Appendix — Allied Chemical Corp. v. Daiflon, Inc.

IN THE

Supreme Court of the United States

Octoser Term, 1979

ALLIED CHEMICAL CORPORATION, ET AL.,

Petitioners,

Darrton, Inc.,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Tenth Circuit

Press or Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

IN THE

Supreme Court of the United States

Octoser TERM, 1979

ALLIED CHEMICAL CORPORATION, ET AL.,

Petitioners,

Datrion, Ine.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Tenth Circuit

INDEX TO APPENDIX

Page

. Opinion of the United States Court of Appeals for

the Tenth Circuit, dated December 21, 1979 ...... la

District Court’s Comments and Rulings on Defend-

ants’ Motions for Judgment N.O.V. and for

New Trial, dated May 14, 1979 .............. 23a

B. Judgment and Writ of Mandamus ............... 29a

C. Court of Appeals Order Denying Petition for Re-

hearing and Suggestion for Rehearing En Bane,

SE PE Oy ao Shows oh decd be eeenk eaves 3la

. Court of —— Order Requiring Submission of

“Narrative Statements,” dated August 10, 1979 ... 32a

. District Court Order Announcing Recusal, dated

pe SE ree a ap ey rey er epee 34a

. Statutory Provisions Involved ................4. 38a

G. Memorandum in Support of Motion for Judgment

Notwithstanding the Verdict .................... 39a

. Memorandum in Support of Motion for New Trial 95a

la

APPENDIX A

UNITED STATES COURT OF APPEALS, TENTH CIRCUIT

No. 79-1459

Darton, Inc., Petitioner,

v.

The Honoraste Lutner Bonanon, Judge of the United

States District Court for the Western District of

Oklahoma, Respondent.

Argued and Submitted October 9, 1979

Decided December 21, 1979

Before McWi.uiaMs, Breitenstein and Doyte, Circuit

Judges.

Wiutuiam EK. Doyte, Circuit Judge.

These are proceedings in which Daiflon seeks review of

an order of the district court granting a new trial in an

antitrust case which had been tried to a jury. Daiflon pre-

vailed in that case and recovered a judgment in the amount

of $2.5 million actual damages. Daiflon moved the court

to treble this amount. The court simply ordered entry

of judgment for $2.5 million. The trial court granted a

new trial on all of the issues. See Exhibit A. Daiflon seeks

to prohibit further proceedings except as the same are

necessary in order to enter judgment on the verdict in-

cluding treble damages, and to determine and assess the

costs against the defendants, including attorneys’ fees.

The remedy here sought is pursuant to extraordinary

writ, 28 U.S.C. §1651(a) and Fed.R.App.P. 21. Daiflon

contends that the trial court’s new trial order exemplified

an erroneous practice likely to recur. It calls attention to

the fact that the trial judge, the Honorable Luther Bo-

hanon, had previously dismissed this case for a trivial

2a

reason which necessitated a reversal by this court. In that

instance the judge entered an order of dismissal with pre-

judice for failure of Daiflon to answer one discovery ques-

tion. This order was vacated and the cause was reinstated

by this court. See Daiflon v. Allied Chemical Corp., 534

F.2d 221 (10th Cir.), cert. denied 429 U.S. 886, 97 S.Ct. 239,

50 L.Ed.2d 168 (1976). In essence, the petitioner contends

that the trial judge has a misconception of the scope and

extent of trial court’s authority to grant a new trial.

Daiflon’s position appears to be that the judge acted on the

premise that the trial court’s discretion is virtually un-

limited, und that because of this there exists a likelihood

that there will be a repetition of the present result.

To obtain relief Daiflon must, of course, demonstrate

that its right is clear and indisputable. See Will v. Calvert

Fire Ins. Co., 437 U.S. 655, 662, 98 S.Ct. 2552, 57 L.Ed.2d

504 (1978); State Farm Mutual Automobile Ins. Co. v.

Scholes, 601 F.2d 1151, 1154 (10th Cir. 1979). Daiflon is re-

quired to show that the order was not only erroneous under

normal standards of appellate review, but also that the

ruling is so extraordinary as to evidence arbitrariness and

a clear abuse of discretion.

The record here is a special one which was prepared by

counsel on order of this court once it had been decided

that the case should be reviewed at least to some extent.

There was no transcript filed so the parties were ordered to

prepare simultaneous summaries of the evidence which had

been presented by each side at the trial. This was to have

been in lieu of a transcript.’ Petitioner followed the direc-

‘The pertinent part of our order noted that the court lacked a

transcript of the evidence. In view of that, the parties were di-

rected as follows:

Accordingly, the parties are directed, in lieu of a transcript

of the evidence, to prepare and sign a narrative statement of

the case along the lines provided in Rule 10(d) of the Rules

of Appellate Procedure. Each side shall prepare a summary

of the evidence presented by it at the trial. These summaries

3a

tions of the court fully. It presented a 160-page document

which was fully referenced, and which complied in every

detail with the court’s order. It was not required to sum-

marize the defendants’ testimony at the trial and so it did

not do so, with the possible exception of presenting evi-

dence in some instances that had been brought out by Dai-

flon on cross-examination of defendants’ witnesses. The

petitioner had a right to assume that the defendants would

present in summarized form the testimony of their own

witnesses. The defendants’ statement was relatively brief

and had an argumentative tone and sought to answer peti-

tioner’s reply brief. Essentially, it was a brief and argu-

ment. Only the testimony of one witness was summarized,

and that was not fully presented.’

The facts can be stated briefly. From 1969 to 1972,

Daiflon had engaged in the business of importing refrig-

erant gas from Japan. The gas was repackaged by Daiflon

and resold to both wholesaler and retail contractors and

servicemen in the non-automotive air conditioning indus-

try. This suit was commenced on July 12, 1972, seven years

prior to the instant proceedings. The suit was brought

under the Sherman Act, §§1 and 2, in the United States

District Court for the Western District of Oklahoma. The

defendants named were EK. I. du Pont de Nemours & Co.,

Allied Chemical Corp., Kaiser Aluminum & Chemical Corp.,

Pennwalt Corp., Racon, Inec., and Union Carbide Corp., all

of which manufactured refrigerant gas. In the suit it was

alleged that the defendants had engaged in an unlawful

shall be simultaneously prepared and shall be simultaneously

submitted on or before September 11, 1979.

It was thus plain that an argumentative brief was not being

sought.

?It did not present a summary of the evidence presented by

defendants as called for. To the present day we are in the dark

as to the identity of the defendants’ witnesses and the testimony

which was given by them.

4a

price-fixing conspiracy, the object of which was to exclude

Daiflon from the market. A further allegation was that de-

fendants conspired to monopolize the market and that du

Pont had engaged in monopolization through predatory

pricing and disparagement of Daiflon’s products. There

was testimony presented at the trial that each of the de-

fendants reduced their selling prices for refrigerant gas

in March 1971 by 13%, and that the defendants had fur-

ther reduced the selling prices of two grades of refrig-

erant gas in March 1972. Daiflon ceased doing business in

October 1972. After the cessation of its business, defen-

dants increased their prices to the pre-March 1971 level.

There was testimony that du Pont had approximately

45% of the market; Allied Chemical had approximately

18-20% ; Union Carbide, 12-14% ; Pennwalt, 8-9% ; Kaiser,

7-8% ; and Racon, 2%. Daiflon sold its refrigereat gas in

31 states, although its share of the market was estimated

to be .5% prior to the price lowering of the defendants.

There does not appear to be any quality difference in this

product.

Daiflon’s sales were shown to have increased after it was

formed in 1969 until June 1971, at which time the price

decrease of the defendants was felt and the sales of Dai-

flon reduced from $160,000 to $10,000 in one month. Follow-

ing this, Daiflon was ordered by its bank to liquidate.

In August 1971, the President imposed a ten percent

surcharge on all imported goods and thereby increased the

duty on refrigerant gas from six to sixteen percent. This

continued in effect until December 1971, at which .ime the

dollar was devalued against the yen. Daiflon dit not im-

port refrigerant gas from Japan after August 1971, but

sold it out of its inventory. The defendants maintained

that Daiflon’s failure was duc to the imposition of the im-

port surcharge and to problems in Daiflon’s operations,

and was not due to the defendants’ actions. This was un-

da

doubtedly one of the primary fact issues submitted to the

jury.

After trial, the trial court denied the defendants’ mo-

tion for judgment notwithstanding the verdict. The judge

did not formally vacate the judgment entered in favor of

Daiflon on April 9 in conjunction with the grant of the

new trial. No doubt this was oversight. The defendants

have nevertheless filed a notice of appeal from the judg-

ment and also from the deniai of their motion for judg-

ment notwithstanding the verdict.

It would appear from reading the transcribed oral rul-

ing of the judge that the trial court’s dissatisfaction was

on the basis that the damages were excessive and was on

the further ground that he had erred in the admission of

unidentified exhibits.

The trial court’s main disagreement was with the amount

of the verdict. The judge stated in connection with the new

trial order that the amount of the award shocked him, and

the indications were that he would have been even more

shocked had he ordered the trebling of the damages. The

judge had much less to say about the jury’s conclusion

that the defendants were liable under the antitrust laws.

The main complaint here was that there was not enough

time and effort given to determining the authenticity of

the documents that were received in evidence, and he ex-

pressed a determination to consider them with much

greater care on retrial. At the same time he did not point

out any single document or group of documents which

should not have been received.

Discussion of the Issues

The primary question in the case is whether, in view of

the fact that final judgment or final order is not from a

practical standpoint present in the record, and hence there

is not an adequate remedy at law, an extraordinary writ

6a

ean be employed to review the validity of the order of the

trial court granting a new trial.

In our opinion the trial court merely overlooked formal

vacating of the judgment, and therefore we must assume

that this intended object was carried out since the new trial

was ordered.

The defendants take the position that there is no rem-

edy under an extraordinary writ. The only possibilities,

according to them, are, first, to grant their motion for

judgment notwithstanding the verdict, or, second, to retry

the case. Defendants do not give recognition to possible

use of the writ on the basis of “a clear abuse of discretion,

an abdication of the judicial function, or the usurpation

of judicial power.” Paramount Film Distributing Corp. v.

Cwie Center Theater, Inc., 333 F.2d 358, 361 (10th Cir.

1964), citing La Buy v. Howes Leather Co., 352 U.S. 249,

77 S.Ct. 309, 1 L.Ed.2d 290 (1957). The truth is that the

extraordinary remedy route is limited, but it cannot be

said to be nonexistent.

We take note of the fact that there has been no certifi-

cation pursuant to 28 U.S.C. § 1292(b). This interlocutory

appeal procedure was not a viable possibility. Defendants

suggest that Daiflon should have sought to oust the judge

by means of §§ 144 and 455 of the Judicial Code on the

basis of an affidavit that he was biased and prejudiced.

This procedure has not been pursued by the petitioner as

of the present time at least, and there is nothing in the

record which indicates that such a course had been con-

templated.

It goes without saying that an orthodox appeal pursu-

ant to § 1291 of the Judicial Code is not a possibility be-

cause, as indicated above, there is no final judgment or

final order which could support an appeal. The grant of a

new trial is not a final judgment.’

* See Kanatser v. Chrysler Corp., 199 F.2d 610, 615 (10th Cir.

1952), cert. denied 344 U.S. 921, 73 S.Ct. 388, 97 L.Ed. 710 (1953).

7a

A valid basis for obtaining appellate review is some-

what elusive. Thus, this is not a question of the trial court’s

acting beyond its jurisdiction. This is a recognized excep-

tion to the final judgment rule.* What we are confronted

with is a request for extraordinary review questioning

whether there has been a clear abuse of discretion in grant-

ing the new trial. So, the lack of jurisdiction remedy is out.

There is a concept of finality which had a practical and

nontechnical construction.’ It is, however, no longer a

viable theory. Coopers & Lybrand v. Livesay, 437 U.S. 463,

98 S.Ct. 2454, 57 L.Ed.2d 351 (1978). The concept of piece-

meal review has rendered the death knell threat practically

ineffectual.

General Issuance of a Writ of Mandamus as an Instrument

of Appellate Review

The only remaining alternative is therefore whether

there is some inherent basis to be found within the four

corners of the writ of mandamus. We proceed to that in-

quiry.

The relevant statute, 28 U.S.C. §1651(a), is not itself

narrow and restrictive. It provides:

The Supreme Court and all courts established by

Act of Congress may issue all writs necessary or ap-

propriate in aid of their respective jurisdictions and

agreeable to the usages and principles of law.

* Demeretz v. Daniels Motor Freight, Inc., 307 F.2d 469 (3d Cir.

1962).

5 Kisen v. Carlisle & Jacquelin, 417 U.S. 156, 171, 94 S.Ct. 2140,

40 L.Ed.2d 732 (1974); Cohen v. Beneficial Loan Corp., 337 U.S.

541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) ; Gillespie v. United

States Steel Corp., 379 U.S. 148, 153, 85 S.Ct. 308, 13 L.Ed.2d 199

(1964).

8a

So, then, it is a question whether the circumstances here

are agreeable to the usages and principles of law.

Perhaps the area which offers a possibility for review is

supervisory use of the writ of mandamus in accordance

with La Buy v. Howes Leather Co., 352 U.S. 249, 77 8.Ct.

309, 1 L.Ed.2d 290 (1957), and Schlagenhauf v. Holder,

379 U.S. 104, 85 S.Ct. 234, 13 L.Ed.2d 152 (1964). See

generally 16 C. Wright, A. Miller, E. Cooper, KE. Gress-

man, Federal Practice & Procedure § 3934 (1977); Note,

Supervisory and Advisory Mandamus under the All Writs

Act, 86 Harv.L.Rev, 595 (1973). The supervisory aspect

of mandamus has indeed been used in order to review the

granting of a new trial.’ However, the decisions reveal

great reluctance to employ it even for the purpose of

supervision.’

Little encouragement for use of writs is to be derived

from the Supreme Court decisions even for supervisory

purposes, although the Supreme Court has approved its

use to review interlocutory orders where the judge being

supervised has “displayed a persistent disregard of the

[Federal] Rules of Civil Procedure” so as to justify exer-

cising supervisory authority to control his conduct,’ or

to confine the trial court to a lawful exercise of its pre-

scribed jurisdiction or to compel it to exercise its author-

ity when it is its duty to do so. See Roche v. Evaporated

Milk Ass’n, 319 U.S. 21, 63 S.Ct. 938, 87 L.Ed. 1185 (1943).

Roche emphasized that mandamus is to be used to aid

appellate jurisdiction by removal of obstacles to an appeal

but not as a substitute for the appeal procedure pre-

®* Grace Lines, Inc. v. Motley, 439 F.2d 1028 (2d Cir. 1971).

TWill v. Calvert Fire Ins. Co., 437 U.S. 655, 98 S.Ct. 2552, 57

L.Ed.2d 504 (1978).

®* Will v. United States, 389 U.S. 90, 96, 88 S.Ct. 269, 19 L.Ed.2d

305 (1967); La Buy v. Howes Leather Co., supra. See also United

States v. Smith, 331 U.S. 469, 67 S.Ct. 1330, 91 L.Ed. 1610 (1947).

9a

scribed in § 1291. Of course there must be no adequate

means at law for gaining review.’ The petitioner has the

burden of showing that his right to the writ is “clear and

indisputable.” "°

Hardship and inconvenience standing alone are, of

course, insufficient under the Roche doctrine. This is not

to say that cost and inconvenience to the petitioner involved

in retrying the case, repreparing it and rediscovering evi-

dence are not entitled to any consideration, but these bur-

dens must be in conjunction with misuse of process or

authority in order to outweigh the roadblock based upon

the policy of avoiding piecemeal review." In Bankers Life

& Casualty Co. v. Holland, 349 U.S. 379, 383, 74 8.Ct. 145,

98 L.Ed. 106 (1953), it was emphasized that the review

that is possible pursuant to extraordinary writs is to be

used only in exceptional cases involving a clear abuse of

discretion or usurpation of judicial power. The Supreme

Court there refused to review by extraordinary writ.

In La Buy v. Howes Leather Co., 352 U.S. 249, 77 S.Ct.

309, 1 L.Ed.2d 290 (1957), the holding condemned the sur-

render by the district court of the power to try the case be-

fore it. The use of an unsupervised master to carry out the

entire trial was condemned. The abdication by the judge of

his official function was held to be a clear abuse of discre-

tion. The recognition given to the scope of the writ in

La Buy and in the Supreme Court’s decision in Schlagen-

hauf v. Holder, 379 U.S. 104, 85 S.Ct. 234, 13 L.Ed.2d 152

(1964) (mandamus used to enforce Rule 35(a) of the Rules

* Kerr v. United States District Court, 426 U.S. 394, 403, 96

S.Ct. 2119, 48 L.Ed.2d 725 (1976).

© Will v. Calvert Fire Ins. Co., 437 U.S. 655, 662, 98 S.Ct. 2552,

57 L.Ed.2d 504 (1978); Bankers Life & Casualty Co. v. Holland,

346 US. 379, 384, 74 S.Ct. 145, 98 L.Ed. 106 (1953).

11 United States Alkali Export Ass’n v. United States, 325 U.S.

196, 202, 65 S.Ct. 1120, 89 L.Ed. 1554 (1945).

10a

of Civil Procedure), do serve as guides to supervisory use

of the writ.’*? Will v. United States, 389 U.S. 90, 88 S.Ct.

269, 19 L.Ed.24 305 (1967), contained some slight enthusi-

asm for use of the writ. It said that such writs may serve

“a vital corrective and didactic function” in the federal

judicial system. 389 U.S. at 107, 88 S.Ct. at 280.

Generally, the more recent cases tend to tighten the re-

strictions. See Kerr v. United States District Court, 426

U.S. 394, 96 S.Ct. 2119, 48 L.Ed.2d 725 (1976), and Will v.

Calvert Fire Ins. Co., 437 U.S. 655, 98 S.Ct. 2552, 57 L.Ed.

