Callahan v. A.E v. Inc.

Opinions of the United

1999 Decisions States Court of Appeals

for the Third Circuit

6-30-1999

Callahan v. AEV Inc

Precedential or Non-Precedential:

Docket 98-3456

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Filed June 30, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 98-3456

MICHAEL W. CALLAHAN; PERRY BEER INC.; PETER G.

PETOUSIS; NORMAN BERNARDI; KATHLEEN A. KAPRES;

PETE'S BEER INC.; LISA MARTIN; ANTHONY

SANTAGUIDA; THOMAS SANTAGUIDA; A. L.

ABROMOVITZ; CARL N. ALTENHOF; DOUGLAS J.

BERTHOLD; BREW-THRU, INC.; ALLEN E. BRAUN;

SPIKE'S BEER DISTRIBUTOR, INC.; DINO A. DEFLAVIO;

CAROLE A. DEMARCO; FRED DEMSHER; E & C PRICE

DISTRIBUTING, INC.; FRISCH DISTRIBUTING CO. INC.;

SARA J. KELLY; MARY LOU LIBELL; THE BEER

WAREHOUSE; ARMANDO NOVELLI; MARTIN P. PEKOR;

T.C. VALLEY BEER & POP COMPANY, INC.; LORETTA J.

PERRI; GREEN VALLEY DISTRIBUTING CO., INC.;

MARYANNE SANTAGUIDA; INGEBORG G. SCHINDLER;

DENNIS SENNEWAY; MICHAEL T. VOELKER; VOELKER

DISTRIBUTING, INC.,

Appellants

v.

A.E.V., INC., a corporation; BEER AND POP

WAREHOUSE, INC., a corporation; BRANDT

DISTRIBUTORS OF PITTSBURGH, a corporation; EARL

BRANDT, an individual; FRANK B. FUHRER WHOLESALE

COMPANY, a corporation; FRANK B. FUHRER, JR., an

individual; JET DISTRIBUTORS, INC., a corporation;

ALFRED M. LUTHERAN DISTRIBUTORS, INC., a

corporation; JAMES LUTHERAN, an individual; Q.F.A.,

INC., a corporation; RED SKY, INC., a corporation;

RETAIL SERVICES AND SYSTEMS, INC., a corporation;

DAVID J. TRONE, an individual

On Appeal From the United States District Court

For the Western District of Pennsylvania

(D.C. Civ. No. 92-cv-00556)

District Judge: Honorable Donetta W. Ambrose

Argued: March 25, 1999

Before: BECKER, Chief Judge, LEWIS and

WELLFORD,* Circuit Judges.

(Filed June 30, 1999)

H. LADDIE MONTAGUE, JR.,

ESQUIRE

JEROME M. MARCUS, ESQUIRE

(ARGUED)

BART D. COHEN, ESQUIRE

Berger & Montague, P.C.

1622 Locust Street

Philadelphia, PA 19103

Counsel for Appellants

ROSLYN M. LITMAN, ESQUIRE

(ARGUED)

MARTHA S. HELMREICH, ESQUIRE

Litman, Litman, Harris and Brown,

P.C.

3600 One Oxford Centre

Pittsburgh, PA 15219

Counsel for Appellees A.E.V., Inc.;

Beer & POP Warehouse, Inc.;

Jet Distributors, Inc.; Q.F.A., Inc.;

Red Sky, Inc.; Retail Services and

Systems, Inc.; David J. Trone

_________________________________________________________________

*Honorable Harry Wellford, United States Circuit Judge for the United

States Court of Appeals for the Sixth Circuit, sitting by designation.

2

MICHAEL YABLONSKI, ESQUIRE

(ARGUED)

Meyer, Unkovic & Scott, LLP

1300 Oliver Building

Pittsburgh, PA 15222

Counsel for Appellees

Frank B. Fuhrer Wholesale Company

and Frank B. Fuhrer, Jr.

OPINION OF THE COURT

BECKER, Chief Judge:

Prior to 1985, the retail sale of beer in the Pittsburgh

area was conducted exclusively by "mom and pop"-type

beer distributorships, such as those operated by plaintiff

Michael W. Callahan and his fifteen co-plaintiffs. In that

year, defendant David Trone opened the first "Beer World"

store, a supermarket-style beer distributorship ten times

the size of the traditional stores. He opened four more such

stores in the Pittsburgh area between 1986 and 1988,

offering a larger selection and lower prices. This case

involves antitrust and RICO claims arising out of the

manner in which Trone operated these stores.

The Pennsylvania Liquor Code limits the ability of one

entrepreneur to own or operate more than one beer

distributorship. Trone apparently evaded these restrictions

by placing the Beer World stores in the names of others,

and, while acting as a "consultant," effectively running the

stores himself. According to the plaintiffs, Trone deceived

the Pennsylvania Liquor Control Board (LCB) as to the true

state of affairs by filing of false statements and affidavits.

Trone negotiated purchases of beer from wholesalers for

all of the Beer World stores collectively. By doing so, the

stores were able to purchase at a wholesale price lower

than they would have been able to obtain in individual

purchases. Central to this case are Trone's negotiations

with defendant Frank Fuhrer, the master distributor in the

Pittsburgh area for Anheuser-Busch and Coors, in the

course of which Trone allegedly forced Fuhrer to agree to

3

give a quantity discount to the Beer World stores based on

their purchases as a group, but not to give this discount to

any other retailers.1 Trone is said to have been able to do

this because the Beer World stores held a substantial

portion (at least 25%) of the Pittsburgh beer market, and

because he threatened to place Fuhrer's products poorly

within the stores. The Beer World stores allegedly received

this discount even though their orders in the aggregate did

not always reach the 4500-case level Fuhrer set for the

discount. According to the plaintiffs, this discount was not

disclosed to anyone else; it was not included on Fuhrer's

ordinary price list and was excluded from loading sheets

posted at Fuhrer's distribution center. Not surprisingly, the

Beer World stores' advantage in pricing, as well as other

areas, cut sharply into the business of the smaller stores.

This state of affairs has spawned this unusual antitrust

and civil RICO case with state tort law claims appended,

brought by the plaintiffs against Trone, the Beer World

stores, and Fuhrer.2 The plaintiffs' antitrust theory is that

Trone, his employees, and the separately incorporated

stores have contracted, combined and conspired to restrain

trade in beer in Allegheny County, by confronting

wholesalers as a group and using their buying power and

the threats described above to force the wholesalers to sell

them beer at a price lower than that available to other

retailers. The plaintiffs' RICO theory is that Trone and

others, by submitting false statements and affidavits to the

LCB, as well as lying to a grand jury to cover up these false

statements, were able to maintain illegal consolidated

control of the Beer World stores. The plaintiffs submit that,

_________________________________________________________________

1. Several other master distributors were involved in similar

arrangements with the defendants. Although they were apparently

named in the original complaint, they have now settled with the plaintiffs

and are no longer participating in this case.

2. The Beer World stores are separately incorporated and named in the

complaint as A.E.V., Inc., Beer and Pop Warehouse, Inc., Jet Distributor,

Inc., Q.F.A., Inc., and Red Sky, Inc., all of which operate under the Beer

World name. Trone is named personally in the complaint, along with the

consulting business he runs, Retail Services and Systems, Inc. Fuhrer

includes both Frank B. Fuhrer, Jr. himself and his business, Frank B.

Fuhrer Wholesale Co.

4

as a result of this control, Trone and the Beer World stores

obtained the advantages that enabled them to sell beer at

prices below that of the plaintiffs. Although in a free

market, these different approaches to operating a beer

distributorship might not seem to offer grounds for a

federal antitrust or civil RICO suit, in the context of

Pennsylvania's detailed malt and brewed beverages

regulatory scheme, the plaintiffs have found grounds for a

lawsuit.

The District Court granted summary judgment for the

defendants on all claims, including both the state tort law

claims and the federal claims, and the plaintiffs have

appealed. Strangely, antitrust liability issues are not

presented in this appeal. The District Court, in deciding the

defendants' motion for summary judgment, did not

consider antitrust liability issues at all; rather, the District

Court disposed of the antitrust and RICO claims on the

ground that the plaintiffs had not produced sufficient

evidence that they suffered actual losses that were in fact

a result of the defendants' actions. Accordingly, and given

the incomplete state of the record as presented to us by the

parties, we do not intend to engage in an examination of

the nature and scope of the plaintiffs' theory or proof of

antitrust violations (and, consequently, we express no view

as to their correctness). Instead, we will assume, for the

purposes of this appeal, that the plaintiffs can offer

sufficient proof that the defendants engaged in antitrust

violations throughout the relevant time periods. We will

accordingly concentrate on the issues -- actual loss and

causation in fact (termed "fact of damage") with respect to

the antitrust claims, and proximate causation with respect

to the RICO claim -- that are fairly presented by this

appeal.

In order to prove that the plaintiffs suffered losses and

that the defendants' antitrust violations caused the injuries

as a matter of fact, the plaintiffs offered (1) testimony that

various customers no longer came to their stores and that

the customers explained that this was because the Beer

World stores offered cheaper prices, along with (2) the

report of an expert who opined that the defendants' actions

had caused harm to the plaintiffs. The defendants contend

5

that this evidence is insufficient to meet the plaintiffs'

burden of production. They first submit that the plaintiffs'

anecdotal evidence is inadmissible hearsay on which the

plaintiffs cannot rely. We disagree. The plaintiffs themselves

can testify that the customers are in fact no longer

shopping at their stores. Furthermore, although the reports

of the customers' statements are hearsay, they are

admissible as evidence of the customers' states of mind,

i.e., their reasons for no longer shopping at the plaintiffs'

stores. This combined evidence is sufficient to meet the

plaintiffs' burden of producing enough evidence of loss and

causation with respect to the plaintiffs' antitrust claims to

overcome a motion for summary judgment.

Also on the antitrust issues, the defendants argue that

the plaintiffs' proffered expert testimony is inadequate to

prove fact of injury and causation because, inter alia, the

expert failed to discuss numerous other possible causes of

the plaintiffs' losses. Furthermore, the defendants challenge

the expert's methodology for estimating the amount of

damages. In spite of these flaws, we conclude that the

expert's testimony is sufficient to meet the plaintiffs' burden

of proof. At all events -- taking into consideration both the

customer evidence and the expert reports-- we believe that

the District Court erred in dismissing the plaintiffs'

antitrust claims on the ground that there was inadequate

proof of fact of injury and causation in fact.

With respect to the RICO claim, the defendants contend

that the alleged causal connection between the defendants'

fraud and the plaintiffs' losses is not sufficiently close to

meet the requirement of proximate causation. The plaintiffs'

RICO claim runs as follows: If Trone and others associated

with the Beer World stores had not defrauded the

Pennsylvania Liquor Control Board by submitting sworn

statements that Trone did not own and control all of the

stores, the Liquor Control Board would have put Trone out

of business. Since he stayed in business, Trone was able to

use his control of several stores to obtain volume discounts

by buying for the stores in the aggregate. The plaintiffs were

then harmed by the defendants' ability to sell at lower

prices.

6

We think this case is similar to Steamfitters Local Union

No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912

(3d Cir. 1999), in which we recently held that the plaintiffs

had failed to prove proximate causation. In Steamfitters, we

recognized three factors the Supreme Court has identified

for determining proximate causation in RICO cases: the

directness of the injury, the difficulty of apportioning treble

damages among potential plaintiffs, and the possibility of

other plaintiffs vindicating the goals of RICO. Given that the

plaintiffs are relatively remote third-party "victims" of the

fraud and that the LCB itself, or the wholesalers, could take

steps to counter the defendants' allegedly illegal actions, we

think the plaintiffs' claim meets none of the factors.

Accordingly, we believe that the District Court properly

dismissed the plaintiffs' RICO claim, although not for the

appropriate reason. For these reasons, we will affirm the

judgment of the District Court to the extent it dismissed the

plaintiffs' RICO claim, but reverse its judgment with respect

to the antitrust claims.

I. Facts and Procedural History

A. The Pennsylvania Beer Sales Regulation Scheme

Pennsylvania is a state in which temperance with respect

to alcoholic beverages has always been an important policy,

and statutory regulation of alcoholic beverage sales is

extensive. The best known example, of course, is the"state

store" system, under which liquor can only be sold in state-

owned stores. With respect to malt and brewed beverages

there is likewise a panoply of regulations. See, e.g., Pa.

Stat. Ann. tit. 47, S 4-441(b) (West 1997) (prohibiting sales

in units smaller than one case); S 4-447 (limiting sellers'

ability to change prices); S 4-492(2) (prohibiting sales by

licensees for consumption on the premises); S 4-492(4)

(prohibiting sales on Sunday); S 4-493(2) (prohibiting credit

sales of alcoholic beverages other than by credit card); S 4-

493(3) (prohibiting exchange of alcoholic beverages for

goods or services); S 4-493(8) (prohibiting the use of labels

or advertisements containing the alcoholic content of

brewed or malt beverages).

For present purposes, we are concerned with the

regulation of beer sales. Under Pennsylvania law, beer

7

sellers are divided into four classes for licensing purposes:

manufacturers, master distributors, importing distributors

and distributors. See Pa. Stat. Ann. tit. 47, S 4-431 (West

1997). The first category consists of breweries. An out-of-

state brewer is required to designate a particular importing

distributor as the master distributor for a particular

geographic area within which only that master distributor

is permitted to buy that brewer's beer directly from the

brewer. See S 4-431(b). Thus, any beer sold in a particular

area must at some point pass through the master

distributor designated for that brand in that area. A master

distributor can sell beer to importing distributors,

(ordinary) distributors or the public. An importing

distributor can also sell beer either to other importing

distributors, (ordinary) distributors or the public. A

distributor can only sell beer to the public. The Beer World

stores all have importing distributor licenses, and can

therefore sell to each other and to the public. Only some of

the plaintiffs have such licenses.

