Appendix — Allied Chemical Corp. v. Daiflon, Inc.
Supreme Court brief1980
Ask Donna
What actually matters in this document.
Text
Supreme Court, U. $
FILED
JUL29 1980
No. 79-1895 MICHAEL ROOAK, IR, CLERK |
IN THE
Supreme Court of the United States
October Term, 1979
ALLIED CHEMICAL CORPORATION, ET. AL.,
Petitioners,
VERSUS
DAIFLON, INC.,
Respondent.
Appendix
To Brief of Respondent in Opposition to Petition
for a Writ of Certiorari to the United States
Court of Appeals for the Tenth Circuit
B. HAYDEN CRAWFORD
1714 First National Bank Bldg.
Tulsa, Oklahoma 74103
JOEL L. WOHLGEMUTH
909 Kennedy Building
Tulsa, Oklahoma 74103
FRANK GREGORY
4107 South 72nd East Avenue
Tulsa, Oklahoma 74145
Attorneys for the Respondent,
Daiflon, Inc.
TYPE SERVICE COO, Law Beret Printirie Disisnon, SOS Chiaker | an) Wer VE
i
No. 79-1895
IN THE ,
Supreme Court of the United States
October Term, 1979
ALLIED CHEMICAL CORPORATION, ET. AL.,
Petitioners,
VERSUS
DAIFLON, INC.,
Respondent.
Appendix
To Brief of Respondent in Opposition to Petition
for a Writ of Certiorari to the United States
Court of Appeals for the Tenth Circuit
INDEX
Page
Appendix A
Special Verdict, March 30, 1979, United States Dis-
trict Court for the Western District of Oklahoma... la
Appendix B
Proposed Judgment, April, 1979, United States Dis-
trict Court for the Western District of Oklahoma.. 6a
Appendix C
Judgment, April 9, 1979, United States District Court
for the Western District of Oklahoma............ Ta
Appendix D
Order, March 22, 1979, United States District Court
for the Western District of Oklahoma............ 10a
Appendix E
Plaintiff’s Response to Defendants’ Motion for Judg-
ment Notwithstanding the Verdict and for New Trial,
United States District Court for the Western District
SE sev ca ta Gee ee ReER REDE COS SEERA l4a
Appendix F
Petition for Writ of Mandamus and/or Writ of Pro-
hibition, United States Court of Appeals, Tenth
EN Le ee alot ae ha ong eh eee we 146a
Appendix G
Order, August 10, 1979, United States Court of
Mi, | 180a
Appendix H
Petitioner’s Narrative Statement of the Case, United
States Court of Appeals, Tenth Circuit............ 182a
Appendix I
Respondents’ Narrative Statement of Facts, United
States Court of Appeals, Tenth Circuit............ 308a
ll
Page
Appendix J
Reply of Petitioner to Respondents’ Answer to
Petition for Writ of Mandamus and/or Writ of
Prohibition, United States Court of Appeals,
TO COR ons bb h.b0 0b 00440005 eee eee 339a
Appendix K
Order, March 5, 1980, United States Court of
Apoeds, TN CHORE oo sist rcascavdsseueleanl 372a
Appendix L
Letter, March 26, 1980, From B. Hayden Crawford
to The Honorable Luther Bohanon.............. 373a
Appendix M
Order, April 7, 1980, United States District Court
for the Western District of Oklahoma............ 375a
Appendix N
Order Denying Second Petition for Rehearing, June
6, 1980, United States Court of Appeals, Tenth
COU ioc rdve bd vdus doseiact+e eee 379a
la
APPENDIX A
No. CIV-72-483-B
IN THE UNITED STATES DISTRICT COURT
FOR THE
WESTERN DISTRICT OF OKLAHOMA
Daiflon, Inc.,
Plaintiff,
VS.
Allied Chemical Corporation;
E. I. du Pont de Nemours and Company;
Kaiser Aluminum & Chemical Corporation;
Kaiser Aluminum & Chemical Sales, Inc.;
Pennwalt Corporation;
Racon Incorporated;
Union Carbide Corporation,
Defendants.
SPECIAL VERDICT
We, the jury, make the following findings in response
to the questions asked:
Be
DO YOU FIND BY A PREPONDERANCE OF THE
EVIDENCE THAT TWO OR MORE DEFEND-
ANTS HAVE UNLAWFULLY CONSPIRED WITH
EACH OTHER IN VIOLATION OF FEDERAL
ANTITRUST LAWS? of
YES NO
(If your answer is ‘‘NO’’, do not answer the next
question but go on directly to answer the questions
on page 2.)
2. IF YES, NAME THE DEFENDANTS WHO CON-
2a
SPIRED WITH EACH OTHER TO DO THAT, IN
THE SPACE BELOW:
Du Pont, Allied Chemical, Kaiser,
Pennwalt, Union Carbide, Racon.
(All Defendants, Inclusive)
(Whatever your answer to the questions on this page
is, gO On to answer the questions on page 2.)
March 30, 1979 /s/ Michael Nord
Date Foreman
3. DO YOU FIND BY A PREPONDERANCE OF THE
EVIDENCE THAT DU PONT’S SHARE OF THE
NON-AUTOMOTIVE REFRIGERANT GAS RE-
PLACEMENT MARKET DURING THE PERIOD
1969-1972 EXCEEDED FIFTY PERCENT (50%)?
YES NO
4. DO YOU FIND BY A PREPONDERANCE OF THE
EVIDENCE THAT DU PONT HAD THE
SPECIFIC INTENT TO ACQUIRE MONOPOLY
POWER AND THAT THERE WAS A DANGER-
OUS PROBABILITY THAT IT WOULD ULTI-
MATELY DO SO?
YES v NO
5. DO YOU FIND BY A PREPONDERANCE OF THE
EVIDENCE THAT DU PONT HAD MONOPOLY
POWER DURING THE PERIOD 1969-1972 (THAT
IS, THE POWER TO EXCLUDE COMPETITORS
FROM THAT MARKET OR TO PRICE AND SELL
ITS PRODUCTS WITHOUT REGARD TO
THE PRICES BEING CHARGED BY ITS
COMPETITORS)?
YES vA NO
3a
(If your answer is ‘‘NO’’, do not consider or answer
any further question on this page.)
(If your answer is ‘‘YES’’, go on to question 6.)
6. IF YOU FOUND THAT DU PONT POSSESSED
MONOPOLY POWER, WAS SUCH POWER:
(1) WILFULLY AND UNLAWFULLY AC-
QUIRED OR MAINTAINED BY DU PONT;
OR, INSTEAD WAS IT
(2) LAWFULLY ACQUIRED THROUGH NOR-
MAL GROWTH AND DEVELOPMENT, AS A
CONSEQUENCE OF BUSINESS ACUMEN,
OR THROUGH HISTORICAL ACCIDENT?
MONOPOLY POWER WAS WILFULLY AND
UNLAWFULLY ACQUIRED_“ _
MONOPOLY POWER WAS LAWFULLY
ACQUIRED
(Whatever your answer to the questions on this page
is, gO On to answer the questions on page 3.)
March 30, 1979 /s/ Michael Nord
Date Foreman
7. DO YOU FIND BY A PREPONDERANCE OF THE
EVIDENCE THAT DAIFLON’S BUSINESS AND
PROPERTY LOSSES WERE PROXIMATELY
CAUSED:
(1) BY A CONSPIRACY TO DIRECTLY EX-
CLUDE DAIFLON OR MONOPOLIZE THE
RELEVANT MARKET; OR BY DU PONT’S
INDIVIDUAL MONOPOLIZATION EF-
FORTS; OR
(2) FOR OTHER REASONS NOT RELATED
TO ANTITRUST VIOLATIONS BY ANY
DEFENDANTS?
4a
DAIFLON FAILURE CAUSED BY CONSPIR-
ACY, OR BY DU PONT’S e* plied
MONOPOLIZATION EFFORTS
DAIFLON FAILURE CAUSED BY _ REA-
SONS NOT RELATING TO ANTITRUST
VIOLATIONS
(If you check ‘‘failure caused by reasons not relating
to antitrust violations,’ do not answer the remaining
questions)
. IF YOU ANSWERED QUESTION 7 THAT THE
FAILURE WAS CAUSED BY CONSPIRACY OR
DU PONT’S INDIVIDUAL MONOPOLIZATION
EFFORTS, WAS THE SUBSTANTIAL CAUSE
CONSPIRACY, DU PONT’S INDIVIDUAL
MONOPOLIZATION EFFORTS, OR BOTH?
CONSPIRACY ONLY
DU PONT’S INDIVIDUAL MONOPOLIZA-
TION EFFORTS ONLY
BOTH
(Go on to answer question 9.)
. DO YOU FIND THAT PLAINTIFF HAS PROVED
BY A PREPONDERANCE OF THE EVIDENCE
THE REASONABLE VALUE OF ITS BUSINESS
AND PROPERTY LOSSES, OR DO YOU FIND
THAT ITS EVIDENCE IS INSUFFICIENT OR
TOO SPECULATIVE?
a PROVED THE VALUE OF ITS LOSSES
EVIDENCE INSUFFICIENT OR TOO SPECU-
LATIVE_
(If you checked ‘‘evidence insufficient or too specula-
tive,’’ do not answer the remaining question.)
Sa
10. IF YOU ANSWERED QUESTION 9 BY SAYING
THAT PLAINTIFF HAS PROVED THE REA-
SONABLE VALUE OF ITS BUSINESS AND
PROPERTY LOSSES, STATE HERE THE DOL-
LAR AMOUNT OF THAT VALUE:
$2,500,000.00
March 30, 1979 /s/ Michael Nord
Date Foreman
6a
APPENDIX B
No. 72-C-483-B
IN THE UNITED STATES DISTRICT COURT
FOR THE
WESTERN DISTRICT OF OKLAHOMA
DAIFLON, INC.,
Plaintiff,
VS.
ALLIED CHEMICAL CORPORATION;
E. 1. DUPONT DE NEMOURS AND COMPANY;
KAISER ALUMINUM & CHEMICAL CORPORATION;
KAISER ALUMINUM & CHEMICAL SALES, INC.;
PENNWALT CORPORATION;
RACON INCORPORATED;
and UNION CARBIDE CORPORATION,
Defendants.
