Petition for Writ of Certiorari — Central Milk Producers Cooperative v. National Farmers' Organization

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R 8 - 1 ? 4 8(\) | “Supreme Court, U.S.

FILED

JAN 26 1989

No. 4 JOSEPH F. SPANIOL, J

CLERK

In the Supreme Court of the United States

OCTOBER TERM, 1988

ASSOCIATED MILK PRODUCERS, INC. and

MID-AMERICA DAIRYMEN, INC.,

Petitioners,

VS.

NATIONAL FARMERS’ ORGANIZATION, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Major W. Park, Jr. Donald M. Barnes

Counsel of Record Counsel of Record

Jeffrey W. Bruce Salvatore A. Romano

Rebecca L. Milne Joyce L. Bartoo

Gage & Tucker Arent, Fox, Kintner, Plotkin

2345 Grand Avenue & Kahn

Kansas City, Missouri 64108 1050 Connecticut Ave., N.W.

(816) 474-6460 Washington, D.C. 20036-5339

Counsel for Petitioner (202) 857-6000

Mid-America Dairymen, Inc. Counsel for Petitioner

Associated Milk Producers,

Eugene Gressman

Inc.

Of Counsel

1111 Raymond Boulevard

Newark, New Jersey 07102

(201) 642-8844

E. L. MENDENHALL, INc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030

QUESTIONS PRESENTED

1. Whether the established antitrust principle that

the fact-finder may make a “just and reasonable estimate

of the damage” caused by an antitrust violation:

(a) permits an antitrust plaintiff to prove the evi-

dentiary basis for its damage estimate by less than “a

preponderance of the evidence”;

(b) allows an appellate court to shift to the defen-

dant the burden of proof as to the measure of the plaintiff's

damages; and

age theory that fails to exclude the effects of significant

lawful competition?

2. Whether there is an “antitrust damages’ excep-

tion to Rule 52(a) that permits an appellate court, based

on its holding that the district court’s findings rested on

an “inappropriate legal standard” of proof, to review the

record de novo, make its own witness credibility assess-

ments and factual findings, and mandate an award of

substantial damages, rather than remanding the case to

the district court to reconsider its findings under the

standard articulated by the appellate court?

This Petition presents only the foregoing two ques-

tions. Petitioners Associated Milk Producers, Inc. and

Mid-America Dairymen, Inc. also adopt and incorporate

by reference the two following questions presented in the

companion Petition for Certiorari being separately filed

by Central Milk Producers Cooperative:

1. Whether a national non-profit collective bargain-

ing association of farmers which claims the right to engage

in horizontal price-fixing on behalf of its members by

reason of an antitrust exemption conferred by § 6 of

the Clayton Act, 15 U.S.C. § 17, and the Capper-Volstead

Act, 7 U.S.C. § 291, suffers “antitrust injury” when its

future membership dues and marketing fees income is

allegedly reduced by a conspiracy which interferes with

the association’s membership growth?

2. Whether proof of a properly defined relevant

geographic market is necessary to show market power

in a conspiracy to monopolize claim under § 2 of the

Sherman Act or in a Rule of Reason conspiracy to restrain

trade claim under § 1?

III

PARTIES TO THE PROCEEDING

Pursuant to Supreme Court Rules 21.1(b) and 28.1,

Petitioners state that in addition to the three parties

named in the caption of this Petition, Central Milk Pro-

ducers Cooperative and Associated Reserve Standby Pool

Cooperative, Inc.’ were parties defendant in the proceed-

ings below. Central Milk Producers Cooperative is sep-

arately filing a companion Petition for Certiorari with

this Court.

Petitioner Associated Milk Producers, Inc. states that

it has no parent, subsidiary or affiliated companies within

the meaning of Rule 28.1.

Petitioner Mid-America Dairymen, Inc. states that it

has no parent or subsidiary companies within the mean-

ing of Rule 28.1, but is affiliated with the following com-

panies: Hiland Dairy Co., Sinton Dairy Foods Co., Gillette

Dairy of the Black Hills, Roberts Dairy, Inc., and Western

Foods Processing, Inc.

1. The Eighth Circuit affirmed the District Court’s dismissal

of NFO’s claims against ARSPC. NFO II, 687 F.2d at 1191, 1207,

App. F at 257, 289.

TABLE OF CONTENTS

Ui yy 8 By - - 5 o> | SNe EER I

PARTIES TO THE PROCEEDING .........00..000000000000....... III

Se ME I vac itastenisscicnnncerndenntacseinaccosonerotstnaneans IV

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ha anscantssehhnicinnamanbeeiiintnlansadiiion 1