Highly relevant here is the extent to which Pennsylvania

law limits the ability of a participant -- e.g., a partner,

member or shareholder -- in one beer distributor to

participate in another. See S 4-438 ("No person shall

possess more than one class of license . . . .");S 4-443

(prohibiting interlocking ownership in various forms). In

particular, the law restricts the ability of an individual to

participate in companies that operate at the same level,

although the parties debate the extent to which the law

does so. See S 4-438(b) ("No person shall possess or be

issued more than one distributor's or importing

distributor's license."); S 4-436(e) (application for brewed or

malt beverage license must state "[t]hat the applicant is

not, or in case of a partnership or association, that the

members are not, or in the case of a corporation, that the

officers or directors are not, in any manner pecuniarily

interested, either directly or indirectly, in the profits of any

other class of business regulated under this article, excepts

as hereinafter permitted"); S 4-436(f) (applicant must state

"[t]hat applicant is the only person in any manner

pecuniarily interested in the business so asked to be

licensed . . . .").

8

B. Trone's Beer Business Arrangements

Trone's family had been in the beer business in

Harrisburg and Pittsburgh for some time. While a business

student at the University of Pennsylvania's Wharton School,

Trone apparently came up with a plan for a new type of

beer distributorship business. Prior to his plan, beer

distributors were typically small, low-capitalization "mom-

and-pop" stores of the kind operated by the plaintiffs. They

usually had ordinary distributor licenses and operated

relatively small stores, selling beer by having people come

in and ask for a particular brand. Trone's idea was to

create much larger stores, roughly ten times the square

footage of the plaintiffs' stores, to be operated like a

supermarket. The cases of beer would be set out on shelves

so that shoppers could wander through the store picking

out particular brands themselves. In addition, Trone

planned to offer soda and snacks in addition to the beer.

This business plan became the "Beer World" concept.3 We

chronicle the history and management structure of the

stores because it bears on the contention that Trone

improperly controls all of the stores in violation of the

Pennsylvania liquor control scheme, an important part of

the plaintiffs' antitrust and RICO claims.

The first Beer World opened in the Pittsburgh area in

1985. Two more stores opened in Pittsburgh in 1986,

followed by the last two in 1987 and 1988. The first store,

incorporated as Jet Distributors, Inc., is apparently owned

by Paul Piho, a childhood friend of Trone's. Piho initially

worked full-time in Chicago after the store opened. For a

short time, he moved to Pittsburgh and managed the store.

Currently, he works at a Delaware branch of a chain of

liquor stores apparently owned by Trone. The second store

is apparently owned by Trone's wife, who for a time worked

at the store, but presently spends less than five hours per

week there. The third is apparently owned by Thomas

_________________________________________________________________

3. It might seem surprising that Trone was thefirst to come up with the

beer supermarket concept. Indeed, one might think that it would have

been around for decades. Perhaps he was simply thefirst to bring this

idea to Pennsylvania. At all events, these ruminations have no bearing

on the outcome of this case.

9

Esper, a retired schoolteacher who apparently knows little

about either the store or the liquor business. The fourth

store is apparently owned by Trone's sister, who has been

in school or working at other jobs for the relevant period.

Before 1990 and since 1994, she has lived outside of

Pennsylvania. The last store was apparently owned by

Albert Vivio, the father of one of Trone's employees. He

stated that he did not pay anything to own the store, but

that Trone asked him to put his name on a license. He

testified that he had "no duties at the store," pursuant to

an "agreement with Mr. Trone."

Since the Beer World stores opened, Trone has been

employed as a "consultant" for all of them. The plaintiffs

allege, however, that Trone's role in the stores is much

greater. When the stores opened, he did much of the work

in preparing the stores, choosing product line and layout,

and selecting employees. He also set up purchasing and

delivery systems. Since then, Trone has apparently

controlled the day-to-day operations of the stores. He set

the salaries for Beer World employees. Employees were

routinely moved from store to store while remaining on the

payroll of the store in which they began. Although each

store maintains a separate bank account in the owner's

name, Trone has a stamp of each owner's signature which

he uses for checks. He also designed all the advertising for

the stores, which included aggressive price advertising until

July 1, 1987, when Pennsylvania banned it. And he

determined purchasing and product placement within the

stores. Finally, Trone purchased a single insurance policy

and used one law firm for all of the stores.

Of particular relevance to the plaintiffs' claims are

Trone's efforts in coordinating purchasing. Trone negotiated

purchases of beer from wholesalers for all of the Beer World

stores at once, obtaining an agreement that the Beer World

stores could order together in order to obtain substantial

volume discounts. The parties focus particularly on the

negotiations between Trone and Fuhrer, who was the

master distributor in the Pittsburgh area for Anheuser-

Busch and Coors. All of Fuhrer's negotiations regarding the

prices he would charge Beer World stores were conducted

with Trone.

10

Even before the Beer World stores opened, beer

wholesalers offered various quantity discounts, although

they were relatively small. From September 1, 1987, until

the end of 1989, pursuant to an agreement with Trone,

Fuhrer implemented a $.25 per case discount for purchases

of 4500 or more cases, a purchase amount substantially

larger than that required for other, smaller volume

discounts wholesalers offered. The Beer World stores were

the only ones ever able to achieve this level of purchasing,

which they did by ordering as a unit. Although each store

would place separate orders that were delivered separately,

they were placed in the name of Jet Distributors, one of the

stores, in order to aggregate the order size to reach the

4500 case level. Each store's order was substantially less

than this, usually in the range of 1000 cases. Although the

plaintiffs attempted to take advantage of this discount, they

were never able or permitted to do so.

Although the parties focus primarily on these quantity

discounts, the plaintiffs allege that Trone was also able to

obtain other benefits for the Beer World stores from

wholesalers. For example, Fuhrer allegedly gave the Beer

World stores a full-time employee, paid by Fuhrer, who

stocked shelves at all of the stores. The plaintiffs further

contend that Trone forced Fuhrer to sell him out-of-code

beer, i.e., beer past its expiration/freshness date, at a

discount. Apparently state law prohibits this and requires

wholesalers to give retailers new beer in exchange for out-

of-code beer. Trone allegedly got such beer at a discount

and sold it while concealing the fact that it had expired

from customers and inspectors sent by the beer brewers.

The plaintiffs criticize several aspects of these

arrangements. First of all, they contend that Trone forced

Fuhrer to agree not to give the discount to any other

retailers. He allegedly could do so because, since the Beer

World stores held a substantial portion (at least 25%) of the

Pittsburgh beer market, Trone's threat to place Fuhrer's

products in unfavorable locations within the stores carried

force. Second, the plaintiffs point out that the Beer Worlds

consistently received this discount even though their orders

in the aggregate did not always reach the 4500-case level.

In addition, many of the individual orders were fairly small:

11

29% were below 500 cases and 14% were below 200 cases,

roughly the level at which the plaintiffs ordered. Finally,

this discount was not disclosed to anyone else; it was not

even included on Fuhrer's ordinary price lists.

In response to the defendants' actions, the plaintiffs

instituted a state lawsuit against the defendants and

convinced the Commonwealth to commence criminal

proceedings. Neither of these actions achieved their desired

results.

C. The Present Lawsuit

The plaintiffs filed the present lawsuit in March of 1992.

Their primary claims include price fixing, engaging in a

group boycott, and attempting and conspiring to

monopolize the beer market in Pittsburgh, all in violation of

the Sherman Act, 15 U.S.C. SS 1 & 2, and civil RICO claims

predicated on money laundering and mail fraud in

connection with the license applications to the LCB, said to

be a violation of 18 U.S.C. SS 1341, 1956, 1962. They also

brought various other claims that have been dismissed and

not appealed or that we may dispose of summarily. 4

Although the plaintiffs moved for class certification, this

motion was denied, at which point some additional

plaintiffs joined the suit.

The antitrust claims arise out of the joint operation of the

Beer World stores. The plaintiffs contend that, by operating

as a group, the Beer World stores were able to obtain an

illegal competitive advantage. As evidence of such joint

operation, they point to inter alia Trone's collective control

of the stores, the aggregated orders through Jet

Distributing, and coordinated advertising. The plaintiffs

contend that this conduct violated the antitrust laws in

_________________________________________________________________

4. These claims include price discrimination in violation of the Robinson-

Patman Act, 15 U.S.C. S 13; common-law fraud; common-law conspiracy

to defraud; and RICO violations predicated on mail fraud in the mailing

of price lists by Fuhrer, 18 U.S.C. SS 1341, 1962. The Robinson-Patman

Act claim was dismissed early on, and the plaintiffs have not appealed

from that dismissal. See Callahan v. A.E.V., Inc., Civ. A. No. 92-556,

1994 WL 682756 (W.D. Pa. Sept. 26, 1994). The plaintiffs' others claims

are discussed in infra note 7.

12

several ways. First, the "quantity" discounts the Beer World

stores were able to obtain are said to have constituted

unfair price fixing, i.e., the price for other beer distributors

was fixed at a level $.25 higher than that for the Beer World

stores. Second, the discounts are claimed to have resulted

in a group boycott, i.e., Beer World convinced the

wholesalers to sell to the other distributors only on unfairly

disadvantageous terms. Finally, the plaintiffs allege that all

of the actions of Trone and the Beer World stores

constituted an effort to monopolize the beer retail market in

Allegheny County, which includes Pittsburgh. These efforts

were aggravated by the fact that, pursuant to the

Pennsylvania Liquor Code, the plaintiffs could only

purchase beer through the single, designated master

distributor for each brand for Allegheny County.

The RICO claim arises out of the various statements

made during and concerning the Beer Worlds' efforts to

obtain licenses from the LCB. First, various of the

defendants and others allegedly lied about the true

ownership of the Beer World stores in affidavits and other

documents filed with the LCB via mailings in order to

obtain and retain their licenses. Second, Trone and others

allegedly lied before a grand jury investigating their

operation when asked about the ownership of the Beer

World stores. The plaintiffs contend that, as a result of this

fraud, the Beer World stores were able to remain in

business illegally under the control of Trone. Furthermore,

Trone is said to have engaged in transactions involving the

proceeds of this fraud, i.e., the income of the stores, by

reinvesting the money in the stores, allegedly in violation of

the money laundering statute. The plaintiffs contend that

these various activities violated RICO.

D. The District Court's Rulings

Following extensive discovery, the parties each moved for

summary judgment on various of the claims. The plaintiffs

moved for summary judgment on their RICO claim relating

to the Trone and Beer World defendants' statements to the

LCB. The District Court denied the plaintiffs' motion

because they did not "provide [any] substantive analysis of

13

the meaning or application of S 1962 or its various

subsections." Dist. Ct. Op. I, at 3.5

The defendants moved for summary judgment on all of

the plaintiffs' claims. The District Court, in a series of

orders, granted the defendants' motions in part and denied

them in part, and granted judgment in favor of the

defendants on all of the plaintiffs' claims. First, the District

Court dismissed part of the plaintiffs' RICO claim on

statute of limitations grounds to the extent it was based on

matters that occurred more than four years before the suit

was filed.6 Second, the District Court dismissed all of the

_________________________________________________________________

5. Since we will affirm the District Court's judgment in favor of the

defendants on the plaintiffs' RICO claim, we need not consider

specifically whether it erred in denying the plaintiffs' motion for

summary judgment.

6. The District Court granted the defendants' motion for summary

judgment on the RICO claim to the extent it was based on actions prior

to March 1988, four years before the present suit was filed, because the

plaintiffs should have been aware of the defendants' acts prior to that

time. The plaintiffs contend that the District Court's conclusion

erroneously rested on the fact that some of themfiled a state lawsuit

against Trone and the Beer World stores in 1986 alleging similar

concerns, during which they could have obtained sufficient discovery to

bring their present claims. They argue that their attorney misled them

into believing they could not pursue their claim in that context, and that

the statute of limitations should be tolled equitably.

We recently explained that attorney misconduct can give rise to

equitable tolling only in unusual circumstances. See Seitzinger v.

Reading Hosp. & Med. Ctr., 165 F.3d 236, 240 (3d Cir. 1999). The

plaintiffs contend that such unusual circumstances are present here,

because their attorney allegedly was conflicted in that he also

represented Fuhrer, and because, unlike Seitzinger, the lack of

information on which to base a claim was at least arguably a result of

the defendants' fraud. Furthermore, the plaintiffs note that, given the

tremendous difficulties they faced in obtaining adequate discovery from

the defendants in this case, the defendants cannot contend that the

plaintiffs would have been able to obtain sufficient discovery in the

previous state case. On the other hand, the defendants point out that,

even if they fraudulently concealed certain facts, the plaintiffs were

aware of those facts by the end of 1987. We need not decide this issue,

because we will affirm the District Court's dismissal of the RICO claim

in its entirety on other grounds.

14

plaintiffs' remaining claims -- the antitrust and RICO

claims -- because it concluded that the plaintiffs had not

offered sufficient evidence of fact of damage, i.e., loss and

causation in fact.7

_________________________________________________________________

7. As noted above, the plaintiffs brought additional RICO and common-

law tort claims. In the same series of orders identified in the text, the

District Court granted summary judgment on these claims in the

defendants' favor. We will affirm those aspects of the judgment

summarily.