JUDGMENT
This action came on for trial before the Court and a
jury, the Honorable Luther Bohanon, United States
District Judge, presiding, and the issues having been duly
tried and the jury having duly rendered its special verdict,
itis ORDERED AND ADJUDGED
That the plaintiff, Daiflon, Inc., recover of the
defendants, Allied Chemical Corporation, E. I. DuPont
de Nemours and Company, Kaiser Aluminum & Chemical
Corporation, Kaiser Aluminum & Chemical Sales, Inc.,
Pennwalt Corporation, Racon Incorporated, and Union
Carbide Corporation, the sum of $7,500,000.00, which is
threefold the damages sustained by plaintiff as determined
by the jury, with interest at the rate of 10% per annum as
provided by law, reasonable attorneys’ fees to be subse-
quently determined by the Court, and its costs of action.
7a
DATED at Oklahoma City, Oklahoma this
day of April, 1979.
CLERK OF COURT
APPROVED:
The Honorable Luther Bohanon
United States District Judge
8a
APPENDIX C
No. CIV-72-483-B
IN THE UNITED STATES DISTRICT COURT
FOR THE
WESTERN DISTRICT OF OKLAHOMA
DAIFLON, INC.,
Plaintiff,
VS.
ALLIED CHEMICAL CORPORATION;
E. 1 DUPONT DE NEMOURS AND COMPANY;
KAISER ALUMINUM & CHEMICAL
CORPORATION;
KAISER ALUMINUM & CHEMICAL SALES, INC.;
PENNWALT CORPORATION;
RACON INCORPORATED;
and UNION CARBIDE CORPORATION,
Defendants.
2
JUDGMENT
This action came on for trial before the court and a
jury, the Honorable Luther Bohanon, United States
District Judge, presiding, and the issues having been duly
tried and the jury having duly rendered its special verdict,
itis ORDERED AND ADJUDGED
That the plaintiff, Daiflon, Inc., recover of the
defendants, Allied Chemical Corporation, E. I. DuPont
de Nemours and Company, Kaiser Aluminum & Chemical
Corporation, Kaiser Aluminum & Chemical Sales, Inc.,
Pennwalt Corporation, Racon Incorporated, and Union
Carbide Corporation, the sum of $2,500,000.00 which are
the damages sustained by plaintiff as determined by the
jury, with interest at the rate of 10 percent per annum as
9a
provided by law, reasonable attorneys’ fees and costs to be
subsequently determined by the court.
Dated this 9th day of April, 1979.
/s/ Luther Bohanon
UNITED STATES DISTRICT JUDGE
ENTERED IN JUDGMENT DOCKET ON 4-9-79
10a
APPENDIX D
No. CIV-72-483-B
IN THE UNITED STATES DISTRICT COURT
FOR THE
WESTERN DISTRICT OF OKLAHOMA
DAIFLON, INC.,
Plaintiff,
VS.
ALLIED CHEMICAL CORPORATION,
et al.,
Defendants.
ORDER
The extremely large number of exhibits at issue in this
case precludes a detailed discussion by the court of each
exhibit’s admissibility. Lists have been prepared, attached
hereto, recording the court’s rulings. Where admission is
refused, it is generally because the relevancy or compe-
tency of the exhibit has not been established, or because it
is unduly prejudicial relative to its probative value, or
unduly confusing or illegible, or because it involves inad-
missible hearsay.
Where plaintiff’s request for admission designated
only a portion of an exhibit, only that portion has been
considered, and only that portion, if any, has been ad-
mitted into plaintiff’s case. The remaining portions of such
documents are admitted only to the extent that defendants
choose to refer to such in presenting their view of an ex-
hibit’s significance, and, then, only to the c«tent such por-
tions are admissible under the rules of evidence.
Plaintiff has previously been requeste. »y the court to
furnish in writing the basis for each exhibit’s proposed
admission. Any of plaintiff’s exhibits not referred to on
lla
the attached lists, whose admissibility is heretofore
unresolved, are denied admission at this time as not having
been submitted to the court in timely fashion and proper
form.
Dated this 22nd day of March, 1979.
/s/ Luther Bohanon
UNITED STATES DISTRICT JUDGE
ADDENDUM TO ORDER
As to the disputed Pennwalt documents, the follow-
ing exhibits, or designated portions thereof, are admitted:
4001 4005 4008 4026 4028
4031 4036 4042 4134 4135
4006
The following exhibits are denied admission:
4000 4003 4007 4076 4142
As to the disputed Racon documents, the following
exhibits, or designed portions thereof, are admitted:
4000 4003 4007 4076 4142
As to the disputed Racon documents, the following
exhibits, or designed portions thereof, are admitted:
5000 5001 5002 5003 5004
5005 5006 5027 5036 5164
5165
Exhibit 5007 is denied admission.
As to the disputed Allied Chemical documents, the
following exhibits, or designated portions thereof, are
admitted:
3000 3001 3010 3011 3013
3014 3016 3019 3025 3042
3043 3045 3066 3074 3103
3065 9069
12a
The following exhibits are denied admission:
3002 3007 3009 3015 3033
3041 3046 3057 3125
As to the disputed Kaiser Aluminum documents, the
following exhibits, or designated portions thereof, are
admitted:
3503 3508 3509 3510 3512
3560 3666 3669 3678 3679
3733 3734 8030 8034 3558
The following exhibits are denied admission:
3667 3668 3675 3676 3677
3680 3682 8000 8032 8042
8008 8053 8056 8062
As to the disputed Union Carbide documents, the
following exhibits, or designated portions thereof, are
admitted:
4500 ASO1 4506 4512 4513
4516 4521 4526 4547 4552
4554 4556 4557 4558 4559
4563 4577 4589
Exhibits No. 4569 and 4593 are denied admission.
As to the disputed DuPont documents, the following
exhibits, or designated portions thereof, are admitted:
1001 1009 1015 1036 1044
1062 1065 1095 1203 1223
1260 1267 1274 1296 1297
1301 1303 1308 1309 1311
1320 1321 1322 1323 1325
1326 1329 1330 1335 1336
1337 1339 1340 1341 1342
1343 1344 1345 1346 1347
1348 1351 1353 1354 7074
7092 7116 7118 7122
l3a
The following exhibits are denied admission:
1000 1024 1041 1045 1046
1048 1049 1051 1052 1067
1076 1077 1087 1100 1101
1103 1186 1187 1190 1191
1193 1195 1215 1216 1217
1220 1221 1229 1255 1268
1270 1271 1272 1299 1302
1307 1317 1327 1328 1331
1332 1333 1334 1338 1349
1350 1352 7000 7015 7035
7037 7047 7053 7054 7055
7058 7059 7066 7067 7071
7072 7073 7076 7078 7079
7082 7090 7091 7094 7100
7101 7102 7123 7124
l4a
APPENDIX E
IN THE UNITED STATES DISTRICT COURT
FOR THE
WESTERN DISTRICT OF OKLAHOMA
No. 72-C-483-B
DAIFLON, INC.,
Plaintiff,
VS.
ALLIED CHEMICAL CORPORATION,
et al.,
Defendants.
PLAINTIFF’S RESPONSE TO DEFENDANTS’
MOTION FOR JUDGMENT NOTWITHSTANDING
THE VERDICT AND FOR NEW TRIAL
JOEL L. WOHLGEMUTH
1100 Philtower Building
Tulsa, Oklahoma 74103
B. HAYDEN CRAWFORD
1714 First National Building
Tulsa, Oklahoma 74103
FRANK GREGORY
1714 First National Building
Tulsa, Oklahoma 74103
INTRODUCTORY STATEMENT
On March 30, 1979 following approximately nine
hours of deliberation, the duly constituted jury in this case
returned its Special Verdict. The jury specifically and con-
siytently answered the ten questions comprising the Special
Verdict, with the foreman signing and dating each of the
three pages upon which the questions were written. The
defendants thereafter requested that the jury be poiled,
and they were so polled. Each juror unequivocally
15a
answered that he concurred in the Special Verdict of
the jury.
The Special Verdict came at the conclusion of a four
week trial which capped close to seven years of hard
fought, complex antitrust litigation. During the course of
the trial the plaintiff, Daiflon, Inc. (‘‘Daiflon’’) called
twenty-five witnesses, and 276 of its exhibits were ad-
mitted into evidence. At the conclusion of plaintiff’s evi-
dence defendants jointly moved for a directed verdict and
presented considerable oral argument in support thereof.
The plaintiff responded with oral argument of counsel,
and contemporaneously submitted a brief in opposition
to the motion. The Court did not grant the defend-
ants’ motion.
Defendants then proceeded with their evidence which
involved the testimony of five witnesses and the introduc-
tion of approximately 100 exhibits. None of the witnesses
called on behalf of the defense were employees or
representatives of defendants.' The motion for directed
'The witness list of defendants, filed of record March 19, 1979,
approximately 2-1/2 weeks into trial, listed twenty witnesses, seven of
whom are employees of defendants. (Messrs. Gordon, Sorensen,
Heaney, Wright, Regan, McHugh, Polaneczky). Defendants’ failure
to call any of their employees or representatives (except McHugh, a
Carbide programmer) to testify at trial was particularly surprising in
view of not only the witness list, but also the opening statements of
counsel, e.g. :
‘‘Our witness who will testify was the man who was the overall
supervisor of our refrigerant business together with some other
areas, and he will testify that if there had been a conspiracy with
the other defendants as has been alleged in this case, he would
have known about it, and he will testify unequivocably that Car-
bide was not involved in any conspiracy with anybody. He will
tell you a little bit about the pricing in the industry because its
much like when you buy a car *** but the significant thing he is
going to tell you is that Carbide reached its pricing decisions
without the need of or the benefit of any conspiracy with any-
body else.’’ Opening Argument of D. Kent Meyers, pp. 60-61.
l6a
verdict was renewed upon conclusion of all the evidence,
specifically with respect to damages. (Transcript of Trial
Proceedings and Testimony taken on March 27, 1979, pp.
2-5). Again, the Court did not grant the motion for
directed verdict, and the case was submitted to the jury.
The issues presented to the jury upon a special verdict
form were in accordance with the provisions of Rule 49
F.R.Civ.P. The Court will recall that defendants, approx-
imately three weeks into trial, proposed to the Court that
the issues presented in this case should be individually and
specifically determined by the jury, and accordingly sug-
gested submitting the case on a special verdict form.
Daiflon opposed the procedure generally, filing a brief in
opposition to the request for a special verdict, and later fil-
ing a supplemental brief. The special verdict form had the
full and unequivocal support of defendants.