2d 504 (1978). The Will case was a plurality decision in

which the main opinion was by Mr. Justice Rehnquist. It

reversed a Seventh Circuit decision granting a writ of

mandamus to overturn a district court’s stay of federal

court proceedings pending the completion of state court

litigation. It was held that the determination as to whether

to defer to state court proceedings rested in the discretion

of the district court, and in such circumstances a litigant’s

right to the writ was not considered to be clear and in-

disputable. Plain abuse of discretion or abuse of power

which add up to mere erroneousness was said not to fur-

nish a basis for interlocutory review by writ. Justice

Blackmun specially concurred in the Rehnquist opinion.

The Burger, Brennan, Marshall and Powell dissent main-

tained that the clear abuse of discretion standard set forth

in La Buy was still a valid basis for issuance of a writ of

mandamus.

Granted that erroneousness does not constitute a valid

ground for issuance of the writ. Nevertheless, it cannot be

said that the clear abuse of discretion standard is repu-

diated. So, therefore, if it is found that there is a disregard

for proper procedure, or misuse of judicial power in the

"* See generally 16 C. Wright, A. Miller, E. Cooper, E. Gress-

man, Federal Practice & Procedure §§ 3934-35 (1977) ; Note, Su-

pervisory and Advisory Mandamus under “ai All Writs Act, 86

Harv.L.Rev. 595 (1973).

lla

trial judge’s conduct, this would constitute a clear abuse

of discretion

If it is founa that there was plain or clear error in the

judge’s evaluation of the facts and that the granting of a

new trial was gross or excessive to the extent that it is

extraordinary, it would seem that vacating the order grant-

ing the new trial would be permissible.

The Tenth Circuit Cases on Use of the Writ for Review

In the Tenth Circuit the extraordinary writs have been

used where there has been a clear abuse of discretion or

where the right to relief is clear and indisputable.”

In Erie v. United States District Court, 362 F.2d 539

(10th Cir. 1963), overruled on other grounds, Liberty Na-

tional Bank & Trust Co. v. Acme Tool Div., Rucker Co.,

540 F.2d 1375 (10th Cir. 1976), the element of hardship

to the petitioner was present. Relief was not granted on

that basis. Usery v. Ritter, 547 F.2d 528, 532 (10th Cir.

1977), approved use of mandamus for the purpose of re-

viewing a district court’s discovery order which had com-

pelled the Secretary of Labor to reveal the identity of in-

formants in an action involving violation of the equal pay

provisions of the Fair Labor Standards Act. In Bruce v.

Bohanon, 436 F.2d 733 (10th Cir. 1970), cert. dented sub

nom, Marathon Ow Co. v. Bruce, 403 U.S. 918, 91 S.Ct

2227, 29 L.Ed.2d 694 (1971), a writ of mandamus was

issued for the purpose of reviewing a pretrial order of the

district judge which had provided that certain of the

claims be tried to a jury and others to the court. Plaintiff

18 State Farm Mutual Automobile Ins. Co. v. Scholes, 601 F.2d

1151, 1154 (10th Cir. 1979); Usery v. Ritter, 547 F.2d 528, 532

(10th Cir. 1977) ; Prop-Jets, Inc. v. Chandler, 575 F.2d 1322, 1324

(10th Cir. 1978); Paramount Film Distributing Corp. v. Civic

Center Theater, Inc., 333 F.2d 358, 361 (10th Cir. 1964) ; Pet Milk

Co. v. Ritter, 323 F.2d 586, 588 (10th Cir, 1963).

12a

had filed a timely demand for jury trial on all issues. This,

of course, was a classic use of the mandamus in a super-

visory Way.

There are other instances in which our court refused to

review interlocutory orders in the absence of a showing of

clear abuse of discretion or abdication of judicial function.

See State Farm Mutual Automobile Ins. Co. v. Scholes,

601 F.2d 1151 (10th Cir. 1979); Prop-Jets, Inc. v. Chand-

ler, supra; Paramount Film Distributing Corp. v. Civic

Center Theater, Inc., supra; Pet Milk Co. v. Ritter, supra.”

On only two occasions have we considered issuance of

the writ in order to review the trial court’s granting of a

new trial. One of these was Kanatser v. Chrysler Corp.,

199 F.2d 610 (10th Cir. 1952). The order in that case was

entered on grounds other than those contained in the mo-

tion for new trial. Also, the order granting new trial was

out of time (six months). Thus, there was a question of

jurisdiction as well as a question of failure to observe the

‘The other circumstances in which this court has ruled on the

propriety of granting or denying extraordinary relief involved the

more traditional function of the writ ‘‘to confine an inferior court

to lawful exercise of its prescribed jurisdiction or to compel it to

exercise its authority .. ..’’ Reche v. Evaporated Mik Ass’n,

supra, 319 U.S. at 26, 63 S.Ct. at 941. E.g., Estate of Whitlock

v. Commissioner, 547 F.2d 506 (10th Cir. 1976), cert. denied 430

U.S. 916, 97 S.Ct. 1329, 51 L.Ed.2d 594 (1977) (mandamus issued

to order Tax Court to comply with previously issued Tenth Circuit

mandate) ; Breckenridge Lands, Inc. v. Sabo, 376 F.2d 840 (10th

Cir. 1967) (denied writ to review new trial order entered within

district court’s jurisdiction) ; Erie v. United States District Court,

362 F.2d 539 (10th Cir. 1963), overruled on other grounds, Liberty

National Bank & Trust Co. v. Acme Tool Div., Rucker Co., 540

F.2d 1375 (10th Cir. 1976) (mandamus issued to compel district

court to dismiss counterclaim filed in interpleader action) ; Ka-

natser v. Chrysler Corp., 199 F.2d 610 (10th Cir. 1952), cert.

denied 344 U.S, 921, 73 S.Ct. 388, 97 L.Ed. 710 (1953) (granted

writ to review new trial order made on grounds outside trial court’s

jurisdiction) ; Tuggle v. Chandler, 199 F.2d 86 (10th Cir. 1952)

(extraordinary relief denied as premature).

13a

procedural rules. Also, the trial court stated that it was

not going to permit a verdict which exceeded $15,000 to

stand. Thus, the circumstances of the Kanatser case dis-

played an arbitrariness that strongly recommended the

supervisory writ. Breckenridge Lands, Inc. v. Sabo, 376

F.2d 840 (10th Cir. 1967), is one in which this court

denied relief in the new trial situation. In that case there

was a lack of any showing of judicial misconduct or clear

abuse of authority.

Consideration of the Cases From Other Circuits in Which Review

of Orders Granting a New Trial Was Sought by Use of an

Extraordinary Writ

From an examination of the decisions of the various

circuits in which extraordinary relief was sought to review

orders granting new trial, it would appear that in the

majority of the cases writs were denied.”*

In each of the cases that are cited below the court

sought to find extraordinary circumstances capable of

justifying issuance of the writ. In the absence of extraordi-

nary circumstances it was held that the general principle

controlled that extraordinary writs cannot be used as

substitutes for the appellate process."

In General Motors Corp. v. Lord, 488 F.2d 1096 (8th

Cir. 1973), the Eighth Cireuit enumerated some circum-

8 General Motors Corp. v. Lord, 488 F.2d 1096 (8th Cir. 1973) ;

Pat Ryan & Assoc., Inc. v. Dupree, 17 F.R.Serv.2d 192 (4th Cir.

1973) (unpublished opinion) ; Thorn v. Parkland Chevrolet Co.,

416 F.2d 95 (4th Cir. 1969); Breckenridge Lands, Inc. v. Sabo,

376 F.2d 840 (10th Cir. 1967); Benton Harbor Malleable Indus-

tries v. International Union, United Automobile, Aircraft and Ag-

ricultural Implement Workers, 355 F.2d 70 (6th Cir. 1966) ; Bigart

v. Goodyear Tire & Rubber Co., 361 F.2d 317 (2d Cir, 1966).

%® General Motors Corp. v. Lord, supra, 488 F.2d at 1099; Benion

Harbor Malleable Industries v. International Union, etc., supra,

355 F.2d at 72-73.

l4a

stances where review by mandamus is proper. They are

as follows:

First, extraordinary circumstances may be present when

the district court’s order was entered without the court

having jurisdiction. Roche v. Evaporated Milk Ass’n, 319

U.S. 21, 26, 63 S.Ct. 938, 87 L.Ed. 1185 (1943).

Second, extraordinary circumstances may be present

where the order under attack is characteristic of an erron-

eous practice which is likely to recur. See, e.g., La Buy v.

Howes Leather Co., 352 U.S. 249, 258, 77 S.Ct. 309, 1

L.Ed.2d 290 (1957); Note, Supervisory and Advisory

Mandamus under the All Writs Act, 86 Harv.L.Rev. 595,

610 (1973).

Third, where the order under attack presents a novel

and important question in which there is a need for guide-

lines which would, if set forth, be useful for the resolu-

tion of similar cases. See Schlagenhauf v. Holder, 379 U.S.

104, 111-12, 85 S.Ct. 234, 13 L.Ed.2d 152 (1964); Note,

Supervisory and Advisory Mandamus under the All Writs

Act, supra, 86 Harv.L.Rev. at 618-19.

The Eighth Circuit recognized the obvious general rule

which is that the grant of a new trial is insufficient with-

out more to justify the use of the writ. We are, of course,

constantly aware of that. The second standard set forth

above, namely that of the presence of extraordinary cir-

cumstances where the order under attack is characteristic

of an erroneous practice likely to recur, is the basis on

which the petitioner seeks relief in the present case.

There are very few cases in which an extraordinary

writ has been approved for the purpose of reviewing

orders granting a new trial (only three to be exact). These

are Peterman v. Chicago, Rock Island & Pacific Railroad

Co., 493 F.2d 88 (8th Cir. 1974), cert. denied 417 U.S. 947,

94 S.Ct. 3072, 41 L.Ed.2d 667 (1974); Grace Lines, Inc. v.

Motley, 439 F.2d 1028 (2d Cir. 1971); and Kanatser v.

15a

Chrysler Corp., 199 F.2d 610 (10th Cir. 1952), cert. denied

344 U.S. 921, 73 S.Ct. 388, 97 L.Ed. 710 (1953).

In Peterman, the court ordered a new trial sua sponte

and did so outside of the ten-day time limitation provided

in Federal Rules of Civil Procedure 59(d).

In Kanatser, this court ordered a new trial on grounds

which were not stated in the motion six months after entry

of judgment.

The third case, Grace Lines, Inc. v. Motley, supra, ex-

emplifies the second extraordinary circumstance set forth

in Lord, namely the use of supervisory mandamus. In

Grace Lines the trial court had ordered a new trial three

days after declaring a mistrial. Thus, there was misuse

of the Rules of Civil Procedure which precluded the use

by the defendants of Fed.R.Civ.P. 50(b) for judgment

notwithstanding the verdict, which constituted a violation

by the trial court of Rule 50(b). The Second Circuit deter-

mined that it was an appropriate case for review. The writ

of mandamus was used to reinstate the jury verdict.

United States v. Smith, 331 U.S. 469, 67 S.Ct. 1330, 91

L.Ed. 1610 (1947), was relied on by the Second Circuit

in Grace Lines, Inc. In the Smith case the Supreme Court

held that mandamus was proper to vacate an order for

new trial which was made in violation of the Federal Rules

of Criminal Procedure.

The opinion of the Second Circuit in Grace Lines con-

tains a summary of the scope of the appellate court super-

visory authority under the All Writs Act. The conclusion

reached was that ordinarily the order granting a new trial

must await the entry of a final judgment following a new

trial.’" The Second Circuit went on to say that the purpose

of the All Writs Act, 28 U.S.C. § 1651, is to allow the

7 Unless, of course, the trial judge is dissatisfied with the ver-

dict and orders another new trial.

l6a

appellate courts to review by mandamus non-appealable

interlocutory orders which would be the subject of appeal

from a final judgment.

The Grace Lines court explained that supervisory man-

damus is not to be used to authorize indiscriminate use

of prerogative writs as a medium for reviewing inter-

locutory orders. The court concluded that “Mandamus will

lie, in the sound discretion of the appellate court, where

the trial court has exceeded or wrongfully refused to

exercise its judicial power or has committed a clear abuse

of discretion * * * * [I]n such cases the desirability of

present review outweighs the policies which confine ap-

peals to the review of final orders.” 439 F.2d at 1031 n. 2.

It is important to notice that the cases in which relief

has been granted involved errors of law rather than fact.

For example, where the order for new trial was granted

on the basis that damages were excessive, mandamus has

been denied. Pat Ryan & Assoc., Inc. v. Dupree, 17 F.R.

Serv.2d 192 (4th Cir. 1973). See also Benton Harbor

Malleable Industries v. International Union, etc., 355 F.2d

70 (6th Cir. 1966).

In summary, in order to grant relief an appellate court

must find not only that the trial judge’s grant of a new

trial was erroneous, but also that the judge’s conduct of

the litigation was such as to raise a conclusion that the

judge clearly abused his discretion and that appeal is not

an adequate remedy under the circumstances.

Is the Posture of This Case Such That a Writ Should Issue?

Stated differently, does the record establish that the

grant of the new trial was not only erroneous but indeed

served to demonstrate such a clear abuse of trial court

discretion that statutory appeal would not be an adequate

remedy under the circumstances.

17a

In our view the question whether the writ should issue

and the question of entitlement to relief are intermingled.

Thus, if the proof is sufficient to justify the issuance of

the writ, the question whether there is entitlement to relief

will have been determined.

The questions are hard and the answers are also diff-

cult. The retrial will be even more difficult inasmuch as a

new round of discovery is contemplated by the trial court.

There is reason to believe that the trial judge was some-

what dissatisfied with the presentation which was made

by the defendants and that he felt that this should be

changed in the event of a second trial.

The judge is, of course, not in a position of advocacy

and if he does hold the view (and this has to be read

between the lines) that the court should encourage the

development of the defendants’ case, he would be acting

outside of and beyond the authority. The fact that one

side was not prepared to the extent that the court felt it

ought to have been is not a basis for the grant of a new

trial.

The trial court’s rulings and comments on defendants’

motion for judgment notwithstanding the verdict and new

trial are appended hereto, and these comments are cogent

evidence to be considered in making the present determi-

nation. These comments of the trial judge were made on

May 14, 1979, following the arguments on motion for new

trial. At that time the court emphasized that it had only

one object and that was to see that the parties had a fair

trial. The judge proceeded to conclude that a judgment

notwithstanding the verdict in accordance with the motion

of the defendants could not under any circumstances be

granted. The court added: “It would not fit this case at

all.” At the same time the judge concluded that the jury

verdict had to be vacated and that a new trial had to be

granted. The reasons given were, first, that counsel for

the plaintiff was an exceedingly good lawyer and able to

lsa

make a lot out of things that really had no importance.

The court said that Mr. Crawford had the jury in the

palm of his hand almost from the beginning and that the

defendants were put at a great disadvantage because they

did not know what the plaintiff’s evidence was going to be.

The court said that the defendants had opened their files

completely and yet were kept in the dark as to the parts

of the files that the plaintiff would select and use. The

court expressed dissatisfaction with the method for pass-

ing on the authenticity of the exhibits.

The judge continued that although he had complete

appreciation for the work of the jury, the jury needed to

be, and apparently was not, apprised of the magnitude of

the problems inasmuch as the issues were foreign to them

(and perhaps beyond their comprehension). From this it

was concluded that there was not a fair trial. His main

reason is stated as his next point in the informal findings,

that the verdict of $2.5 million indeed was excessive in-

asmuch as the original capital investment was only

$200,000. It should be said at this time that the trial court

was not correct in this statement because the actual initial

capital was $300,000 together with a very substantial line

of credit amounting to approximately $500,000. The court

said that the defendants had a perfect right to meet com-

petition. At the same time the judge said that Daiflon was

insignificant.

The judge went back to the damages and said: “What

are the actual damages? There is nowhere it reaches two

and a half million dollars.” The judge was also depressed

about having to treble the amount of the damages. On this

he said: “Well, here is what the court is going to do.

The Court grants a new trial; and we are going to have

a conference where every exhibit to be used by either side

will be passed on before we ever call a jury.” Actually this

procedure was followed in the proceedings before us, but

undoubtedly from what the judge said it was not pursued

19a

to the full satisfaction of the trial court. In any event, he

was looking forward to a conference for the purpose of

reconsidering the admissibility of all exhibits and for the

purpose of examining the depositions that are to be read

to the jury. On this it should be added that this informa-

tion was fully communicated to the defendants and was

available to the court. It is not up to the litigants to

guarantee that everybody who is interested will read this

material before trial.

The trial court also mentioned that some of the exhibits

which were admitted had been erroneously received. It is

important to mention, however, that the judge does not

specify as to which of these were improperly received and

there is no way to ascertain this. He spoke of proofs of

papers “in the usual course of business, a lot of them were

never identified by the custodian. A lot of them were not

proved. They were just thrown in evidence.” The court

concluded, “Well, the court is absolutely not satisfied with

it. The verdict of the jury, the Court was shocked when

the verdict was read of $2,500,000 based upon the evidence

before that jury, just does not justify that kind of a

verdict.”

It is thus apparent that it is the amount of the verdict

rather than any other factor which caused the judge to

enter the order for new trial. From an examination of

the trial court’s comments it is to be concluded that there

is no rational basis furnished for granting a new trial

other than the magnitude of the verdict.

As far as liability is concerned, the judge indicated his

belief that it was established. If he had doubts about this,

he would have granted the defendants’ motion for judg-

ment notwithstanding the verdict. This was a subject on

which he was positive. He said that this would not be

appropriate under any thinking or analysis. On the sub-

ject of liability, this is not a case in which the evidence

20a

to establish liability is vague and questionable. The evi-

dence supported the conclusion that the several defendants

engaged in a “buccaneering”’ scheme designed to eliminate

the plaintiff as a contender. To be sure, Daiflon’s market

share was relatively small, but the price manipulation and

the timing lends itself to the interpretation that elimina-

tion of Daiflon was an object of the conspiracy. Defend-

ants lowered their prices by 13%, thus foregoing susbtan-

tial profits.