IE cach scractnctecrerecabichdodepaneseesnnasineantaiisaschonisiomial 2

STATUTES AND RULES INVOLVED .......................... 3

STATEMENT OF THE CASE .......................................... 4

Background—NFO I and II .....0..2.2.22-2--2-2------0------- 4

NFO III—Proceedings on Remand .......................... 5

BITE wsicarantcepaia ai aedaaatiaesnaiaadia Aetlnckeadtiaciabwebanaten 7

REASONS FOR GRANTING THE WRIT .........00..0... g

I. THE EIGHTH CIRCUIT’S DECISION DI-

RECTLY CONFLICTS WITH DECISIONS

FROM OTHER CIRCUITS INTERPRETING

SUPREME COURT DECISIONS REGARD-

ING PROOF OF ANTITRUST DAMAGES

AND CREATES CRITICAL PROBLEMS IN

THE ADMINISTRATION OF ANTITRUST

TREBLE-DAMAGE CLAIMS ......000020000200000...... 10

A. The Eighth Circuit’s Adoption of a

“Lesser Standard of Proof” ........................ 10

B. The Eighth Circuit’s Shifting of the Bur-

BE Ie I iccnrnssscn ceca eneutiaeennes 14

C. The Eighth Circuit’s Acceptance of a

of a Damage Theory That Failed to Ac-

count for the Effects of Lawful Factors 15

Il. THE EIGHTH CIRCUIT'S DECISION

RAISES AN IMPORTANT QUESTION

WHETHER AN APPELLATE COURT’S RE-

VIEW OF A DISTRICT COURT’S ANTI-

TRUST DAMAGE FINDINGS IS IMMUNE

FROM THE COMMANDS OF RULE 52(a) 18

CONCLUSION

APPENDIX*

anni shelsnss Soneteidetasteaeteiauehitess ean ae 23

2. Petitioners adopt and incorporate the Appendix accom-

panying the companion Petition for Certiorari being separately

filed by Central Milk Producers Cooperative. All citations to

the Appendix, e.g., “App. A at 1”, refer to that separately bound

Appendix.

TABLE OF AUTHORITIES

Cases

Anderson v. City of Bessemer City, 470 U.S. 564

(12GB) ...eincssnrsiceninsitsmnnpaisnipalacemnedadisdinietisanmaaneeie 19, 22

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251

(BID) nxceviesincsinarsinicsncspvahapesiicnamanectiiagebaaiaae 8, 11, 13, 16, 17

Bigelow v. RKO Radio Pictures, Inc., 150 F.2d 877

(7th Cir. 1945), rev’d on other grounds, 327 USS.

y ES. , SRNL ENC DLO ne ER ie on BA 9 ES 12, 13, 14

Brunswick Corp. v. Pueblo Bowl-o-Mat, Inc., 429 U.S.

TE CITE) eccinnsncnsennissiccsiidlencemetmanintan sama 13, 14, 18

Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338

(BR CUR, TTD) crc censssnisstannsscicesnennepesorantaseeesancteaiamnemana 17

D & S Redi-Mizx v. Sierra Redi-Mix and Contracting

Co., 692 F.2d 1245 (9th Cir. 1982) ~.......................... 14-15

Farley Transportation Co. v. Santa Fe Trail Transpor-

tation Co., 786 F.2d 1342 (9th Cir. 1985) —.000200...... 17

Garrett’s v. Farah Manufacturing Co., 412 F. Supp.

C06 (DBL. BUR) ccc 12

Gray v. Shell Oil Co., 469 F.2d 742 (9th Cir. 1972),

cert. denied, 412 U.S. 943 (1973) —....02000220002.... 13

Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709

(TEG) esernsnrseinnnsnssisinstsneccontenictiabiamnmasaammammumaaamaamae 18

ILC Peripherals Leasing Corp. v. IBM Corp., 458 F.

Supp. 423 (N.D. Cal. 1978), aff'd sub nom. Mem-

orex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir.

1980) (per curiam), cert. denied, 452 U.S. 972

(ROR) cncernrnnsithsssnisssinnarsinnsiriildtanissbetinlaieapeelaaaan magma emai 17

J. Truett Payne Co. v. Chrysler Motors Cob. 451

UWB. BOT CHG) .cccccccincerisinccrstinccce 11-12, 13, 14, 15, 17

Vil

Klinger v. Baltimore & Ohio Railroad, 432 F.2d 506

SEE ING SII, ce. Lov dno sesiipnsteindvediuphinatitinensacipmegininbasacostonavanichindi 15

Locklin v. Day-Glo Color Corp., 429 F.2d 873 (7th

SE UUM icideatetot cetenehgctcateancsiancsbaseseentaneace caaeioisselccidaus 12, 14

MCI Communications Corp. v. American Telephone

& Telegraph Co., 708 F.2d 1081 (7th Cir.), cert.