By its Special Verdict the jury made the following
findings’: That all defendants (Allied Chemical, DuPont,
Kaiser, Pennwalt, Racon and Carbide ‘‘inclusive’’) con-
spired with each other to violate the federal antitrust laws
(Special Verdict Findings | and 2); that DuPont’s share of
the relevant market during the period 1969-1972 exceeded
50% (Special Verdict, Finding 3); that DuPont had the
specific intent to acquire monopoly power and that there
was a dangerous probability that it would ultimately do so
(Special Verdict, Finding 4); that DuPont had monopoly
power during the period 1969-1972 (Special Verdict, Find-
ing 5); that such monopoly power was willfully and
unlawfully acquired (Special Verdict, Finding 6); that
Daiflon’s business and property losses were proximately
caused by defendants’ unlawful conspiracy and DuPont’s
individual monopolization efforts (Special Verdict, Find-
?In the 52 page brief submitted by defendants in support of their
motion for judgment notwithstanding the verdict, the special verdict
of the jury is barely acknowledged.
17a
ings 7 and 8); that the plaintiff proved by a preponderance
of evidence the reasonable value of its business and prop-
erty losses, and that its evidence was not unduly
speculative (Special Verdict, Finding 9); and that the
reasonable value of Daiflon’s business and property losses
was Two Million Five Hundred Thousand Dollars
($2,500,000.00).
On April 9, 1979 the Court entered judgment in favor
of Daiflon against defendants in “the sum of
$2,500,000.00 which are the damages sustained by plain-
tiff as determined by the jury, with interest at the rate of
10% per annum as provided by law, reasonable attorneys’
fees and costs to be subsequently determined by the
Court.’’? Within the time prescribed by Rules 50 and 59
F.R.Civ.P. defendants have moved for judgment not-
withstanding the verdict (hereinafter ‘‘Judgment n.o.v.
Brief’’) and for a new trial. The Judgment n.o.v. Brief is
premised upon the following grounds:
‘1. Plaintiff failed to prove substantial evidence of
monopolization or attempted monopolization by
DuPont.
2. Plaintiff failed to produce substantial evidence |
of conspiracy.
3. Plaintiff failed to produce substantial evidence of
impact and damages.’’ (Motion for Judgment Noth-
withstanding the Verdict and For New Trial, p. 1,
filed April 18, 1979).
Defendants’ enlarge upon each of the foregoing
propositions in their Judgment n.o.v. Brief.
*Daiflon has pointed out that the Court’s form of judgment is
_ inadequate for the reason that it does not include treble damages as
required by 15 U.S.C. §15. (See Motion to Include Treble Damages in
Judgment Pursuant to 15 U.S.C. §15 and supporting memorandum
brief, filed April 12, 1979).
18a
Defendants state that it is ‘‘their primary position that
this Court should enter a judgment as requested by that
motion.’” (Memorandum in Support of Defendants’
Motion for New Trial, p. 1). Defendants have, in the
alternative, moved for a new trial in accordance with the
provisions of Rule 59 F.R.Civ.P. The motion for a new
trial is based upon the following grounds: (a) the verdict is
contrary to the law and the weight of the evidence on all
counts; (b) the damage award is excessive and was
apparently ‘‘given under the influence of passion and
prejudice;’’ (c) the damage award was based upon
evidence that counsel for plaintiff knew or should have
known as untrue; (d) error of the court in failing to strike
the testimony of Scott Campbell; (e) error of the court in
admitting certain of plaintiff’s exhibits into evidence.
Propositions I through VII of Daiflon’s argument, infra.,
relate to the motion for judgment n.o.v., while the
remaining propositions deal with the motion for new trial.
ARGUMENT
PROPOSITION I
DEFENDANTS HAVE MISSTATED THE FUN-
DAMENTAL STANDARDS APPLICABLE TO CON-
SIDERATION OF A MOTION FOR JUDGEMENT
NOTWITHSTANDING THE VERDICT.
The Judgment n.o.v. Brief, in excess of fifty pages in
length, is remarkable not much for what it includes, but
rather for what it omits. For example, while defendants
speak in terms of ‘‘Rule 50’’ and ‘‘motions for judgment
n.o.v.,’” the controlling provisions of Rule 50(b)
F.R.Civ.P. are not recited and since that is the rule under
which defendants proceed, let us at the outset examine the
specific language of the rule:
‘‘Whenever a motion for a directed verdict made
at the close of all the evidence is denied or for any
19a
reason is not granted, the Court is deemed to have
submitted the action to the jury subject to a later
determination of the legal questions raised by the
motion***,’’
The meaning of Rule 50(b) is not difficult to ascertain:
Questions of fact must be decided by the jury and may not
be re-examined by the Court; however, following return of
the verdict and upon a motion for judgment n.o.v., the
court may determine the /ega/l question of whether there is
sufficient evidence to raise a question of fact to be
presented to the jury. Wright & Miller, Federal Practice &
Procedure, §2522, p. 538. In view of the contents of
defendants’ Judgment n.o.v. Brief, the language of Rule
50(b) is especially critical. In essence, a party is not given
the latitude under Rule(b) to reargue or resubmit, perhaps
in a way not done at trial, issues of fact which have been
determined by the jury. Rather, the question is merely
whether sufficient evidence existed, as a matter of law, to
present questions of fact to the jury for its determination.
Daiflon respectfully submits that the Judgment n.o.v.
Brief is a skillful, albeit improper, effort to have this
Court resolve dispositive factual issues which were clearly
answered by the jury in its Special Verdict. To accomplish
this defendants have (a) collected mere fragments of
evidence which they perceive to be helpful to their
position, (b) wholly ignored all the evidence favorable to
Daiflon, (c) applied certain principles to their evidentiary
arguments which are, as will be shown, demonstrably
wrong, and (d) materially contravened the principle that
Daiflon is entitled to have this Court accept as true all
reasonable inferences to be drawn from the facts
presented.
Defendants take great care in their motion and brief
to emphasize the ‘‘requirement’”’ that the Court determine
the existence of ‘‘substantial evidence’ of conspiracy,
attempted monopolization and monopolization as a
20a
prerequisite to the denial of the motion for judgment
n.o.v. (See e.g., Motion for Judgment Notwithstanding
the Verdict and For New Trial, p. 1; Judgment n.o.v.
Brief, pp. 2, 5, 27, 31, 51). Defendants conclude their
presentation by stating:
‘*Plaintiff failed to produce substantial evidence on
every one of the essential elements of its necessary
proof. Defendants accordingly are entitled to judg-
ment notwithstanding the verdict.’’ (Judgment
n.o.v. Brief, pp. 51-52).
The requirement that the verdict be supported by
‘*substantial evidence’’ (not the law of this circuit) has
been criticized by Professors Wright and Miller:
‘*A number of decisions say that the motion must
be granted unless there is ‘substantial evidence’ in
opposition to it. It is very doubtful that the adjective
has anything of value, particularly when, as in a lead-
ing case, ‘substantial’ evidence is defined in terms of
evidence that would lead reasonable men to different
conclusions.’’ (Wright & Miller, Federal Practice &
Procedure, §2524, p. 546).
In Boeing Company v. Shipman, 411F.2d 365, 393-394
(Sth Cir. 1969) Judge Rives makes the following
observation:
‘****IT note that, notwithstanding all the variations
which the Supreme Court has played on its suffi-
ciency theme, I have been unable to find a single
instance in which the Supreme Court has used ‘sub-
stantial’ in any of its articulation of the constitutional
standard.”’ (cited with approval by Wright & Miller,
Federal Practice & Procedure, §2524, P. 546, fn. 43).
Let us look specifically at the law of this circuit
regarding motions presented under Rule 50(b).
Defendants cite Barnett v. Life Insurance Company of the
Southwest, 562 F.2d 15 (10th Cir. 1977) for the
proposition that the plaintiff, although entitled to all
2la
reasonable inferences, ‘‘still has the burden of establishing
a prima facie case in responding to a motion for judgment
n.o.v.’’ (Judgment n.o.v. Brief, p. 1) Essentially, Barnett
involved a jury verdict for compensatory and punitive
damages based upon a claim of fraud under Oklahoma
state law. The Court on appeal affirmed the district
court’s action in granting a motion for judgment n.o.v. on
the ground that the plaintiff therein ‘‘failed entirely to
' produce evidence on several of the essential elements of
fraud***.’’ (/d. p. 19). Citation was made to Oklahoma
law that a fraud case should not go to the jury ‘‘. . . unless
facts are produced from which an irresistable deduction of
fraud reasonably arises.’’ (/d. citing Johnson v. Caldwell,
180 Okl. 470, 71 P.2d 620).
The importance of Barnett to this case, defendants’
memorandum nothwithstanding, is that the Court does
cite in its opinion other important cases from the circuit
which disclose the appropriate considerations for passing
on a Rule 50(b) motion. The Court stated:
**The trial court on this motion for judgment n.o.v.
by the defendant should have examined the evidence
in a light most favorable to the plaintiff, together
with the reasonable inferences to be drawn from the
facts. The standard to be used by the trial courts is
essentially the same as applied for directed verdicts.
See Oldenburg v. Clark, 489 F.2d 839 (10th Cir.);
Taylor v. National Trailer Convoy, Inc., 433 F.2d 569
(10th Cir.); Rule 50(b), Fed.R.Civ.P., and the general
common law practice. In Taylor v. National Trailer
Convoy, Inc., we held that judgment n.o.v. is proper
where ‘. . . the evidence and all the inferences to be
‘ drawn therefrom are so patent that minds of reason- -
able men could not differ as to the conclusions to
be drawn therefrom.’ We said in Symors: v. Mueller
Co., 493 F.2d 972 (10th Cir.):
‘... A scintilla of evidence is insufficient, of
22a
course, to justify submission of a case to the jury.
Nevertheless, a directed verdict or judgment n.o.v.
may not be granted unless the evidence points but one
way and is susceptible to no reasonable inferences
which may sustain the position of the party against
whom the motion is made. Swearingen v. Sears Roe-
buck & Co., 376 F.2d 637, 639 (10th Cir. 1967).’
And in C. H. Codding & Sons v. Armour & Co., 404
F.2d 1 (10th Cir.):
‘The rule for the granting of a directed verdict has
been often repeated. Its essence requires that before
a motion for a directed verdict shall be sustained the
evidence must be ‘‘all one way or so overwhelmingly
preponderant in favor of the movant that the trial
court in the exercise of its sound discretion would
be required to set the verdict aside.’’ Chicago, Rock
Island and Pacific R.R. v. Howell, 10th Cir., 401
fe & =
The decisions cited by the Barnett court are consistent
with the principles outlined by Professors Wright and
Miller in their treatise:
‘*In determining whether the evidence is sufficient the
Court is not free to weigh the evidence or pass on
the credibility of witnesses or to substitute its judg-
ment of the facts for iiiat of the jury. Instead it must
view the evidence most favorably to the party against
whom the motion is made and give that party the
benefit of all reasonable inferences from the evi-
derice.”” Wright & Miller, Federal Practice & Pro-
cedure, §2524, pp. 543-545.