None of the trial judge’s comments were directed to

inadequacy of the evidence to establish the conspiracy that

is charged. Instead the burden of the trial court’s dis-

cussion was on the magnitude of the judgment and the

deficiency of evidence to support it. From the record be-

fore the court, which admittedly is not a full record, it is

not clear that the evidence was insufficient to satisfy the

$2.5 million verdict. However, the cases teach us that

subject only to the limitation of the Seventh Amendment

the trial court’s discretion is most full and complete when

the court is considering a factual question such as dam-

ages. Richardson v. Communications Workers of America,

530 F.2d 126, 129 (8th Cir.), cert. denied 429 U.S. 824, 97

S.Ct. 77, 50 L.Ed.2d 86 (1976); Brown v. Richard H.

Wacholz, Inc., 467 F.2d 18 (10th Cir. 1972).

This court is, in view of this, unwilling to vacate the

trial court’s determination based on possible erroneous

premises which the court entertained on the damages

issue, because the trial court did hear the evidence in its

entirety and hence it is in a much better position to judge

this issue than is an appellate court.

We take a different view, however, of the issue of the

liability of the defendants, and we point out that as to

this element the trial court has given no reason to indicate

that the record evidence was insufficient or that the jury

acted erroneously in making its determination as to lia-

2la

bility. The trial judge offered no rational basis for in-

validating the jury verdict in its entirety. He pointed out

no particular error in law or in the receipt of evidence.

He appeared to have ordered a new trial primarily be-

cause he was shocked at the size of the verdict. By so

doing, the trial court invaded the province of the jury as

the primary trier of fact, cf. Moore v. Shultz, 491 F.2d 294

(10th Cir.), cert. denied 419 U.S. 930, 95 S.Ct. 203, 42

L.Ed.2d 161 (1974), and interfered with Daiflon’s right

to a jury trial under the Seventh Amendment.

[I]t lias long been the rule that a trial judge should

not act merely as a “13th juror” and set a verdict

aside simply because he would have reached a differ-

ent result had he been the trier of fact. Rather, the

judge’s duty is to exercise a more limited judicial

discretion. ... A trial judge is not to interfere with

the verdict, “unless it is quite clear that the jury has

reached a seriously erroneous result.”

Borras v. Sea-Land Service, Inc., 586 F.2d 881, 887 (1st

Cir. 1978).

In summary and conclusion:

Despite the narrowness of the exception which allows

appellate review on extraordinary writ of orders granting

new trial, we are convinced that a case has been made

here for review by supervisory mandamus on the issue

of liability of the defendants to the plaintiff-petitioner.

As we have stated above, we take a different view of the

issue of damages, even though the trial judge went for-

ward on some misconception as to some of the facts. The

question of damages is one of fact, and the cases hold that

the trial court has more discretion in this area than in

the area of liability, which involves a question of or ques-

tions of law.

22a

Therefore, it is our judgment, and it is so ordered, that

the trial court shall restore the verdict of the jury as to

liability of the defendants. The trial court shall therefore

reinstate the verdict insofar as it determines the several

defendants to be liable. Since we are granting a new trial

as to damages, the trial court shall proceed to try that

part of the case. The plaintiff should be allowed to bring

to the attention of the jury all of those matters that have

been previously presented on liability that would have an

effect on damages. It does not appear to be necessary to

re-present this evidence. Most of it can be read to the

jury or the jury could be allowed to see or read exhibits.

The trial court has previously commented on the need

for organizing the evidence prior to further proceedings,

and we do not wish to curtail this activity, but it is our

view that insofar as possible, redetermination of issues

already decided should be avoided so that the actual trial

shall be as simple as possible. We repeat, that evidence

which is relevant and material to the issues, including

that evidence which reveals the nature of the activity of

the defendants which caused the damage, and on the other

side that evidence of the defendants which tends to miti-

gate the damages, should be fully presented.

The one particular part of the evidence which Daiflon

claims it was prevented from developing and which ap-

pears to be relevant is that which concerned Daiflon’s plans

to construct a domestic refrigerant gas manufacturing

facility. The court should carefully consider the bearing

which this evidence might have on the measure of damages,

and if it is shown to have relevance, it should be received.

See Wood Exploration & Production Co. v. Aluminum Co.

of America, 509 F.2d 784 (5th Cir. 1975).

The writ of mandamus shall therefore issue in accord-

ance with the views set forth in the foregoing opinion.

23a

Exhibit “A”

IN THE DISTRICT COURT OF THE UNITED STATES

FOR THE WESTERN DISTRICT OF OKLAHOMA

No. 72-483-B (Civil)

Darvon, Inc., Plaintiff,

vs.

AuuLiep CHEMICAL CorporATION, et al, Defendants.

May 14, 1979

Court’s Rulings and Comment on Defendants’ Motions for

Judgment N.O.V. and for New Trial

Bonanon, District Judge.

Tue Court: Well, the Court concludes that counsel have

concluded your arguments.

Needless to say, the Court has struggled long and with

difficulty over the Court’s problem. You lawyers think you

have problems. I was a lawyer a long time, and you do

have problems. I used to think the courts didn’t have any

problems. They just sat there and took care of those mat-

ters like water off of a duck; but it isn’t true. You stay

awake, You work. You worry.

The Court has one object and only one object, and that

is to see that the parties have a fair trial. No other object,

no other interest, and no other concern.

I have reviewed all of the briefs, reviewed the file, and

studied and analyzed the case as the evidence came for-

ward.

The Court has concluded that the Court cannot, under

any circumstances, grant judgment NOV, it just would not

fit this case at all.

The Court further concludes and holds that the Court

must vacate, and does vacate, the jury verdict.

24a

The Court must and does grant a new trial.

I say this to you, Mr. Crawford, you are an exceedingly

good lawyer, and you make a lot out of things that are

really not important, as I view it from this evidence; but

you had this jury in the palm of your hand almost from

the beginning.

The Court finds and holds that the defendants were put

at a great, great disadvantage, when you march into court

on the day of trial, and I believe it was on Friday, and

the time before the trial the defendants were complaining

about not knowing what your evidence was going to be,

what your documents were going to be.

Now the Court ordered the defendants, and they worked

with you in good faith, and they opened their bowels and

bared their chest and you got out of their files literally

hundreds of exhibits. They were kept in the dark as to

which ones of these you were going to use until Friday

before the trial, and then the Court made certain orders,

and we started the trial with literally dozens and dozens of

exhibits that were not agreed to; and the Court had been

open during all this period of time, after it came back, for

the purpose of settling any issue; and the defendant came

to me and said, “We are not getting this, we are not getting

that out of the plaintiff, and what these exhibits are going

to be.”

The pretrial order was pretty plain: Everyone would

know exactly what exhibits would be offered and what

would not be offered.

Then the question of whether or not they were compe-

tent was never tried. We started this case with the defend-

ant in the dark, and the Court in the dark; and the failure

to get together on these exhibits put an exceedingly hard

load on this Court, to say “This is in; this is out.” And try

the case day to day, hear the evidence, the Court gets tired

just like lawyers do.

25a

When the Court goes home at night, we can’t do much

more than say, “Well, I’m tired. I’ve got to go to sleep,

get some rest for the next day’s work” And that’s what

happened.

The Court has full and complete appreciation for the

work of the jury in this case, and full regard for their

stability in the solving of problems of this kind; but not-

withstanding this appreciation and deep regard and con-

cern with the work of the jury, the jury in order to do

their functions must be adequately apprised of the tre-

mendous problems. These kinds of cases are not easy cases,

and particularly not easy for jurors where the issues are

completely foreign to them. They don’t understand about

this gas business. After weeks of work they get to where

they do.

The Court finds that there was not a fair trial, and this

Court has a duty to see that there is a fair trial. The Court

has no love for the defendants and no love for the plain-

tiffs in this case, but there was not a fair trial, say from

beginning to end.

The Court would be less than honest if the Court let this

verdict stand. The Court would be somewhat of a coward

to let this verdict stand, under all of the evidence and all

of the things that happened before and during the trial

of the case.

Furthermore, the Court would be exceedingly lazy if he

let it stand and refused to try the case again. It’s a lot of

work. The Court could easily say, “Well,. let the verdict

stand,” and get out of the work; but this is not my duty.

It’s work. Of course it’s work, but the Court must shoulder

its responsibility as long as I sit on the bench.

When you consider the verdict, two and a half million

dollars—when you consider that this company started

out with a capital investment of $200,000 to get into a

business that runs into the millions, it would be just like

26a

me going out here and saying, “I’m going to go into the

oil business, and I’m going to get a block and drill a well,

on $100,000.”

Why, you couldn’t even get started.

The $200,000 that the plaintiff had wasn’t enough to

really get them started into breaking into this business, as

long as the defendants were concerned about their busi-

ness.

The defendants had a perfect right to meet competition,

and for them not to meet competition is to deny them free

enterprise.

This is what they did in places, but they did it in rare

places, in Alabama, Houston, maybe in Oklahoma City—

some little places where they met competition, but gener-

ally Daiflon was insignificant; and the Japanese treatment

by this country, the surtax, and the exchange of the dollar

—this had a tremendous amount of effect upon what hap-

pened to this plaintiff.

You can consider the earnings, 1969, 1970, 1971. If you

consider the earnings, 1969, 1970, 1971, there is no basis

upon these earnings by the company to project that they

lost $2,500,000. Their earnings during these years were

insignificant to say that builds into a judgment, a verdict,

of two and a half million dollars.

What are the actual damages? There is nowhere it

reaches two and a half million dollars.

Now the Act provides that where you find a conspiracy,

and it is operation, why, for punishment the Court adds,

triples it; but you can’t say there’s two and a half million

dollars in damages from the years 1969- 1970 and 1971

operation.

Well, here is what the Court is going to do. The Court

grants a new trial; and we are going to have a conference

27a

where every exhibit to be used by either side will be passed

on before we ever call a jury.

I am going to take time. We are going to have a con-

ference. We can’t have it this month. I don’t think we can

have it next month. I am moving my quarters right away

up to the Fifth Floor, and I'll have in the future the Cir-

cuit court room up there; but I am going to set a date

and a time when it is reasonably agreeable to counsel, and

we are going over every exhibit. We are going to match

it with the rules of evidence, and if it is admissible, we

are going to put it over here; if it is not admissible we

are going to put it over here, so to speak. These that are

admissible, would be admitted. There will be no argument

before the jury. There will be no time delay. There will be

no headaches for the Court to pass upon as to what ex-

hibits are to be received in evidence and what are not to

be received in evidence.

Those that are to be received in evidence, and the depo-

sitions that are to be reread to the jury, we will know

what they are and know where we are going from the very

beginning.

Now I assume that the parties may, but I am going to

ask now, do the parties want any further discovery, and

if so, how much time do you want for discovery, or do you

want to think about it and talk to the Court about it a little

later on—a period of discovery. We are going to have a

fixed time for further discovery.

I think perhaps we should either pass upon the great

volume of exhibits before we go into further discovery,

or vice versa. I don’t know which would be the best—

whether the egg before the chicken or the chicken before

the egg; but you’ve got to have some discovery.

Some of these exhibits that the Court admitted, the

Court erred in it. We erred seriously, and we erred be-

cause of the pressure that was put on the Court to conduct

28a

a trial and to pass two hundred, three hundred exhibits,

and the right to be admitted or not was wholly unfair to

the Court. Just not fair to the Court. I sat here in this

court room. We spent two hours passing on exhibits, and

by the flip of the thumb I said, “This is in” and “This is

not.” I didn’t know what I[ was talking about, because

whether or not these exhibits come within the pale of the

rule or not, why, there is no proof to show it.

These proofs of papers in the usual course of business,

a lot of them were never identified by the custodian. A lot

of them were not proved. They were just thrown in evi-

dence,

It is not every piece of paper that you get out of a de-

fendant’s file that’s admissible just because it has some

inference about some question.

Well, the Court is absolutely not satisfied with it. The

verdict of the jury, the Court was shocked when the ver-

dict was read of $2,500,000 based upon the evidence before

that jury, does not justify that kind of a verdict.

So does anyone have anything further to say? As quick

as I can get settled down, why the Court will give you

notice and we will begin shaping this case so that we can

have a trial that the Court can say is and was a fair trial.

The verdict may be more under new evidence than that

allowed. It may be less. I don’t know, don’t care; but I

will know in my own mind that there was a fair trial, and

that these exhibits will not be a headache to the defendant,

they will not be a headache to the Court. We can hear the

evidence and let the jury hear the story, or the arguments

and evidence on both sides.

If anyone has anything further to say, the Court will

hear you. Otherwise we will take a recess until further

notice through the Clerk.

(The proceedings are adjourned.)

29a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

November Term—December 21, 1979

Datrton, Inc., Petitioner,

vs.

Tue Honoraste Lutuer Bouanon, Judge of the United

States District Court for the Western District of

Oklahoma, Respondent.

JUDGMENT AND WRIT OF MANDAMUS

No. 79-1459

(D.C. No. CIV 72-C-483-B)

Before The Honorable Robert H. McWilliams, Circuit

Judge, The Honorable Jean S. Breitenstein, Circuit

Judge, and The Honorable William KE. Doyle, Circuit

Judge hace,

This cause came on to be heard on the narrative state-

ments of the case filed by petitioner and respondent along

lines provided in Rule 10(d) F.R.A.P. pursuant to order

of court as a result of a petition for writ of mandamus

and/or Writ of Prohibition seeking review of an order of

the United States District Court for the Western District

of Oklahoma granting a new trial in an antitrust case

which had been tried to a jury. The cause was argued by

counsel.

Upon consideration whereof, it is ordered that the judg-

ment of the trial vacating the verdict of the jury as to

liability of the several defendants is reversed and that the

writ of mandamus shall issue:

30a

Therefore, it is our judgment, and it is so ordered, that

the trial court shall restore the verdict of the jury as to

liability of the defendants. The trial court shall there-

fore reinstate the verdict insofar as it determines the sev-

eral defendants to be liable. Since we are granting a new

trial as to damages, the trial court shall proceed to try

that part of the case. The plaintiff should be allowed to

bring to the attention of the jury all of those matters that

have been previously presented on liability that would

have an effect on damages. It does not appear to be neces-

sary to re-present this evidence. Most of it can be read to

the jury or the jury could be allowed to see or read ex-

hibits.

The trial court has previously commented on the need

for organizing the evidence prior to further proceedings,

and we do not wish to curtail this activity, but it is our

view that insofar as possible, redetermination of issues al-

ready decided should be avoided so that the actual trial

shall be as simple as possible. We repeat, that evidence

which is relevant and material to the issues, including that

evidence which reveals the nature of the activity of the

defendants which caused the damage, and on the other

side that evidence of the defendants which tends to miti-

gate the damages, shuulu be fully presented.

The one particular part of the evidence which Daiflon

claims it was prevented from developing and which ap-

pears to be relevant that which concerned Daiflon’s plans

to construct a domestic refrigerant gas manufacturing

facility. The court should carefully consider the bearing

which this evidence might have on the measure of dam-

ages, and if it is shown to have relevance, it should be re-

ceived. See Wood Exploration & Production Co. v. Alumi-

num Co. of America, 509 F.2d 784 (5th Cir. 1975).

The writ of mandamus shall therefore issue in accord-

ance with the views set forth in the foregoing opinion.

/3s/ Howarp K. PHi.uips,

Howard K. Phillips, Clerk

3la

APPENDIX C

January Term—March 5, 1980

No. 79-1459

Darton, Inc., Petitioner,

vs.

Tue HonorasLe Luruer Bounanon, Judge of the United

States District Court for the Western District of

Oklahoma, Respondent.

Before Honorable Oliver Seth, Chief Judge, Honorable

Jean S. Breitenstein, Honorable Robert H. McWil-

liams, Honorable James E. Barrett, Honorable Wil-

liam E. Doyle, Honorable Monroe G. McKay, Honor-

able James K. Logan and Honorable Stephanie K.

Seymour, Circuit Judges

This matter comes on for consideration of the petition

of respondent for rehearing and suggestion for rehearing

en bance.

Upon consideration whereof, it is ordered:

1. The petition for rehearing is denied by Circuit Judges

McWilliams, Breitenstein and -Doyle, the panel to whom

the case was argued and submitted.

2. The Clerk having transmitted the suggestion for re-

hearing en banc to the members of the panel and the judges

of the Court who are in regular active service (except

Judge William J. Holloway, Jr., who is recused and who

did not participate) and no judge in regular active service

nor judge who was a member of the panel that rendered

the decision sought to be reheard having requested a vote

on the suggestion, the suggestion for rehearing en banc is

denied. Rule 35, Federal Rules of Appellate Procedure.

/3/ Howarp K. Putuirs

Howrd K. Phillips, Clerk

32a

APPENDIX D

May Term—Avuaust 10, 1979

Before Honorable Robert H. MeWilliams, Honorable Jean

S. Breitenstein, and Honorable William E. Doyle, Circuit

Judges.

No. 79-1459

Darton, Inc., Petitioner,

VS.

Tue Honoraste Lutuer Bouanon, Judge of the United

States District Court for the Western District of Oklahoma,

Respondent.

The matter is before this Court on the petition of Daiflon,

Ine. seeking a writ of mandamus or a writ of prohibition

against the respondent trial judge, the Honorable Luther

Bohanon.

On May 14, 1979, the trial court herein entered its order

granting a new trial to all of the defendants in the above-

entitled case. This order also set aside a very substantial

jury verdict.

The matter has been extensively briefed, and the briefs

include statements of the case. However, this Court is

asked to judge the exercise of discretion on the part of

the trial judge without having a record or a statement of

evidence with which to measure the action taken by the

trial court.

Accordingly, the parties are directed, in lieu of a tran-

script of the evidence, to prepare and sign a narrative

statement of the case along the lines provided in Rule

10(d) of the Rules of Appellate Procedure. Each side shall

prepare a summary of the evidence presented by it at the

trial. These summaries shall be simultaneously prepared

and shall be simultaneously submitted on or before Sep-

tember 11, 1979.

33a

This matter shall be orally argued and presented by

counsel to Division I of this Court in Denver, Colorado,

on Tuesday, October 9, 1979, at 10:00 a.m.

It is the further order of the Court that proceedings in

the appeal of the defendants from the judgment entered

and from the order denying the motion for judgment not

withstanding the verdict entered in this action on May 14,

1979, (presently Undocketed Appeal No. 24 in this Court)

are suspended pending the disposition of the petition for

writ of mandamus or prohibition.