denied, 444 US. G81 (1963) ................................ 16, 17, 18

Metrix Warehouse, Inc. v. Daimler-Benz Aktiengesell-

schaft, 828 F.2d 1033 (4th Cir. 1987), cert. denied,

SU I I ai shiictenarncisiildinctinsleccasssiias 17

Pullman-Standard v. Swint, 456 U.S. 273 (1982) ...... 22

Story Parchment Co. v. Paterson Parchment Paper

a i I anions 11, 13, 14

United States Football League v. National Football

League, 842 F.2d i335 (2d Cir. 1988) 0... 17

Wells Real Estate, Inc. v. Greater Lowell Board of

Realtors, 850 F.2d 803 (ist Cir.), cert. denied, 109

S. Ct. 392 (1988) _... ease aakena sete tenestdscnte ede 14

Zenith Radio Corp. v. Hazeltine Research, Inc., 395

SE NE EE cients cee 9,11, 12, 14, 23

Statutes

| A Oh eee aode paeernittart nate LT PRL 3,4

ET sit enteric eee ere ets yl eben oe .. 24

We wistttietinsscnc SUE en enn A eo ovseenthhy My 1B

ee I ee aes es 2

Other Authorities

i A | ee Fiabe penne passim

Fifth Circuit Pattern Jury Instructions, Civil Cases

(1983), reprinted in 3 E. Devitt, C. Blackmar &

M. Wolff, Federal Jury Practice and Instructions

Re & FF. fF S|; Berean 12

No.

In the Supreme Court of the United States

OCTOBER TERM, 1988

ASSOCIATED MILK PRODUCERS, INC. and

MID-AMERICA DAIRYMEN, INC.,

Petitioners,

VS.

NATIONAL FARMERS’ ORGANIZATION, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioners Associated Milk Producers, Inc. and Mid-

America Dairymen, Inc. pray that a Writ of Certiorari

issue to review the judgment and opinion of the United

States Court of Appeals for the Eighth Circuit in National

Farmers’ Organization, Inc. v. Associated Milk Producers,

Inc., 850 F.2d 1286 (8th Cir. 1988) (“NFO IV”).

OPINIONS BELOW

The four opinions! rendered by the courts below are

reprinted in the Appendix and are officially reported as

follows:

1. For convenience, each opinion will be referred to herein

by its shorthand designation, e.g., “NFO IV,” rather than by its

full case name, followed by an official reporter citation and an

Appendix citation when necessary.

National Farmers’ Organization, Inc. v. Associated

Milk Producers, Inc., 850 F.2d 1286 (8th Cir. 1988)

(“NFO IV”), reprinted in App. B at 3. Review by

writ of certiorari is sought as to this decision.

Alexander v. National Farmers Organization, 614 F.

Supp. 745 (W.D. Mo. 1985) (“NFO III”), reprinted

in App. E at 65.

Alexander v. National Farmers Organization, 687 F.2d

1173 (8th Cir. 1982) (“NFO II’), cert. denied, 461

U.S. 937 (1983), reprinted in App. F at 231.

In re Midwest Milk Monopolization Litigation, 510 F.

Supp. 381 (W.D. Mo. 1981) (“NFO I”), reprinted in

App. G at 297.

JURISDICTION

The United States Court of Appeals for the Eighth

Circuit issued its opinion and entered its judgment in NFO

IV on July 5, 1988. Petitioners’ timely Petition for Re-

hearing and Suggestions for Rehearing En Banc was de-

nied on September 13, 1988. App. D at 63. Circuit Judges

Bowman and Magill dissented from the denial of rehearing

en banc. On December 3, 1988, Justice Blackmun granted

petitioners an extension of time within which to file this

Petition for Writ of Certiorari to and including January

26, 1989.

The jurisdiction of this Court is invoked pursuant to

28 U.S.C. § 1254(1).

STATUTES AND RULES INVOLVED

Statutes’

Section 1 of the Sherman Act, 15 U.S.C. § 1.

Section 2 of the Sherman Act, 15 U.S.C. § 2.

Section 4 of the Clayton Act, 15 U.S.C. § 15.

Rules

Fed. R. Civ. P. 52(a) provides in pertinent part:

In all actions tried upon the facts without a jury

.. . the court shall find the facts specially and state

separately its conclusions of law thereon, and judg-

ment shall be entered pursuant to Rule 58.... Find-

ings of fact, whether based on oral or documentary

evidence, shall not be set aside unless clearly errone-

ous, and due regard shall be given to the opportunity

of the trial court to judge of the credibility of the

witnesses. ... It will be sufficient if the findings

of fact and conclusions of law . . . appear in an opin-

ion or memorandum of decision filed by the court... .

2. The pertinent text of the statutes involved in this case

is reprinted in App. A at 1.

STATEMENT OF THE CASE

Background—NFO I and II

This 17-year-old private antitrust litigation arose out

of competition for dairy farmer membership between re-

spondent National Farmers Organization (“NFO”), a na-

tional, non-profit collective bargaining association of farm-

ers, and petitioners Mid-America Dairymen, Inc. (‘“Mid-

Am”), Associated Milk Producers, Inc. (“AMPI’), and

Central Milk Producers Cooperative (‘“(CMPC’’), all three

of which are Capper-Volstead agricultural cooperative

milk marketing associations.

NFO asserted claims against Mid-Am, AMPI, and

CMPC under Sections 1 and 2 of the Sherman Act, alleg-

ing unlawful monopolization, attempted monopolization

and conspiracy to monopolize, restrain trade, and eliminate

NFO as a competitor in the marketing of raw Grade A

milk in a ten-state midwestern region of the United

States.2 The District Court held that NFO had failed to

present sufficient evidence to establish petitioners’ liability

and dismissed each of NFO’s claims. NFO I, 510 F. Supp.

at 502-03, App. G at 548-51.