The plaintiffs' common-law claims are that Fuhrer issued price lists

that were fraudulent because they did not state the volume discount the

Beer World stores received, and that Trone and Fuhrer conspired to

misrepresent the prices through the same mechanism. Claims for

common-law fraud and conspiracy are governed by a two-year statute of

limitations. See 42 Pa. Cons. Stat. S 5524(7). The discount was

discontinued at the end of 1989, and the plaintiffs were aware of the

discount before then. The complaint was filed in March of 1992.

Accordingly, the District Court concluded that more than two years had

elapsed between the defendants' fraudulent acts and the filing of the

complaint, and that the claim was therefore time-barred. Since the

plaintiffs have not addressed this issue in the briefs (or, apparently,

before the District Court), and the District Court's decision appears to

be

correct, we will affirm the District Court's judgment as to the common-

law claims summarily.

The other RICO claim was based on Fuhrer's allegedly fraudulent

mailing of price lists that did not include the $.25/case volume discount

offered to the Beer Worlds. This discount was begun in September of

1987. Fuhrer did not mail a price list thereafter until March of 1988,

and the plaintiffs were aware of the discount by October of that year.

The District Court analyzed whether this constituted a "pattern of

racketeering activity," 18 U.S.C. S 1962, in light of long-standing

precedent. See, e.g., H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S.

229, 241 (1989). First, the Court concluded that this was not an open-

ended pattern because, as Fuhrer discontinued the discount in 1989,

the alleged fraud was unlikely to recur. Second, the Court found that

fraud of six months' duration could not constitute a closed-ended

pattern. See, e.g., Tabas v. Tabas, 47 F.3d 1280, 1293 (3d Cir. 1995)

("Since H.J., Inc., this court has faced the question of continued

racketeering activities in several cases, each timefinding that conduct

lasting no more than twelve months did not meet the standard for

closed-ended continuity." (citing cases)). Because the plaintiffs could

prove no pattern of racketeering activity, the District Court concluded

that they could not bring a successful RICO claim based on the price

lists. Since the plaintiffs have not discussed this issue in their briefs

and

the District Court's reasoning is persuasive, we will affirm the District

Court's judgment in favor of the defendants on this other RICO claim,

also summarily.

15

Summary judgment "shall be rendered forthwith if the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter

of law." Fed. R. Civ. P. 56(c). Although the plaintiffs must

prove loss, causation and specific damages, at the

summary judgment stage, the court's main concern should

be with determining loss and causation in general, rather

than proof of specific amounts of damages:

At this procedural juncture, reviewing the district

court's grant of summary judgment, we are not, as we

would be upon reviewing a jury verdict, determining

whether a plaintiff has brought sufficient evidence to

justify the actual damages awarded. Rather, here, all

we are concerned with is whether Rossi has

established that the defendants' illegal conduct was a

material cause of [his] injury.

Rossi v. Standard Roofing, Inc., 156 F.3d 452, 484 (3d Cir.

1998) (citation and quotations omitted); see also Stelwagon

Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1276

n.19 (3d Cir. 1995) (declining to consider whether the

plaintiff had offered sufficient proof of the amount of

damages, since the plaintiffs' proof of loss in general was

inadequate).

On appeal, our review of a District Court's grant of

summary judgment is plenary. See In re Baby Food

Antitrust Litig., 166 F.3d 112, 123 (3d Cir. 1999). "We

evaluate the evidence using the same standard the District

Court applied in reaching its decision." 166 F.3d at 123-24.8

II. Antitrust Claims: Antitrust Liability

In the ordinary case, liability is the first question that

must be decided. Accordingly, we would usually begin our

analysis of this case with a discussion of whether the

plaintiffs have produced sufficient evidence to prove that

_________________________________________________________________

8. The District Court had subject matter jurisdiction pursuant to 28

U.S.C. S 1337 and 1367, as well as 15 U.S.C.S 15. We have appellate

jurisdiction pursuant to 28 U.S.C. S 1291.

16

the defendants violated the Sherman Act. Although that

would appear to be an obvious question in this case, for the

reasons set forth below we are not presently in a position

to evaluate the plaintiffs' theory of antitrust liability. We

will, however, briefly summarize that theory and the

defendants' arguments against it in order to provide a

background for our discussion of fact of damage, and for

the benefit of the District Court and the parties on remand.

The plaintiffs' antitrust claims begin with the premise

that Trone coordinated the activities of all of the Beer World

stores. In support of this contention, they note that Trone

dictated most aspects of store policy, was in charge of

hiring and managing employees, and had sole control of the

stores' accounts. In addition, Trone coordinated the stores'

interactions with other people, including wholesalers and

customers. He negotiated a single set of wholesale prices for

all of the Beer World stores. When one wholesaler would

not agree to a discount, he organized a joint advertising

campaign among the stores against the wholesaler. He also

published joint advertising for the stores.

Furthermore, Trone and the stores allegedly conspired

with wholesalers, Fuhrer in particular, so that the stores

could obtain a competitive advantage over other retailers.

Most prominently, the plaintiffs allege that Trone convinced

Fuhrer to grant the stores a volume discount $.25/case

lower than that available to any other retailer. This

discount was concealed from other customers and

wholesalers in several ways, and denied to the customers

when they requested it. The Beer World stores' orders

pursuant to the discount were placed jointly. Furthermore,

the discount was always given even though the minimum

order required for the discount was not always met by the

Beer World stores in the aggregate. In addition, the

plaintiffs contend that the evidence shows that Fuhrer

granted the stores other advantages, including special

delivery terms and assistance in placing beer in the stores.

The plaintiffs contend that the advantages the Beer World

stores obtained caused losses to the plaintiffs. As a result

of the advantages, the Beer World stores were able to

undersell the plaintiffs. Accordingly, the plaintiffs contend,

they lost customers to the Beer World stores. The plaintiffs

17

submit that these harms were particularly aggravated

because of the geographical limitations the Liquor Code

places on distributors. The Code requires that, for each

brand of beer sold in a particular area, a specific wholesaler

be designated as the master distributor. A beer retailer

within that geographic area, must buy that brand either

from the master distributor, or from someone who bought

it from the master distributor. Since the plaintiffs allege

that the defendants were conspiring with the master

distributors, they were at a particular competitive

disadvantage.

Although, as noted above, the plaintiffs identify several

antitrust liability theories, they focus on one in particular

in their briefs. They argue that the aforementioned actions

constitute a group boycott on the part of Trone, the Beer

World stores, and Fuhrer. They contend that Trone

convinced Fuhrer to agree to sell beer to the Beer World

stores at a lower price than would be available to any other

retailer. They rest their legal theory on, inter alia, Klor's,

Inc. v. Broadway Hale Stores, Inc., 359 U.S. 207 (1959),

and Rossi v. Standard Roofing, Inc., 156 F.3d 452 (3d Cir.

1998).

The defendants contend that the plaintiffs' theory of

antitrust liability is untenable for several reasons. First,

they argue that the plaintiffs' theory is simply a Robinson-

Patman Act price-discrimination claim recast as a Sherman

Act claim. They note too that the plaintiffs did bring a

Robinson-Patman Act claim that was dismissed on

jurisdictional grounds. The defendants also submit that

price discrimination without much more cannot be a

violation of the Sherman Act.

We agree that price discrimination simpliciter -- even

when it violates the Robinson-Patman Act -- is usually not

a Sherman Act violation. But we do not think this

necessarily means that the plaintiffs are barred from

bringing a price discrimination claim under the Sherman

Act. The plaintiffs' claims are unlike an ordinary price

discrimination case, in which a single supplier offers

different prices to different purchasers in order to advance

its own interests. They allege that Fuhrer was convinced to

offer different prices in order to advance the defendants' --

18

the plaintiffs' competitors -- interests. We see no reason

why price discrimination, under appropriate circumstances,

could not be part of an agreement in restraint of trade or a

monopolization attempt. See, e.g., Black Gold, Ltd. v.

Rockwool Indus., Inc., 729 F.2d 676, 683-84 (10th Cir.

1984); Peelers Co. v. Wendt, 260 F. Supp. 193, 198 (W.D.

Wash. 1966); McKeon Constr. v. McClatchy Newspapers,

Civ. No. 51627, 1969 WL 226 (N.D. Cal. Nov. 24, 1969). So

long as the price discrimination involves a conspiracy to

restrain trade or create a monopoly in some market--

along with a substantial effect on competition in the

market, see J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d

1524, 1541 (3d Cir. 1990) (quoting Zoslaw v. MCA

Distributing Corp., 693 F.2d 870, 887 (9th Cir. 1982)); see

also United States v. Arnold, Schwinn & Co., 388 U.S. 365,

375 (1967) -- it would violate the Sherman Act. The proper

evidence in this case might support the conclusion that this

constituted a conspiracy or agreement to restrain trade or

create a monopoly, although we express no opinion as to

whether the plaintiffs have produced such evidence.

The defendants also contend that the plaintiffs cannot

prove that they engaged in a group boycott. Relying on

Klor's and Rossi, they submit that a group boycott only

exists where the defendants' actions result in the product's

not being available to the plaintiffs at all, or only being

available at highly unfavorable terms. Of course, when one

thinks of a boycott, one ordinarily thinks of preventing

access to something entirely. Moreover, the defendants

contend that the putative quantity discount is modest. The

plaintiffs respond, however, that the evidence here is

sufficient to conclude that, as a result of the defendants'

actions, beer was only available to them on highly

unfavorable terms, i.e., $.25/case more than their

competitors were paying.

Finally, the defendants contend that the antitrust

violations were limited to a narrow array of conduct,

specifically the $.25/case discount discussed above.

Plaintiffs contest this point vigorously. They suggest that,

solely with respect to Fuhrer, the evidence supports the

conclusion that he engaged in other activities over a longer

period of time, including delivery and product placement

19

assistance, that gave the Beer World stores an advantage.

Furthermore, the plaintiffs point to evidence that suggests

that other wholesalers were giving the Beer World stores

discounts and other benefits throughout a substantially

broader time frame.

The District Court did not address these questions of

antitrust liability because it thought it could dispose of the

case on other grounds. In part, this may have been because

the Court came to the case late, upon transfer of the case

from the docket of another judge.9 In addition, it

undoubtedly seemed to it to be a more straightforward way

in which to dispose of the case. We imply no criticism of the

District Court's approach. As discussed further below,

however, liability is not an issue that ultimately can be

avoided in this case. The defendants have suggested that it

is an appropriate alternative grounds upon which we can

rest our judgment, but we do not think so. Although the

parties have set forth in their briefs their legal analyses of

the liability questions, the record as presented to us is not

sufficiently adequate for us to give the careful and thorough

consideration these issues merit. Since the case must go

back to the District Court, we think these issues would

benefit from further elaboration there in thefirst instance.

On remand, in determining whether the plaintiffs can

prove that the defendants violated the Sherman Act, the

District Court can answer the questions discussed above.

The Court will be able to determine under which of their

variegated antitrust theories the plaintiffs may proceed. In

addition, the Court can clarify the precise temporal scope

and nature of the defendants' antitrust violations.

Explication of this last issue in particular will provide a

better framework for more precise analysis of the questions

to which we turn next (and which will remain a matter in

controversy on remand). At this juncture, because of the

lack of clarity concerning the precise nature and scope of

the plaintiffs' antitrust liability proofs, we will assume that

the plaintiffs can prove that the defendants engaged in

antitrust violations throughout the relevant period. Based

_________________________________________________________________

9. We also note that the present plaintiffs' counsel came to the case late

as well, after much of its present contours had beenfixed.

20

on this assumption, we turn to the issue upon which the

District Court rested its decision: whether the plaintiffs

have offered sufficient proof of fact of damage.

III. Antitrust Claims: Fact of Damage

The primary issue actually before us on the antitrust

claims is whether the plaintiffs have proffered sufficient

evidence to raise a genuine issue of material fact as to

whether the defendants' alleged antitrust violations caused

harm to the plaintiffs. "[A] plaintiff must prove a causal

connection between [the antitrust violation] and actual

damage suffered." Stelwagon Mfg. Co. v. Tarmac Roofing

Sys., Inc., 63 F.3d 1267, 1273 (3d Cir. 1995); see also Rossi

v. Standard Roofing, Inc., 156 F.3d 452, 483 (3d Cir. 1998)

("To recover damages, an antitrust plaintiff must prove

causation, described in our jurisprudence as `fact of

damage or injury.' " (citations omitted)); II Phillip E. Areeda

& Herbert Hovenkamp, Antitrust Law P 360c2, at 195 ("The

plaintiff must show actual injury that was `caused' by the

violation."). Although we suspect our factual analysis of loss

and causation would apply equally to both the plaintiffs'

antitrust and RICO claims, we will focus in this section

only on the former. We can put the RICO claim to the side

because, although we are unsure that the District Court's

reasons for dismissing it was correct, we think they should

be dismissed for other reasons, i.e., lack of proximate

causation.

In brief, the plaintiffs' theory of antitrust fact of damage

is as follows: Trone, the Beer World stores, and Fuhrer

engaged in various joint actions, including but not limited

to granting the Beer World stores secret discounts on

wholesale purchases, which resulted in the plaintiffs' losing

business. In support of this theory of fact of damage, the

plaintiffs offer two types of evidence: (1) testimony

concerning customers who no longer shop at the plaintiffs'

stores and their statements about their reasons for not

doing so; and (2) expert opinion testimony concerning the

cause of the plaintiffs' loss of income. We must decide

whether the former type of evidence is admissible, and

21

whether either is sufficient, individually or together, to

establish actual injury and causation in fact.10

A. Customer Evidence

1. Summary of the Evidence: In opposition to the

defendants' motion for summary judgment, the plaintiffs

offered deposition testimony concerning their customers. It

included testimony of various plaintiffs that certain

customers ceased purchasing beer from them after the Beer

World stores opened, and that the customers stated that

they had done so because the Beer World stores had

cheaper beer. The District Court concluded that this

testimony was inadmissible hearsay and therefore could not

meet the plaintiffs' burden of production to defeat the

defendants' motion for summary judgment.