/s8/ Howarp K. Pxt.urps

Howard K. Phillips

Clerk

34a

APPENDIX E

IN THE UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF OKLAHOMA

No. CIV-72-483-B

Dairion, Inc., Plaintiff,

Vs.

Auuiep CuemicaL Corporation, et al, Defendants.

ORDER

Filed April 7, 1980

The court has reviewed its notes of the evidence and

testimony in the above-entitled cause and the briefs of the

parties, and has carefully considered the substance and

tenor of the circuit court’s opinion in Daiflon, Inc. v. The

Honorable Luther Bohanon, No. 79-1459 (10th Cir. Dee.

21, 1979).

The trial court is charged in the aforesaid Opinion of

the United States Court of Appeals for the Tenth Circuit

(hereinafter Opinion) with perhaps being an advocate in

favor of the defendants. The circuit court arrives at this

conclusion, in part, by reading between the lines.’ Further,

the trial court is charged for oversight in failing to enter

a formal order’ and for not giving sufficient reason for

vacating the jury verdict as to the matter of liability.’

From this perspective, it seems perfectly clear to this

court that considerable reason and justification for the

granting of the motion can be found in the transcript ap-

pended to the circuit court’s opinion. Clarification of the

? Opinion at 6 and 18,

? Opinion at 6.

® Opinion at 22.

35a

trial court’s reasons, other than given, would have gladly

been furnished upon request.

The trial court, in sustaining the defendants’ motion for

new trial, noted:

(a) that there had not been a fair trial; *

(b) that the court confessed error in admitting cer-

tain exhibits, to which the court after this period of

reflection contends substantially affected the rights of

the parties.’ Said exhibits were not properly identified

for admission under Rule 803(6), Federal Rules of

Evidence.

The trial court saw and heard all the evidence (approxi-

mately four weeks of trial) and had a clear understand-

ing of the evidence and issues before the jury; and based

upon what the trial court knew, it had to, in honesty,

grant defendants’ motion for new trial as to all issues.

The court unequivocably stated that to permit the verdict

to stand and not grant a new trial, the court would be dis-

honest and cowardly.* What more can a judge say regard-

ing his feelings that a new trial was required? The court

observed that if it did not grant a new trial, it would have

been exceedingly lazy." What more can a judge say to show

his feelings that a new trial was essential for justice to

be done in this case?

This court specifically noted that it had no interest in

who won or lost the case, but only in seeing that each

party was afforded a fair trial, and that the ends of jus-

tice were met. This trial court has never in 19 years on

the bench ever favored one party over another.

* Appendix to Opinion at 4.

* Appendix to Opinion at 7.

* Appendix to Opinion at 4.

* Appendix to Opinion at 5.

36a

Nor can the court candidly state that its refusal to grant

defendants a judgment notwithstanding the verdict (Judg-

ment N.O.V.) should be considered any proof of the lia-

bility of the defendants, as urged by the cireuit court."

This court is ordered to accept the verdict of the jury

as to liability of defendants and to try the case again as

to the amount of damages. The district court does not set

to review and reverse the judgments of the court of ap-

peals.” A district court is required to follow the mandate

of a court of appeals and may not take action inconsistent

with it.’®

If this court were to retry the cause on the basis of the

mandate, for the reasons hereinbefore stated, it could not

be satisfied with the result. The court is passionately con-

vineed that the issue of liability has not been proven,

though there exists some evidence otherwise. Further, any

verdict of damages must be founded upon a totality of

the evidence—including that evidence bearing upon the

question of liability.

This court is not moved to any degree by the personal

charges made by plaintiff counsel in its mandamus action

before the circuit court; nor is this court moved by the

threats in plaintiff counsel’s letter of March 26, 1980. The

question of the trial court's bias and prejudice was

squarely before the circuit court in the mandamus action,

and the request to remove the trial court from this case

was denied, or at least not acted upon, distinguishing this

case from Webbe v. McGhie Land Title Co., 549 F.2d (10th

Cir. 1977) and the United States v. Ritter, 540 F.2d 459

(10th Cir. 1976). This court had desired to wait until all

appellate issues had been settled before withdrawing, but

* Opinion at 21,

® Lacob v. United States, 59 F.R.D. 329 (N.D. Ill. 19738),

Paull v, Archer Daniels-Midland Co., 313 F.2d 612 (5th Cir.

1963).

37a

time did not permit in light of the correspondence of coun-

sel, which is filed with the Clerk of the Court. If this court

tried this case again, the provisions of 28 U.S.C.A. § 455

and § 144 would not be violated, and it is not because of

these threats that this court withdraws, but rather because

of the mandate.

This court respectfully withdraws from this cause and

asks to be relieved from all duties in connection there-

with. Said withdrawal is not based upon any feeling of

prejudice or interest, accusations intimated in the circuit

court’s opinion and in the charges—pro and con—in the

correspondence between counsel and the court. Said re-

quest of withdrawal is based wholly upon the reasons

herein stated.

Ir Is So Orperen.

Dated this 7th day of April, 1980.

/s/ LutHer Bouanon

United States District Judge

38a

APPENDIX F

Statutory Provisions Involved

All Writs Act, 28 U.S.C. 1651(a) :

(a) The Supreme Court and all courts established

by Act of Congress may issue all write necessary or

appropriate in aid of their respective jurisdictions

and agreeable to the usages and principles of law.

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

Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or com-

merce among the several States, or with foreign na-

tions, is declared to be illegal. Every person who shall

make any contract or engage in any combination or

conspiracy hereby declared to be illegal shall be

deemed guilty of a felony, and, on conviction thereof,

shall be punished by fine not exceeding one million

dollars if a corporation, or, if any other person, one

hundred thousand dollars, or by imprisonment not

exceeding three years, or by both said punishments, in

the discretion of the court.

Section 2 of the Shern.an Act, 15 U.S.C. § 2:

Kvery person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other

person or persons, to monopolize any part of the trade

or commerce among the several States, or with foreign

nations, shall be deemed guilty of a felony, and, on

conviction thereof, shall be punished by fine not ex-

ceeding one million dollars if a corporation, or, if any

other person, one hundred thousand dollars, or by

imprisonment not exceeding three years, or by both

said punishments, in the discretion of the court.

39a

APPENDIX G

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

Civil No. 72-C-483-B

Darrion, Inc., Plaintiff,

Vv.

Auuiep CuemicaL Corporation, et al., Defendants.

MEMORANDUM IN SUPPORT OF MOTION FOR JUDGMENT

NOTWITHSTANDING THE VERDICT

TABLE OF CONTENTS

Es Re TOE FN 5a 5 oii ved es eae eae nn 2°

II. Plaintiff Failed To Produce Substantial Evidence

of Monopolization or Attempted Monopolization

ff OE pr eee ry rrr ree ere 4)

A. The Relevant Market Is National in Scope .. 6

B. Plaintiff Failed To Show that Du Pont Pos-

sessed Monopoly Power in the Relevant Mar-

| OP ee een Te re Peer eee 9

1. Du Pont’s Market Share Is Such As To

Preclude a Valid Finding of Monopoly

UE 8 dick scene es acs ha a oe ea ees 9

2. Du Pont Lacked Power To Control Prices

or Exclude Competitors ................ 16

* Page reference refer to pages of memorandum as originally

filed. Bracketed numbers in text also refer to pages of memoran-

dum as originally filed.

III.

IV.

40a

C. There Is No Evidence of the Exercise by Du

Pont of Monopoly Power ....:scenvevssepes

D. Plaintiff Also Failed To Produce Substantial —

Evidence of Attempted Monopolization by Du

POR. oo pckcwew pane ced eee eee eee

Plaintiff Failed to Produce Substantial Evidence

Of CORMPITOON ic vic os see shan eee eeeeeeeees

A. The List Price Reduction First Implemented

by Du Pont in March 1971 Was the Product of

Competition Rather than of Conspiracy .....

B. There Was No Other Credible Evidence At

Trial of the Alleged Conspiracy ............

1. The opportunity to conspire .............

2. Market intelligence activities ............

3S. Dietribwtiem matteree ooc i cc ncévsctccvss

4. Late 1972 price increases .............65.

All Defendants Are Entitled To Judgment Be-

cause of Plaintiff's Failure To Prove Impact and

IMG 56 os 0 ceda4 hee ee eke ee

A. Gup Was Not Competent To Introduce the

Conelusions of Another Expert (Iskander) ..

B. Gup’s Damage Theory Improperly Assumed a

Daiflon Sales Price Prevailing During De-

fendants’ Alleged Conspiracy To Raise Prices

C. Gup’s Damage Theory Falls Also Because He

Was Completely Wrong About One of The

Most Important Facts—The Market Share

that Daiflon Actually Had Attained—Under-

lying His Theory ..... PORT ET Te Pes ae

D. Gup’s Damage Theory Rests on the Patently

Untenable Assumption that Daiflon Would

21

27

31

45

45

4la

Have Performed Like a Broad Spectrum of

Big American Companies in All Their Opera-

EDOM e Crore a cha wxkh bi hi Aa SRR RO 47

Ki. Even If Gup Had Been Right in Everything

Klse, He Did Not Take Into Account the

Import Surcharge and the Devaluation of the

Dollar, Which Eat Up All of Daiflon’s As-

sumed Net Income With Something To Spare 50

re er Ue ea ee oe 52

The legal standards applicable to a motion for judg-

ment n.o.v. are well settled. Although entitled to all rea-

sonable inferences, plaintiff still has the burden of estab-

lishing a prima facie case in responding to a motion for

judgment n.o.v. Barnett v. Life Ins. Co. of the Southwest,

562 F.2d 15, 17 (10th Cir. 1977). An antitrust plaintiff is

not entitled to go to the jury, and cannot support a favor-

able verdict, “on the basis of speculation, surmise or con-

jecture.” Independent Iron Works, Inc. v. United States

Corp., 177 F.Supp. 748, 746 (N.D. Cal. 1959), aff’d, 322

F.2d 656 (9th Cir.), cert. denied, 375 U.S. 922 (1963). As

the Supreme Court pointed out in Galloway v. United

States, 319 U.S. 372, 395 (1943):

“|T }he essential requirement is that mere speculation

be not allowed to do duty for probative facts, after

making due allowance for all reasonably possible in-

ferences favoring the party whose case is attacked.”

Furthermore, the question presented by a motion for

judgment n.o.v. is not

“whether there is no evidence supporting the party

against whom the motion is made, but whether there

42a

is evidence upon which the jury could probably find

a verdict for that party.”

[2] Yazzie v. Sullivent, 561 F.2d 183, 188 (10th Cir, 1977).

This means that a jury verdict can be sustained only if

there is substantial evidence to support it—that is, “ ‘such

relevant evidence as a reasonable mind might accept as

adequate to support a conclusion.’” Janich Bros., Inc. v.

American Distilling Co., 570 F.2d 848, 853 n. 2 (9th Cir.

1977), cert. denied, 99 S.Ct 103 (1979), quoting from

Washington v. United States, 214 F.2d 33 (9th Cir.), cert.

denied, 348 U.S. 862 (1954).

The essential findings challenged in this motion are (1)

that defendants engaged in an unlawful conspiracy to

drive plaintiff out of business, (2) that defendant Du Pont

monopolized, or attempted to monopolize, the non-automo-

tive replacement market for refrigerant gas and (3) that

plaintiff suffered damages in the amount of $2,500,000 as

a consequence of such unlawful acts. As demonstrated be-

low, plaintiff has failed to produce a substantial evidence

showing either that the defendants, or any one of them,

violated some provision of the antitrust laws or that plain-

tiff has suffered measurable damages as a result of acts

attributable to any of the defendants. Such failure of proof

requires that judgment n.o.v. be entered for defendants.

I. The Background Facts

Plaintiff, Daiflon, Inc., was formed for the purpose of

importing refrigerant gas from Japan, repackaging this

gas in smaller cylinders, and selling it in the United States.

Jarter, Tr. 147. Daiflon commenced operations in early

1969, imported refrigerant gas until August 1971, and

made its last sale in October 1972. Carter, Tr. 99, 104.

Daiflon’s Japanese supplier was unable to provide it

with adequate amounts of gas in 1969 and 1970; neverthe-

48a

less, at no time during its existence did Daiflon ask any

of the defendants—the domestic manufacturers of refrig-

erant [3] gas—to sell it any grade of gas. Carter, Tr. 148,

343. Mr. Richard Carter, plaintiff’s president, testified

that by early 1971 Daiflon’s supply problems had been

solved, and that Daiflon then had a viable business. Carter,

Tr. 103. The value of the business at that time, as reflected

in a contemporaneous stock sale as well as in statements

and analyses that were not prepared for purposes of this

litigation, was $200,000. Carter, Tr. 254; MeDonald, Tr.

523, 554, 572-576; Def. Exh. Nos. 7, 8.

In August 1971, the President of the United States im-

posed a 10 percent surcharge of all imports from Japan

and other countries. Carter, Tr. 176-177; Def. Exh. No. 6.

The effect of the surcharge of Daiflon’s importing business

was “disastrous.” Carter, Tr, 213. Daiflon did not place

any orders for refrigerant gas with its Japanese supplier

after that time. Carter, Tr. 214-215. This surcharge re-

mained in effect until December 1971, when it was replaced

by new exchange rates involving the dollar, the Japanese

yen and other currencies. As of December 15, 1971, the

devaluation of the dollar as against the Japanese yen had

the effect of increasing by some 17 percent the cost of im-

ported Japanese goods, including refrigerant gas. Brad-

field, Tr. 28.

Mr. Carter and Mr. R. D. McDonald, the primary in-

vestor in Daiflon, testified that, even before these cost in-

creases, Daiflon’s costs were higher than those of the

domestic manufacturers. Carter, Tr. 154-155; MeDonald,

Tr. 586-587. During the four years of its existence, Daiflon

sold a total of some 2.4 million pounds of refrigerant gas,

which was less than 14 of one percent of the total sales of

refrigerant gas in the United States during that period.

Hibdon Direct, Tr. 34; Def. Exh. No. 91. At no time did

Daiflon realize a profit on its refrigerant gas business.

Carter, Tr. 275-285.

44a

[4] The defendants are the six domestic manufacturers

of refrigerant gas. Du Pont was the first entrant into this

business. Until 1949 patents covering refrigerant gas pro-

ducts legally precluded the sale of refrigerant gas in the

United States by any other person. After the original pat-

ents expired, the other defendants entered this business.

Allied Chemical was the first new entrant, in 1952; Racon

was the last of the defendants to commence the manufac-

ture and sale of refrigerant gas, doing so in 1965. In 1977,

Union Carbide ceased manufacturing refrigerant gas. Hib-

don Direct, Tr. 11-12; Pl. Exh. No. 1113, pp. 15-16.

It is undisputed that refrigerant gas is a homogeneous,

fungible product—that is, the gas produced by any defend-

ant is chemically identical to the gas produced by any other

defendant. Rose, Deposition 47; Hibdon Direct, Tr. 10, 23-

24. The economic implication of this fact is also undis-

puted. The economists who appeared were unanimous in

stating that, because of the homogeneous nature of refrig-

erant gas, one would expect substantial similarity in re-

frigerant gas prices among the defendants. The reason is

that no purchaser would pay any defendant more for its

refrigerant gas than it had to pay to obtain the refrigerant

gas of any other defendant. Hibdon Direct, Tr. 10-11, 24;

Gup., Tr. 1075-1077; Jadlow, Tr. 1169, 1172-1173.

This did not mean, however, that there was no price

competition among the defendants. On the contrary, while

the list prices of each defendant were similar, there was

substantial discounting off list prices. Hibdon Direct, Tr.

28-29. In addition, there were other competitive activities

that affected the prices paid by various of the defendants’

customers. This price competition was intense throughout

the 1969-1972 period, throughout the United States. Hib-

don Direct, Tr. 9, 20, 28-29, 36-38.

[5] Plaintiff's claim is that it was forced to begin liqui-

dating its business operations in August 1971 because of

a 13 percent reduction in the defendants’ list prices in the

45a

spring of 1971. Carter, Tr. 110-112; MeDonald, Tr. 538,

597. It claims that this general reduction in list prices was

the result of a conspiracy among the defendants to drive

it out of business. It also claims that Du Pont’s pricing

practices independently violated Section 2 of the Sherman

Act.

We begin by showing that plaintiff tendered no evidence

to support the latter claim. We then show that there was

also a complete failure of proof on the conspiracy issue.

Finally, we show the lack of any probative evidence to

support any award of damages to Daiflon, much less the

jury’s determination that plaintiff’s damages were $2,500,-

000 before trebling.

Il. Plaintiff Failed To Produce Substantial Evidence of Monopoli-

zation or Attempted Monopolization by Du Pont

The essential elements of a monopolization charge are

“(1) the possession of monopoly power in the relevant

market and (2) the willful acquisition or maintenance of

that power as distinguished from growth or development

as a consequence of a superior product, business acumen,

or historic accident.” Pacific Engineering & Production

Co. v. Kerr-McGee Corp., 551 F.2d 790, 791 (10th Cir.),

cert. denied, 434 U.S. 879 (1977), citing United States v.

Grinnell Corp., 384 U.S. 563 (1966). A case of attempted

monopolization, by contrast, requires “proof [1] that the

defendant’s conduct was motivated by specific intent to

monopolize and [2] that a dangerous probability of mo-

nopoly power existed.” /bid., citing EF. J. Delaney Corp.

v. Bonne Bell, Inc., 525 F.2d 296 (10th Cir, 1975), cert. de-

nied, 425 U.S. 907 (1976). Plaintiff’s proof with respect to

each of [6] these elements fell far short of the required

showing. Indeed, the evidence at trial absolutely precluded

a finding of monopolization or attempted monopolization

by Du Pont.

46a

A. The Relevant Market Is National in Scope

Plaintiff’s expert economist, Dr. Joseph Jadlow, testified

that, in his opinion, the relevant market “would probably

be the non-automotive aftermarket for refrigerant gas.”

Judlow, Tr. 1158. This is the market in which Daiflon sold

refrigerant grades 11, 12 and 22. Carter, Tr. 321. Du Pont

did not dispute that conclusion—and the Court’s instruc-

tions, as well as the special verdict form that was sub-

mitted to the jury, reflected the parties’ agreement that

the relevant product market consists of refrigerant gas

used in the non-automotive replacement market.