On appeal the Eighth Circuit affirmed the District

Court’s dismissal of NFO’s actual and attempted monopo-

lization claims. NFO II, 687 F.2d at 1191-92, App. F at

256-59. With respect to the District Court’s dismissal of

NFO’s Section 2 conspiracy claim, however, the Eighth

Circuit reversed. The Eighth Circuit held that petitioners

had conspired to monopolize and eliminate NFO as a com-

petitor in the marketing of raw Grade A milk produced

3. Jurisdiction in the District Court was based on 28 U.S.C.

§ 1337 and 15 U.S.C. §§ 15 and 26.

in a ten-state midwestern region and cited “examples of

conduct” and “specific overt acts” directed against certain

independent dairies in furtherance of the alleged con-

spiracy. 687 F.2d at 1193, 1196-1204, App. F at 261-62,

266-83. The Eighth Circuit also held, however, that many

of the acts alleged by NFO to be unlawful were in fact

lawful. 687 F.2d at 1195, 1199-1200, 1206-07, App. F at

264-65, 274-75, 287-89.

The Eighth Circuit observed that “[i]n light of its

ruling as to liability, the district court did not decide any

question of [NFO’s] standing to recover damages, the

appropriateness of particular damage theories, or the

amount of any damages”, and that absent relevant factual

findings on these critical and complex issues, remand was

necessary. 687 F.2d at 1208, App. F at 291. The Eighth

Circuit noted that additional factual findings were re-

quired to assess NFO’s damage theories and determine

the amount of its damages, if any, attributable to petition-

ers’ unlawful conduct and stated that those matters

“largely raise factual questions for the district court” on

remand. 687 F.2d at 1209, App. F at 294.

NFO III—Proceedings on Remand

On remand to the District Court, NFO declined the

opportunity to reopen the record and present additional

evidence to support its claim for damages, electing instead

to rely on the evidence presented and the damage theories

advanced at the original trial. NFO described its damage

theories as the “test market” and “market structure’”’

4. The District Court’s rejection of NFO’s “market struc-

ture” damage theory was affirmed by the Eighth Circuit in

NFO IV, 850 F.2d at 1292 & n.3, App. B at 11. Therefore, that

damage theory will not be discussed further.

approaches, both of which attempted to estimate NFO’s

lost membership dues and checkoff (or marketing) fees

under a “failure to grow” theory.

Under its “test market” theory, NFO sought to use

its performance in an identifiable portion (Federal Milk

Market Order 68, encompassing Minneapolis-St. Paul,

Minnesota and several surrounding counties) of a ten-

state geographic area as a “yardstick” to measure its per-

formance in the remainder of the area (comprising nine

of the twenty-seven federal milk market orders located

in that geographic area). The “market” in which NFO

sought damages, i.e., the market for members, was not,

however, the same market in which the Eighth Circuit

found unlawful restraints, i.e., the market for the sale of

raw Grade A milk.

The validity of NFO’s “test market” theory turned on

‘the reasonableness and accuracy of its underlying factual

assumptions and whether the relevant conditions in the

other nine damage orders were sufficiently similar to the

conditions in Order 68 such that NFO’s performance in

Order 68 could fairly be extrapolated to the other orders

so as to provide a “just and reasonable estimate” of NFO’s

damages. NFO IV, 850 F.2d at 1294-95, App. B at 16-18.

NFO supported its “test market” damage theory pri-

marily through the testimony of its expert economist and

three of its employees. Several critical factual assumptions

provided by NFO’s counsel served as the foundation for

its expert’s testimony regarding damage projections in the

ten federal milk market orders. In an exhaustive review

and analysis of NFO’s damage theory in light of the record

evidence, the District Court rejected each of these assump-

tions as “untenable” and concluded that they were not

supported by reasonable and credible facts and inferences

in the record. NFO III, 614 F. Supp. at 757-93, App. E at

82-154.

The District Court specifically found and concluded

“that a just and reasonable estimate of NFO’s alleged lost

market penetration damages cannot be made on any cred-

ible relevant data adduced by NFO and that any award

of damages based on such a theory would necessarily be

based on speculation and conjecture.” NFO III, 614 F.

Supp. at 792-93, App. E at 153. The District Court also

analyzed NFO’s damage theory with respect to the specific

overt acts directed against various independent dairies as

described by the Eighth Circuit in NFO II and concluded

that NFO’s damage theory that it lost membership dues

and checkoff fees as a result of those acts was untenable

and was not supported by reasonable and credible facts

and inferences in the record. NFO III, 614 F. Supp. at

793-99, App. E at 154-67. Accordingly, the District Court

awarded no damages to NFO on its Section 2 conspiracy

claim and entered judgment thereon in favor of petitioners.