Moreover, it is the law of this circuit that it is not only
error for the trial court to direct a verdict when the
evidence is in conflict, but also where ‘‘***conflicting
inferences may be derived from evidence which is
unchallenged.’” Gulf Insurance Company vy. Kolob
Corporation, 404 F.2d 115, 117 (10th Cir. 1968). This
23a
principle is particularly relevant to the case sub judice
where the defendants made the tactical decision, following
presentation of plaintiff’s evidence, to eliminate all but
five of their listed witnesses thereby permitting the
substantial portion, if not all, of the record established by
the plaintiff to go virtually unchallenged.
Finally, recognition should be given to _ the
proposition that the relief sought by defendants in their
motion for judgment n.o.v. is considered to be drastic and
‘*should be cautiously and sparingly granted. The court
may not substitute its judgment on a question of fact for
that of the jury not direct a verdict because the evidence
decidedly preponderates for the moving party.’ Wilkin v.
Sunbeam Corporation, 377 F.2d 344, 347 (10th Cir. 1967);
Swearingen v. Sears Roebuck & Co., 376 F.2d 637, 639
(10th Cir. 1967).‘
That judgments n.o.v. will be entered in only the
clearest and most unusual circumstances applies
specifically to antitrust actions. (See generally, Von
Kalinowski, Antitrust Law and Trade Regulation, Vol.
16M, §112.08). In Continental Ore Company v. Union
Carbide and Carbon Corporation, 370 U.S. 690 (1962),
the Supreme Court reversed the circuit court’s decision
sustaining the granting of a motion for directed verdict,
finding that the district and circuit courts had failed to
adhere to the requirement that the evidence be viewed
most favorably to the non-moving party (370 U.S. at
695-696). Von Kalinowski generally emphasizes the
applicability of the rule strictly limiting the use of directed
verdicts and judgments notwithstanding the verdict in
complex commercial litigation such as antitrust cases,
where issues of fact must normally be proved by indirect
evidence, and the inferences to be drawn may be
‘Both the Sunbeam and Sears Roebuck decisions are cited with
approval by Wright & Miller at §2524, p. 542, fn. 29.
24a
dispositive. In so doing, he emphasizes that ‘‘it is for the
jury and not for the court to weigh the evidence,’’ and
‘*The very essence of the jury’s fact-finding function
is to select from among conflicting inferences and
conclusions those it considers most reasonable.”’
(Von Kalinowski, supra.)
The Tenth Circuit has likewise emphasized the
principle of minimal interference with the jury’s function
to .evaluate the evidence and draw inferences and
conclusions therefrom in the context of antitrust cases. In
Continental Baking Company v. Utah Pie Company, 349
F.2d 122 (10th Cir. 1965), rev’d on other grounds, 386
U.S. 685, the Court considered this issue in the specific
context of a predatory-pricing antitrust case:
‘*A trial court, in determining whether it will grant
a motion for a directed verdict or for a judgment
n.o.v., should view the evidence in a light most
favorable to the party against which the motion is
directed and give such party the benefit of all the
inferences which the evidence reasonably supports,
even though contrary inferences might reasonably
be drawn therefrom, and, if the evidence and the
inferences so viewed and considered are of such a
character that reasonable men in the exercise of a
fair and impartial judgment can reach different
conclusions, the motion should be denied. In reaching
its determination, the court may not pass on the
weight of the evidence or decide where the pre-
ponderance of the evidence lies. With the exception
of clearly incredible evidence, the court should not
consider or pass on the credibility of witnesses and
should accept as true the evidence in favor of the
party against whom the motion is directed.’’ (349
F.2d at 147, citing Anderson v. Hudspeth Pine, Inc.,
299 F.2d 874 [10th Cir. 1962]).
25a
Reed Brothers, Inc. v. Monsanto Company, 525 F.2d
486 (8th Cir. 1975), cert. denied, 96 S.Ct. 787, an antitrust
action arising from the Southern District of lowa, is of
special signficance to the motions presently before this
_Court..In that case Reed Brothers, Inc. (‘‘Reed’’) brought
an action for damages pursuant to 15 U.S.C. §15 against
Monsanto Company (‘‘Monsanto’’) claiming that
Monsanto had violated the Sherman Act by engaging in
- unlawful territorial and customer restraints. The jury
returned a verdict in favor of Reed in the sum of
$59,990.04, but the district court thereafter entered
judgment notwithstanding the verdict or, in the
alternative, for a new trial, ‘‘principally on the grounds of
insufficient evidence.’’ (/d. p. 488). The Eight Circuit, in
an opinion written by Associate Supreme Court Justice
Tom C. Clark, retired, sitting by designation, reversed the
ruling of the trial court and ordered that the jury verdict
be reinstated.
The district court had granted the motion for
judgment n.o.v. on the following grounds: (a) there was
insufficient evidence of a contract, combination or
conspiracy between Monsanto and its distributors to
restrict sales and assign territories to submit the issue to
the jury; (b) there was insufficient evidence to show that
territorial restrictions were enforced by Monsanto; (c)
there was insufficient evidence of a contract, combination
Or conspiracy between Monsanto and its distributors to
impose post-sale restraints on where and to whom
Monsanto products could be sold; (d) even if Monsanto
and its distributors had agreed to certain post-sale
restraints, such practices did not constitute a violation of
the Sherman Act; (e) the evidence as to the fact of
damages and the amount of damages was too speculative
and uncertain to justify submission of the issue to the jury.
(Id. p. 492). With respect to the motion for new trial, the
district court determined that in the event the circuit court
26a
of appeals reversed the granting of the judgment n.o.v.,
the motion for new trial would be granted on the following
grounds: (a) the grounds on which the motion for
judgment n.o.v. was granted; (b) the verdict was against
the clear weight of the evidence; (c) issues involving
Monsanto’s alleged post-sale restraints should have been
submitted to the jury under the rule of reason. (/d. pp.
493-494).
With respect to the trial courté grant of the motion
for judgment n.o.v., Justice Clark conciuded:
‘*‘From our examination of the record, we think that
the jury could well have concluded that Monsanto’s
1969 and 1972 policies directly effected where its
distributors could sell and to whom they could sell,
which is precisely the sort of restraint forbidden in
Schwinn. The judgment n.o.v. must therefore be
reversed, for as the Supreme Court emphasized re-
garding judgments n.o.v. in Tennant v. Peoria and
Pekin Union Ry., 321 U.S. 29, 35, 64 S.Ct. 408, 88
L.Ed 520 (1944):
‘Courts are not free to reweigh the evidence and
and set aside the jury verdict merely because the jury
could have drawn different inferences or conclusions
or because judges feel that other results are more
reasonable.’’’ (/d. pp. 494-95)
In reviewing the evidence, Justice Clark reviewed the
portions of testimony selected by defendant in support of
the claim that the evidence was insufficient, and stated:
‘*The question of who said what to whom is obviously for
the jury to determine, and not the district court***the
weight and credibility to be given this testimony — like
that of all the witnesses — was a mat‘’~: for the jury to
ponder.’’ (/d. pp. 497-498).
Finally, Justice Clark held that the district court had
submitted to the jury, under careful instructions, the issue
of whether Monsanto and its distributors had adhered to
27a
policies which effectively limited or restricted the
territories within which Monsanto’s products could be
resold. He noted that the jury found such an effect, and
accordingly there was ‘‘no justification for unseating the
verdict.’’ ([d. p. 498). Further, the Court held that the
grant of a judgment n.o.v. is improper where ‘‘***the jury
could have found that Monsanto made rebate policies and
enforced its ‘area of primary responsibility’
contracts***.’’ (/d.)°
It is curious that defendants, in their Judgment n.o.v.
Brief, barely allude to the applicable legal standards
which must guide this Court’s consideration in connection
with the motion for judgment n.o.v. There is no
discussion whatsoever of the fundamental principles that
the court is not free to weigh the evidence, pass on the
credibility of witnesses or substitute its judgment of the
facts for that of the jury. Rather, defendants choose to
rely upon the so-called ‘‘substantial evidence’’ standard,
without reference to other principles, and proceed to apply
that proposition to bits and pieces of evidence introduced
at trial. Defendants’ approach is particularly misleading
when considered within the perspective of the special
verdict of the jury, returned at defendants’ behest. Again,
defendants simply ignore the importance of the special
findings made by the jury.
Daiflon respectfully submits that this Court, upon
review of the evidence presented by Daiflon will conclude,
as the court concluded at the time the defendants’ motions
for directed verdict were denied, that the evidence
presented by the plaintiff (which went virtually
*As indicated, Justice Clark also set aside the trial court’s alterna-
tive grant of the motion for new trial, stating that while such a decision
was particularly within the discretion of the trial judge, a different situ-
ation exists ‘‘where the grant is based on the district court’s appraisal
of the evidence, for we must be sensitive that the trial judge not inter-
fere with the role of the jury as trier of fact.’’ (/d.)
28a
unchallenged) and the reasonable inferences which could
be drawn therefrom were more than sufficient to raise
issues of the fact for the jury in connection with Daiflon’s
claims against defendants. The jury thereafter specifically
and consistently determined those issues of fact in favor of
Daiflon and against defendants.
PROPOSITION II
DEFENDANTS’ MISPLACED ARGUMENT
WITH RESPECT TO THE WEIGHT OF THE
EVIDENCE AND CREDIBILITY OF WITNESSES AT
TRIAL IS FURTHER WEAKENED BY PERVASIVE
MISREPRESENTATIONS OF THE RECORD
Defendants’ n.o.v. Brief, insofar as it purports to set
forth an analysis of the evidence presented at trial within
the perspective of the ‘‘substantial’’ evidence standard,
grossly distorts the record of proceedings before this
Court. Daiflon respectfully submits that defendants’ mis-
characterization of the evidence is readily apparent in
most areas, and that it would be an unnecessary and
unproductive effort by plaintiff to attempt to respond to
each area in which the defendants misconstrue the
evidence, omit critical evidence from their discussion, or
state conclusions totally unsupported by the record.
Moreover, as indicated in Daiflon’s discussion under
Proposition I, supra., that is not the function of legal
argument with respect to a Rule 50 motion. However, so
there will be no question in this Court’s mind with respect
to inadequacy of defendants’ effort to reargue questions
of fact and credibility, Daiflon shall, in this proposition,
address certain of the ‘‘facts’’ which defendants seek to
establish. In doing do, Daiflon does not concede that the
presentation of argument with respect to the weight of the
evidence and credibility of witnesses is proper and
appropriate; rather, the sole purpose here is to
29a
demonstrate defendants’ use of ‘‘selected’’ parts of the
record to make a case at post-trial which the jury did not
accept at trial.