Five of the plaintiffs offered testimony concerning

customers' behavior and statements. This testimony can be

divided into two categories. First, several of the plaintiffs

testified that, during the time at issue in this litigation,

some people who had formerly been their customers

stopped coming to their stores. Carl Altenhof testified that,

"Retail customers that I had as steady customers, I don't

have anymore when Beer World came in . . . ." App. at 750.

Likewise, Douglas J. Berthold stated in his deposition that,

although he could not document his losses, he had"lost

forty percent of [his] business, probably most of them are

one case purchase customers, some of them two case

purchase [sic]." App. at 754. Finally, Kathleen Kapres said

that she lost customers, purportedly to Beer World. App. at

819.

Second, several of the plaintiffs testified that various

customers, some identified and some not, told them that

_________________________________________________________________

10. Given our conclusion that the customer and expert evidence of

causation is sufficient, we need not consider the plaintiffs' other

arguments for reversing the District Court's conclusion that they had not

adduced sufficient evidence of causation: (1) that a price differential

permits an automatic presumption of causation of loss to those who pay

the higher price, see Bogosian v. Gulf Oil Corp., 561 F.2d 434, 455 (3d

Cir. 1977), and (2) that the defendants' own statements and

"admissions" constitute proof of causation.

22

they no longer shopped at the plaintiffs' stores because of

the Beer World stores' operations. Berthold testified that

one customer, David Begg, told him that he was going to

shop at Beer World because "I like selection" and "money

talks." App. at 755. Kapres also stated that she"had quite

a few customers come in and say they wanted the same

deal [lower prices] from me or they were just going to buy

their beer from [Beer World], and I said I just can't give you

that deal." App. at 819. In addition, Paul Kelly identified by

name three customers of his who began to buy from Beer

World, and discussed at length conversations with one of

them in which the customer revealed that he was going to

Beer World because of the prices. App. at 822-27.

As noted previously, the defendants contend that the

plaintiffs have presented evidence of antitrust violations at

most during a fairly brief period of time, for which only

some of the customer evidence is relevant. The District

Court did not consider this issue and, as we have stated,

neither will we. Instead, we assume that the plaintiffs can

establish antitrust violations throughout the relevant

period. On remand, the District Court will have to analyze

the extent of the defendants' antitrust violations and then

determine whether the plaintiffs' evidence of loss and

causation remains sufficient in light of the more specific

temporal scope. If it appears that the defendants did not

engage in antitrust violations during some of the relevant

period, the District Court is free to revisit the question

whether the plaintiffs' proof of causation remains sufficient.

2. Admissibility: The District Court, rely ing on our

decision in Stelwagon Manufacturing Co. v. Tarmac Roofing

Systems, Inc., 63 F.3d 1267 (3d Cir. 1995), held this

evidence inadmissible, finding that the plaintiffs' testimony

concerning their customers' statements was inadmissible

hearsay. It also noted that, although this litigation has been

proceeding for some six years, the plaintiffs had not taken

the simple step of obtaining affidavits from customers

concerning their reasons for ceasing to purchase beer from

the plaintiffs. We disagree with the District Court's reading

of Stelwagon.

In Stelwagon, the plaintiff proffered the testimony of its

employees concerning the statements of their customers.

23

The employees proposed to testify, based on "out-of-court

conversations with Stelwagon customers . . . that the

customers could and did purchase Tarmac MAPs from

780<!>Standard at prices lower than Stelwagon's prices."

Stelwagon, 63 F.3d at 1274. The plaintiff argued that this

testimony was admissible to prove fact of damage, i.e., both

loss and causation, under Federal Rule of Evidence 803(3),

which provides:

The following are not excluded by the hearsay rule,

even though the declarant is available as a witness:. . .

A statement of declarant's then existing state of mind,

emotion, sensation, or physical condition (such as

intent, plan, motive, design, mental feeling, pain, and

bodily health), but not including a statement of

memory or belief to prove the fact remembered or

believed unless it relates to the execution, revocation,

identification, or terms of declarant's will.

Fed. R. Evid. 803(3).

In Stelwagon, the plaintiff offered the customers'

statements to prove, not only causation, i.e., the reason it

lost business -- for which purpose it would be admissible

evidence of motive under Rule 803(3) -- but also loss, i.e.,

the fact that it lost business to the defendants. We

concluded that the customers' statements about why they

purchased from Standard was inadmissible to prove that

they actually did so. See 63 F.3d at 1274 ("Statements that

are considered under the exception to the hearsay rule

found at Fed. R. Evid. 803(3) . . . cannot be offered to prove

the truth of the underlying facts asserted." (footnote

omitted)). As we have explained, " `[s]tatements of a

customer as to his reasons for not dealing with a supplier

are admissible for this limited purpose,' i.e., the purpose of

proving customer motive, but not as evidence of the facts

recited as furnishing the motives." J.F. Feeser, Inc. v. Serv-

A-Portion, Inc., 909 F.2d 1524, 1535 n.11 (3d Cir. 1990)

(quoting Herman Schwabe, Inc. v. United Shoe Mach. Corp.,

297 F.2d 906, 914 (2d Cir. 1962)).

We think that the District Court's dismissal of the

plaintiffs' evidence on the basis of Stelwagon was

inappropriate. The purpose for which the customers'

24

statements are offered in this case differs in substance from

the purpose for which the court in Stelwagon found them

inadmissible. In that case, the only evidence of actual loss,

i.e., that customers stopped purchasing from the plaintiff,

was the employees' reports that customers had said that

they were no longer buying from the plaintiff because the

plaintiff 's competitors had lower prices. We concluded that

this evidence could not be used to prove such loss. While

the plaintiffs here have also offered similar testimony that

their customers told them that they were purchasing beer

from the Beer World stores and not the plaintiffs, they offer

it only for "the [limited] purpose of proving customer

motive," for which purpose we found such evidence

admissible under Rule 803(3). Stelwagon, 63 F.3d at 1274.11

_________________________________________________________________

11. The defendants also complain that, even if the testimony is otherwise

admissible under Rule 803(3), it is not admissible, particularly for use

at

the summary judgment stage, because the declarants are unidentified or

inadequately identified. First, the defendants contend that this means

the evidence cannot meet the plaintiffs' burden to defeat a motion for

summary judgment because it is not in an admissible form. See Fed. R.

Civ. P. 56(e) ("Supporting and opposing affidavits [introduced at the

summary judgment stage] . . . shall set forth such facts as would be

admissible in evidence . . . ."); Petruzzi's IGA Supermarkets, Inc. v.

Darling-Delaware Co., 998 F.2d 1224, 1234 n.9 (3d Cir. 1993) (noting

that evidence introduced to defeat a motion for summary judgment must

be "capable of being admissible at trial"). In particular, the defendants

argue that, since the declarants are unidentified, there is no way to

ensure that they will be able or willing to testify at trial. We need not

consider this issue, however, because the statements are admissible

hearsay as discussed in the text.

Moreover, contrary to the defendants' apparent suggestion, we do not

think that the fact that the declarants are not specifically identified is

relevant for determining whether their statements fall within the Rule

803(3) hearsay exception. The defendants cite Philbin v. Trans Union

Corp., 101 F.3d 957 (3d Cir. 1996), for the proposition that a hearsay

statement by an unidentified or unknown person"is not `capable of

being admissible at trial.' " Philbin, 101 F.3d at 961 n.1 (quoting

Petruzzi's, 998 F.2d at 1234 n.9). Philbin is distinguishable, however.

The plaintiff in that case relied on the statement of an unidentified

official of the defendant as direct evidence of the defendant's allegedly

unlawful motive in a Fair Credit Reporting Act suit. The declarant's

identity was important to ensure that he or she was in fact an official of

25

In addition, however, the record contains other non-

hearsay evidence of a type not before the court in

Stelwagon, that the plaintiffs offer to prove the fact of loss,

the issue for which the court in Stelwagon found the

customers' statements inadmissible. Here, the plaintiffs

themselves testified that they knew of customers who used

to purchase beer from them, but no longer did. This is

direct evidence of an actual loss of customers. Although in

Stelwagon we held that customers' hearsay statements

were not admissible to prove lost business, the plaintiffs'

own testimony about the actual behavior of their customers

is not hearsay. Rather, it is admissible evidence of lost

business, although not of the reason therefore. Thus, in the

present case, the plaintiffs' testimony that certain

customers no longer purchased beer from them, coupled

with their testimony concerning the customers' statements

of their motive, which is admissible hearsay under Rule

803(3), are together evidence of the fact of damage.

_________________________________________________________________

the defendant company whose statement would be admissible

nonhearsay under Fed. R. Evid. 801(d). Identity was a critical element of

admissibility.

The customers' statements in this case, however, are different. In a

practical sense, their identities are not important. The relevance of

their

statements depends only on the fact that they were the plaintiffs'

customers, not their particular identities. Furthermore, we do not think

that the admissibility of their statements under the Rule 803(3) hearsay

exception depends on their being identified. Knowing the specific identity

of the declarant will not make the statements more trustworthy evidence

of the declarants' descriptions of their states of mind, the primary

concern in interpreting hearsay exceptions.

In United States v. Mitchell, 145 F.3d 572, 576-77 (3d Cir. 1998), we

held that the identity of the declarant is a substantial, although not

determinative, factor in determining whether a hearsay statement is

admissible under the present sense impression or the excited utterance

exceptions to the hearsay rule. The proposed evidence in that case was

an anonymous note purportedly identifying a getaway car. We held that

the note was not admissible as a present sense impression or excited

utterance because there was no evidence that the unidentified declarant

personally perceived the event or condition about which the statement is

made. With respect to a state-of-mind statement, however, it is only

important that the declarant be the person whose state of mind the

statement concerns, which is true by definition.

26

3. Sufficiency of the Evidence to Prove Causation: The

next question is whether this evidence is sufficient to defeat

a motion for summary judgment. "[O]ur jurisprudence does

not require the summary judgment opponent to match,

item for item, each piece of evidence proffered by the

movant, but rather he or she must only exceed the`mere

scintilla' standard." Rossi, 156 F.3d at 466 (citations and

some quotations omitted). We recently confronted the

question of the sufficiency of this sort of evidence of

causation in antitrust cases. In Rossi, the plaintiff offered,

in opposition to the defendants' motion for summary

judgment, the testimony of several potential customers that

they would have purchased a certain product from him if

he had not been deprived of it in violation of the antitrust

laws. We concluded that this evidence was sufficient

evidence of fact of damage to defeat a motion for summary

judgment:

Rossi has proffered evidence from five specific

customers that they would have purchased GAF

product from Rossi if he had been able to sell it to

them, and Rossi's inability to consummate those sales

(leading to a loss of business and therefore injury) is a

direct result of the alleged antitrust violation-- the

group boycott. In addition, Richard Droesch, Rossi's

partner in the failed Rossi Florence venture, backed

out of that venture at least in part based upon his

understanding that the company would not be able to

get the products it needed, particularly GAF product,

to compete successfully in the market. For all these

reasons, we believe that the record supports Rossi's

allegations that he suffered antitrust injury, and that it

was caused by the defendant's [sic] allegedly unlawful

actions.

156 F.3d at 485. We think that Rossi supports the

conclusion that the plaintiffs' testimony concerning their

customers' actions and statements is sufficient to meet

their burden to produce evidence of loss and causation.

Initially, we reject the defendants' attempt to distinguish

Rossi on the ground that the customers there stated that

they would have purchased product from Rossi but for

circumstances that were the direct and intended result of

27

the conspiracy. As noted previously, we have had to

assume for the purposes of this appeal that the plaintiffs

will be able to prove that the defendants violated the

antitrust laws. The direct result of these violations would be

the Beer World stores' ability to sell beer at a lower price

than the plaintiffs, the precise circumstance the customers

cited as a reason for their actions.

The defendants also submit that Rossi is distinguishable

because in this case there was no admissible evidence that

the customers purchased beer from the Beer World stores.

Of course, the defendants are correct that the testimony at

issue is not admissible to prove that the customers

purchased beer from the defendants. See Stelwagon, 63

F.3d at 1274. But the plaintiffs do not need to prove that

point; in order to establish antitrust liability and damages,

all the plaintiffs must show is that they suffered an

economic loss as a result of the defendants' antitrust

violations; not that the defendants benefitted from that loss

directly. See Rossi, 156 F.3d at 464-65 (plaintiff, in order to

recover on an antitrust claim, must prove an antitrust

violation and "that the plaintiffs were injured as a

proximate result of that" violation (citation omitted)). As

long as the plaintiffs can prove that they lost business, and

that this loss was a result of the defendants' antitrust

violations, they can bring a successful antitrust claim.

At all events, Rossi makes no mention of any evidence, or

even any requirement, that the customers in that case

purchased product from the defendants instead of the

plaintiff. See Rossi, 156 F.3d at 485. For all we know, the

customers who offered testimony in Rossi simply decided

not to purchase GAF product at all, instead of buying it

from the defendants. What the customers did instead of

purchasing product from the plaintiff is irrelevant, so long

as there is evidence that they did not purchase from the

plaintiff because of the defendants' antitrust violations.

In addition to these points, we also find it significant that

neither here nor in Rossi did the customer evidence purport

to prove any specific amount of damages. Although the

plaintiff in Rossi proffered the testimony of five customers,

these customers gave no indication of exactly how much

product they would have bought from him if they could. Yet

28

we concluded that the evidence of causation was sufficient.