NFO IV

On appeal the Eighth Circuit again reversed, holding

that NFO’s “test market” theory was “a proper basis

for a substantial damage award.” NFO IV, 850 F.2d

at 1292, App. B at 11-12. The Eighth Circuit justified

its reversal on the erroneous premise that the District

Court had used an “inappropriate legal standard” in re-

jecting NFO’s damage theory and evidence. 850 F.2d at

1292, App. B at 12.5 Relying on four Supreme Court

5. Although the Eighth Circuit seemingly concluded that

the District Court’s findings “would be clearly erroneous”, [sic]

NFO IV, 850 F.2d at 1294, App. B at 16, nowhere in its opinion

did the Eighth Circuit explain the basis for its rejection of the

District Court’s factual findings as “clearly erroneous”’.

decisions for the principle that the fact-finder may make

a “just and reasonable estimate of the damage”, the

Eighth Circuit held that the District Court should have

applied a “lesser standard of proof” in analyzing NFO’s

theory and evidence of the amount of its damages. 850

F.2d at 1293, App. B at 13.°

Rather than remanding the case to the District Court

for reconsideration and new findings under this “lesser

standard of proof”, the Eighth Circuit reviewed the record

de novo. The Eighth Circuit engaged in its own inde-

pendent factual and legal analysis of NFO’s “test mar-

ket” damage theory and reversed, often without explana-

tion, the District Court’s factual findings, including its

credibility determinations, with respect to the critical

assumptions on which NFO’s damage theory was based.

850 F.2d at 1294-1308, 1312-13, App. B at 16-47, 57-58.

The Eighth Circuit stated that a “review of the record

and our prior opinion” in NFO II left it “with the definite

and firm conviction that the amount of damages suffered

by NFO as a result of the illegal conspiracy was sub-

stantial” and that “[t]he record simply will not support

a finding that NFO is entitled to only nominal damages.”

6. The Eighth Circuit reasoned that the District Court had

improperly rejected NFO’s damage evidence in its entirety be-

cause certain portions of it rested upon proposed findings which

the District Court had rejected in NFO I, and that the District

Court should have independently reexamined NFO’s damage evi-

dence “in light of the lesser standard of proof applicable to

determining the amount of damages.” NFO IV, 850 F.2d at 1294,

App. B at 16.

An examination of the District Court’s opinion in NFO III

clearly shows that, contrary to the Eighth Circuit’s unsupported

statement, the District Court conscientiously applied the proper

legal standard in evaluating NFO’s damage evidence. See, e.g.,

NFO III, 614 F. Supp. at 778 n.26 (citing Bigelow v. RKO Radio

Pictures, Inc., 327 U.S. 251 (1946)), 791-93, App. E at 125-26,

151-53.

850 F.2d at 1308, App. B at 47. The Eighth Circuit

concluded that “NFO’s damage evidence, while not per-

fect, clearly establishes the basis for a significant award.”

850 F.2d at 1294, App. B at 16.

The Eighth Circuit remanded the action to the Dis-

trict Court “for computation of the amount of damages”

with explicit directions that the District Court “shall

accept the ‘test market’ theory propounded by NFO as

a valid base from which to determine the amount of

damages and shall use the $7,403,374 claimed under the

theory as a starting point.” 850 F.2d at 1312, App. B

at 57. The court allowed for certain reductions from

NFO’s damage figure if on remand it was determined

that such reductions were supported by the existing rec-

ord. 850 F.2d at 1312-13, App. B at 57-58.

REASONS FOR GRANTING THE WRIT

This case presents an example of an appellate court’s

blatant disregard of the limited scope of review permitted

under Federal Rule of Civil Procedure 52(a). It also

gives this Court an opportunity to clarify for the lower

federal courts the interplay between Rule 52(a) and a

line of cases from this Court holding that the fact-finder

is permitted to make a “just and reasonable estimate

of the damage based on relevant data” and “to act upon

probable and inferential, as well as direct and positive

proof.” Zenith Radio Corp. v. Hazeltine Research, Inc.,

395 U.S. 100, 124 (1969).

The Eighth Circuit, in contrast to other Circuits,

interprets this line of Supreme Court cases as allowing

proof of the underlying evidentiary basis for the esti-

mate of antitrust damages by less than a “preponderance

of the evidence.” Its opinion suggests that this “lesser

standard of proof” gives an appellate court more latitude

than otherwise permitted under Rule 52(a) when re-

viewing a district court’s findings regarding an antitrust

plaintiff’s proof of the amount of its damages.

The Eighth Circuit also interprets this line of cases

as allowing an appellate court to shift to the defendant

the burden of proof as to the quantum of damages and

permitting an antitrust plaintiff to rely upon a damage

theory that fails to exclude the effects of significant

lawful competition and other lawful factors. If left to

stand the Eighth Circuit’s decision will encourage private

antitrust litigation even though the plaintiff has no proof

of actual measurable damages.

This Court should give plenary attention to the

critical problems in the administration of private antitrust

treble-damage claims that emerge from the Eighth Cir-

cuit’s decision in this case.