A. Defendants’ Recitation of ‘‘The Background
Facts. ’’
Following the discussion of the legal standards
applicable to a motion for judgment n.o.v., defendants
attempt to state the ‘‘background facts’’ relating to
Daiflon’s claims. (Judgment n.o.v. Brief, pp. 2-5). In
essence, this section of the brief represents a highly
selective presentation of bits and pieces of and/or
references to the testimony of four of plaintiff’s twenty-
five witnesses (Carter, McDonald, Gup and Jadlow) and
two of defendants’ five witnesses (Bradfield and Hibdon).
Additionally, four exhibits are referred to, but not
described: Pl. Exh. No. 1113, Def. Exh. Nos. 7, 8 and 91.
Of course, the ‘‘background facts’’ contain no discussion
of the price movements effected by defendants during the
1969-1972 period. In lieu of such a discussion, defendants
choose to relate the undisputed fact that refrigerant gas is
a homogeneous, fungible product. Further, defendants
conclude that:
‘‘The economists who appeared were unanimous in
stating that, because of the homogeneous nature of
refrigerant gas, one would expect substantial simi-
larity in refrigerant gas prices among the defend-
' ants.’’ (Judgment:n.o.v. Brief, p. 4)
Defendants do not elect to discuss such issues as the
. drastic price reduction (while costs were drastically on the
increase) Of 13% which DuPont instituted, and the other
defendants foliowed, in March of 1971; the subsequent
reduction of prices in March of 1972 by all defendants on
R-12 and R-22, the staples of Daiflon’s business; or the
defendants’ price hikes of October and December, 1972
following Daiflon’s exit from the industry.
30a
Moreover, defendants apparently determined that the
pattern which had been established in the industry for the
distribution of refrigerant gas, and which continued to
predominate during the period of Daiflon’s existence, was
not of sufficient consequence to merit inclusion as ‘‘back-
ground”’ information. Nor did defendants elect to discuss
any of the scores of exhibits introduced by plaintiff sup-
portive of the jury’s special findings in connection with
defendants’ antitrust activities. Witness, for example, the
following:
Pl. Exh. Nos. 1224 and 1236: These are DuPont
documents which disclose directly that during the period
June, 1970 through February, 1971 DuPont had embarked
upon an investigation of freight rates from Japan to
various locations in the United States, including Houston,
Daiflon’s plant location. What possible use could Du-
Pont, the undisputed price leader of the industry, make of
such commercial information other than the obvious, to-
wit: DuPont was determining, prior to March, 1971 price
reduction, what plaintiff’s costs of operation were so that
it would know what price level would be required to
eliminate the competition encountered from Daiflon.
Even if defendants should assume the position that these
exhibits do not necessarily establish the conclusions which
Daiflon here asserts, can they deny that these exhibits
alone are sufficient to create a question of fact for the jury
as to whether or not DuPont in fact conducted their
freight study for this purpose and whether they subse-
quently acted upon that study?
Pl. Exh. Nos. 1259, 1264 and 1265: These exhibits
reflect that DuPont was engaged, in 1971, in an investiga-
tion of the prices paid for refrigerant grades 11, 12 and 22
by customers of the Japanese manufacturer. The impor-
tance of these exhibits with respect to the jury questions
presented, and the ‘‘background”’ to this action, is
undeniable.
3la
Pl. Exh. No. 3013: On April 7, 1970 Mr. Jerry W.
Woyahn, Assistant District Sales Manager of Allied
Chemical for the Midwestern District, submitted a
memorandum to a number of Allied officials including,
inter alia., H. C. Hansen, Director of Sales and A. J.
Johnston, Manager of Sales:
‘*As you know, the Japanese Refrigerant ‘Daiflon’
is being offered and their much more aggressive ap-
proach in ’70 is causing real concern. Please let me
know of each and every instance where foreign mate-
rial is purchased and also the amount, and whose
account this contractor was. No rumors or excuses
by some of customer’s salesmen for their own poor
selling; just the facts. For example — John Johnson
& Son — 3-1000 Ib. drums of Daiflon — customer of
Klich Refrigeration. Under no circumstances do I
want any conversation regarding ‘Daiflon’ initiated
by us. Do not give our competitor any publicity.
However, if your customer brings it up, exhibit real
concern and let them know Allied is very aware of
this situation. And you will be kept informed as to
what steps are being taken to combat this problem.”’
(emphasis original)
Pl. Exh. No. 3016: H. C. Hansen (Allied Director of
Sales) a recipient of Mr. Woyahn’s memorandum of
April 7, 1970, prepared a memorandum nine days later
dealing with ‘‘Japanese Daiflon refrigerant,’’ and submit-
ted it to Mr. A. H. Baker, Allied Vice President-
Marketing. A copy of this letter is shown to have been
delivered to E. L. Granholm, Product Manager of Allied
Chemical. The Director of Sales suggests a number of
possible actions to counter the threat of Daiflon, in-
cluding, inter alia: (a) dumping ‘‘Genetron’’ (Allied’s
trade name for refrigerant gas) in Japan; (b) directing the
flow of refrigerant from Japan to foreign markets other
than the United States; (c) taking the Japanese manufac-
32a
turer out of the business; (d) supplying Japanese manufac-
turers representatives; (e) selling through wholesalers and
giving customers a ‘‘functional fee for business obtained
in competition against Daiflon’’. Did Allied’s Vice Presi-
dent Baker in fact consider these suggestions by his Direc-
tor of Sales? If considered, did Mr. Baker institute policies
to implement the suggestions? These are questions for the
jury. With respect to the grant of functional fees, or off-
list discounting, defendants’ only comment in its recita-
tion of ‘‘background facts’’ is that ‘‘while the list prices of
each defendant were similar, there were substantial dis-
counting off-list prices.’ (Judgment n.o.v. Brief, p. 4).
Pl. Exh. Nos. 3508 and 3512: These exhibits demon-
strate that in September of 1971 Kaiser was engaged in an
investigation of Daiflon’s ‘‘net delivered costs and a com-
parison of: that information with Kaiser’s distributor
costs.’’ The difference reflected on Plaintiff’s Exhibit No.
3512 shows that Kaiser’s distributors were, at that time
(following the March, 1971 price reduction) able to sell
refrigerants R-12 and R-22 at prices below those charged
by Daiflon. This exhibit was furnished to W. A. Sorensen,
Kaiser’s National Sales Manager.
Pl. Exh. No. 3687: This document, a competitive
status report of Kaiser, certainly provides interesting
“‘background”’ information on Kaiser’s competitive prac-
tices during the year 1970. The Kaiser salesman who
prepared the memo indicates that Japanese gas is ‘‘in-
filtrating the Springfield area’’ and that selected contrac-’.
tors are being offered 1,000 pound quantities which are
being shipped direct at reduced prices. He recommends
that Kaiser ship ton cylinders direct to U.S. Electric Com-
pany, a contractor-customer in order that ‘‘they can quote
the competitive price.’’ (/d.) Mr. Sorensen, Kaiser Na-
tional Sales Manager, accepts the salesman’s recommen-
dation to ship ton cylinders direct to that customer, with
33a
the handwritten proviso: ‘‘Limit to contractors who have
been offered Japanese gas.”’
Pl. Exh. No. 3733: On March 9, 1972, J. M. Lawlor
of Kaiser’s Houston office writes to Frank Rose in Dallas,
with a copy to National Sales Manager Sorensen, with
respect to the ‘‘Gas Fight at Houston’s O.K. Corral.’”
Lawlor refers to the deteriorating prices on refrigerants in
the Houston territory and speculates that ‘‘the foreign gas
influence in Houston, San Antonio, Austin, Corpus
Christi and the Galveston areas’’ has created an ‘‘emo-
tional marketing strategy.’’ Lawlor concludes his
memorandum by stating:
‘It goes without saying, gentlemen, that this is a
pandora’s box and this will not necessarily stay in
this territory. We must urgently make decisions as to
how we plan to handle this market.’’
Within the month, Kaiser joined the other defendants in a
drastic reduction in the list price of refrigerants R-12 and
R-22, the particular grades of refrigerant gas sold by
Daiflon.
Pl. Exh. No. 4008: This is an inter-office memoran-
dum prepared by E. S. Ward, Jr., Pennwalt’s Marketing
Manager. Mr. Ward states that it has come to his ‘‘atten-
tion that the field: sales force are restricting their calls
primarily to existing accounts.’’ (/d.) He recommends that
all full line wholesalers ‘‘should be called on to at least
establish good rapport.’’ This document, which relates
directly to the pattern of distribution which is central to
the plaintiff’s lawsuit, ties in neatly with the Gresham
testimony which shall be discussed later. In any event, it
alone raises a fact issue with respect to the basic question
of market allocation, and the ultimate issue of the ex-
istence of a freely competitive market.
Pl. Exh. No. 4557: This is an internal memorandum
dated February 9, 1971 from F. T. Schuhlein of Union
Carbide to R. C. Thies with copies to Messrs. Carmody
34a
and Reid. Schuhlein relates that he has received ‘‘addi-
tional inputs on the competitive activities of the Japanese
in the South.’’ After detailing those activities he states that
he has requested another Carbide employee, Quinn Har-
mon, to determine whether the Japanese cylinders have
the approval of the Department of Transportation. He
concludes: ‘‘Whether they are or not, this further move by
foreign gas (referring to the establishment of bulk lift
tanks) must be considered for its future impact on pricing
and the possible movement of wholesaler/fillers into the
traditional distribution chain.’’®
Pl. Exh. No. 5027: Approximately nine days follow-
ing Mr. Schuhlein’s preparation of the internal memoran-
dum designated as Pl. Exh. No. 4557, Mr. Snyder of
Racon’s Houston office wrote a memorandum to J. L.
Maurer in connection with the competitive activity of
Daiflon. Mr. Snyder states that ‘‘there is no doubt in my
mind that during the summer of 1971, they will become a
very definite factor in the sale of refrigerants to large con-
tractor operations in the South Central area which would
include Louisiana, Arkansas, Oklahoma, Texas and New
Mexico.’’ Mr. Snyder notes that Racon has already seen
the ‘‘footprints of this operation’’ in such areas as New
Orleans, Baton Rouge, Tulsa, Oklahoma City, Dallas,
Fort Worth, El Paso, Albuquerque and Houston. He then
States: ‘‘No constructive suggestions to make as to how to
combat this situation.’’ (A copy of this memorandum was
sent to Maurice J. Knopf, President of Racon.) This
memorandum was written approximately one month prior
to the 13% reduction.