The only evidence on the question of the geographic

scope of the relevant market established that it was a

national market. Dr. Jadlow so testified (Tr. 181):

“Q. Now, I believe you defined the relevant market,

as you view it, as the non-automotive replace-

ment market for refrigerant gas.

af Me lla

“Q. That would be a product market throughout the

United States?

"7"

Dr. Jadlow’s testimony on this issue was consistent with

the testimony of company witnesses whose depositions

were read by plaintiff. Mr. Robert Wright, Marketing

Manager for Refrigerants at Du Pont, testified that Du

Pont refrigerants are distributed to the non-automotive

replacement market on a national basis and that Du Pont’s

list prices apply throughout the United States. E.g.,

Wright, Deposition 194-198. Representatives of Allied

Chemical, Union Carbide and Kaiser also testified that the

refrigerant distribution policies of their respective com-

panies encompassed the entire United States—and with

the [7] exception of instances involving isolated competi-

tive offers to individual customers, that their company

47a

pricing policies reflected national, rather than regional,

marketing conditions.’

The evidence at trial thus showed a national market for

refrigerant gas used for non-automotive replacement pur-

poses. As in United States v. Grinnell Corp., supra, 384

U.S. at 576, the evidence in this case was of a business

“operated on a national level,” with “national planning”;

each of the defendants had “a rational schedule of prices

* * * and terms,” which occasionally were “varied to meet

local [competitive] conditions”; indeed, in light of the

evidence at trial, only a national market “reflects the re-

ality of the way in which [the defendants, including Du

Pont] built and conducted their [replacement refrigerant]

business.” See also, e.g., Tampa Elec. Co, v. Nashville Coal

Co., 365 U.S. 220, 327 (1961); Standard Oil Co. v. United

States, 337 U.S. 293, 299 n. 5 (1949); United States v. Em-

pire Gas Corp., 5387 F.2d 296, 304 (8th Cir. 1976), cert.

denied, 429 U.S. 1122 (1977); Castlegate, Inc. v. National

Tea Co., 34 F.R.D. 221, 223 (D. Colo, 1963).

There was no competent evidence at trial of a market

having a more limited geographic scope. Although Mr.

Carter and Mr. Bus Adams testified that plaintiff sold its

replacement refrigerant products in approximately 31

states at various times during the 1969-1972 period (Carter,

Tr. 603; Adams, Tr. 647-648), that testimony was totally

insufficient to establish that the relevant market was lim-

ited to those states.

In assessing claims that a particular market is limited

to a specific region or locality, the courts have [8] focused

on two factors: (1) the extent to which the defendants are

unable, as a practical matter, to sell the relevant product

outside the region or locality because of high transporta-

tion costs and (2) the extent to which buyers are unable to

‘E.g., Regan, Deposition 19-24; Napoli, Lx position 7, 131, 152;

Sorensen, Deposition 20-23.

48a

go to sellers located outside the region or locality to obtain

the product. E.9., United States v. Philadelphia Nat'l

Bank, 374 U.S. 321, 357 (1963); Tampa Elec. Co. v. Nash-

vile Coal Co., supra, 365 U.S. at 327; Honeywell Ince. v.

Sperry Rand Corp., 1974-1 Trade Cas. {| 74,874 (D. Minn.

1973); Case-Swayne Co, v. Sunkist Growers, Inc., 369

F.2d 449, 456 (9th Cir. 1966), cert. denied, 387 U.S. 932

(1967). There was no evidence in the present case that

transportation costs prevented any of the major sellers

of refrigerant gas from selling that product in other than

the states in which plaintiff actually made sales, Neither

was there evidence showing that individual purchasers were

unable to obtain refrigerant gas from other than regional

or local sources. The evidence was, in fact, to the contrary

—that is, there was ample testimony showing that most

wholesalers of refrigerant gas purchased from one or more

of the defendants, each of which operated on a national

seale. See, e.g., Lynn, Deposition 19-21; Dailey, Deposition

19. ‘

In short, if plaintiff intended at trial to carve out a

regional market for the purpose of its monopolization

and attempted monopolization claims against Du Pont, it

failed to accomplish that objective.’

* During discussions with the Court in connection with the

framing of instructions, Mr. Gregory, one of plaintiff’s counsel,

appeared to suggest that the jury could infer from the fact that

plaintiff actually had sold refrigerant in 31 states that the relevant

market is limited to those states. That suggestion is, of course,

untenable. If the suggestion were accepted, an antitrust plaintiff

could concentrate its sales efforts in those local areas in which a

high percentage of the sales were being made by a particular com-

pany—and, by means of such manipulation, make the target com-

pany vulnerable to a monopolization charge, The test for the geo-

graphic component of the relevant market focuses on market

realities; for good reason, the efforts of an individual plaintiff

to limit its claim to areas having no separate economic significance

are entitled to no weight. See, ¢c.g., Telex Corp. v. International

49a

[9]

B. Plaintiff Failed To Show That Du Pont Possessed Monopoly

Power in the Relevant Market

Monopoly power is defined generally as the “power to

control prices or to exclude competitors” in a relevant

market. /’. g., Telex Corp. v. International Business Ma-

chines Corp., supra, 510 F.2d at 914. Whether a particular

antitrust defendant possesses monopoly power often in-

volves a complicated factual inquiry, requiring an assess-

ment of the strength and vigor of the defendant’s com-

petitors as well as the existence of barriers to entry that

might prevent new firms from entering the market. No

such inquiry is required here, however, because the size of

Du Pont’s market share during the period of plaintiff’s

existence absolutely precludes, as a matter of law, a valid

finding of monopoly power.

1. Du Ponv’s Market Suare Is Sucw As To Prec.LupEe

A Vauip Finpina or Monopoty Power

The courts have held on numerous occasions that “con-

trol of less than 50 pereent of the relevant market is by

itself sufficient evidence that monopoly power does not

exist.” J. von Kalinowski, Antitrust Laws and Trade

Regulation §8.02[2], pp. 8-34 and 8-34.1 (1979 ed.). In

fact, in those instances in which the Supreme Court has

sustained findings of monopoly power, the market shares

involved have [10] ranged from a minimum of 70 percent

(United States v. Paramount Pictures, Inc., 334 U.S, 131

_ ee ee eee

Business Machines Corp., 510 F.2d 894, 917 (10th Cir, 1975),

cert. dismissed, 423 U.S, 802 (1976).

Of course, if this Court should conclude that the relevant market

is limited to the 31 states in which plaintiff sold refrigerant gas

at some time during the period of its existence, that conclusion

would not benefit plaintiff since there was no evidence, of any

sort, of Du Pont’s market share in those states. See discussion at

pp. 12-15 infra.

50a

(1948)) to a high of 90 percent (Standard Oi Co. v.

United States, 221 U.S, 1 (1911)). As the Supreme Court

explained in l/nited States v. United States Steel Corp.,

251 U.S. 417, 444 (1920), in discussing the significance of

a substantially larger market share than plaintiff estab-

lished here:

“The power attained was much greater than that pos-

sessed by any one competitor—it was not greater

than that possessed by all of them. Monopoly, there-

fore, was not achieved, * * *”

Accord, e.g., Holleb & Co. vy. Produce Terminal Cold Stor-

age Co., 582 F.2d 29, 33 (7th Cir. 1976) (monopolization

claim rejected since, even assuming the appropriateness of

the market plaintiff had alleged, plaintiff failed to prove

that defendant “had a dominant share exceeding 60% of

the market”); T'win City Sportservice, Inc, v. Charles O.

Finley & Co., 512 F.2d 1264, 1274 (9th Cir. 1975) (50 per-

cent market share insufficient to establish monopoly

power); Telex Corp. v. International Business Machines

Corp., supra, 510 F.2d at 915-16, 919 (36.7 percent of the

relevant market “is insufficient to justify any inference or

conclusion of market power”, and further quoting with

approval, “something more than 50% of the market is a

prerequisite to a finding of monopoly”); White Bag Co.

v. International Paper Co., 1974-2 Trade Cas. {| 75,188 (4th

Cir. 1974) (tabulation of cases revealed monopoly power

is found only when share of relevant market is 70 percent

or more) ; Continental Baking Co. v, Old Homestead Bread

Co., 476 F.2d 97, 104 (10th Cir.), cert. denied, 414 U.S.

975 (1973) (“[I]t is fairly clear that a market share of

fifty-one percent would not constitute monopoly power.”) ;

Cliff Food Stores, Inc. v. Kroger, Inc., 417 F.2d 203, 207

n. 2 (Sth Cir. 1969) (“It appears that something more than

50% of the market is a prerequisite [11] to a finding of

monopoly.”); United States v. Aluminum Company of

America, 148 F.2d 416, 424 (2nd Cir. 1945) (Over 90 per-

Sla

cent of the velevant market “is enough to constitute a

monopoly; it is doubtful whether sixty or sixty-four per-

cent would be enough; and certainly thirty-three percent

is not.”); Nankin Hosp. v. Michigan Hosp. Service, 361 F.

Supp. 119, 1209 (#.D. Mich. 1973) (market share below 50

percent insufficient to show monopoly power).

The evidence at trial showed that Du Pont’s share of

the non-automotive refrigerant gas replacement market

during the 1969-1972 period was approximately 40 percent.

That is well below the 50 percent figure that, in the Tenth

Circuit as elsewhere, has been held “by itself” to be “suf-

ficient evidence that monopoly power does not exist.”’ Von

Kalinowski, Antitrust Laws and Trade Regulation, supra.

The most reliable evidence of Du Pont’s market share

during the relevant period is probably the Du Pont Busi-

ness Plan, which was prepared for internal use by Du Pont

in November 1971. Du Pont’s share of the non-automotive

refrigerant gas replacement market is estimated in the

Business Plan to have been 39 percent as of 1971. Pl, Exh.

No. 1113, p. 18. This is consistent with the estimate of

Du Pont’s market share contained in the Marketing Plans

of Pennwalt for the years 1971 and 1972; according to the

Pennwalt Marketing Plans, Du Pont’s share of the replace-

ment market in 1971 was approximately 40 percent and in

1972 was approximately 38 percent. Pl. Exh. No. 4146, p. 5;

Pl. Exh. No, 4196, p. 4.°

Although there was no evidence that Du Pont’s share of

the refrigerant gas replacement market approached 50

percent during the 1969-1972 period, one of the jury’s

[12] findings, as reflected by the special verdict form, pur-

ported to find to the contrary. Verdict Form, Finding No.

3. This finding cannot be sustained in view of the total

*It also is consistent with the estimate of Du Pont’s market

share provided by officials of Allied Chemical, Kaiser, Union Car-

bide and Racon, Regan, Deposition 96; Sorenson, Deposition 158 ;

Napoli, Deposition 125; Knopf, Deposition 96.

52a

absence of record evidence to support it. Indeed, the find-

ing could only have been based on the mischaracterization

of market share evidence by plaintiff’s counsel during

closing arguments.

At two points during his closing argument, plaintiff’s

counsel stated that there was evidence that would support

a finding that Du Pont’s share of the refrigerant gas

replacement market exceeded 50 percent. Near the outset

of his argument, plaintiff’s counsel referred to a Union

Carbide document that, according to counsel, “shows that

Du Pont’s share of the 22 market was 53 percent * * *.”

Crawford, Tr. 1494. But plaintiff made no effort to estab-

lish by evidence at trial that the relevant product market

was limited to grade 22 refrigerant gas; there was no

evidence at all tending to show that it would be appropriate

to treat any single type of refrigerant gas as a relevant

market, and plaintiff’s counsel never even argued that

issue to the jury. Moreover, the Union Carbide document

relied upon by plaintiff's counsel was not limited to the

non-automotive replacement market. Rather, it dealt with

market share for all end uses in the aggregate—which

means that it included fluorocarbons sold as aerosol pro-

pellants, foaming agents, solvents and resins, in addition

to refrigerant gas sold to original equipment manufac-

turers and for replacement purposes. Pl. Exh. No. 4500,

p. 5. Accordingly, the 53 percent market share figure re-

ferred to by counsel cannot support any finding that in the

non-automotive replacement market Du Pont had a greater

than 50 percent share of any or all refrigerant gas sales.

Plaintiff’s counsel also relied during closing arguments

on the testimony of Mr. Bus Adams for the proposition

that Du Pont’s share of the relevant market during the

[13] 1969-72 period exceeded 50 percent. According to

counsel :

“Now, one thing about Mr. Adams[’] testimony that

I wanted to testify to, or I want to advise you of and

53a

request that you consider, is that Mr. Adams stated

that he traveled throughout these whole 31 states and

Puerto Rico, and you know that he did, * * * but he also

testified that he understood the territory. he under-

stood the competition, and his estimate was that Du

Pont had over 50 percent of the refrigerant gas after-

market in that market area, in that relevant market,

and there has been no testimony in this matter to refute

that, and it stands unrefuted, and it’s the truth.”

Crawford, Tr. 1507.

The testimony by Mr. Adams referred to was not accu-

rately described by counsel, and, in any event, the testi-

mony is both irrelevant and demonstrably unreliable. As

already noted, there is no basis for concluding that the

relevant geographic market for the purpose of this case is

anything but national in scope. But, in addition, the cross-

examination of Mr. Adams demonstrated beyond perad-

venture that Mr. Adams’ statements concerning Du Pont’s

market share amounted to no evidence at all, much less

substantial evidence. During cross-examination, Mr.

Adams testified as follows:

“Q. Now, you testified yesterday as to the apparent

comparative volume of refrigerant gas of Du

Pont as compared to the sales volume of the other

defendants.

Was that testimony based on any survey that you

conducted?

“A. No, sir, it came from individuals that I knew from

the past years.

“Q. Was this an individual at Pennwalt that told you

that?

“A. No, sir.

“Q. Individual at Du Pont?

“A. No, sir.

54a

“Q. Individual in any one of these companies?

“A.

It was an individual of some of your largest dis-

tributors.,

[24] “Q. * * * So it’s information that came to you

cA

“Q.

sad .

“Q.

ad.

“Q.

6A

“().

“4,

from some customers; is that right?

Yes, sir.

All customers or just some?

Oh, I would say I could name you about three or

four.

. Is that the basis for your testimony?

. Well, observing is very good.

I asked whether you went into the backroom of

wholesalers or contractors’ offices and counted up

the number of Pennwalt cylinders, the number of

Carbide cylinders, and that’s how you decided.

Did you do that?

No. I did not go back and count them, no, sir.

Did you ask people that you ealled on where they

bought their refrigerants from?

I may or I may have not.

You don’t remember?

No, sir.”

Adams, Tr. 772-774.

Following this exchange, plaintiff’s counsel asked Mr.

Adams on redirect to estimate Du Pont’s market share in

the area in which Daiflon was operating. Mr. Adams re-

sponded as follows:

“T would say du Pont’s sales [were] over 50 percent

of the customers that I called on, and I talked to

presidents of the companies that told me what pur-

chases they bought.” Adams, Tr. 775.

o0a

It is thus apparent that plaintiff’s counsel mischaracter-

ized Mr. Adams’ testimony in suggesting that Mr. Adams

had stated that Du Pont “had over 50 pertent of the

refrigerant gas after-market” in the 31 states in which

plaintiff actually made refrigerant gas sales during the

1969-1972 period. In fact, Mr. Adams’ testimony was that

Du [15] Pont’s sales were “over 50 percent of the custo-

mers that [he] called on” (Adams, Tr. 775)—a group that

hardly amounts to a relevant market. Moreover, it is diffi-

cult to conceive of less reliable evidence of Du Pont’s sales

to even these isolated, and unnamed, customers than is

provided by Mr. Adams’ testimony.

Mr. Adams conceded on cross-examination that his mar-

ket share estimate was not based on any survey he had

undertaken or on conversations he had had with repre-

sentatives of any of the defendants. Although he appeared

at one point to testify that his estimate was based on con-

versations with three or four Du Pont customers concern-

ing their own purchases, he stated subsequently that he

did not remember whether he had asked people on whom

he called for information as to the sources of their re-

frigerant purchases. It is, of course, impossible to recon-

cile this statement with Mr. Adams’ statement on redirect

examination that he had “talked with presidents of the

companies that told me what purchases they bought.”

Adams, Tr. 775. Finally, although Mr. Adams suggested

that his estimate of Du Pont’s market share might be based

on “observing” (Tr. 773), he later testified that he did not

go into the backroom of wholesalers or contractors and

count the number of cylinders in stock from the various

manufacturers.

In short, although the mischaracterization by plaintiff’s

counsel of Mr. Adams’ testimony may explain the jury’s

finding that Du Pont’s share of the non-automotive refrig-

erant gas replacement market exceeded 50 percent during

the 1969-1972 period, the testimony itself is a wholly inade-

56a

quate predicate for an antitrust verdict. The only credible

evidence in the present record of Du Pont’s share of the

relevant market places it at approximately 40 percent. As

a matter of law, a market share of 40 percent is insufficient

to permit a finding a monopoly power.

[16] 2. Du Pont Lackep Power To ControL Prices Or

EXxcLupe CoMPETITORS

Of course, even if one assumes, contrary to the evidence,

that Du Pont’s share of the relevant market during the

1969-1972 period was greater than 50 percent, that would

not necessarily mean that Du Pont possessed monopoly

power. Once a company’s market share has been shown to

exceed 50 percent, the law reyuires that an assessment be

made to determine whether, in view of other industry

characteristics, the company has the power “to control

prices or to exclude competition.” Telex Corp. v. Inter-

national Business Machines Corp., supra, 510 F.2d at 914.

Kven if Du Pont’s minority market share is ignored, the

evidence at trial showed conclusively that Du Pont did not

possess any such power.

A company cannot be said to have monopoly power over

price unless it has the power to charge prices for its

products substantially without regard to competitive con-

ditions and without having to take into consideration the

prices of its competitors’ products. EF. g., Continental Bak-

ing Co. v. Old Homestead Bread Co., supra, 476 F.2d at

104; Cole v. Hughes Tool Co., 215 F.2d 924, 938 (10th Cir.