I. THE EIGHTH CIRCUIT’S DECISION DIRECTLY

CONFLICTS WITH DECISIONS FROM OTHER

CIRCUITS INTERPRETING SUPREME COURT

DECISIONS REGARDING PROOF OF ANTI-

TRUST DAMAGES AND CREATES CRITICAL

PROBLEMS IN THE ADMINISTRATION OF

ANTITRUST TREBLE-DAMAGE CLAIMS

A. The Eighth Circuit’s Adoption of a ‘Lesser

Standard of Proof’’

The Eighth Circuit in NFO IV correctly stated that

an antitrust plaintiff must prove: (1) that the defendant

violated the antitrust laws; (2) that the violation caused

injury to the plaintiff; (3) that the injury was of a type

sought to be prevented by the antitrust laws; and (4) the

amount of the plaintiff’s injury. The Eighth Circuit held

that “[w]hile the first three of these elements must be

established by a preponderance of the evidence, a lesser

standard of proof is applicable to proof of the amount of

damage.” NFO IV, 850 F.2d at 1293, App. B at 13. The

Eighth Circuit relied upon four decisions from this Court

to support its adoption of this “lesser standard”. See J.

Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557

(1981); Zenith Radio Corp. v. Hazeltine Research, Inc., 395

U.S. 100 (1969); Bigelow v. RKO Radio Pictures, Inc., 327

U.S. 251 (1946); and Story Parchment Co. v. Paterson

Parchment Paper Co., 282 U.S. 555 (1931).

Fairly read, these decisions do not sanction proof of

the underlying evidentiary basis for antitrust damage

theories and estimates by less than a “preponderance of

the evidence.” They simply permit the fact-finder to

make a “just and reasonable estimate of the damage based

on relevant data” and “to act upon probable and inferen-

tial, as well as direct and positive proof.” Zenith Radio,

395 U.S. at 124 (quoting Story Parchment, 282 U.S. at 564,

and Bigelow, 327 U.S. at 264).

This Court was simply recognizing in those cases that

the amount of an antitrust plaintiff's damages need not

and often cannot be established with mathematical cer-

tainty or precision. The plaintiff still must present suf-

ficient credible evidence, however, to enable the fact-

finder to make a “just and reasonable estimate” of the

actual damages sustained as a result of the antitrust vio-

lation. “Preponderance of the evidence” is the proper

standard with respect to that underlying proof. See J.

Truett Payne, 451 U.S. at 568; Zenith Radio, 395 U.S. at

124; see also Locklin v. Day-Glo Color Corp., 429 F.2d 873,

879 (7th Cir. 1970) (stating that an antitrust plaintiff

“must prove the amount of damages by a preponderance

of the evidence” and that “estimates based upon assump-

tions” must “rest upon an adequate base”), cert. denied,

400 U.S. 1020 (1971); Bigelow v. RKO Radio Pictures,

Inc., 150 F.2d 877, 883-84 (7th Cir. 1945) (stating that an

antitrust verdict must be based “upon a preponderance of

all the competent evidence” and that the amount of dam-

ages “may be reasonably approximated if based upon com-

petent evidence”), rev’d on other grounds, 327 U.S. 251

(1946); Garrett’s v. Farah Manufacturing Co., 412 F. Supp.

656, 666 (D.S.C. 1976) (stating that the plaintiff “ha[s]

the burden of proving by a preponderance of the evidence

the amount of damages actually sustained as a result of

the [antitrust] violation”); Fifth Circuit Pattern Jury

Instructions, Civil Cases (1983) (stating that the fact-

finder “should award an amount shown by a preponder-

ance of the evidence in the case to be a just and reasonable

sum sufficient to fairly and adequately compensate for

the injury or damages sustained”), reprinted in 3 E. Devitt,

C. Blackmar & M. Wolff, Federal Jury Practice and In-

structions § 86.04, at 362 (4th ed. 1987) (emphasis added).

The Fifth Circuit’s Pattern Jury Instruction correctly

recognizes that while the legal standard applied to the

amount of damages is a “just and reasonable” estimate,

the standard applied to the underlying evidentiary proof

on which that estimate is based is a “preponderance of the

evidence”. The Eighth Circuit failed to recognize this

distinction in NFO IV.

The Eighth Circuit’s adoption of this “lesser standard”

of proof permits an appellate court to usurp the function

of the fact-finder in violation of the commands of Rule

52(a). Even if an antitrust plaintiff's damage theory

is rejected by the fact-finder because it is based upon

inadequately supported factual assumptions and dis-

credited testimony, the appellate court can apply the

vague “lesser standard” and substitute its own contrary

conclusions and inferences from a cold record. This

“lesser standard”, as evidenced by its application here,

permits an appellate court to award substantial antitrust

damages based solely upon its finding of an antitrust vio-

lation. NFO IV, 850 F.2d at 1293-94, App. B at 15-16.

Such a result-oriented approach is contrary to the well-

established antitrust principle that an antitrust violation

alone does not mandate an award of substantial damages.

See J. Truett Payne, 451 U.S. at 562; Brunswick Corp. v.

Pueblo Bowl-o-Mat, Inc., 429 U.S. 477, 486 (1977); Gray v.