*Plaintiff respectfully invites the Court’s attention to Pl. Exh.
No. 4506, another Carbide document, indicating their deep concern
with respect to Daiflon’s potential impact or disruption of traditional
distribution patterns. (This is discussed in some detail in Propositions
II(d) and III, infra.)
35a
Pl. Exh. No. 7116: Virginia Chemicals, DuPont’s
sales agent, reports in a memorandum to D. M. Glover of
DuPont that in April of 1970:
**Increased concern was noted among the whole-
salers about the effects of their refrigerant sales to
Daiflon’s recently accelerated sales activities. Since
Daiflon’s distribution is not exclusively directed
through conventional trade channels, Daiflon could
upset the market to an extent far greater than the
pounds of refrigerant iiiat would be sold.”’
Pl. Exh. No. 7122: Another report from Virginia
Chemicals to Glover of DuPont wherein it is stated:
‘‘Wholesalers are naturally concerned about the
impact of Diaflon [sic] and Friggen (the German
refrigerant). As of now, they are not a serious threat
but what probably really worries the wholesalers is
that the distributors of these foreign refrigerants
may not adhere to traditional U.S. refrigerant dis-
tribution policies.’’
Plaintiff’s Exhibit Nos. 1062 and 1065 deserve, as
**background information’”’ to Daiflon’s claims for relief,
special attention. Pl. Exh. No. 1065 is a DuPont trade
report prepared by DuPont salesman D. B. Hartman
describing a sales call occurring on April 30, 1971 to Mr.
Robert Gennett, President of Refrigeration Supplies
Distributor. Mr. Hartman’s trade report was distributed
to seven DuPont employees including R. Wright, Jr., the
National Manager for Refrigerants and P. B. O’Donnell,
Marketing Manager for the Southwest Region. In this
report Mr. Hartman concludes that: ‘‘Mr. Gennett is caus-
ing quite a stir in the market in the Birmingham area. He is
passing on the 13% discount which we offered in order to
combat the Japanese refrigerant.’” DuPont did not choose
to call Mr. Hartman as a witness to testify with respect to
his conclusions as set forth on Pl. Exh. No. 1065, nor were
36a
Messrs. O’Donnell or Wright called as witnesses.” Within
the purview of the motion for judgment n.o.v., the ap-
propriate question is whether evidence such as Pl. Ex. No.
1065, together with all reasonable inferences which are
permissible therefrom, creates an issue for the jury in con-
nection with the claims asserted by Daiflon. This exhibit is
particularly significant when viewed within the perspective
of Pl. Exh. No. 1062, which is inter-office correspondence
from Luther Cox of Virginia Chemicals to P. B. O’Don-
nell of DuPont bearing date of April 30, 1971. Cox states:
‘*I believe that our new pricing policy will be a great
help in combatting the threat of Diaflon [sic]. If
there’s any sudden changes in this area, Mike and
I will let you know promptly.”’
None of the plaintiff’s exhibits discussed above are
mentioned by defendants in their incomplete, argumen-
tative approach to the ‘‘background facts’’ of this litiga-
tion. In fact, only one of these critical documents, PI.
Exh. No. 1065, is mentioned in defendants’ memoran-
dum. (Judgment n.o.v. Brief, p. 25, fn. 6). Particularly
significant, i2 view of the statements contained in PI. Exh.
Nos. 1062 and 1065, is the existence of the following state-
ment at page 24 of defendants’ memorandum: ‘‘The com-
petition that led DuPont to reduce its list prices: in March
of 1971 was from the other defendants, not from
Daiflon.’’ No citations to the record followed this bald,
conclusory statement.
Finally, defendants conclude their short, but pointed
presentation of background facts with the statement that
‘‘price competition was intense throughout the 1969-1972
period, throughout the United States.’’ Cited as authority
for this proposition is Professor James Hibdon of the
University of Oklahoma, whose testimony shall now be
addressed. :
"However, it should be noted that Mr. Wright was listed as a
DuPont witness.
37a
B. The Hibdon Testimony.
Defendants rely in their motion for judgment n.o.v.,
as they did at trial, on the expert testimony of Dr. Hibdon
(See esp. Judgment n.o.v. Brief, pp. 4, 38, 42). The weight
to be given to the Hibdon testimony is, as the Court in-
structed, a question for the jury. Nevertheless, since
defendants do once again cite the testimony of this witness
to establish the affirmative of certain important issues of
fact and law, brief comment should be made with respect
to his trial testimony. As the court will recall, Professor
Hibdon was employed by counsel for Union Carbide to
make an ‘‘independent’’ study of the fluorocarbon in-
dustry (Hibdon Direct, Tr. p. 8). In order to carry out this
study he was provided with selected materials and deposi-
tions including the depositions of Wright, Ward, Napoli,
O’Donnell, Sorensen, Regan and Knopf (Hibdon, Cross-
examination prior to mid-afternoon recess, Tr. p. 1-2).
Although available, he did not read such critical testimony
as that contained in the Rose, Gresham, Solon, Montrose
or R. B. Ward depositions. (/d. pp. 2-3). Nor was Hibdon
permitted access to any of the exhibits which Daiflon in-
troduced at trial.
- Moreover, his study was of the entire fluorocarbon
industry, which includes, inter alia., hairspray, anti-
perspirant spray, aerosol propellant, oven cleaners, paint,
wax, and perfume.* (/d. p. 3). He testified that he did not
do ‘‘an exhaustive analysis’? of the relevant product
market involved in this case, nor did he prepare any charts
or other exhibits with respect to that market. (/d.) When
asked whether the price movements occurring in the years
1971 and 1972 (the decreases in March of 1971 and 1972
and the increass of the fall of 1972) were representative of
the other 60% to 70% of the fluorocarbon industry,
‘Dr. Hibdon testified that refrigerant gases comprise ‘‘approxi-
mately 30 to 40 percent’’ of the fluorocarbon industry. (/d.)
38a
defendants’ expert witness responded: ‘‘I don’t really have
factual knowledge of what went on in each segment of the
market, of the total market.’’ (Hibdon, Cross-
examination following mid-afternoon recess, Tr. p. 16).
Perhaps the crux of Hibdon’s testimony, and a fair state-
ment of his claimed ‘‘independence’’ came during cross
examination when he was asked whether or not he would
consider it predatory for DuPont to institute a 13%
decrease to combat and drive Daiflon out of the market.
He responded:
‘OQ. (The Witness) If the facts are as you say, but I
cannot conceive that they would be.
Q. (By Mr. Crawford) Because you can’t conceive
DuPont doing that?
A. That’s exactly right, not getting at reducing
prices, but the costs are extremely high, as I
mentioned before, for that sort of activity. It
wouldn’t be worth it.’’ (/d. p. 31).
Finally, Hibdon’s predilection to rationalize conduct
by DuPont at the expense of his purported independence,
is reflected upon further cross-examination wherein he
was requested to comment upon a statement in a survey of
the fluorocarbon refrigerant market originally prepared
for Union Carbide and testified to by the witness for his
testimony at trial. In that report it is indicated that
‘****head to head confrontation with DuPont should be
avoided on a price basis. However, efforts should con-
tinue towards sharing customer requirements with them.’’
(Id. p. 41). Professor Hibdon stated that he understood
that analysis to ‘‘suggest’’ that ‘‘maybe’’ they ‘‘are not as
efficient as DuPont, they don’t want to try to undersell
DuPont because they are not sure they they can, or under-
price DuPont; so they are going to try to get what business
they can.’’ (Id. pp. 41-42).
The ‘‘independence’’ of the expert Hibdon was a
question for the jury, as was the weight of his testimony.
39a
C. Testimony of Harold David Gresham.
The testimony of Harold David Gresham
(‘‘Gresham’’) a Kaiser employee during the period July,
1969 to August, 1970 (Gresham Depo. p. 9), is discussed in
a single footnote to defendants’ memorandum (Judgment
n.o.v. Brief, p. 41, fn. 12). In that footnote defendants
seek to ‘‘explain away’’ the very damaging testimony
given by this witness:
**Although Mr. Gresham uses the word ‘allocation’ in
his deposition (Gresham Depo., p. 16, it is apparent
that Mr. Gresham’s definition of that word bore no
relation to the definition supplied by plaintiff’s
counsel — where the kind of market allocation that
is of concern under the antitrust laws.”’ (/d.)
Defendants then cite two sentences from Gresham’s
testimony, taken out of context to appear as one state-
ment, but in reality excerpted from separate parts of the
deposition. This discussion by defendants is characteristic
of the entire thrust of their brief — which involves patent
mischaracterizations of the record as part of an effort to
reargue questions of fact to this Court which have been
specifically and unequivocally determined by the jury.
As the Court will recall, Gresham testified that, dur-
ing discussions with Mr. Mike Sharp, the Kaiser employee
who preceded him in his sales position, he learned that
Kaiser was allotted the Port Arthur location of Standard
Brass: ‘***the Port Arthur store would be the sharing of
business that we were to receive.’’ (Gresham Depo., p. 14)
Sharp explained to Gresham that Kaiser would get the
business in Port Arthur and the larger chemical companies
*****had the other stores, and this is the way it was allot-
ted.’’ (Id. pp. 14-15). He testified that Kaiser’s allottment
was about every fourth truckload, with the other three
truckloads divided about two to one between DuPont and
the other companies. (/d. p. 15).
The point here is not that the jury was bound to ac-
40a
cept Daiflon’s interpretation of the Gresham testimony
rather than the interpretation urged by defendants.
Rather, it is apparent that defendants have, in footnote 2
to their brief, mischaracterized that testimony, and further
have attempted to obscure the proposition that the only
issue raised by the motion for judgment n.o.v. is whether
the evidence presented, such as the Gresham testimony, was
sufficient to create an issue of fact for the jury. Wright &
Miller, Federal Practice & Procedure, §2524, pp. 541-547.
D. Defendants’ Discussion of ‘‘Distribution
Patterns’.
A little over one full page of defendants’ memoran-
dum is devoted to the subject ‘‘Distribution patterns’’
(Judgment n.o.v. Brief, pp. 41-42). Defendants, under-
standably, seek to limit the issue of ‘‘distribution
patterns’’ to the legality of individual refusals to sell.
Defendants state: ‘‘In fact, each of the defendants is en-
titled by law to determine with whom it wishes to do
business.’’ (Judgment n.o.v. Brief, p. 41). That simply is
not the issue. The significance of the methods established
by these defendants to distribute refrigerant gas for
replacement puproses is amply covered by plaintiff’s ex-
hibits and deposition testimony relating to those exhibits.