This conclusion was driven by the principle that, on review

of a grant of summary judgment, we should focus on

whether there is sufficient evidence of fact of damage in

general, not on the sufficiency of the evidence of a specific

amount of damages. See Rossi, 156 F.3d at 484.

Accordingly, just as in Rossi, the lack of specific evidence of

the total amount of lost beer sales does not preclude our

ultimate conclusion that the customer evidence, especially

in conjunction with the expert evidence discussed next, is

sufficient to meet the plaintiffs' burden of producing

evidence of fact of damage.

B. Expert Evidence

The plaintiffs also offered expert opinion evidence in

support of their contention that the defendants' alleged

antitrust violations caused actual injuries to them. In

particular, they offered the report and testimony of their

primary expert, Garth Seidel, along with the report and

testimony of their rebuttal expert, Brian Sullivan, to that

effect. Neither the defendant nor the District Court raised a

question about the admissibility of Seidel's or Sullivan's

opinion, see Kumho Tire Co. v. Carmichael, 119 S. Ct. 1167

(1999); Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579

(1993). The District Court concluded, however, that this

evidence was insufficient as a matter of law to permit a

finding of causation. In particular, the Court noted that

Seidel's opinion appeared to be based primarily on timing,

and that he did not consider a number of possible

alternative causes of the plaintiffs' losses. It therefore

concluded that Seidel's report was deficient under the

standards we have set forth in previous cases. We disagree.

1. Seidel's Report: Seidel concluded, base d on the facts

provided to him, that "the plaintiffs experienced significant

drops in gross profits in the period subsequent to the start

of Beer World operations and which were caused by the

Beer World Stores' unique advantage." App. at 830. He

began by collecting data on gross profits of the sixteen

plaintiffs from 1980 to 1995, although such information

was not available from every plaintiff for every year, or even

for many of the years. He then made two calculations. First,

29

using the admittedly incomplete data he had, he calculated

the plaintiffs' average annual gross profits for the periods

from 1980-84 and 1985-95. He then estimated that the

plaintiffs' damages were the difference between these two

numbers, multiplied by eleven years and sixteen plaintiffs,

or approximately $6.6 million. Second, he made a similar

calculation, but using only data from the six plaintiffs for

whom data was available for most of the years. This method

gave a damages estimate of $2 million.

Next, he concluded that these lost profits "were caused

by the Beer World Stores' unique advantage." App. at 830.

He based this opinion initially on his conclusion that the

Beer Worlds' ability to purchase beer at a lower wholesale

cost "must have had a significant impact on the market."

App. at 831. He also stated that the Beer World stores'

aggressive price advertising would have magnified the effect

of the special discount. In addition, he examined Fuhrer's

profits between 1989 and 1994, and observed that they

increased substantially during this period. Based on this,

Seidel concluded that the malt-beverage market

experienced no downturn during this time. Third, he noted

that, beginning in 1991 -- after the grand jury investigation

of Trone began -- the Beer World stores' volume of business

declined each year until 1995, while at the same time the

plaintiffs' gross profits increased. Finally, he noted that two

other stores had opened using a "supermarket" approach

similar to the Beer Worlds'. One of them opened shortly

after the Beer World stores, but failed within a matter of

months in spite of aggressive promotions. The other was

open from the mid-1970's to the mid-1990's, but did not

appear to have had any effect on the plaintiffs. App. at 829-

32.

The District Court found Seidel's report inadequate to

meet the plaintiffs' burden of production because it failed to

consider other market forces that could have explained the

plaintiffs' losses. The Court began with the proposition that

"any analysis of antitrust, RICO or similar damage that fails

to exclude or take account of any adverse effects caused by

other factors, including lawful competition on the part of

the defendants, is fatally flawed." Dist. Ct. Op. IV, at 6. It

observed that Seidel's report did not include a comparison

30

of costs and business practices, price advertising, the

availability of pool-buying and other discounts, store size,

purchasing capacity, or proximity to a Beer World store,

any one of which might have provided an alternative

explanation for the plaintiffs' losses. Furthermore, it noted

that Seidel had specifically failed to consider whether any

other differences between the plaintiffs and the Beer World

stores accounted for the plaintiffs' loss of business to the

latter. Given these omissions, the District Court concluded

that Seidel's report provided insufficient evidence of

causation.

The plaintiffs contend that we must reverse the judgment

because the District Court relied, in its legal analysis, on

the district court's opinion in Rossi rejecting Rossi's

proffered expert evidence, which opinion we later reversed

on these exact grounds, although not until well after the

District Court in the present case had issued its opinions.

See Rossi v. Standard Roofing, Inc., 958 F. Supp. 976

(D.N.J. 1997), revd., 156 F.3d 452 (3d Cir. 1998). As this

question is before us on an appeal from a grant of

summary judgment and our review is plenary, we will start

from the premise that it is the defendants's burden to show

that Seidel's report is inadequate to create a genuine issue

of material fact as to causation. We begin with a review of

our case law in this area, and then apply that law to the

evidence before us.

2. Precedent: Stelwagon and Rossi: We have twice

recently considered the sufficiency of expert evidence

offered as proof of causation in antitrust cases. See Rossi,

156 F.3d at 485-87; Stelwagon, 63 F.3d at 1275-76. In

addition to the customer evidence discussed above, the

plaintiff in Stelwagon offered expert opinion evidence to

prove causation. In brief, "based on the assumption that

but for Tarmac's price discrimination, Stelwagon's sales of

MAPs would have tracked its sales of [other] products [not

subject to anticompetitive practices], Dr. Perry concluded

that Stelwagon lost $257,000 in profits as a result of

Tarmac's illegal pricing policy." Stelwagon, 63 F.3d at 1275.12

_________________________________________________________________

12. More specifically, the expert's report based its analysis on two

premises. First, it assumed that Stelwagon's sales of the product at issue

31

We concluded that the expert's testimony, although

admissible evidence, was insufficient by itself to prove that

the antitrust violations had in fact caused Stelwagon's

losses:

Significantly, Dr. Perry's analysis failed to sufficiently

link any decline in Stelwagon's MAPs sales to price

discrimination. The sales may have been lost for

reasons apart from the price discrimination -- reasons

that Dr. Perry's analysis apparently did not take into

account. For example, the evidence showed that

Stelwagon had higher overhead costs than his

competitors. In addition, there was undisputed

evidence that Stelwagon experienced other business

complications during the relevant time period. In 1988,

for example, Stelwagon terminated a vice-president,

two territorial managers and three key employees for

their part in an embezzlement scheme.

Stelwagon, 63 F.3d at 1275. Given that Stelwagon had not

offered any other evidence of loss -- as discussed

previously, its employees' anecdotal testimony concerning

lost customers was not admissible to prove that it actually

lost customers, see Stelwagon, 63 F.3d at 1274-75 -- we

concluded that he could not meet his burden of proof,

Stelwagon, 63 F.3d at 1275-76.

In Rossi, by contrast, we considered an expert opinion

and found it sufficient to prove loss and causation. The

expert in Rossi rested his calculation of damages on two

assumptions:

First, he estimated that Rossi[`s businesses] would

have achieved the same pattern of sales revenues (and

revenue growth) beginning in 1989 and extending to

_________________________________________________________________

during the year in which it did not allegedly suffer antitrust harm were

representative of what the sales would have been in the absence of such

harm. Second, the expert assumed that its sales of this product would

follow a pattern similar to that of other products Stelwagon sold.

Finally,

the expert posited that Stelwagon would have been able to charge the

same retail markup on the product at issue as it did on other products.

Based on these assumptions, the expert calculated Stelwagon's lost sales

and profits. See Stelwagon, 63 F.3d at 1275.

32

2008 that ABC's Morristown sales branch actually

achieved from 1990-93, operating out of the same

location, with Rossi as branch manager. . . . The

second major assumption in the Rockhill Report is that

Rossi would have been able to manage [his proposed

businesses] in the manner that he had run Standard's

Morristown branch from 1984-87. Rockhill used

Standard's Morristown branch financial statements to

develop 14-year averages for [costs] and applied them

to the sales estimate.

Rossi, 156 F.3d at 486 (footnote omitted). Based on these

assumptions, the expert estimated Rossi's losses as a result

of the defendants' antitrust violations.

We determined that this expert evidence was sufficient

proof of causation to defeat a motion for summary

judgment. We began our analysis with the recognition that

the expert's opinion was a "but for" damage model -- one

that "aggregates the defendant's alleged violations and

creates a hypothetical calculation projecting the plaintiff 's

profits and losses `but for' the defendant's antitrust

violations" -- which several courts have rejected. Rossi, 156

F.3d at 485 (citing Southern Pac. Com. Co. v. American Tel.

& Tel. Co., 556 F. Supp. 825 (D.D.C. 1982), affd., 740 F.2d

980 (D.C. Cir. 1984)); Van Dyk Research Corp. v. Xerox

Corp., 478 F. Supp. 1268 (D.N.J. 1979), affd., 631 F.2d 251

(3d Cir. 1980)). We identified two key problems with the use

of "but for" damage models:

First, they do not attempt to measure the

particularized effects of any specific alleged illegal

activities, but rather rely on an aggregation of injury

from all factors. Second, their hypothetical "but for"

calculations usually rely upon unrealistic ex ante

assumptions about the business environment, such as

assumptions of perfect knowledge of future demand,

future prices, and future costs that tend to overstate

the plaintiff 's damages claim. Thus, using a"but for"

damage model arguably makes it impossible for the

trier of fact to determine what, if any, injury derived

from the defendant's antitrust violations as opposed to

other factors, and courts sometimes reject such models

33

as the basis of either causation or the amount of

injury.

Rossi, 156 F.3d at 486 (citations omitted).

We concluded that, although the Rockhill Report rested

on a "but for" damage model, this did not mean it was

inadequate proof of causation, because it did not have the

usual problems of "but for" damage models. We noted that,

since the Report was based on the actual performance of

other businesses -- the business Rossi managed instead of

running his own and the business he formerly managed--

it did not involve any "unrealistic ex ante assumptions

about the business environment." We concluded that, "This

kind of estimate, while perhaps not one upon which we

would base our own personal investment decisions,

nevertheless is sufficient to establish causation . . . ." Rossi,

156 F.3d at 485.

We also rejected the defendants' argument, upon which

the district court had rested its decision, see Rossi, 958 F.

Supp. at 991, that the Rockhill Report was inadequate

because it failed to consider possible alternative causes of

Rossi's losses. In particular, the defendants contended that

Rossi's businesses failed because: "(1) they were start-up

operations, (2) they were founded during one of the worst

recessions ever to hit the New Jersey housing market, (3)

Rossi, as a manager, failed to control his costs, and/or (4)

Rossi worked on other ventures to the detriment and

ultimate failure of both companies." Rossi , 156 F.3d at 486.

Although we recognized that these explanations might

ultimately prove to be correct, we found that they were

issues of fact best left to the jury, not reasons for

concluding that the Rockhill Report was insufficient

evidence of causation as a matter of law.

3. Application to Seidel's Report: We beli eve that our

jurisprudence supports the conclusion that the plaintiffs,

by offering Seidel's report, have produced sufficient

evidence of causation to defeat a motion for summary

judgment. Here, as in Rossi, Seidel's report rests on

assumptions that are based on past performance, not

guesses as to the future. His opinion was based on the

assumption that the plaintiffs' performance in the years

34

before Beer World entered the Pittsburgh market provided

an appropriate benchmark for their performance thereafter.

This assumption does not rest on any "assumptions of

perfect knowledge of future demand, future prices, and

future costs" of the sort we condemned in Rossi. At most,

it requires some consideration of whether general economic

conditions were substantially similar before and after the

Beer World stores opened. Seidel's observation that

Fuhrer's sales increased substantially during the period

after the Beer World stores opened strongly suggests that

economic conditions were at least as good during this

period. See App. at 831.

The defendants, in response, identify several problems

that they believe render Seidel's report inadequate. In

general, the defendants criticize Seidel's report for failing to

take into account potential alternative causes for the

plaintiffs' losses not attributable to the defendants' actions.13

Seidel stated that, "In my opinion, it does not appear that

the losses in plaintiffs' profits . . . were caused by market

factors other than plaintiffs' competition with the Beer

World stores in the face of the availability to the Beer

Worlds of unique discounts and special services, such as

free delivery." App. at 831. The defendants contend that,

just as we found in Stelwagon that the expert's report was

inadequate because it failed to consider alternative causes,

so must we find Seidel's report inadequate because he

failed to consider certain specific factors that might have

affected the plaintiffs' business success, such as general

economic conditions, changes in their operations during the

relevant time period, or changes in costs.

_________________________________________________________________

13. The defendants also contend that, even if Seidel has shown that the

defendants' acts caused the damages, he has not shown that the

defendants' illegal acts caused damages. The defendants are correct that

Seidel failed to account for many variations in what the defendants did

during the periods that Seidel aggregated for analysis. We cannot

evaluate this contention without a clearer picture of the scope of the

defendants' antitrust violations, however. In the absence of such a

clarification, we will leave it to the District Court to consider this

objection in the first instance after examining the plaintiffs' antitrust

liability theories in greater depth. Only after such a closer examination

can this criticism of Seidel's report be given adequate consideration.