Shell Oil Co., 469 F.2d 742, 749 (9th Cir. 1972), cert. denied,

412 U.S. 943 (1973).

The Eighth Circuit’s novel interpretation of this

Court’s decisions in Story Parchment, Bigelow, Zenith

Radio and J. Truett Payne adds to the already significant

confusion and uncertainty in the lower federal courts re-

garding the appropriate standard for proof of the amount

of an antitrust plaintiff's damages. If left to stand, it will

encourage the proliferation of private antitrust litigation

and authorize substantial treble-damage awards in cases

where, as here, there is no credible proof of actual, mea-

surable damages. This case presents an excellent op-

portunity for this Court to resolve the split of authority

in the Circuits and to clear up the confusion generated

by this Court’s prior decisions regarding the legal stan-

dards to be applied to an antitrust plaintiff’s proof of the

amount of its damages.

B. The Eighth Circuit’s Shifting of the Burden

of Proof

Presented with NFO’s refusal on remand in NFO III

to present additional evidence in order to provide the fact-

finder a reasonable basis on which to estimate its alleged

losses, the Eighth Circuit, relying upon its new “lesser

standard of proof,” simply shifted to petitioners the burden

of proof on the amount of NFO’s damages. The Eighth

Circuit suggested that petitioners, as the defendants,

should have presented evidence of a proper “yardstick”

for measuring the amount of damages in order to remedy

NFO’s defective damage theory and evidence. See, e.g.,

NFO IV, 850 F.2d at 1296-97, 1301, App. B at 20-21, 32.

In support of its holding the Eighth Circuit again relied

upon this Court’s decisions in J. Truett Payne, Zenith

Radio, Bigelow, and Story Parchment for the proposition

that petitioners had to bear the risk of uncertainty in-

volved in NFO’s damage theory.

Other Circuits, also relying on Bigelow, have rejected

the notion that the uncertainty of the plaintiff's damages

justifies a shifting of the burden of proof to the defendant.

See, e.g., Wells Real Estate, Inc. v. Greater Lowell Board

of Realtors, 850 F.2d 803, 816 (1st Cir.) (stating that

“fa]lthough a private antitrust litigant is not required to

prove the amount of its damages with mathematical cer-

tainty . . ., this guiding principle does not shift the burden

of proof”), cert. denied, 109 S. Ct. 392 (1988); Locklin v.

Day-Glo Color Corp., 429 F.2d 873, 879 (7th Cir. 1970).

There is an apparent split in the Circuits on this issue,

however, as some courts have suggested that the burden

of proof does shift to the defendant. Cf. D & S Redi-Mix

». Sierra Redi-Mix and Contracting Co., 692 F.2d 1245,

1249 (9th Cir. 1982); Klinger v. Baltimore & Ohio Rail-

road, 432 F.2d 506, 516 (2d Cir. 1970).”

Review by this Court is necessary to resolve the

confusion and apparent split of authority among the Cir-

cuits regarding the proper allocation of the burden of

proof on the amount of an antitrust plaintiff’s damages.

C. The Eighth Circuit’s Acceptance of a Damage

Theory That Failed to Account for the Effects

of Lawful Factors

This case presents an important question regarding

the proper interpretation of Section 4 of the Clayton Act,

15 U.S.C. § 15, and the necessary elements of an anti-

trust damage theory to support an award of substantial

damages. Section 4 of the Clayton Act permits recovery

for actual damages or injury “by reason of anything

forbidden in the antitrust laws,” but does not permit

recovery for economic injury resulting from lawful con-

duct or causes not attributable to an antitrust violation.

The Eighth Circuit in NFO IV again relied upon the

“just and reasonable” language in this Court’s prior cases

to hold that NFO’s damage theory was not impermissibly

7. The Eighth Circuit’s shifting of the burden in NFO IV

is inconsistent with its prior decision in NFO II, wherein it re-

peatedly emphasized NFO’s burden on remand to prove its dam-

age theory. See, e.g., NFO II at 1196 n.21, 1203 n.35, 1206-07,

1208, 1209 n.42, 1210, App. F at 37, 51, 58-59, 62-65. More-

over, the Eighth Circuit’s shifting of the burden to defendants

is fundamentally unfair in the circumstances of this case and

mandates an impossible task on remand. Defendants now ap-

parently must attempt to correct NFO’s flawed damage theory

on the existing record. NFO was afforded an opportunity on

remand to the District Court in NFO III to reopen the record,

but expressly declined to do so. Defendants, unaware that the

Eighth Circuit would subsequently shift the burden to them,

have been deprived of the opportunity to present additional evi-

dence,

flawed simply because of its failure to account for law-

ful competition. NFO IV, 850 F.2d at 1305-08, App. B

at 42-47.2 The Eighth Circuit’s holding conflicts with

decisions of this Court and of other Circuits, and, if

allowed to stand, would establish a dangerous precedent

under which defendants would be required to pay sub-

stantial treble damages for completely lawful conduct.