Without belaboring the point, consider Pl. Exh. No. 4506
wherein Gordon of Union Carbide, the promised witness
who did not appear, relates to Carbide management that
the ‘‘***importers could completely disrupt our distribu-
tion pattern which has taken years to develop.’’ This docu-
ment was received by Napoli, Union Carbide’s market
manager, on March 15, 1971. Also, a number of plaintiff’s
exhibits reflect that during April, 1971 O’Donnell of DuPont
wrote memoranda to all of his refrigeration sales represen-
tatives and agents requesting information with respect to
Daiflon’s practice of selling ton containers directly to con-
tractors, who are then able to refill smaller cylinders for
4la
resale. (Pl. Exh. Nos. 1244-1248). In these written com-
munications O’Donnell states that the information which
he requests is ‘‘most important for our current market
studies. We ask that you make a diligent effort to uncover
how widespread this practice has become,’’ (Pl. Exh. Nos.
1244-1245). He indicates that DuPont is:
‘‘***anxious to get a picture of the methods of
distribution they (referring to Daiflon) plan to
follow and the effects it could: have on our present
form of distribution. Your suggestions as to how you
think we can most effectively meet the competitive
inroads will be greatly appreciated.’’ (Pl. Exh. Nos.
1246-1248).
The fears expressed by O’Donnell were echoed by
evidence obtained from Virginia Chemicals, ‘DuPont’s
sales agent:
‘“‘With the Daiflon market penetration on the
increase, we can expect to see severe continued
price competition with this product. The presence
of the RIP situation in the southwest along with
Daiflon and new variations in price competition
threatens to change marketing methods as we present-
ly know them.”’ (PI. Exh. No. 7092, interoffice corre-
spondence from V. S. Wulfson, Jr. to R. B. Ward,
Houston, Texas, October 13, 1971).
+ * *
‘It has become evident that more and more ton
containers are being sold directly to contractors
for refilling smaller cylinders. DuPont has asked for
our help in determining exactly where this is being
done, the sources of supply and volume involved.
They consider this matter URGENT.’’ (emphasis
original) (Pl. Exh. No. 7107, p. 7, interoffice corre-
spondence from R. B. Ward to Western Region
Salesmen, dated April 9, 1971).
* * *
42a
‘Increased concern was noted among wholesalers
about the effects of their refrigerant sales on
Daiflon’s recently accelerated sales activities. Since
Daiflon’s distribution is not exclusively directed
through conventional trade channels, Daiflon could
upset the market to an extent far greater than the
pounds of refrigerant that would be sold.’’ (PI.
Exh. No. 7116, interoffice correspondence from Paul
A. Nelson to R. M. Glover of DuPont, dated April
18, 1970).
It abundantly clear from the evidence that the impor-
tance of defendants’ traditional, inflexible methods of
distributing refrigerant gas were of far more significance
to this case than that attributed by defendants in their
memorandum. They jury properly took such evidence into
consideration in arriving at its Special Verdict.
The matters discussed in this proposition of Daiflon’s
brief — the ‘‘background facts’’ related by defendants,
the testimony of Professor Hibdon, the testimony of
Harold Gresham, and the matter of ‘‘distribution pat-
terns’” — are included only to demonstrate the inadequacy
of the approach undertaken by defendants in their
memorandum. It is not permissible to support a motion
for judgment n.o.v. with a piecemeal discussion of the
evidence presented during the course of the antitrust trial.
Under Rule 50 it is wholly inappropriate to make an argu-
ment to the Court predicated upon the weight of the
evidence or credibility of witnesses. As stated by the
Supreme Court in Tennant v. Peoria & Pekin Union
Railway Co., 64S.Ct. 409, 412, 321 U.S. 29, 89 L.Ed. 520
(1944):
‘It is not the function of a court to search the
record for conflicting circumstantial evidence in
order to take the case away from the jury on a theory
that the proof gives equal support to inconsistent
and uncertain inferences. The focal point of judicial
43a
review is the reasonableness of the particular infer-
ence or conclusion drawn by the jury. It is the jury,
not the court, which is the fact-finding body. It
weighs the contradictory evidence and inferences,
judges the credibility of witnesses, receives expert
instructions, and draws the ultimate conclusion as
to the facts. The very essence of its function is to
select from among conflicting inferences and conclu-
sions that which it considers most reasonable.”’
PROPOSITION III
DEFENDANTS SHOULD NOT BE ALLOWED TO
IGNORE THE FACTS (1) THAT THE JURY FOUND
THAT THEY ENTERED INTO A PRICE-FIXING
CONSPIRACY IN ORDER TO SET PRICES, TEM-
PORARILY, AT A LOW LEVEL TO DRIVE DAIFLON
FROM THE MARKET, OR (2) THAT SUCH PRICE
SETTING IS A PER SE VIOLATION OF §1.
In their attack on the jury’s finding as to liability and
damage, defendants advance a number of theoretical con-
tentions built on their own interpretation of highly complex
economic principles. We address these issues subsequently
and point out that defendants’ characterization of many of
the points is fallacious. However, whatever tactical advan-
tages may accrue to the defendants from the present at-
tempt to interject complex economic theories into the case,
such attempt ignores (a) the fact that the jury found for
the plaintiff as to the price-fixing conspiracy in addition to
monopolization, and (b) the fact that such conspiracies
constitute a per se offense under the antitrust law, so that
they stand on their own footing and are fundamentally il-
legal without regard to all the economic issues defendants
seek to raise.
A. The Nature of the Conspiracy
The nature of the price-fixing conspiracy alleged by
44a
plaintiff, and proved by its evidence, is a simple one, and
can be summarized as follows: Defendants knew that Du-
Pont was generally regarded as the price leader in the in-
dustry. They knew, also, that DuPont, like themselves,
was concerned about the emergence of plaintiff Daiflon as
a potential competitor in the non-automotive aftermarket
for refrigerant gas, and they further knew that plaintiff’s
resources were such that it could not withstand a signifi-
cant period of ‘‘price war’’ conditions. Accordingly, in the
face of its own constantly increasing costs of operation,
and expecting that its action would lead the other defend-
ants to follow suit, DuPont cut prices in order to make it
uneconomical for Daiflon to continue in the industry and
thus to force it out of business. The other defendants
understood the nature and purpose of DuPont’s conduct,
and supported DuPont’s action, by cutting their prices ina
similar fashion. We now briefly consider whether (1) such
conduct constitutes the formation of a conspiracy in
restraint of trade under Section One of the Sherman
Antitrust Act, 15 U.S.C., and (2) whether, as plaintiff
earnestly contents, it also constitutes a price-fixing con-
spiracy violative of the law on a per se basis.
_B. The Action Referred to is a Conspiracy for
Purposes of the Sherman Act.
The pattern of conduct alluded to above, which was
demonstrated in plaintiff’s evidence, and was accepted by
the jury by reason of the first finding of their special ver-
dict, constitutes an actionable conspiracy under Section
One of the Sherman Act. What is required for such a con-
spiracy is,-simply stated, that there be the interrelated con-
duct of two or more persons having a consensus to act
together to achieve an improper objective. Kiefer-Stewart
Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, reh.
den., 340 U.S. 939 (1951); Interstate Cement v. United
States, 306 U.S. 2008 (1939); United States v. Armour &
Co., 137 F.2d 269 (10th Cir., 1943).
45a
Although defendants urged in their motion for a
directed verdict, as apparently they would now suggest,
that plaintiff must show a specific express agreement in
order to demonstrate an actionable conspiracy, the law is,
in fact, clear that the agreement may be tacit or implied
from conduct. Theater Enterprises v. Paramount Film
Distributing Corp., 346 U.S. 537 (1954); Moore v. James
H. Matthews & Co., 473 F.2d 328 (9th Cir., 1973). The ac-
ceptance by defendants, without previous agreement, of a
plan to eliminate Daiflon from the market by persistent
sales near or below defendants’ costs of operation is suffi-
cient to establish an unlawful conspiracy under §1 of the
Sherman Act. /nterstate Cement, Inc. v. United States,
306 U.S. 2008 (1939). As there stated:
‘It is elementary that an unlawful conspiracy may
be and often is formed without simultaneous action
Or agreement on the part of the conspirators (citing
authorities). Acceptance by competitors, without
previous agreement, of an invitation to participate
in a plan, the necessary consequence of which, if car-
ried out, is restraint of interstate commerce, is
sufficient to establish an unlawful conspiracy under
the Sherman Act.’’ (306 U.S. at 227)
‘The teaching of such authorities as these is clear; At the
time that defendants other than DuPont, knowing the
nature and purpose of DuPont’s downward price move,
supported that price move, they formed an illegal con-
spiracy. To repeat, this commitment of other manufac-
turers, after DuPont had taken its action, is sufficient.
There is no requirement that there have been a prior agree-
ment within the industry. Jnterstate'Cement, supra; Wall
Products Co. v. National Gypsum, 326 F.Supp. 295
(N.D., Cal., 1971).
C. A Price-Fixing Conspiracy is a per se Violation
of the Sherman Act
46a
A price-fixing conspiracy is a per se Sherman Act
violation. The cornerstone case commenting on the nature
of per se antitrust violations generally is Northern Pacific
Railway Company vy. United States, 356 U.S. 1 (1958). As
the Supreme Court there stated:
‘‘There are certain agreements or practices which,
because of their pernicious effect on competition
and lack of any redeeming virtue, are conclusively
presumed to be unreasonable and therefore il-
legal. . .”’ (356 U.S. at 5)
That price-fixing conspiracies are among the antitrust
violations within the per se category, and are therefore
presumed as a matter of law to be unreasonable and
unlawful, is demonstrated by cases from the early years of
the Sherman Act through the present. United States v.
Trenton Potteries Co., 273 U.S. 292 (1926); United States
v. McKesson & Robbins, Inc., 351 U.S. 305 (1956);
Albrecht v. Herald Co., 390 U.S. (1948). An example of
the numerous declarations setting forth the per se nature
of a price-fixing agreement is found in the following
declaration from the McKesson & Robbins case:
“It has been held too often to require elaboration
now that price fixing is contrary to the policy of
competition underlying the Sherman Act and that its
illegality does not depend on a showing of its un-
reasonableness since it is conclusively presumed
to be unreasonable. It makes no difference whether
the motives of the participant are good or evil,
whether the price fixing is accomplished by express
contract or by some more subtle mean; whether the
paricipants possess market control; whether the
amount of interstate commerce affected is large or
small; . . .’’ (351 U.S. at 309-09; emphasis added)
As suggested by this declaration, it is clear that the per se
condemnation of pricing arrangements applies whether a
specific price is particularly agreed upon, or, as here, what
47a
is involved is a scheme to manipulate prices. In United
States v. Socony Vacuum Oil Co., Inc., 310 U.S. 150
(1940), the defendant oil companies had entered into a
program which was not characterized by an agreement set-
ting prices at a specific amount, but rather was a price
stabilization scheme. The companies attempted to defend
the program on the ground that the same constituted only
indirect stabilizing of prices, and that it was done under an
arrangement which had been adopted by the industry to
counter sharp practices and poor economic conditions.