1954). To put the matter another way, a company does not

have monopoly power over price unless it has substantially

unbridled discretion to charge a premium for its products

—and thereby, at its option, to reap monopoly profits.

E.g., Janich Bros., Inc. v. American Distilling Co., supra,

570 F.2d at 856; Pacific Engineering & Production Co. v.

Kerr-McGee Corp., supra, 551 F.2d at 797. If, on the other

hand, there is—as Dr. Jadlow, plaintiff’s economic expert,

o7a

testified—“price competition, true price competition, * * *

that is not a monopoly market.” Jadlow, Tr, 1186.

[17] The present record is devoid of any evidence tend-

ing to show that Du Pont had sufficient market power to

be able to charge prices for its refrigerant products in

the non-automative replacement market without regard to

the prices charged by its competitors. In fact, the evidence

showed overwhelmingly that any effort by Du Pont to

charge a higher price than any of its competitors would

have resulted in lost sales and market share by Du Pont—

hardly the kind of penalty a monopolist would suffer. Thus,

one of the options discussed in the Du Pont Business Plan

for 1971 was to “[i]nerease prices and/or resist lower

prices offered to key accounts by competition.” This option

was rejected by Du Pont because, as stated in the Business

Plan, “[a]ttempts to increase prices or resist lower com-

petitive price offerings at this time would lead to a loss in

market position and have a detrimental effect on long-term

earnings.” Pl, Exh. No. 1113, p. 21.

This assessment of Du Pont’s lack of significant market

power was echoed by numerous witnesses at trial. Mr.

Robert Wright of Du Pont testified, for example, that one

of the primary reasons Du Pont lowered its list prices for

replacement refrigerants in March 1971 was that “it was

quite evident that we were not competitive at a number of

wholesalers, and as such [Du Pont] was being penalized

in penetration * * *.” Wright, Deposition 187. So far as the

March 1972 price decrease, initiated by Allied Chemical,

was concerned, Mr. Wright observed that “we would have

been very pleased to have been able to get the price up,

and at least gain some of our profit back. Competitive

conditions certainly precluded this, in our best judgment.”

Td, at 114; [18] see also O’Donnell, Deposition 36-41; Hib-

don Direct, Tr. 10-11, 24.*

* Plaintiff’s counsel argued at length in his closing arguments

that Du Pont was a ‘‘price leader’’ in the refrigerant gas in-

58a

An alternative way of looking at a company’s market

power, suggested by plaintiff’s expert economist, Dr. Jad-

low, is to assess the extent to which the company is subject

to “price competition, true price competition.” Jadlow,

Tr. 1186. The existence of vigorous price competition is,

of course, inconsistent with the possession of monopoly

power over price. If a company must adjust its prices

downward in response to lower-price competitive offerings

in order to avoid a loss of sales, that company lacks the

kind of control over prices that is encompassed by the

phrase “monopoly power.” £.g., Telex Corp. v. Interna-

tional Business Machines Corp., supra, 510 F.2d at 914.

There was overwhelming evidence at trial of vigorous

price competition in the sale of replacement refrigerants,

and undisputed evidence of Du Pont’s vulnerability to that

competition. In addition to acknowledging Du Pont’s in-

ability to “increase prices and/or resist lower prices offered

to key accounts by competition” without a significant loss

of sales and market share, the Du Pont Business Plan

clearly spells out Du Pont’s intentions as of November

1971 to compete actively with the other sellers of refrig-

erant gas on the basis of price, service to customers and

technical innovation. Pl. Exh. No, 1113, pp. 19-21. The

[19] Business Plan also summarizes the kind of ecompeti-

dustry. E.g., Crawford, Tr. 1364. In fact, however, of the five

major list price changes that occurred during the 1969-1972 period,

Du Pont was the first company to implement only one—in March

1971. Wright, Deposition 91, 98, 113-116; O’Donnell, Deposition

44-45; Napoli, Deposition 148. In addition, both Mr. Wright and

Mr. O’Donnell testified that it was Du Pont’s policy not to offer

to sell to individual customers at prices below list unless Du Pont

was meeting a competitive offer. Wright, Deposition 52-53 ; O’Don-

nell, Deposition 29-30. Finally, the evidence was undisputed that

Du Pont could not charge a higher price for its refrigerant gas

than its competitors without losing sales and, consequently, market

share. Pl. Exh. No. 1113, p. 21; Hibdon Direct, Tr. 24.

59a

tion Du Pont faced in the replacement market for refrig-

erant gas from the other American manufacturers:

“Allied * * * emphasizes special price deals coupled

with intensive personalized entertainment. Union Car-

bide * * * and Pennwalt * * * focus on special price

deals motivated by their need to fill expanded ca-

pacity. Racon also uses price deals in an attempt to

move their mix to a high cylinder/bulk ratio. Kaiser

uses incentive trips to gain business.” Jd. at 13.

If Du Pont had possessed monopoly power, as alleged by

plaintiff, it would not have been concerned about price

competition from other companies—and there would have

been no reason for Du Pont to resolve to compete on the

basis of price, service to customers or technical innovation.

The Du Pont Business Plan is not alone in providing a

sense of the competition Du Pont faced during the 1969-

1972 period. The Du Pont Monthly Report for December

1970 observed, for example, that “[t]he decline in sales

to wholesalers [during 1970] was due to competitive deals

which we were reluctant to meet until mid-year. These in-

cluded extended terms, rebates, discounts, and LTL’s at the

truckload price.” Pl. Exh. No. 1296, p. 2. The Monthly

Report for January 1971 commented: “There is continuing

deterioration of prices in the marketplace due to increased

competitive rebates.” Pl. Exh. No. 1297, p. 3. The Report

for July 1971 contained a similar observation: “Price ero-

sion continues in the wholesale market.” Pl. Exh. No. 1303,

p. 1. Finally, the Monthly Report for November 1971 indi-

cated that the vigorous competitive activity, centering on

price, that had been described in the earlier reports had

not abated: “Competition is fierce. They have upgraded

their personnel and they are continuing to offer selected

and special deals.” Pl. Exh. No. 1090, p. 2.

[20] Additional insight into the extent of competitive

activity, and of Du Pont’s lack of control over the market

60a

price of refrigerants, during the period of plaintiff’s ex-

istence also is provided by the competitive price authoriza-

tion forms (“CPA’s”) that plaintiff chose to offer into

evidence. The mere existence of those CPA’s, which record

price deals reported by wholesalers to have been offered

by Du Pont’s competitors and decisions by Du Pont to

meet these offers to avoid losing business, is inconsistent

with the notion that Du Pont possessed monopoly power

over price. Moreover, even a cursory examination of the

CPA’s that are in evidence confirms that Du Pont faced

intensive price competition from all of the other American

manufacturers of refrigerants—and that Du Pont was well

aware that it would lose sales in the event it refused .o

lower its prices to meet competitive offers. E.g., Pl. Exh.

Nos. 1117, 1119, 1120 and 1121 (price competition at Baker

Brothers from Allied, Pennwalt and Union Carbide); Pl.

Exh. No. 1154 (price competition at Harry Alter Company

from Kaiser, Allied, Union Carbide and Pennwalt) ; rr.

No. 1163 (price competition at Refrigeration Supplies from

Racon, Allied, Pennwalt and Kaiser); Pl. Exh. No. 1164

(price competition at Solar Supply from Union Carbide,

Pennwalt and Allied); Pl. Exh. 1166 (price competition at

Standard Brass from Union Carbide and Kaiser); PI.

Exh. Nos. 1179, 1180 and 1181 (price competition at Tersco

from Allied and Union Carbide); Pl. Exh. Nos. 1182-1185,

1189, 1192 and 1194 (price competition at Waugh Brothers

from Pennwalt, Racon, Allied and Union Carbide).

It defies reason to maintain, in the face of all this evi-

dence, that Du Pont possessed monopoly power over the

market price of replacement refrigerants—that it had

[21] the power to price and sell refrigerant gas in the

replacement market without regard to the activities of its

competitors. The simple fact, which was clearly and un-

disputably evidenced ai trial, is that Du Pont did not have

monopoly power over the price of refrigerant gas.

It is equally clear that Du Pont lacked the power to

exclude competitors or prospective competitors from the

6la

non-automotive replacement market for refrigerant gas.

Once the original refrigerant gas patents expired in 1949,

any barriers to entry that remained did not prevent the

other defendants in this case from beginning to produce

and sell refrigerant gas. There was no evidence at trial that

Du Pont attempted to prevent any of the defendants from

entering the refrigerant gas business—or, even more

importantly, any evidence that it would have had the

power to do so had it made the effort. The fact that Allied

Chemical, Union Carbide, Pennwalt, Kaiser and Racon

were able successfully to enter the refrigerant gas busi-

ness prior to the time plaintiff began to import refrigerant

gas from Japan shows conclusively that entry was possible

so long as the potential entrant was not subject to dis-

abling operating problems and diseconomies. Indeed, the

presence of these competitors—all of which, with the excep-

tion of Racon (which was only in fluorocarbons), were

large multi-product companies (Hibdon Direct, Tr. 12)—

is fatal to any claim that Du Pont had the power to exclude

competitors from the non-automotive replacement market

for refrigerant gas.

C. There Is No Evidence of the Exercise by Du Pont of

Monopoly Power

A further defect in plaintiff’s individual monopolization

claim against Du Pont stems from the fact that the pos-

session of monopoly power, of itself, does not violate [22]

the antitrust laws. Before a monopolization claim can be

sustained, there must be a showing that monopoly power

was employed unfairly. E.g., Pacific Engineering & Pro-

duction Co. v. Kerr-McGee Corp., supra, 551 F.2d at 791;

Telex Corp. v. International Business Machines Corp.,

supra, 910 F.2d at 926-27. As in the Pacific Engineering

case, the “essential unfair means” alleged here relates to

what plaintiff has characterized as “predatory pricing.”

62a

According to plaintiff's president, Mr. Richard Carter,

the lowering of list prices in March 1971 effectively

“stopped” plaintiff’s sales of refrigerant gas. Carter, Tr.

196. Mr. Carter also testified that it was not until June

1971 that the full force of that price decrease was felt in

the marketplace—and that plaintiff did not order any

refrigerant gas from Japan after that time because plain-

tiff was unable, because of the price decrease, to sell the

refrigerant gas plaintiff already had in storage. Carter,

Tr, 197-198. Although plaintiff apparently continued to sell

small quantities of refrigerant gas until October 1972, Mr.

R. D. MeDonald testified that in August 1971 The United

States National Bank in Galveston, which had loaned sub-

stantial operating capital to plaintiff, instructed plaintiff

to begin an “orderly liquidation” of its operations. Mc-

Donald, Tr. 538, 597. As plaintiff’s counsel explained the

situation in his closing argument:

“For six months they just went like a house afire.

From January of ’71 to June of ’71, they did great.

They did great.

* . *

“And then in June of ’71, the handle was turned off,

and it stopped. Didn’t have any more customers.

“They were out, and they realized they were out, and

the bank advised them to go through whatever they

called it, an orderly liquidation or something of that

nature.

[23] “They were through. They had been driven out.”

Crawford, Tr. 1386, 1388.

The question that must be considered, then, is whether—

assuming arguendo that Du Pont had monopoly power—

Du Pont’s decision in March 1971 to reduce its list prices

for refrigerant gas in the non-automotive replacement mar-

63a

ket constituted an “unfair means” of competition. The

evidence at trial permits but one answer: that is, that the

March 1971.list price reduction represented entirely rea-

sonable, and permissible, competitive behavior by Du Pont.

There was extensive testimony concerning the nature of

and the reasons for the March 1971 price reduction. Al-

though Du Pont announced to the trade that it was reduc-

ing its list prices by 13 percent, the reduction amounted

in fact to only eight percent. The reason is that, in imple-

menting the reduction, Du Pont eliminated the five percent

prompt payment discount that it previously had been

allowing. Wright, Deposition 98, 194-198; O’Donnell, Depo-

sition 44-45. Moreover, at least 50 percent of Du Pont's

customers already were purchasing at the reduced price

because of price competition Du Pont had encountered at

those accounts from the other defendants. Wright, Depo-

sition 197; O’Donnell, Deposition 45. The Du Pont execu-

tives responsible for the price reduction understood that

customers who already were purchasing at the reduced

prices would react unfavorably to extension of the lower

terms to other customers (e.g., Pl. Exh. No. 1042), but they

concluded that a lowering of Du Pont’s list prices was

nevertheless required by competitive conditions.

As explained by Mr. Wright and Mr. O’Donnell, the

March 1971 price reduction represented an effort on Du

Pont’s part to stop the loss of sales and erosion of market

position that had been occurring. As stated by Mr. Wright,

Du Pont’s Marketing Manager for Refrigerants:

[24] “(When I joined the [Freon Products] group in

the fall of ’70, it was quite evident that we were not

competitive at a number of wholesalers, and as such

were being penalized in penetration; a as long as

that volume was not great in penalty, ana the prices

maintained themselves, we still were making good

money, but as soon as the volume began to eat away

to the point that our plants were running at such a

64a

rate that all of the distributives that I mentioned were

beginning to be constant on a smaller group of pounds,

then the profits began to tumble.” Wright, Deposition

188,

Mr. Wright and Mr. O’Donnell also testified that although

they were aware of Daiflon’s existence as of March 197],

that fact did not play any role in the decision to reduce

Du Pont’s list prices. Wright, Deposition 198-199; O’Don-

nell, Deposition 92. That is hardly surprising since not one

of the CPA’s that were received in evidence mentioned

Daiflon as the source of a competitive offer to one of Du

Pont’s customers; and, as noted previously, Daiflon sold

only 2.4 million pounds of refrigerant gas during the four

years of its existence, which was less than 4 of one percent

of the total sales of refrigerant gas in the United States

during that period. Discussion at p. 3 supra. The competi-

tion that led Du Pont to reduce its list prices in March

1971 was from the other defendants, not from Daiflon.

Furthermore, there is no evidence whatsoever, that as a

result of the March 1971 price reduction, Du Pont was

selling its refrigerant gas below either its fully allocated

cost or its marginal or incremental costs. Neither is there

any basis for finding that Du Pont was making other than

a reasonable profit on the sales it made pursuant to the

March 1971 list price reduction; indeed, the undisputed

evidence was that Du Pont would have sacrificed short-

term profits had it not reduced its list prices at that time.

In sum, in light of the competitive conditions that existed

as of March 1971, the decision by Du Pont to reduce its

list prices constituted “rational, competitive behavior.”

Pacific [25] Engineering & Production Co, v. Kerr-Mc-

Gee Corp., supra, 551 F.2d at 797.°

‘The testimony of Mr. Wright indicating that Du Pont made

some below-cost sales of refrigerant gas in mid-1972 is of no as-

sistance to plaintiff. Although plaintiff’s counsel failed to mention

the fact in his arguments to the jury, Mr. Wright testified that,

65a

The fact that the lowering of Du Pont’s list prices may

have made life more difficult for Daiflon does not make

Du Pont’s actions unlawful.® As the court of [26] appeals

although below fully-allocated cost, each of those sales was above

Du Pont’s marginal and average variable costs. Wright, Deposi-

tion 193-194. Mr. Wright testified additionally that the sales be-

low fully-allocated cost were made to meet competition from the

other defendants, not Daiflon, following the list price reduction

first made by Allied Chemical in March 1972. Id. at 114. Finally,

any such sales are, in any event, irrelevant to this case since, as

already noted, plaintiff’s position at trial was that it was driven

out of business by the events of mid-1971, and that the ‘‘orderly

liquidation’’ of plaintiff’s operations that was ordered at that time

by The United States National Bank in Galveston was virtually

complete by mid-1972. £.g., Crawford, Tr. 1386, 1388.

* This would be true even if there were evidence, which there is

not, that this was Du Pont’s intent. Under the law in this Circuit,

as elsewhere, sales made by a company above its fully-allocated

costs (at the very least) are conclusively presumed to be lawful.

E.g., Pacific Engineering & Production Co. v. Kerr-MeGee Corp.,

supra, 551 F.2d at 795-97.

Thus, the statements of plaintiff’s counsel during closing argu-

ments focusing on Pl. Exh. No. 1066, a trade report written by a

Du Pont salesman in Birmingham, Alabama, were wholly beside

the point. The portion of that exhibit relied upon by counsel reads

as follows: ‘‘Mr. Gennett is causing quite a stir in the Birming-

ham area. He is passing on the 13% discount that we offered in

order to combat the Japanese refrigerant.’’ Since there was no

evidence that any sales made by Du Pont pursuant to the March

1971 list price reduction were below Du Pont’s fully-allocated

costs, such sales would not have been unlawful (or have had any

relevance to plaintiff’s monopolization or attempted monopoliza-

tion charges), even if made ‘‘to combat the Japanese refrigerant.’’

Moreover, there is no evidence that the writer of the trade report,

a salesman in the field, had any knowledge concerning Du Pont’s

intent in reducing its list prices in March 1971. Finally, we submit

that the quoted portion of the trade report cannot sensibly be con-

strued as plaintiff’s counsel has suggested. As Professor James

Hibdon stated, when shown the report by plaintiff's counsel: ‘‘Du

Pont apparently had given a 13% discount which Mr. Gennett

received, and what he is doing is passing on that discount in order

that he can meet the Japanese competitor.’’ Hibdon Direct, Tr.

29-30.

66a

for this Circuit pointed out in Atlas Building Products Co.

v. Diamond Block & Gravel Co., 269 F.2d 950, 954 (10th

Cir. 1959), cert. denied, 363 U.S. 843 (1960): “Antitrust

legislation is concerned primarily with the health of the

competitive process, not with the individual competitor

who must sink or swim in competitive enterprise.” Because

plaintiff’s costs were admittedly higher than those of the

defendants, including Du Pont (McDonald, Tr. 586-587),

plaintiff was uniquely vulnerable to competition. But, un-

fortunately for plaintiff, neither the antitrust laws “nor

any social value compels the sheltering of an individual

competitor, at the expense of the public interest, from the

competitive process.” International Air Indus., Inc, v.

American Excelsior Co., 517 F.2d 714, 721 (5th Cir.), cert.

denied, 424 U.S. 943 (1975), quoted approvingly in Pacific

Engineering & Production Co. v. Kerr-McGee Corp., supra,

551 F.2d at 799; accord, e.g., Hanson v, Shell Ou Co., 541

F.2d 1352, 1358-59 (9th Cir. 1976), cert. denied, 429 U.S.