This Court has held that antitrust damages cannot

be based upon “speculation and guesswork”, Bigelow,

327 U.S. at 264, and that a fact-finder may award dam-

ages only to the extent those damages are caused by

defendants’ wrongful acts and are “not shown to be

attributable to other causes”, J. Truett Payne, 451 US.

at 566 (quoting Bigelow).

In contrast to the Eighth Circuit, the Second, Third,

Fourth, and Ninth Circuits, also applying the Bigelow

line of cases, uniformly have held that an antitrust dam-

age theory that fails to take into account the effects of

lawful competition is speculative as a matter of law and

cannot form the basis of a “just and reasonable esti-

mate” of damages. For example, in MCI Communications

Corp. v. American Telephone & Telegraph Co., 708 F.2d

1081 (7th Cir.), cert. denied, 464 U.S. 891 (1983), the

Seventh Circuit determined that some of the acts for

which the plaintiff sought to recover damages were law-

8. Throughout this litigation NFO assumed, as part of its

damage theories, that virtually every activity undertaken by

defendants since the early 1960s was unlawful. Both the Dis-

trict Court and the Eighth Circuit held, however, that many

of the challenged activities were entirely lawful. See NFO II,

687 F.2d at 1195, 1199-1200, 1206-07, App. F at 264-65, 274-75,

288-89; NFO IV, 850 F.2d at 1306 n.44, App. B at 43. NFO

refused the opportunity to present additional evidence on re-

mand to allow the District Court to adjust its damage theories

and calculations to account for the effects of that lawful conduct.

ful. Because the plaintiff's evidence did not afford any

basis for apportioning plaintiff’s alleged losses between

the lawful and unlawful acts, however, the Seventh Cir-

cuit reversed the district court’s award of substantial

damages, stating:

When a plaintiff improperly attributes all losses

to a defendant’s illegal acts, despite the presence

of significant other factors, the evidence does not

permit [the fact-finder] to make a reasonable and

principled estimate of the amount of damage. This

is precisely the type of “speculation or guesswork”

not permitted for antitrust injury verdicts. To allow

otherwise would force a defendant to pay treble dam-

ages for conduct that was determined to be entirely

lawful.

708 F.2d at 1162-63 (citing Bigelow); see also United

States Football League v. National Football League, 842

F.2d 1335, 1378-79 (2d Cir. 1988); Coleman Motor Co.

v. Chrysler Corp., 525 F.2d 1338, 1352-53 (3d Cir. 1975);

Metrix Warehouse, Inc. v. Daimler-Benz Aktiengesell-

schaft, 828 F.2d 1033, 1043-45 (4th Cir. 1987), cert. denied,

108 S. Ct. 1753 (1988); Farley Transportation Co. v.

Santa Fe Trail Transportation Co., 786 F.2d 1342, 1350-52

(9th Cir. 1985); accord ILC Peripherals Leasing Corp.

v. IBM Corp., 458 F. Supp. 423, 435-36 (N.D. Cal. 1978),

aff'd sub nom. Memorex Corp. v. IBM Corp., 636 F.2d

1188 (9th Cir. 1980) (per curiam), cert. denied, 452 U.S.

972 (1981).

The rationale of these cases is sound. Section 4 of

the Clayton Act permits recovery only for losses directly

attributable to a defendant’s unlawful conduct. See J.

Truett Payne, 451 U.S. at 566. A damage theory that

attributes all of the plaintiff’s alleged losses to all of the

defendants’ acts, as NFO’s did here, despite the presence

of substantial lawful competition and other lawful causes

and factors not attributable to the antitrust violation, can-

not as a matter of law form the basis of a reasonable and

principled estimate of damages.? An appellate decision

which permits such a damage theory to form the predicate

for a potential multi-million dollar damage award turns

the competition policy of the antitrust laws upside down

and improperly compensates a plaintiff for what was in

fact lawful competition.

Il. THE EIGHTH CIRCUIT’S DECISION RAISES

AN IMPORTANT QUESTION WHETHER AN

APPELLATE COURT’S REVIEW OF A DIS-

TRICT COURT’S ANTITRUST DAMAGE FIND-

INGS IS IMMUNE FROM THE COMMANDS OF

RULE 52(a)

The Eighth Circuit totally ignored the District Court’s

extensive findings supporting its conclusion that there is

no “credible” evidence that NFO suffered any injury

entitling it to treble damages. As in Icicle Seafoods, Inc.

v. Worthington, 475 U.S. 709, 713 (1986), “nowhere in

its opinion did the [Eighth Circuit] ever mention any

of the factual findings of the district court, much less

discuss or analyze them.” Instead, the Eighth Circuit

improperly reviewed the record independently and en-

gaged in its own fact-finding in order to reach its own

foregone conclusion that NFO’s evidence “clearly estab-

9. The issue is not simply one of damage measurement,

as the Eighth Circuit suggested, but rather goes to the funda-

mental element of causation, inasmuch as losses resulting from

lawful competition are not the type of antitrust injury for which

recovery is permitted under § 4 of the Clayton Act. See Bruns-

wick Corp. v. Pueblo Bowl-o-Mat, Inc., 429 U.S. 477, 489 (1977);