35

Initially, we note that, as discussed above, Seidel does

discuss some of these factors the defendants suggest he

should have -- including general economic conditions --

albeit not to the degree the defendants might prefer. In

addition, he specifically noted a correlation between

declining profits for the Beer World stores and increasing

profits for the plaintiffs after the criminal indictment came

down in 1991. Furthermore, we think that the factors

Seidel failed to explain are more like those at issue in Rossi,

in which we found the export's report acceptable in spite of

certain gaps, than the factors in Stelwagon. In the latter

case, the expert failed to discuss certain factors-- higher

overhead costs and embezzlement by the plaintiff 's

employees -- about which the defendants introduced

specific evidence. In Rossi, by contrast, the defendants

argued that the Rockhill Report was inadequate because of

factors the effects of which were pure speculation on the

defendants' part. Similarly, the defendants here propose

numerous factors extrinsic to the defendants that might

explain the plaintiffs' losses. But they have not directed us

to any point in the record that suggest that these concerns

were actually relevant in this case. Accordingly, we will

leave these questions to be resolved during further

proceedings in the District Court. See Rossi, 156 F.3d at

487 ("[Although o]ne or more of these reasons. . . might

explain Rossi's failure and could conceivably result in a

verdict for the defendants at trial . . . they all involve

factual disputes that need to be resolved by the trier of fact,

not by this court on a motion for summary judgment.").

Finally, the defendants make a number of arguments to

the effect that Seidel's method of calculating the plaintiffs'

losses is unsupported and inappropriate. Seidel's

calculations were based on the average or aggregate gross

profits of the plaintiffs. The defendants contend that this

use of averages was inappropriate, as it ignored potential

differences among the plaintiffs. For instance, it ignores the

problem that data was not available for all of the plaintiffs

for all of the relevant time period. Furthermore, there is no

way to determine based on this calculation how the

damages are to be allocated among the plaintiffs. Finally, it

masks the fact that some of the plaintiffs in fact had higher

gross profits during the relevant period as compared with

36

earlier. The defendants' observations are, of course, correct.

They ignore a vital distinction, however: proof of fact of

damage and proof of the actual amount of damages are two

distinct steps. Cf. Stelwagon, 63 F.3d at 1276 n.19

("Because of our conclusion on the issue of Stelwagon's

entitlement to damages under the Clayton Act [i.e., he

failed to present sufficient evidence to prove causation], we

do not reach Tarmac's argument that the amount of

damages is unsupported by the evidence.").

As we stated in Rossi, at the summary judgment stage

"we are not, as we would be upon reviewing a jury verdict,

determining whether a plaintiff has brought forth sufficient

evidence to justify the actual damages awarded." Rossi, 156

F.3d at 484. Rather, before us is only the question whether

the defendants' unlawful actions caused the plaintiffs'

losses. See 156 F.3d at 484. Although in Rossi we did

specifically note that the Rockhill Report would support a

damages judgment in the amount the expert estimated, we

did so only for the future guidance of the district court, and

not for any purposes related to deciding motions for

summary judgment. See Rossi, 156 F.3d at 486 n.22 ("For

the guidance of the district court on remand, we note that

the Rockhill Report satisfies the relaxed Bigelow standard

of proof for estimating the amount of damages . . . ."

(emphasis added)).

In sum, we believe that, although the question is close,

Seidel's report, like the Rockhill Report in Rossi, is

sufficient to create a genuine issue of material fact

concerning fact of damage. This is in contrast to the expert

evidence offered in Stelwagon, in which the expert's opinion

involved more speculation and failed to explain certain

factors concerning which the defendants had presented

specific evidence at trial.

4. Sullivan's Report: We find additional evidence of loss

and causation, contributing to our ultimate conclusion that

the plaintiffs have adduced sufficient evidence of fact of

damage, in the report of the plaintiffs' rebuttal expert,

Brian Sullivan. Sullivan examined the defendants' expert's

report and rebutted it in part. Although his report focused

primarily on antitrust liability issues, Sullivan observed

that, between 1985 and 1993, beer distributors in

37

Allegheny County failed at a rate nearly twice that in

Pennsylvania as a whole. The plaintiffs argue that, since

the record suggests no other distinction between Allegheny

County and the remainder of the Commonwealth than the

presence of Beer World stores, the logical conclusion is that

these failures were caused by the Beer World stores.

The defendants contend that we cannot consider

Sullivan's report for several reasons. First, they submit that

we cannot do so because he functioned only as the

plaintiffs' rebuttal expert to respond to the defendants'

expert, and that his report and testimony therefore cannot

be introduced to support the plaintiffs' substantive case.

The District Court refused to consider Sullivan's report on

precisely these grounds. We think that that refusal was

inappropriate. See Bowers v. Northern Telecom, Inc., 905 F.

Supp. 1004, 1008 (N.D. Fla. 1995) (holding that labeling of

a witness as a rebuttal expert did not preclude

consideration of his testimony to defeat a motion for

summary judgment). The Federal Rules of Civil Procedure,

and Rule 26(a)(2) governing the disclosure and discovery of

expert witnesses in particular, make no distinction between

the permissible uses of "regular" experts and"rebuttal"

experts. Furthermore, we see no reason to prevent the

plaintiffs from using Sullivan in their case-in-chief at trial.

Accordingly, it is appropriate to consider Sullivan's report

as evidence in opposition to the defendants' motion for

summary judgment.

Second, the defendants submit that the distinction upon

which the plaintiffs base their reasoning is flawed, in that

Sullivan's own report reveals that there were Beer World

stores in other parts of Pennsylvania. Although there may

have been other beer supermarkets in Pennsylvania, as far

as we can determine from the record the only other Beer

World store was one in Harrisburg. We do not think the

existence of this one store can be sufficient to render

Sullivan's opinion a nullity as a matter of law.

Third and last, the defendants argue that Sullivan's

report is irrelevant, since it focuses on predatory pricing

and the Beer World operations in general, rather than the

specific discriminatory discount. Once again, we note that

the record before us is not sufficiently developed for us to

38

address this contention. We will assume for present

purposes that the Beer World stores committed antitrust

violations. Accordingly, we leave the defendants' contention

to the District Court to consider in the first instance. We

conclude that Sullivan's report provides some additional

evidence of causation that, together with Seidel's report,

meets the plaintiffs' burden of production on the issue of

actual loss and causation in fact.

C. Is the Evidence in the Aggregate Sufficient to

Prove Causation in Fact?

At all events, we are satisfied that Seidel's report, as well

as Sullivan's, in conjunction with the customer evidence

discussed above, constitutes sufficient evidence of

causation. In Stelwagon, we noted that there was no

admissible evidence that the plaintiffs had suffered injuries

attributable to the defendants' price discrimination. See

Stelwagon, 63 F.3d at 1275. We therefore held that the

expert's report was not sufficient evidence of causation and

loss. Here, by contrast, there is direct evidence-- i.e., the

plaintiffs' testimony about their customers' behavior -- that

identifies customers whom the plaintiffs lost as a result of

the defendants' actions. See supra section III.A.

Furthermore, there is evidence -- the customers' hearsay

statements, which are admissible under Rule 803(3), in

addition to the expert reports -- of the reasons for such

loss. Thus, the plaintiffs have "adduced evidence of specific

lost transactions showing causation or fact of injury, which

is bolstered by an expert damage report that is not overly

speculative as a matter of law." Rossi, 156 F.3d at 487. We

conclude that all of this evidence taken together defeats the

defendants' motion for summary judgment on the ground

that the plaintiffs have not adduced sufficient evidence of

fact of damage on their antitrust claims.14 Accordingly, we

_________________________________________________________________

14. The defendants offer as an alternative ground for affirming the

dismissal of the plaintiffs' antitrust claim that the plaintiffs have

failed

to show that they suffered an "antitrust injury." Since we have declined

to consider whether the plaintiffs have offered sufficient evidence of

antitrust violations at the present time, we will also refrain from

considering the defendants' contention that the plaintiffs cannot prove

an antitrust injury. See supra Part II.

39

will reverse the District Court's grant of summary judgment

on the antitrust claims, and remand for further

proceedings.

IV. RICO: Proximate Causation

A. Basic Principles

In addition to establishing that the defendants' unlawful

actions in fact caused the plaintiffs' losses, the plaintiffs

must also establish proximate causation, i.e., that this

causal connection is not too remote. Although this

requirement applies to both antitrust and RICO claims, in

this section we focus on the latter, because the plaintiffs'

RICO claim founders on these grounds. A causal

connection simpliciter between the defendants' actions and

the plaintiffs' injuries is insufficient to give rise to a RICO

claim; the plaintiff must show that that connection is

proximate, i.e., not too remote. See Holmes v. Securities

Investor Protection Corp., 503 U.S. 258, 268 (1992);

Steamfitters Local Union No. 420 Welfare Fund v. Philip

Morris, Inc., 171 F.3d 912, 932 (3d Cir. 1999).

The defendants contend that, with respect to the

plaintiffs' RICO claim, the causal connection between the

defendants' racketeering activities -- defrauding the LCB --

is too remote as a matter of law from the plaintiffs' losses

-- lost business. We agree. The LCB and the

Commonwealth more generally were the direct victims of

the defendants' actions; the plaintiffs' losses are at most

derivative of any injuries to the LCB's regulatory mission.

The plaintiffs are simply to remote to be able to bring a

claim based on the defendants' actions.

In Holmes, the Court identified three key factors in

determining whether a RICO claim is based on an injury

too remote from the alleged racketeering activity:

First, the less direct an injury is, the more difficult it

becomes to ascertain the amount of a plaintiff 's

damages attributable to the violation, as distinct from

other, independent, factors. Second, quite apart from

problems of proving factual causation, recognizing

claims of the indirectly injured would force courts to

40

adopt complicated rules apportioning damages among

plaintiffs removed at different levels of injury from the

violative acts, to obviate the risk of multiple recoveries.

And, finally, the need to grapple with these problems is

simply unjustified by the general interest in deterring

injurious conduct, since directly injured victims can

generally be counted on to vindicate the law as private

attorneys general, without any of the problems

attendant upon suits by plaintiffs injured more

remotely.

Holmes, 503 U.S. at 269-70 (citing, inter alia, Associated

General Contractors, Inc. v. California St. Council of

Carpenters, 459 U.S. 519, 540-42 (1983));15 see also

Steamfitters, 171 F.3d at 932 (citing Holmes).

_________________________________________________________________

15. Although the Court in Holmes adopted these three factors for RICO

cases from Associated General Contractors, we recognized in Steamfitters

that the Court in the latter case had outlined six factors relevant to

antitrust proximate causation analysis. See Steamfitters, 171 F.3d at

924. These factors included:

(1) the causal connection between defendant's wrongdoing and

plaintiff 's harm; (2) the specific intent of defendant to harm

plaintiff;

(3) the nature of plaintiff 's alleged injury (and whether it

relates to

the purpose of antitrust laws, i.e., ensuring competition within

economic markets); (4) "the directness or indirectness of the

asserted injury"; (5) whether the "damages claim is . . . highly

speculative"; and (6) "keeping the scope of complex antitrust

trials

within judicially manageable limits," i.e., "avoiding either the

risk of

duplicate recoveries on the one hand, or the danger of complex

apportionment of damages on the other."

Steamfitters, 171 F.3d at 924 (quoting Associated General Contractors,

459 U.S. at 537-38, 540, 542-44). In our discussion of proximate

causation for the RICO claims in Steamfitters , in addition to analyzing

the Holmes factors, we incorporated by reference our discussion of the

Associated General Contractors factors from the antitrust analysis. We

did not express an opinion as to whether the Holmes factors replace the

Associated General Contractors factors for RICO claims or merely

supplement them.

At all events, to the extent the Associated General Contractors factors

are relevant only to antitrust analysis, they are irrelevant in the

present

case. In addition, to the extent that any of the issues raised in these

factors are not included in Holmes, they only weigh against a finding of

41

Both Holmes and Steamfitters clarified how the three

factors set forth above would apply in particular cases.16

_________________________________________________________________

proximate causation. For example, the second factor, specific intent to

injure, is arguably not included in Holmes. To the extent it is not,

however, we think it would be difficult on the present facts to conclude

that the defendants specifically intended to harm the plaintiffs. Although

harm to the plaintiffs may have been a probable ultimate consequence

of the defendants' actions, we do not think they specifically intended to

cause such harm. Accordingly, considering this factor in addition to the

Holmes analysis would only provide an additional reason to conclude

that proximate causation is lacking.

16. In a recent case, we concluded that RICO proximate causation

existed without specifically analyzing the Holmes factors. See Brokerage

Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494 (3d Cir. 1998). That

case is distinguishable, however. The plaintiff BCI had formerly been the

administrator of a pharmacy's self-funded employee health-insurance

plan. When the pharmacy opened a new branch that it wanted to be a

part of U.S. Healthcare's network, U.S. Healthcare essentially forced the

pharmacy to use a U.S. Healthcare affiliate as its health-plan

administrator, rather than the plaintiff. We concluded that, in such

circumstances, proximate causation could exist:

The injury proved by BCI, the loss of its TPA contract with Gary's

[the pharmacy], is not derivative of any losses suffered by

Gary's.

Unlike the injuries suffered by the non-purchasing customers in

Holmes, BCI's injury was not contingent upon any injury to Gary's,

nor is it more appropriately attributable to an intervening cause

that

was not a predicate act under RICO. Here, BCI's[administrator]

relationship with Gary's was the direct target of the alleged

scheme

-- indeed, interference with that relationship may well be deemed

the linchpin of the scheme's success.

Brokerage Concepts, 140 F.3d at 521. The plaintiffs contend, similarly,

that interference with their relationship with their customers, i.e.,

attracting the plaintiffs' customers to shop at Beer World stores, the

precise harm the plaintiffs suffered, is the "linchpin of [Trone's]

scheme's

success." Although it may be true that interference in the relationship

between the plaintiffs and their customers was the linchpin of the

success of Trone's scheme, we think Brokerage Concepts is

distinguishable.