1074 (1977); Atlas Building Products Co. v. Diamond

Block & Gravel Co., supra, 269 F.2d at 956.

Contrary to plaintiff's contentions at trial, nothing in

Section 2 of the Sherman Act prohibits “price changes

which are within a ‘reasonable’ range, up or down.” Telex

Corp. v. International Business Machines Corp., supra,

510 F.2d at 927. That was all that was shown here: a rea-

sonable, and moderate, list price reduction by Du Pont

in response to competitive conditions. As the court of ap-

peals concluded recently in Pacific Engineering & Produc-

tion Co. v. Kerr-McGee Corp., supra, 551 F.2d at 795 quot-

ing from Union Leader Corp. v. Newspapers of New Eng-

land, Inc., 180 F. Supp. 125 (D. Mass.), modified, 284 F.2d

582 (Ist Cir. 1960), cert. denied, 365 U.S. 833 (1961):

“¢'T|ntending the natural consequences of acts which are

in all respects lawful, does not constitute the ‘exclusionary

intent’ [27] that is a prerequisite for finding a violation

of section 2 [of the Sherman Act].’”

67a

D. Plaintitf Also Failed To Produce Substantial Evidence of

Attempted Monopolization by Du Pont

The fundamental defect of plaintiff’s attempted monop-

olization claim against Du Pont is that it confuses compe-

tition, which the law encourages, with the kind of preda-

tory conduct that is of concern under the antitrust laws.

From the closing argument of plaintiff’s counsel, one would

suppose that it is unlawful to engage in price competition,

to try to prevent continued inroads by expanding compe-

titors, or to try to meet competition in the marketplace.

Indeed, plaintiff’s position at trial appeared to be that it

was entitled to a “reasonable” share of the sales of refrig-

erant gas in the non-automotive replacement market—

despite its admittedly high costs and operating probleims.

Of course, that is not the law. The courts have been quite

specific concerning the components of an unlawful attempt

to monopolize. As noted above (discussion p. 5, supra),

the essential elements of an attempted monopolization

claim are proof of a specific intent to monopolize accom-

panied by a dangerous probability that monopoly power

will be achieved. A showing of the requisite specific intent

requires, in turn, proof that the defendant engaged in

predatory conduct designed to control prices or destroy

competition. /.g., Pacific Engineering & Production Co.

v. Kerr-McGee Corp., supra, 551 F.2d at 797. The evidence

at trial precludes a finding in plaintiff’s favor on any of

these elements.

At the outset, it is important to emphasize that the

present record contains undisputed evidence of Du Pont’s

marketing objectives and goals as of 1971 when, according

to plaintiff, Du Pont reduced its list prices in an effort to

[28] monopolize the non-automotive replacement market

for refrigerant gas. That evidence, reflected in Du Pont’s

Business Plan, was that Du Pont intended by 1976 merely

to attempt to maintain against competitive inroads the

40 percent market share it had in 1971. Pl. Exh. No, 1113,

68a

p. 28. A company with this intent can hardly be said to be

attempting to monopolize the market.

Plaintiff simply ignored this evidence. It originally chose

instead to base its predatory pricing allegation against

Du Pont on the testimony of Mr. Scott Campbell, an ac-

countant who had been retained by plaintiff. The choice

proved to be disastrous. This effort to prove predatory

pricing was a complete failure. Mr. Campbell testified on

direct examination that he had been able to document sales

below cost by Du Pont at two accounts—Tersco, Ine., and

Waugh Brothers, Inc. But on cross-examination, Mr.

Campbell was forced to admit that the charts on which

his testimony was based were “inaccurate and misleading”

in that (1) he had inaccurately plotted Du Pont’s cost in-

formation, so that his charts purported to show sales below

total cost when in fact Du Pont’s offering prices always

were above its total cost, and (2) he did not know whether

Du Pont actually had made any sales at the price levels

shown on the charts. Campbell, Tr. 886, 908-909. It is to put

the matter charitably to say that plaintiff’s attempted

monopolization claim died with the testimony of Mr.

Campbell.’

Plaintiff then retreated to the March 1971 list price

reduction that Du Pont had implemented as showing Du

Pont’s specific intent to monopolize. As previously demon-

strated, however, that reduction represented reasonable

[29] competitive behavior by Du Pont: just as there was

no evidence that that price reduction constituted an “un-

fair means” of competition, there is no basis for conclud-

ing that the reduction amounted to “predatory conduct”

designed to control prices or destroy competition.

"The fact that plaintiff failed even to show that it was com-

peting with Du Pont for the business of Tersco or Waugh Broth-

ers, or for the business of customers of those companies, only

underscores the absurdity of the Campbell presentation.

69a

Under settled law, “[p]ricing is predatory only where

the firm foregoes short term profits in order to develop a

market position such that the firm can later raise prices

and recoup lost profits.” Janich Bros., Inc. v. American

Distilling Co., supra, 570 F.2d at 856 (emphasis added) ;

accord, e.g., Pacific Engineering & Production Co. v. Kerr-

McGee Corp., supra, 551 F.2d at 797. But what plaintiff has

persistently overlooked is that not every price reduction

signals that the firm is foregoing short-term profits for

longer-term gain. The term “predatory pricing” does not

encompass prices set above a firm’s total cost—and it is

exceedingly doubtful, under recent cases in this Circuit,

whether prices set above a firm’s marginal or average

variable cost could ever be presumed predatory. E.g., Pa-

cific Engineering & Production Co. v. Kerr-McGee Corp.,

supra, 551 F.2d at 795-97; accord, e.g., William Inglis &

Sons Baking Co. v. ITT Continental Baking Co., 1978-2

Trade Cas. { 62,345 (9th Cir. 1978); Murphy Tugboat Co.

v. Crowley, 1978-2 Trade Cas. J 62,172 (N.D. Calif.) ; Jan-

ich Bros., Inc. v. American Distilling Co., supra, 570 F.2d

at 858; Hanson v. Shell Oil Co., supra, 541 F.2d at 1358-59.

Thus, even if the inaccurate and misleading nature of

Mr. Campbell’s testimony had not been revealed on cross-

examination, that testimony would have had little, if any,

relevance to plaintiff’s attempted monopolization charge

because Mr. Campbell did not even purport to show any

sales by Du Pont below its marginal or average variable

cost. Campbell, Tr. 869. And, as noted, there was no evi-

dence whatosever that any sales by Du Pont pursuant to

the March [30] 1971 list price reduction were below total

cost—much less marginal or average variable cost. Discus-

sion at pp. 23-24, supra. There was, in short, a complete

failure of proof at trial that Du Pont ever engaged in

predatory conduct of the type required to show a specific

intent to monopolize.

There is yet a further defect in plaintiff’s attempted

monopolization case against Du Pont. At no time following

70a

plaintiff’s entry into the refrigerant gas industry was

there a “dangerous probability”—or, indeed, any proba-

bility at all—that Du Pont somehow would achieve a

monopoly in the non-automotive replacement market for

refrigerant gas. During the 20-year period following the

expiration of the original fluorocarbon patents in 1949, Du

Pont’s share of the non-automotive refrigerant gas re-

placement market dropped continuously—from 100 percent

in 1949 to approximately 40 percent during the 1969-1972

period. Hibdon Direct, Tr. 11-12. The cases are uniform

in holding that where a company’s market share is not

close to the level recognized as the threshold of. monopoly

power (as Du Pont’s was not), and it faces competition

from strong and vigorous competitors, no “dangerous

probability” exists that a monopoly will be achieved. E.a.,

United States v. Empire Gas Corp., supra, 537 F.2d at 296

(attempted monopolization claim rejected where defen-

dant’s market share only 50 percent and it had powerful

rivals) ; Diamond International Corp. v. Walterhoefer, 289

F. Supp. 550 (D. Md. 1968) (51.1 percent of egg carton

market was insufficient to show a dangerous probability of

monopoly where defendant “vulnerable to competition”’).

In sum, plaintiff failed at trial to produce substantial

evidence of either monopolization or attempted monopoli-

zation by Du Pont. In fact, the evidence at trial was such

as to preclude, as a matter of law, findings [31] against

Du Pont on those claims. That portion of the jury’s verdict,

as a consequence, cannot be sustained.

III. Plaintiff Failed To Produce Substantial Evidence of Conspiracy

The law in this Circuit, as elsewhere, is that a conspi-

racy claim under the Sherman Act cannot be sustained

without proof of an agreement—that is, a “meeting of the

minds” or “conscious commitment” among the alleged con-

spirators—to engage in conduct that violates the antitrust

laws. E.g., Webb v. Utah Tour Brokers Ass’n, 568 F.2d

7la

670, 674-75 (10th Cir. 1977); Hanson v. Shell Oil Co.,

supra, 541 F.2d at 1359; Cacklng Acres, Inc. v. Olson

Farms, Inc., 541 F.2d 242, 244-45 (10th Cir. 1976), cert.

denied, 429 U.S. 1122 (1977). Although a conspiracy can be

established by circumstantial evidence (see, e.g., Theatre

Enterprises, Inc. v. Paramount Film Dist. Corp., 346 U.S.

037, 540-41 (1954) ), the burden always remains with plain-

tiff to prove by a fair preponderance of the evidence both

(1) that a conspiracy existed and (2) that, as a result of

the conspiracy, plaintiff suffered measurable damages.

Whether these elements are sought to be proved by direct

or circumstantial evidence, the “essential requirement is

that mere speculation be not allowed to do duty for proba-

tive facts * * *.” Galloway v. United States, supra, 319

USS. at 395,

The conspiracy charged in the present case is a con-

spiracy to reduce the price of refrigerant gas in the non-

automotive replacement market in order to drive plaintiff

out of business. Plaintiff admitted prior to trial, in answer-

ing interrogatories served by the defendants, that it had

“no knowledge of any specific meeting, conversation or

communication by which the claimed combination or con-

spiracy was formed or effectuated.” Ans. to Int. 11(b).

True to its word, plaintiff introduced no direct evidence at

trial of any conspiracy directed toward it—or, indeed, of

any [32] conspiracy involving the defendants having some

different purpose. In short, the success of plaintiff’s con-

spiracy claim was dependent throughout on plaintiff’s ad-

ducing persuasive circumstantial evidence of the alleged

conspiracy.

It is difficult to imagine a more complete failure of

proof than occurred here. Although plaintiff had almost

unlimited access to the files of all of the defendants for

several years, and took numerous depositions, the present

record contains no credible evidence—circumstantial or

otherwise—of the conspiracy alleged by plaintiff. As plain-

72a

tiff’s case developed at trial, it became clear that the

centerpiece of its conspiracy claim, as of its monopoliza-

tion claims, was the list price reduction first implemented

by Du Pont in March 1971. But the evidence showed con-

clusively that that price reduction was the product of

vigorous competition rather than of any conspiracy.

Because of this failure of proof, plaintiff's counsel was

forced to resort during closing arguments to unwarranted

speculation, mischaracterization of the evidence and an

appeal to the jurors’ emotions and possible prejudices.

Although these tactics apparently had their intended effect

on the jury, they cannot be allowed “to do duty for proba-

tive facts.” Galloway v. United States, supra, 319 US. at

395. The absence of substantial, credible evidence of a

conspiracy means that the conspiracy verdict cannot be

sustained.

A. The List Price Reduction First Implemented by Du Pont in

March 1971 Was the Product of Competition Rather Than

of Conspiracy

The reasons for, and some of the circumstances sur-

rounding, the decision by Du Pont in March 1971 to reduce

its list prices for refrigerant gas have already been dis-

cussed. See discussion at pp. 23-25 supra. As we showed

[33] there, although Du Pont billed the reduction as one

of 13 percent, it amounted in practical effect to an eight

percent reduction for some customers and to no reduction

at all for the approximately 50 percent of Du Pont’s custo-

mers who previously had been buying refrigerant gas from

Du Pont at the reduced price; the purpose of the list price

reduction, according to the Du Pont executives who were

responsible for it, was to stop the loss of sales and erosion

of Du Pont’s market share stemming from Du Pont’s

failure to remain competitive; finally, there was testimony

establishing that the existence of Daiflon played no role

in Du Pont’s decision to reduce its list prices.

73a

But even if it could be said that Du Pont’s March 1971

list price reduction was somehow unreasonable in terms

of its magnitude, or that the purpose of the reduction was

to injure Daiflon, those conclusions would not help plain-

tiff’s conspiracy claim. The question, so far as plaintiff’s

conspiracy allegation is concerned, is whether the reduction

was arrived at and implemented pursuant to a conspiracy

—an agreement—involving two or more of the defendants.

In fact, evidence of the absence of a conspiracy is over-

whelming.

Perhaps understandably, plaintiff’s counsel did not refer

during the closing arguments to the unrefuted evidence

concerning the manner in which Du Pont chose to announce

its March 1971 list price reduction to the trade. Mr.

Wright explained that aspect of the March 1971 reduction

as follows:

“Q. Did Du Pont initiate that price reduction?

“A. We did, indeed.

“Q. To what extent did you have any discussion with

any colupetitor prior to the initiation of that price

reduction?

[34] “A. None whatsoever. In fact, we didn’t put it in

writing, even, to make sure that we were able to

get it to all the customers verbally at the ap-

pointed hour on March 15th, we hoped. We had

very extensive meetings across the country, which

we had all travelled very extensively for, to pre-

pare everybody for the details of this move, this

particular move, and the reasons ‘or it.

“Q. To your knowledge, did anyone in DuPont dis-

cuss this price reduction with any of your com-

petitors?

“A. To our knowledge, it was a complete surprise to

all of our competition, which was precisely the

move we wanted to make.”

T4a

Wright, Deposition 195; see also id. at 187-188, 194-199;

O’Donnell, Deposition 91.

Plaintiff made no effort at trial to explain why Du Pont

made such elaborate efforts to communicate privately to

individual customers its decision to reduce its list prices.

Obviously, if Du Pont had arrived at the decision pursuant

to a conspiracy with the other defendants—and the other

defendants, as a consequence, already were aware of the

decision—the secrecy would have served no purpose. The

manner in which Du Pont chose to inform its customers

of the reduction is thus inconsistent with any notion of a

conspiracy.

Moreover, although plaintiff's counsel asserted repeat-

edly at trial that the other defendants moved “simultane-

ously” to meet Du Pont’s list price reduction (e.g., Hibdon

Cross-Examination, Tr. 4), the evidence is squarely to the

contrary. Union Carbide, for example, did not decide to

meet Du Pont’s list price reduction until late May 1971

—some 60 days after the effective date of Du Pont’s re-

duction. Pl. Exh. No. 4589, p. 7. It was not until May 19,

1971, that Allied Chemical adjusted its list prices down-

ward to meet the Du Pont competition (Pl. Exh. No, 514),

although [35] Allied had begun to meet the reduction at

individual accounts by the end of March. Pl. Exh. No.

1042. Kaiser did not alter its list prices until October

1971, making the reductions effective as of September 1,

1971. Sorensen, Deposition 93-94; Pl. Exh. No. 3719. As for

Pennwalt, the only evidence of the timing of Pennwalt’s

decision to reduce its prices was a Du Pont trade report,

written by a salesman after a survey of customers in the

field, reporting to Du Pont management as of March 30,

1971, that he had heard “[n]o word on Pennwalt as to

their reaction to our discount arrangement.” * Pl. Exh, No.

*To remedy this glaring lack of evidence, plaintiff’s counsel

grossly and inexcusably misread this document in his closing to

the jury as ‘‘No word yet from Pennwalt.’’ Crawford Tr. 1482,

Line 10 (emphasis supplied).

75a

1042. Finally, Racon reacted quickly to Du Pont’s surprise

across-the-board price decrease of March 15, 1971. Racon’s

management, while admittedly still somewhat confused

about the extent of “the recent price moves”, decided even

before the situation was “completely clarified” to move to

meet this price competition “retroactive to 3-15-71” and

formally instructed its sales force by memorandum dated

April 1, 1971, to “move promptly to meet this competition

(where offered)... . Do not lose any business!” Pl. Exh.

No. 5024.

There is absolutely no evidence that any defendant com-

pany knew either that the price decrease was coming or

Du Pont’s reason for deciding to reduce prices.

The evidence thus belies plaintiff’s assertions that the

defendants reduced their list prices “simultaneously” on

March 15, 1971. As word of the Du Pont list price reduc-

tion spread throughout the industry, the other defendants

decided individually—over a period of almost six months

—to meet the Du Pont reduction, There also was substan-

tial evidence indicating why the other defendants had little

choice but to reduce their list prices in response to Du

Pont’s actions.

[36] One of plaintiff’s expert witnesses, Dr. Benton Gup,

testified, for example, that as an economist, he would ex-

pect the price of refrigerant gas to “be the same through-

out the industry.” Gup, Tr. 1075. Following that statement,

the following exchange occurred:

“Q. Well, is this charging of identical prices, that you

presuppose, a perfectly normal competitive re-

action?

“A. For homogeneous products?

“Q. Yes.

“A. Yes.

76a

“Q. Why is that?

“A. It’s a natural market mechanism among competi-

tors.”

Gup, Tr. 1076. Dr. Gup then was asked what would hap-

pen if one of the domestic manufacturers decided to try

to sell its refrigerant gas at a price above the price being

charged by its competitors. Dr. Gup responded: “He

[would] lose market share.” Gup, Tr. 1076-1077. Finally,

Dr. Guy agreed that, if one manufacturer lowered its price,

the other manufacturers would be forced to lower their

prices “pretty quick” as well. Gup, Tr. 1077. Accord, e.g.,

Jadlow, Tr. 1217; Hibdon Direct, Tr. 24-25; Carter, Tr.

113.

