar No. 327580
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that this brief complies with the font
requirements set forth in Florida Rule of Appellate Procedure 9.210 by using
Times New Roman 14-point font.
/s/ Cristina Alonso
CRISTINA ALONSO
Florida Bar No. 327580
29023005.1
51