The relationship between the alleged racketeering activities and the

injuries to the plaintiffs are more distant than they were in Brokerage

Concepts. In the latter case, the pharmacy, the party with whom BCI had

42

The factual circumstances of these two cases, which inform

our decision, are briefly summarized in the margin.17

B. Anatomy of the Plaintiffs' RICO Claim

The plaintiffs' RICO claim alleges that the defendants

engaged in racketeering activities by fraudulently obtaining

and retaining licenses to operate beer distributorships.

Specifically, they contend that Trone and others made false

and fraudulent statements to the Pennsylvania LCB in

order to obtain or retain various liquor licenses. The

_________________________________________________________________

a relationship with which U.S. Healthcare interfered, was the direct

target of U.S. Healthcare's alleged racketeering activities, which

included

extortion and commercial bribery. See Brokerage Concepts, 140 F.3d at

521. Here, although the ultimate goal of Trone and the Beer World stores

was presumably to woo customers away from the plaintiffs, the direct

target of its alleged fraudulent scheme was the LCB, not customers.

Unlike Brokerage Concepts, this case involves two third parties, one that

was the target of the defendants' racketeering and another that had a

relationship with the plaintiffs with which the defendants interfered.

17. In Holmes, the plaintiffs (actually the plaintiffs' subrogors,

although

that was not relevant to the result) were customers of broker-dealers

that had failed as a result of the defendants' conspiracy to manipulate

certain stocks. As a result of the broker-dealers' failure, their

customers

suffered losses. The particular plaintiffs in Holmes were customers of the

broker-dealers who never purchased the particular stocks that the

defendants had manipulated. Thus, the plaintiffs' losses were not an

immediate result of the defendants' manipulations, but rather were a

derivative effect of the collapse of the broker-dealers. The Court found

this connection insufficient to establish proximate causation for RICO

claims. See Holmes, 503 U.S. at 271.

Steamfitters involved claims of union health and welfare funds against

tobacco companies. The funds alleged that the tobacco companies had

defrauded the funds by misleading them into believing that tobacco

products were safe and could not be made safer. As a result of this

fraud, the funds did not take steps to reduce their costs by, for example,

attempting to reduce smoking among their participants or undertaking

legal efforts to shift the costs of smoking back to the companies. The

funds were harmed because their participants continued to smoke and

accumulate medical bills that the funds were obligated to pay. We

concluded that this causal chain was too attenuated to satisfy the

requirements of proximate causation. See 171 F.3d at 932-34.

43

plaintiffs themselves best summarize their contention that

the defendants' actions proximately caused their injuries:

[C]ausation in plaintiffs' RICO case . . . is a simple

claim: we say that absent the fraud, the Trone

defendants would not have been able to assemble or

operate the chain of stores, and that only by

assembling the chain -- by "aggregat[ing]" their

purchases, as Mr. Fuhrer put it -- were the Beer

Worlds able to secure the discriminatory discount. The

Trone defendants' brief (at 40) asks rhetorically how

David Trone's fraudulent statements to the LCB caused

the discount, but the above two sentences show exactly

how: absent the fraud, no chain; absent the chain, no

discrimination. It's that simple.

Appellant's Reply Brf. at 13 (emphasis added; alterations in

original). Although this is a clever and well-phrased

summary, we disagree with its conclusion because the

claim does not satisfy the specific factors the Court in

Holmes identified as indicative of proximate causation.18

_________________________________________________________________

18. The plaintiffs argue that, since the defendants' antitrust violations

were a proximate cause of the plaintiffs' losses, a point the defendants

do not -- unlike the issue of causation in fact-- presently contest, the

RICO violations must also be a proximate cause of their losses. They

base this contention on our recognition in Steamfitters that proximate

causation principles for antitrust and RICO claims are closely related.

See Steamfitters, 171 F.3d at 921 ("[T]he standing requirements for RICO

and antitrust claims are similar, and . . . the standing analysis under

these federal laws is drawn from common-law principles of proximate

cause and remoteness of injury . . . .").

The plaintiffs misread Steamfitters. Admittedly, we said in that case

that "much (if not all) of what we have said above in our discussion of

antitrust standing applies to the Funds' RICO claims." See 171 F.3d at

932. But that was simply a recognition that the factual underpinnings of

the causation chains in the funds' antitrust and RICO claims was so

similar. The plaintiffs' theory of antitrust proximate causation in this

case, however, is factually distinct from their RICO theory. Causation in

their antitrust claim rests on the simple notion that the defendants

contracted, combined and conspired to force the wholesalers to offer

them beer at a lower price, which gave them a competitive advantage

over the plaintiffs. Their RICO claim, however, rests on the more

complicated theory of causation discussed in the text. It includes the

44

Reflection on these three factors reveals that the direct

impact of the fraud is primarily on the LCB, not the

plaintiffs.

C. Analysis

1. Directness of the Injury: The first f actor, and the one

on which we focused primarily in Steamfitters , is the

directness of the relationship between the defendants'

actions and the plaintiffs' injuries. See Holmes, 503 U.S. at

269. This is significant because "the less direct an injury is,

the more difficult it becomes to ascertain the amount of a

plaintiff 's damages attributable to the violation as distinct

from other, independent, factors." Holmes, 503 U.S. at 269.

The more difficult it is to distinguish between the effects of

the defendants' legitimate activities and their alleged

racketeering actions on the plaintiffs, the more likely we are

to conclude that proximate causation is lacking.

In Holmes, the Court found this factor indicated a lack of

proximate causation. "If the nonpurchasing customers were

allowed to sue, the district court would first need to

determine the extent to which their inability to collect from

the broker-dealers was the result of the alleged conspiracy

to manipulate, as opposed to, say, the broker-dealers' poor

business practices or their failures to anticipate

developments in the financial markets." Holmes, 503 U.S.

at 272-73. In Steamfitters, we reasoned that

if the Funds are allowed to sue, the court would need

to determine the extent to which their increased costs

for smoking-related illnesses resulted from the tobacco

companies' conspiracy to suppress health and safety

information, as opposed to smokers' other health

problems, smokers' independent (i.e., separate from the

fraud and the conspiracy) decisions to smoke, smokers'

ignoring health and safety warnings, etc.

_________________________________________________________________

additional step that Trone was able to operate the Beer World stores as

a group because of his fraud on the LCB, which enabled him to obtain

discounts which hurt the plaintiffs. This additional step distinguishes

the plaintiffs' RICO and antitrust claims, and bars the inference of

proximate causation they suggest, for reasons amplified in the text,

infra.

45

Steamfitters, 171 F.3d at 933 (footnote omitted).

We believe that this case presents similar difficulties in

ascertaining the proportion of the plaintiffs' losses that can

be attributed to the defendants' alleged racketeering

activity. We think it would be difficult to trace the chain

from the fraud on the LCB to particular actions of the

defendants, and then to particular portions of the plaintiffs'

losses, because the fraud only directly affects the LCB. In

order to determine how the fraud affected the plaintiffs, we

would need to analyze the extent to which the defendants

were permitted to act as they did as a result of the fraud as

opposed to normal operating procedures. More specifically,

focusing solely on the issue of volume discounts, even if we

could say that the plaintiffs' losses were entirely

attributable to the defendants' ability to obtain such

discounts, we would be hard-pressed to say that those

discounts were entirely attributable to Trone's fraud on a

third party, the LCB. Rather, it is likely that the defendants'

ability to obtain these discounts was attributable, in at

least as substantial a part, to the size of the individual Beer

World stores, Trone's negotiating ability, the operating

methodology of the stores, or other legitimate actions.

Accordingly, we conclude that, "As in Holmes [and

Steamfitters], this causation chain is much too speculative

and attenuated to support a RICO claim." Steamfitters, 171

F.3d at 933.

2. Apportionment of Damages: Holmes also directs that

we inquire into the difficulty of apportioning damages

among potential plaintiffs in determining whether

proximate causation is present. "[R]ecognizing claims of the

indirectly injured would force courts to adopt complicated

rules apportioning damages among plaintiffs removed at

different levels of injury from the violative acts, to obviate

the risk of multiple recoveries." Holmes, 503 U.S. at 269. As

a result, where granting plaintiffs relief would require us to

apportion that relief among numerous plaintiffs of different

standing, we are inclined to find an absence of proximate

causation for those less directly involved.

Again, this factor as applied to the facts in Holmes

suggested that proximate causation was missing. The Court

noted that the broker-dealers had suffered at least as much

46

at the hands of the defendants as their customers did, and

thus any determination of liability to the customers would

necessitate an inquiry into the defendants' liability to the

broker-dealers. The Court concluded that the possibility of

treble damages in favor of both groups of plaintiffs militated

in favor of finding no proximate causation for the former.

See Holmes, 503 U.S. at 273 ("[T]he district court would . . .

have to find some way to apportion the possible respective

recoveries by the broker-dealers and the customers, who

would otherwise each be entitled to recover the full treble

damages."). Likewise, in Steamfitters, we noted the potential

difficulty in allocating recovery between the funds and their

participants:

As we noted in our discussion of the Funds' antitrust

claims, more directly injured parties, i.e., smokers,

would be unlikely to bring federal claims against

tobacco companies for the same damages claimed by

the Funds. Yet, as we also noted above, Fund

participants who have not been fully reimbursed for

their out-of-pocket costs that are traceable to

defendants' alleged fraud and conspiracy might bring

RICO or antitrust claims. Therefore, as in Holmes, a

court adjudicating the Funds' RICO claims would need

to consider the appropriate apportionment of damages

between smokers and others such as the Funds who

suffered economic losses as a result of the tobacco

companies' alleged fraudulent acts.

Steamfitters, 171 F.3d at 933.

We believe that these cases support the conclusion that

the defendants' fraud on the LCB did not proximately cause

the plaintiffs' injuries. In particular, we note that the

master distributors from whom the defendants purchased

their beer at an artificially lowered price -- at least

according to the plaintiffs' theory of the case-- suffered an

injury identical to the plaintiffs'. The wholesalers

presumably were paying the same price to brewers for beer,

regardless of the price at which they sold it to distributors.

Any discounts they gave to the Beer World stores as a

result of racketeering violations came out of their own

pockets. Determining how to apportion damages between

the wholesalers and the plaintiffs in this case would require

47

exactly the same sort of apportionment determination

condemned in Holmes and Steamfitters.19 This difficulty in

apportioning damages among the potential plaintiffs

suggests that proximate causation is not present in this

case.

3. Vindication of Claims by Others: Thefinal factor that

the Court in Holmes recognized as significant for proximate

causation analysis was whether the plaintiff 's claim could

be vindicated by another, more directly injured plaintiff.

More specifically, the Court recognized that the searching

inquiry into causation and apportionment of damages

among plaintiffs discussed above is unjustified where the

central focus of RICO in deterring unlawful conduct can be

vindicated by other means. See Holmes, 503 U.S. at 269-70

("[T]he need to grapple with these problems is simply

unjustified by the general interest in deterring injurious

conduct, since directly injured victims can generally be

counted on to vindicate the law as private attorneys

general, without any of the problems attendant upon suits

by plaintiffs injured more remotely."). Where a more directly

affected party is available to vindicate the public interest in

enforcing the law, we have less need to stretch the limits of

proximate causation in RICO cases.

In Holmes, the Court concluded that, since the broker-

_________________________________________________________________

19. The plaintiffs in their supplemental memorandum discussing

Steamfitters contend that we cannot consider the wholesalers in our

Holmes calculus because "they have decided to make their separate

peace with Beer World, no doubt for the same reasons they decided to

acquiesce in this scheme in the first place." Appellant's Post-Arg. Memo.

at 13. While it may be true that the wholesalers in this case have not

attempted to recover from the defendants, we do not think this is

relevant to our Holmes analysis. We do not think the question whether

the defendants' fraud proximately caused the plaintiffs' injuries can turn

on whether some other potential claimants have filed suit. Although the

broker-dealers identified in Holmes as having a potential claim did in

fact sue the defendants in that case, see Holmes , 503 U.S. at 273 &

n.21, we recognized in Steamfitters that the fact that smokers themselves

could bring claims against the tobacco companies was relevant to

determining proximate causation with respect to the funds, even though

the smokers were in fact unlikely to bring claims on their own, see

Steamfitters, 171 F.3d at 933.

48

dealers were available to vindicate the public interest in

deterring racketeering, it was unnecessary to extend

proximate causation analysis to include the customers.

"[T]he law would be shouldering these difficulties [of making

fine distinctions among causes of the plaintiff 's injuries

and apportioning recovery among potential plaintiffs]

despite the fact that those directly injured, the broker-

dealers, could be counted on to bring suit for the law's

vindication." Holmes, 503 U.S. at 273. In Steamfitters,

however, we found this factor to be less helpful. We noted

initially that, although the funds' participants might be able

to pursue RICO claims against the tobacco companies,

granting due deference to the funds' allegations we could

not conclude that their suits would provide the same

deterrence as the funds. We were, however, ultimately

"unconvinced that this distinction [from Holmes was]

sufficient to overcome the concerns about apportioning

damages and, most fundamentally, the remoteness of the

Funds' alleged RICO injuries from any wrongdoing on the

part of the tobacco companies." Steamfitters, 171 F.3d at

933-34 (citation omitted).

The plaintiffs contend that this factor dictates afinding

that proximate causation is present in this case because

there is no other party that was more directly injured or

that will otherwise be able to vindicate the public interest

in deterring racketeering activity of the sort in which the

defendants have engaged. Preliminarily, as noted above, the

master distributors were injured by the defendants'

activities, and accordingly they could presumably serve at

least as well to vindicate the public interest in deterring

violations of the law. More significantly, the LCB-- the

direct victim of the defendants' alleged fraud -- is an

additional possible alternative agent for vindicating the

public interest.