The validity of the unanimous expert opinion on this

matter, and of its applicability to the refrigerant gas in-

dustry, is dramatically illustrated by an internal Union

Carbide document entitled “The Fluorcarbon Market—

Competitive Situation and UCC Pricing Strategy 1967

Through 1971.” Pl. Exh. No. 4589. As already noted, Union

Carbide did not respond to Du Pont’s March 1971 list price

reduction until late May 1971. Pl. Exh. No. 4589 reveals

that this two-month delay had a devastating effect on

Union Carbide’s sales:

“Competitive price action in the Replacement Refrig-

erants (cylinders) rapidly increased in intensity in the

[37] early part of 1971 as the refrigeration season got

underway. The UCC position through the first part of

the season was to reject all competitive price offers

in an effort to maintain the Pennwalt January, 1971

price increase. We were forced to retreat from this

position late in May, 1971 as it became very obvious

that we were losing position at a catastrophic rate.

As a result, UCC lost market share in the Replace-

ment Market by the end of 1971 (about 2%).”

77a

The sales losses that Union Carbide suffered because

of its failure to respond quickly to Du Pont’s March 1971

list price reduction amounted to some 5,000,000 pounds

of refrigerant gas in 1971 alone, Napoli, Deposition 66.

This is two and 4 million pounds more than Daiflon sold

during its entire four-year existence. Def. Exh. No. 91. To

suggest that Union Carbide delayed responding to Du

Pont’s list price reduction until the effects on Union Car-

bide’s sales were “catastrophic,” but that Du Pont’s actions

nonetheless were pursuant to a conspiracy with Union Car-

bide and the other defendants, borders on the ludicrous.

See also Sorensen, Deposition 91-94.

If plaintiff had made an analysis of the refrigerant gas

industry before deciding to begin importing refrigerant

gas from Japan, rather than simply assuming that the in-

dustry had been and would continue to be a “high profit”

business for everyone involved (Carter, Tr. 104),° [38] it

* During the final portion of his closing argument, plaintiff’s

counsel referred to Pl. Exh. No. 1311 as showing

‘*lfo]bviously high profits. There is no—they don’t refute it.

It’s $3.19 profit they were making on a product they were

selling for $3.96. Why didn’t they say something about that?

It shows the high profits, * * *’’ Crawford, Tr. 44.

What plaintiff’s counsel failed to tell the jury was that (1) the

product on which Du Pont had realized a profit of $3.19 per pound

was F-13, a product not involved in this case (Daiflon sold only

R-11, R-12 and R-22); (2) Du Pont had a patent covering F-13,

so that it could not be manufactured by any other company; and

(3) the purchaser in the transaction referred to by counsel was

the Linde Division of Union Carbide. Thus, counsel’s references

to Pl. Exh. No. 1311 were both misleading and prejudicial—and

the portion of the exhibit counsel relied upon is itself irrelevant

to this vase.

The only evidence at trial of the profits realized by the de-

fendants on R-11, R-12 and R-22 (the products at issue here) in

the non-automotive replacement market was the testimony of Pro-

fessor Hibdon. Professor Hibdon testified that there was no evi-

dence of the defendants making monopoly profits and, in fact,

there was evidence to the contrary. Hibdon, Re-Direct Tr. 43.

78a

would have discovered that there was nothing unique

about the list price reduction made by the defendants at

various times in early 1971. As demonstrated by the testi-

mony of Professor James Hibdon, actual transaction prices

for fluorocarbon products, including refrigerants, had been

declining precipitously during the entire ten-year period

preceding plaintiff’s entry in the business. Hibdon Direct,

Tr. 20. The primary reason for this price deterioration

was, according to Professor Hibdon, the substantial over-

capacity that existed. Hibdon Direct, Tr. 20-21, Accord

e.g., Wright Deposition 188. Indeed, the price declines were

most severe during the 1960s in refrigerant grade 22, which

is the grade of refrigerant gas on which plaintiff chose to

concentrate its sales efforts. Hibdon Direct, Tr. 22.

In sum, there is no evidence that the list price reduction

about which plaintiff has complained was other than a nor-

mal, and entirely lawful, competitive reaction to market

realities. Plaintiff’s failure to produce substantial evidence

to the contrary means that the conspiracy verdict in this

case cannot stand. As noted, plaintiff’s position at trial was

that the effect of the defendants reducing their list prices

in early 1971 was to “stop” plaintiff’s sales. Carter, Tr.

196. According to plaintiff’s counsel, by June 1971 “[t]hey

were out, and they realized they were out, and the bank

advised them to go through whatever they called it, an

orderly liquidation or something of that nature.” Crawford,

Tr. 1388. Even if [39] these assertions are accepted at face

value, and the admittedly “disastrous” impact on plain-

tiff’s business of the import surcharge that was imposed in

August 1971 is ignored (Def. Exh. No. 9), there simply

is no basis for finding that plaintiff's failure was the result

of conspiratorial conduct by the defendants.

B. There Was No Other Credible Evidence At Trial of the

Alleged Conspiracy

The other pieces of evidence that plaintiff relied upon

do not, either singly or in combination, provide substan-

79a

tial evidence to support plaintiff’s conspiracy claim. In-

deed, none of this evidence warrants more than summary

analysis.

1. The opportunity to conspire. Plaintiff attempted

to make much at trial of the fact that representatives

of various of the defendants sometimes attended trade

association meetings. Attendance at those meetings,

according to plaintiff, means that the defendants had

the “opportunity” to conspire.” Crawford, Tr. 1469-

1482.

But there was no evidence that Daiflon, or Japanese

refrigerants, was discussed at any trade association

meeting attended by representatives of one of more

of the defendants. See, e.g., Napoli, Deposition 220-

221; Ward, Deposition 107-108; Wright, Deposition

205; Regan, Deposition 84-86. Indeed, there is no rea-

son to believe that attendance at trade association

meetings gave the defendants any more “opportunity”

to conspire than did the fact that executives of the

defendants, responsible for the sale of refrigerant gas,

each presumably had access to telephones.

[40] 2. Market intelligence activities. A substantial

amount of trial time was consumed by plaintiff’s effort

to prove that each of the defendants attempted to

gather information about Daiflon, both to determine

whether Daiflon’s Japanese supplier was violating

federal anti-dumping laws and to obtain a sense of the

nature and size of Daiflon’s operations. There is no

dispute that some of these activities occurred, even if

Mr. McDonald acknowledged that representatives of A. Y.

McDonald Company attended trade association meetings. McDon-

ald, Tr. 570. Mr. Adams acknowledged that he had attended trade

association meetings in the past. Adams, Tr. 721.

80a

they were not always successful.’ But neither is there

any basis for suggesting that such activities are other

than a normal, and entirely appropriate, aspect of the

competitive process,

Defendants had a constitutional right to investigate

the possibility of a dumping violation by Daiflon’s

Japanese supplier, even though the exercise of that

right might have been intended to harm Daiflon. 19

U.S.C. § 160 et seq.; Eastern R. R. Conf. v. Noerr

Motor Freight, Inc., 365 U.S. 127, 135-45 (1961). Sim-

ilarly, true competition could not exist if individual

companies were required to close their eyes to the

activities of their competitors, or risk violating the

federal antitrust laws. And there is no evidence at

all tending to show that the defendants shared among

themselves information as to Daiflon’s costs, prices or

methods of distribution. Such market intelligence ac-

tivities are indicative of the vigorous competition [41]

that existed in the refrigerant gas industry during the

period encompassed by this case.

3. Distribution patterns. A significant portion of the

exhibits that plaintiff offered at trial were letters from

certain of the defendants declining to sell refrigerant

gas directly to the individuals or companies involved.

Plaintiff’s counsel repeatedly used the phrase “Dear

John letters” to refer to these exhibits, suggesting that

the exhibits somehow revealed improper conduct by

the defendants, F.g., Crawford, Tr. 1449-1452.

An illustration of the deficiencies of defendants’ market in-

telligence activities is Pl. Exh. No. 4552. As of April 28, 1971—

fully one month after defendants are alleged to have*conspired to

reduce the price of refrigerant gas to drive Daiflon out of busi-

ness—at least two of the alleged co-conspirators were unaware of

Daiflon’s source of supply. Indeed there is a suggestion in the ex-

hibit that one of the other domestic manufacturers (a purported

co-conspirator here) was supplying refrigerant gas to Daiflon.

Sla

In fact, each of the defendants is entitled by law to

determine with whom it wishes to do business. There

was absolutely no evidence that the defendants com-

municated among themselves concerning the selection

of whoiesale outlets for their refrigerant products.”

[42] Nevertheless, plaintiff's counsel persisted during

his examination of witnesses, as well as in closing ar-

guments, in referring to “their |[—the defendants’—]

approved list,” implying that there was some common

list approved by defendants pursuant to agreement

among them. F.g., Crawford Rebuttal, Tr. 28. Objec-

tions to this tactic did not deter counsel from continu-

ing this course of purposefully misleading the jury.

E.g., Hibdon Direct, Tr. 8-13. Although the jury may

have been unable to appreciate that the “Dear John

2 1t is instructive in this regard to recall the deposition testi-

mony of Mr. Harold Gresham, which was often referred to by

plaintiff’s counsel during closing arguments as showing that the

defendants had ‘‘allocated’’ the refrigerant gas replacement mar-

ket among themselves. E.g., Crawford, Tr. 1498-1503. Although

Mr. Gresham used the word ‘‘allocation’’ in his deposition (Gres-

ham, Deposition 16), it is apparent that Mr. Gresham’s definition

of that word bore no relation to the definition supplied by plain-

tiff’s counsel or to the kind of market allocation that is of concern

under the antitrust laws. When asked to define what he meant in

using the word ‘‘allocation,’’ Mr. Gresham responded:

‘* Well, there’s [a] certain percent of the market that Kaiser

was getting, and it was my impression from management that

we would try to maintain that percent of the market and not

really go all out with any particular account and try to

change it. * * * It was my understanding, now, that with

Kaiser we expected, or we wanted a much larger percent of

the market, and that if we went after a much larger percent

of that, that we would suffer pricewise * * *.’’ Gresham,

Deposition 179.

In addition, Mr. Gresham stated specifically that he had no

reason to believe that any of the decisions made by his superiors

at Kaiser were based on agreements, understandings or discus-

sions with any of the other manufacturers of refrigerant gas.

Gresham, Deposition 183.

82a

letters” do not constitute evidence of a conspiracy, the

fact that plaintiff felt compelled to emphasize the let-

ters is indicative of the weakness of plaintiff’s case.

Furthermore, although plaintiff attempted at trial

to minimize the significance of the import surcharge

and the subsequent devaluation by suggesting that “it

ran out of customers, not gas” (Crawford, Tr. 546-

547; McDonald, Tr. 547, 609) it made no effort to ex-

plain why it ran out of customers or on what basis

defendants could be held responsible for that develop-

ment. Plaintiff made no effort to establish, for exam-

ple, that “it ran out of customers” in June 1971 be-

cause the defendants began, as part of the alleged

conspiracy, to sell refrigerant gas directly to custo-

mers of Daiflon to whom they previously had refused

to sell.

4, Late 1972 price increases. Plaintiff’s counsel also

argued that the list price increases that occurred in

October 1972, at about the same time that Daiflon

made its last sale of refrigerant gas, indicate that

the defendants waited until Daiflon had been excluded

from the business before permitting prices to increase.

Crawford, Tr. 17-19. There is no credible evidence to

support this theory.

[43] Mr. Don Napoli of Union Carbide, which ini-

tiated the October 1972 price increase, testified that the

Union Carbide business team had begun to discuss in

late 1971 and early 1972 the possibility of raising Car-

bide’s list prices in October 1972, after the busiest

portion of the air conditioning season had ended.

Napoli, Deposition 53-54. The reason for Union Car-

bide’s decision to increase its list prices at that time,

as explained by Mr. Napoli, was “to attempt on our

own * * * to cover increasing costs consistent with

Federal Regulations.” (Emphasis supplied.) Napoli,

Deposition 203.

83a

Mr. Napoli also testified that, because the other de-

fendants decided to continue to sell their refrigerant

gas at prices below Carbide’s increased list prices,

Carbide was soon forced to rescind the increase in

order to avoid losing sales:

“Q. Why did you find it necessary to change your

price schedule that you had just issued in

October?

“A. Because after competition announced their

price decreases, and other competitors did

likewise, we found ourselves in a_ position

where we would lose all our business as a

result of feedback we got from our customers,

saying they would no longer buy from us.”

Napoli, Deposition 196.

In short, there was no evidence that the list price

increases announced in the Fall of 1972 were conspi-

ratorial. And there is no evidence that any defendant’s

decision to increase list prices at that time was moti-

vated or influenced by Daiflon’s exit from the market.

Given this complete failure of proof with regard to

the 1972 price increases, the fact of the increases does

not permit any inference that the 1971 list price reduc-

tion, about which plaintiff complains, was arrived at

pursuant to a conspiracy or that it was directed at

plaintiff.

[44] In sum, this case has been pending in the federal

courts, in one form or another, for over seven years.

Plaintiff was given every opportunity during that time to

search through each of the defendants’ files, to take deposi-

tion testimony from employees of the defendants, and to

discover any pertinent evidence that might be possessed

by non-party witnesses. Despite this opportunity plaintiff

has failed miserably to produce credible evidence of any

conspiracy. It has fared no better with its belated monop-

84a

olization and attempted monopolization claims against Du

Pont, The only result, consistent with the legal principles

governing plaintiff’s substantive claims, would be to enter

judgment n.o.v. for the defendants.

IV. All Defendants Are Entitled To Judgment Because of

Plaintiff's Failure To Prove Impact and Damages

Going into the trial, Daiflon had taken the position that

its only damages are the fair market value of its allegedly

destroyed business, as calculated by Dr. Benton Gup. This

damage claim was set out in plaintiff’s Supplemental Re-

sponse to Defendants’ Third Set of Interrogatories, filed

in July 1977."* Dr. Gup’s damage computation was asserted

to be the sole basis for Daiflon’s damages claim by Mr.

Carter during his deposition in November 1977 (page 13),

and this deposition testimony was reaffirmed by Mr. Carter

at trial. Carter, Tr. 275.

As we will show, however, for a number of reasons, Dr.

Gup’s damage computations—the exclusive basis of Dai-

flon’s claim for damages—are legally insufficient to permit

any damage award.

[45]

A. Gup Was Not Competent To Introduce the Conclusions of

Another Expert (Iskander)

On the basis of his limited expertise, all that Dr. Gup

could put before the jury were his ranges of various as-

sumed values (such as “minimum,” “most likely” and “max-

imum” market share, ete.), which are shown in the chart

entitled “Financial Model Used to Determine Value of Dai-

flon, Inc. Def. Exh. No. 79. To get from this collection of

‘The method and numbers used in that interrogatory answer

are those that went into Dr. Gup’s trial testimony and into the

two exhibits (Def. Exh. Nos. 79 and 80) that he used to illustrate

his testimony.

85a

numbers to the claimed most likely fair market value of

Daiflon of $2.96 million, Dr. Gup employed a computer

programmer, Mr. Fadel Iskander, who wrote and ran the

program that resulted in the $2.96 million figure that Dr.

Gup then proffered as his own. However, Dr. Gup ad-

mitted that he had simply relied on Iskander, that he

(Gup) had not checked the program, and that he (Gup)

was in fact not even competent to read the program, Gup,

Tr. 962, 966, 1021, 1028.

A report prepared by one expert (Iskander) cannot just

be adopted and proffered by a different expert who is on

the stand (Gup). 6816.5 Acres of Land vy. United States,

411 F.2d 834, 839-40 (10th Cir. 1969). This is particularly

so when the absent expert’s report is prepared for the

specific purpose of the litigation. See also the precisely

in-point discussion of Rule 703 of the Federal Rules of

Evidence in Carlin v. Zimmer Manufacturing Co., ——

F.Supp. —— (E.D. Pa. 1978), a copy of which is attached

for the Court’s convenience.

B. Gup’s Damage Theory Improperly Assumed a Daiflon Sales

Price Prevailing During Defendants’ Alleged Conspiracy To

Raise Prices

A key assumption made by Dr. Gup in valuing Daiflon

was that Daiflon would most likely be getting a price of

60¢/lb. in the marketplace for its products. If that assump-

tion cannot stand, Dr. Gup’s assumption as to net income

[46] (putting to one side the separate infirmities which

that net income figure has) of course cannot stand either.

It is absolutely clear that no claim for damages can

validly be based on this 60¢/lb. price. This is because, in

assuming that in the base year (1972) Daiflon would be

getting the same price as the defendants (this being a

homogeneous product), Dr. Gup also assumed that this

60¢/lb. price was then being charged by the defendants

pursuant to a conspiracy to keep the price as high as 60¢/

86a

lb. Gup, Tr. 1069-1070. A theory of damages that measures

what plaintiff would have done by reference to the bene-

ficial, protective umbrella of defendants’ alleged conspi-

racy is legally impermissible. Eastman Kodak Co. v. South-

ern Photo Materials Co., 273 U.S. 359, 376-78 (1927). See

also Murphy Tugvoat Co. v. Crowley, supra, 1978-2 Trade

Cases {62,172 (N.D. Calif.).

:C. Gup’s Damage Theory Also Falls Because He Was Completely

Wrong About One of The Most Important Facts—The Market

Share That Daiflon Actually Had Attained—Underlying His

Theory

Dr. Gup’s damage theory also is invalid because he was

totally wrong about what he acknowledged was one of the

most important facts underlying his assumption that Dai-

flon would most likely have had 2 percent of the market.

He acknowledged that market share is a “critical” number

in valuing a company. Gup, Tr. 1089. And he admitted that

“one of the most important facts” in coming up with the 2

percent “most likely” market share assumption was his

belief that Daiflon actually had attained a 2 percent share

of the market. Dr. Gup stated that he had seen the 2 per-

cent figure in some balance sheet. Gup, Tr. 1089-1094.

But Dr. Gup was absolutely and incontrovertibly wrong

about the market share Daiflon had attained. On his own

figures, 2 percent of the relevant market is 2.84 million

pounds per year. Def. Exh. Nos. 74 and 79. Daiflon [47]

never attained more than about one third of that. And

the balance sheet that Dr. Gup was referring to exists

only in his imagination.

Mr. Carter acknowledged that Daiflon’s sales never

amounted to more than somewhere in the range of $42

million a year. Carter, Tr. 266. Daiflon’s financial statement

for the fiscal year ending February 28, 1971 (Pl. Exh. No.

9), shows refrigerant sales of $417,475. Its

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