As the plaintiffs point out, the LCB would not be able to

bring a private civil RICO action, since it is not a"person

injured in his business or property by reason of " the

defendants' alleged racketeering violations. 18 U.S.C.

S 1964(c). In spite of the fact that the LCB cannot bring a

private civil RICO action, we think that the LCB and the

Commonwealth of Pennsylvania more generally are in a

49

position to vindicate the public interest in the sense set

forth in Holmes. If the facts justified it, the Commonwealth

could bring a criminal charge against Trone and the other

defendants under the state "little RICO" corrupt

organizations statute, which is virtually identical to the

federal racketeering statute. See 18 Pa. Cons. Stat.

S 911(b). Section 911 includes in particular perjury, false

swearing in official matters, and tampering with official

records as predicate activities which can lead to

racketeering liability. See S 911(h)(1)(i) (" `Racketeering

activity' means any act which is indictable under any of the

following provisions of this title: . . . Chapter 49 (relating to

falsification and intimidation)."); see also 18 Pa. Cons. Stat.

S 4902(a) (defining perjury); S 4903 (defining false swearing

in official matters); S 4911 (defining tampering with public

records or information).

In fact, the Commonwealth indicted Trone on state

racketeering charges predicated on tampering with public

records and perjury before the LCB. See App. at 99. These

charges arose out of the same activities that the plaintiffs

identify as the racketeering acts upon which their RICO

claim is predicated. Although the indictment was dismissed,20

this does not affect our ultimate conclusion that the

Commonwealth could vindicate the public interest. The

racketeering indictment charged Trone only with

racketeering predicates in which he participated as a

principal, and was dismissed because all but one of these

was found wanting. But the indictment included perjury

charges against others involved in the Beer World

_________________________________________________________________

20. See App. at 43. The court dismissed the tampering charges on the

ground that they should have been brought under a more specific

statute, the Liquor Code, see Pa. Stat. Ann. tit. 47, S 4-436(j) (West

1997), which makes false statements on liquor license applications a

misdemeanor. See App. at 25-31. The alleged tampering therefore also

could not serve as part of the pattern of racketeering activity necessary

to support the racketeering charge, since Liquor Code violations are not

specified as racketeering activities in section 911. See App. at 39 n.6;

18

Pa. Cons. Stat. S 911(h). Since the only remaining racketeering activity

was one alleged instance of perjury on the part of Trone, the court

concluded that there was no "pattern of racketeering activity" as required

to support a racketeering charge. See App. at 40.

50

operations, which, like the remaining charge against Trone,

were eventually nolle prossed. See App. at 98, 100. The

indictment could have charged these other acts of perjury

as predicates to the racketeering charge against Trone,

which would have created the pattern of racketeering

activity necessary to support a "little RICO" charge.

Although the Commonwealth cannot now bring civil RICO

claims against the defendants here, given the possibilities

set forth above, we do not think this brings it outside the

scope of the third Holmes factor. The Court's primary

concern in Holmes was to ensure that some plaintiff be

available to vindicate the law's "general interest in deterring

injurious conduct." Holmes, 503 U.S. at 269. A civil RICO

action is not specifically required to vindicate this general

deterrence interest. See Laborers Local 17 Health & Benefit

Fund v. Philip Morris, Inc., 172 F.3d 223, 235 (2d Cir. 1999)

(concluding that the possibility of independent tort claims

by smokers, or subrogated claims based thereon by union

health funds, would be sufficient to satisfy the

requirements of the third Holmes factor). Although not

providing for treble damages, we believe that the prospect

of state criminal racketeering charges would provide an

adequate deterrent to lawless conduct of the type alleged

here to satisfy the concerns embodied in Holmes.21

4. Summary: At all events, even to the ext ent that we

have questions about whether the possibility of the

_________________________________________________________________

21. Judge Wellford in his dissent contends that we cannot consider the

wholesalers or the Commonwealth as potential alternative agents for the

vindication of the public interest, because in this case none of them

brought suit against Trone and the Beer World stores. We think this

circumstance is irrelevant to determining whether the plaintiffs' injuries

are too remote from the defendants' actions to be a proximate cause for

the RICO claim. The post-injury actions of intervening parties cannot

make the plaintiffs' losses more or less of a direct result of the

defendants' actions. The only question is whether these intervening

parties are ones that possibly could take steps to deter illegal activity

as

contemplated in Holmes. See Holmes, 503 U.S. at 269-70 ("[D]irectly

injured victims can generally be counted on to vindicate the law as

private attorneys general . . . ." (emphasis added)); 503 U.S. at 273

("[T]hose directly injured . . . could be counted on to bring suit for the

law's vindication . . . .").

51

Commonwealth bringing criminal racketeering charges

against Trone and the other defendants falls within the

scope of the third Holmes factor, such questions cannot

alter our ultimate conclusion, based on the Holmes factors

as a whole, that proximate causation is lacking here. To

paraphrase Steamfitters, "we are unconvinced that [the

potential lack of alternative plaintiffs] is sufficient to

overcome the concerns about apportioning damages and,

most fundamentally, the remoteness of [the plaintiffs']

alleged RICO injuries from any wrongdoing on the part of

[Trone]." Steamfitters, 171 F.3d at 933-34. Considered as a

whole, the Holmes factors dictate the conclusion that the

plaintiffs cannot demonstrate a proximate causal

connection between their injuries and the defendants'

alleged racketeering activities.

D. Policy Issues: Were the Plaintiffs the Intended

Beneficiaries of the Liquor Code?

The plaintiffs also contend that proximate causation is

present in a civil RICO case where the alleged racketeering

conduct effects violations of a regulatory regime designed to

protect the plaintiffs. See, e.g., Rodriguez v. McKinney, 878

F. Supp. 744, 747-49 (E.D. Pa. 1995); Trautz v. Weisman,

819 F. Supp. 282, 287 (S.D.N.Y. 1993); see also In re

Orthopedic Bone Screw Prods. Liab. Litig., 159 F.3d 817,

826-27 (3d Cir. 1998) (recognizing a similar principle in the

context of state common-law fraud claims). Although this

may be a valid principle, we find it inapposite in the

present case, as the condition of its application is not

present here.

The purpose of the Pennsylvania Liquor Code is to

promote temperance, not to protect small-business owners

or ensure competition among beer retailers:

The provisions of [the Liquor Code] are intended to

create a system for distribution that shall include the

fixing of prices for liquor and alcohol and controls

placed on prices for malt and brewed beverages, and

each of which shall be construed as integral to the

preservation of the system, without which system the

Commonwealth's control of the sale of liquor and

alcohol and malt and brewed beverages and the

52

Commonwealth's promotion of its policy of temperance

and responsible conduct with respect to alcoholic

beverages would not be possible.

Pa. Stat. Ann. tit. 47, S 1-104(d) (West 1997) (emphasis

added); see also S 1-104(a) ("This act shall be deemed an

exercise of the police power of the Commonwealth for the

protection of the public welfare, health, peace and morals of

the people of the Commonwealth and to prohibit forever the

open saloon . . . ."); Altshuler v. Pennsylvania Liquor Control

Bd., ___ A.2d ___, No. 2126 C.D.1998, 1999 WL 298228, at

*3 (Pa. Commw. Ct. May 13, 1999) ("The purpose of the

Liquor Code is not to promote the sale of liquor, rather it is

to regulate and restrain the sale of liquor."). At least one

court has recognized that the Liquor Code was, in fact, not

at all intended to protect the economic interests of liquor

retailers. See Lancaster County Tavern Assn. v.

Pennsylvania Liquor Control Bd., 14 Pa. D. & C.3d 381

(Lancaster Cty. C.P. Ct. 1980).

The plaintiffs submit that even if the purpose of the

Liquor Code is not to protect retailers like themselves, the

effect of the Code, and one of the goals of the LCB in

enforcing it, is to protect retailers and competition. But

although the LCB's efforts to enforce the Code may have

resulted largely in a predominance of beer retailers similar

to the plaintiffs, that does not render large-scale stores like

the Beer World stores automatically illegal. Accordingly, we

do not think that the principle of Rodriguez, were we to

adopt it, would compel a finding of proximate causation. We

will therefore affirm the District Court's grant of summary

judgment on the plaintiffs' RICO claim.

For the foregoing reasons, the judgment of the District

Court will be reversed to the extent that it granted

summary judgment to the defendants on the plaintiffs'

antitrust claims, but affirmed in all other respects, and the

case will be remanded to the District Court for further

proceedings in accordance with this opinion.

53

WELLFORD, Senior Circuit Judge, concurring in part and

dissenting in part:

I concur in Chief Judge Becker's excellent analysis of the

antitrust claims of plaintiffs against the defendants. I

therefore share in the conclusion that the district court was

in error in granting summary judgment to defendants on

the antitrust claims before the court.

My disagreement is in respect to the treatment of the

RICO claims. I dissent in that respect with some

trepidation, realizing that Chief Judge Becker has recently

authored several RICO decisions of this court flowing from

the Supreme Court decision in Holmes v. Securities Investor

Protection Corp., 503 U.S. 258 (1992). I begin, then, with an

analysis of Holmes in respect to the RICO issues in this

case.

First, however, I construe plaintiffs' RICO claim to be as

follows: as an intended consequence of defendants' alleged

predicate fraudulent actions and activities in attaining a

special status as a Pennsylvania beer retailer/distributor

and obtaining through that fraud from the state a special

license and status (contrary to any legal entitlement),

plaintiffs were economically damaged. The relevant cases

discuss in the RICO context whether plaintiffs have

standing to bring the claim against a defendant, and

whether plaintiffs can establish commercial damages as a

proximate cause of defendant's illegal predicate acts.

Holmes involved the issue of standing and of proximate

cause under RICO by a party asserting securities fraud.

Plaintiff, Securities Investor Protection Corp. ("SIPC"), was

neither a buyer nor a seller of alleged manipulated stocks

orchestrated by defendants. SIPC sued seventy-five

defendant broker/dealers whose alleged illegal predicate

acts brought about the collapse of several brokerage

concerns which were members of SIPC, causing it to pay

millions in damages to the failed member brokerage

houses. Holmes acknowledged that S 1964(c) of RICO was

"modeled on the civil-action provision of the federal

antitrust laws." Id. at 267. We agree that plaintiffs in this

case have set out an antitrust claim that survives summary

judgment treatment. Holmes interpreted proximate cause in

its RICO analysis:

54

At bottom, the notion of proximate cause reflects"ideas

of what justice demands, or of what is administratively

possible and convenient." W. Keeton, D. Dobbs, R.

Keeton, & D. Owen, Prosser and Keeton on Law of Torts

S 41, p. 264 (5th ed. 1984). . . . [One requirement is]

some direct relation between the injury asserted and

the injurious conduct alleged.

Id. at 268.

Was the plaintiff in Holmes simply complaining about

"harm flowing merely from the misfortunates visited upon a

third person by the defendant's acts . . ."? Id. Holmes held

that SIPC was complaining about an indirect injury, but it

is important to consider why it reached that result. First,

Holmes noted in footnote 19 that SIPC was not claiming to

sue under a claimed right of any customer who actually

purchased the manipulated securities. Id. at 272 n.19.

Second, it is important to note that in Holmes , the

broker/dealers, directly defrauded, who went into

bankruptcy "have in fact sued" the same defendants. Id. at

273. Those third parties might then vindicate the public

interest in recouping the economic damages caused by the

fraudulent defendants, and in punishing them by treble

damages.

Because of the potential of multiple claims against

defendants seeking damages as a direct result of the same

illegal predicate acts and the necessity of difficult and

complex apportionment, Holmes decided in favor of

defendants that SIPC's damages claims did not meet the

proximate cause test. Our case is a very different one

factually from Holmes. Plaintiffs here assert actions arising

from defendants' illegally attained status based on asserted

fraud perpetrated on the state of Pennsylvania. This does

not, in my view, vindicate the rights of private parties, such

as plaintiffs, arising out of that fraud.1 Unlike defrauded

third party customers who had also sued defendants for the

RICO actions in Holmes, neither Fuhrer, nor any other

master distributor, sought any such damages against the

Trone defendants for the alleged illegal predicate activity.

_________________________________________________________________

1. As Chief Judge Becker indicates, Pennsylvania may only seek criminal

penalties and withdrawal of defendants' special license, not damages.

55

Indeed, Fuhrer denied that any such illegal activity took

place, and is an alleged co-conspirator in the antitrust

activity.

In sum, I cannot construe Holmes as helpful to

defendants in this case. Steamfitters Local Union Fund No.

420 v. Philip Morris, Inc., 171 F.3d 912 (3d Cir. 1999), I

think, is distinguishable. In Steamfitters, customers or

purchasers of the tobacco products had brought suit, or

might be expected to bring suit, to vindicate plaintiff 's

clearly indirect claim. These customers or purchasers had

varying degrees of proximate contributory or comparative

negligence or knowledge about the danger of the tobacco

product used or sold to them. Respectfully, I do not believe

plaintiffs' claims in the instant case to be as attenuated as

in Steamfitters. It is closer to the standing and proximate

causal relationship of plaintiff in Brokerage Concepts, Inc. v.

U.S. Healthcare, Inc., 140 F.3d 494 (3d Cir. 1998), in my

view.

I do, therefore, respectfully dissent on the RICO element

of this difficult case. I would hold that we should reverse

and remand on both the antitrust and RICO claims.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

56