The Court rejected all such contentions, saying:
‘(Flor over 40 years this court has consistently and
without deviation adhered to the principle that
price-fixing agreements are illegal per se under the
Sherman Act and that no showing of so-called com-
petitive abuses or evils which those agreements
were designed to eliminate or alleviate can be
interposed as a defense.’’ (310 U.S. at 218)
One of the authorities heavily relied upon by the
defendants with respect to a portion of their attack on the
individual monopolization or attempted monopolization
facet of the plaintiff’s case is Mr. Von Kalinowski. With
respect to the illegal nature of price-fixing arrangements,
Von Kalinowski, Volume 16H, Antitrust Laws, §65.06,
emphasizes the per se nature of such antitrust violations
saying that ‘‘although other antitrust per se rules may ad-
mit of some few narrow exceptions’’, such is not the situa-
tion with respect to the prohibition against price-fixing con-
spiracies since, as to these arrangements, the law
**recognizes no exceptions’’ from the rule of per se con-
demnation. In United States v. National Association of
Real Estate Boards, 339 U.S. 485 (1950), the Court
discusses, as follows, the nature of the per se prohibition
of price-fixing arrangements, saying:
‘Price fixing is per se an unlawful restraint of
trade. It is not for the courts to determine whether in
48a
particular settings price-fixing serves an honorable
or worthy end. An agreement, shown either by ad-
herence to a price schedule or by proof of consensual
action ... is itself illegal under the Sherman
Act... .’’ (339 U.S. 489)
Clearly, the fact that the conspiracy was one to
depress prices rather than to raise them is of no
Significance; a conspiracy to depress prices is also
unlawful under §1 of the Sherman Act and is also a per se
offense. Albrecht v. Herald Co., supra; Cackling Acres,
Inc. v. Olson Farms, Inc., supra.
The significance of the applicability of the per se rule
here is that, even if it were assumed, arguendo, that the
various theoretical economic arguments advanced by
defendants in their attack on the monopolization and at-
tempted monopolization claim do have merit, (these are
addressed subsequently and shown to be misconceived) the
same still would not justify defendants’ request that the
Court overturn the jury’s verdict. The very essence of the
per se rule is that, once such a violation is shown to exist,
economic arguments of the sort the defendants now ad-
vance are no defense. As stated in Volume II, C.C.H.,
Antitrust and Trade Regulation Reporter, §4600:
“* |. it is said that price fixing by competitors is
illegal per se under the Sherman Act. In practical
application, this means that the practice cannot be
justified under any circumstances.’’
D. The Evidence of Record which Supports the
Jury’s Finding of a Conspiracy Exceeds that which is
Required Under the Applicable Standard
Plaintiff’s evidence supporting the jury’s finding that
defendants conspired to exclude Daiflon from the industry
by temporarily setting prices at an artificially low level is
supported by evidence of record in various forms, in-
cluding: documentary evidence of collusive communica-
49a
tions among the defendants regarding pricing; testimonial
evidence revealing collusion among the defendants on
matters other than — but closely related to — pricing;
evidence of extensive parallel behavior as to a number of
business matters, including pricing; and the expert
testimony of Dr. Joseph M. Jadlow. We now summarize
plaintiff’s evidence which shows that the jury’s finding of
a conspiracy to drive Daiflon from the market is well
within the standards referred to above. Next, we discuss
the defendants’ attacks on the jury’s conspiracy finding
and show the attacks to be without merit.
I. Summary of the Evidence
A. The Documentary Evidence
It is, of course, rare that a government or private
antitrust action is supportable by direct evidence of con-
spiratorial behavior. However, such is the situation in the
present case. For example, Plaintiff’s Exhibit No. 4552, is
a Union Carbide field report issued approximately 40 days
after the March, 1971, 13 percent price reduction shown
by other evidence to have been initiated for the specific
purpose of ‘‘countering’’ Daiflon. In the report, R. P.
Lavach of Union Carbide reports on a ‘“‘recent visit to
Allied Chemican and discussions with Messrs. Noble and
Conroy’’. The report shows that Lavach and Noble
discussed Japanese imports of gas, and the question of
whether Daiflon’s emergence in the industry had yet
caused ‘‘any shift in distribution patterns’’.
Another instance of a document constituting direct
collusion among the defendants is Plaintiff’s Exhibit No.
4134. This is a communication by a representative of
Pennwalt which was prepared in 1969, the year that the
plaintiff commenced its Galveston operations. Here Ward
of Pennwalt is told by R. P. Howard of the same company
that ‘‘Don Miller of DuPont recently told you that was a
result of situations like Lennox’’.
50a
Plaintiff’s Exhibit No. 4506 is a document which
shows collusive action among the defendants to establish
the form of restrictive distribution systems which Daiflon
alleges defendants created and perpetuated, and which, in
turn, provided a main motivating factor for defendants’
conduct in putting the plaintiff out of business. This com-
munication, which corresponds with the date of the thir-
teen percent price reduction, makes specific reference to
Daiflon and the ‘‘threat’’ which Daiflon was thought to
pose to the industry.
‘‘The problem here as I see it is not the dollars but
the fact that the importers could completely disrupt
our distribution system which it has taken years to
develop . . .’’ (emphasis added)
This memorandum sets for the essence of the litiga-
tion. Initially, over years of operation, the defendants
‘*developed’’ the rigid and restrictive distribution system
whereby the manufacturers sold to distributors and
distributors resold to contractor-retailers. Daiflon
threatened to disrupt the restrictive distribution pattern
which, as shown by the memo in question, had been
developed by defendants over a period of years. The
‘*solution’’ ultimately adopted by defendants was to con-
spire a still further time, in order to place industry prices at
a level at which it was known that Daiflon could not sur-
vive. In this regard, we have already discussed above some
of the evidence which shows that the defendants engaged
in extensive intelligence activities, a significant part of
which was related to obtaining detailed information about
Daiflon’s operating costs, supra, pp. 14to 15.
Finally, of great significance is Plaintiff’s Exhibit No.
1042, a DuPont confidential memorandum from A. P.
Dougherty, Jr., to D. H. George which is dated March 30,
1971, and constitutes, in part, an assessment of the re-
action of other members of the industry to DuPont’s
Sla
March 15, 1971, price reduction. The memorandum
states, in part:
‘*Allied will meet us, as well as Raycon.’’
The memo adds:
‘‘No word on Pennwalt as to their reaction to our
discount arrangement.’’
The memo concludes:
‘‘In summary, all territories except Dallas express
overall endorsement of our program.’’
The above discussion refers only to some of the prin-
cipal documents evidencing on their face collusive com-
munications among the defendants. Many other
documents of record also bear directly on the jury’s find-
ing of a conspiracy to drive Daiflon out of business since
they reveal (a) industry-wide concern about Daiflon and
the potential impact on the industry’s sales and distribu-
tion practices, and (b) an industry-wide willingness — and,
indeed, determination — to take the necessary action with
regard to Daiflon. Many of these documents are discussed
subsequently, infra, pp. 53 to 56, in connection with the
discussion of defendants’ collusive and_ individual
monopolization. Such documents, however, are clearly
relevant to the jury’s determination as to conspiracy since
(a) the determination of the conspiracy issue turns on the
nature and purpose of the industry-wide price reductions
in the spring of 1971 and 1972 and (b) these documents
provide overwhelming support for the jury’s finding that
the reductions were directed against Daiflon rather than
being solely the product of other economic forces in the
industry.
B. Testimony of Dr. Jadlow
Dr. Joseph M. Jadlow is a Professor of Economics at
Oklahoma State University and is thoroughly familiar
with antitrust economics, having served, among other
capacities, as a consultant for the Federal Trade Commis-
52a
sion (Tr. 1152). Dr. Jadlow’s testimony bore on the
likelihood of a conspiracy among the defendants from
several different respects. He addressed the issue from the
standpoint of (1) whether the refrigerant gas industry is
one whose organization, membership, and market share is
suggestive of collusion, (2) whether the behavior of the
refrigerant gas market is suggestive of collusion, (3)
whether the likelihood of collusion in this industry is or is
not consistent with plaintiff’s. evidence with respect to
monopoly power, and (4) the historic practices of defend-
ant DuPont.
Dr. Jadlow testified that a basic issue to be examined
by an economist in determining the likelihood of the ex-
istence of a conspiratorial arrangement in an industry is the
degree of concentration. This is true because highly con-
especially susceptible to collusive activity. Dr. Jadlow
stated that, in determining whether an industry is a con-
centrated one, and therefore likely also to be collusive,
economists employ what is called the ‘‘four firm concen-
tration ratio’. As Dr. Jadlow explained this test:
‘In other words, (you) look at the four largest
firms in a market, you see what percent of the sales
in that market these four firms account for.
‘‘Now, as a kind of benchmark, the all manufac-
turing average four firm concentrate in ratio has
tended to be about 39% .
‘*So, if we find four-firm market concentration
gets very far above 39%, we would tend to con-
clude that that’s a very good chance that there is
high monopoly power in that market.’’ (Tr. 1159-60)
In the present case, the evidence of record was undisputed
that DuPont itself had a market share greater than the
39% figure referred to by Dr. Jadlow, and that, in the
refrigerant gas industry, the ‘‘concentration ratio’’ of the
four largest firms would actually exceed ninety percent.
Obviously, therefore, any basis in the record to pro-
53a
vide a relationship between very high market concentra-
tion and collusion provides, in and of itself, a significant
degree of support for the jury’s specific finding of a con-
spiracy. It is highly significant, therefore, that Dr.
Jadlow’s testimony discussed this relationship, and
further pointed out that a specific economic study had
supported the proposition that collusive arrangement are
normally found in an industry having precisely the
characteristics of the non-automotive aftermarket for
refrigerant gas.
*“*‘A ... possible pricing strategy that could be an
important one is what we might call predatory
credible threat pricing or exclusionary pricing.’”’
‘*This, in a sense, is a combination of some or all
of the other three policies that we mentioned. It
might start out, for example, with a firm with
monopoly power charging a short-run profit maxi-
mizing price or a group of firms through price-
fixing charging the profit maximizing price, and then
an entry may occur and they stand by the higher
profits. And, after entry has occurred, the established
firm or firms may cut their price down to below the
cost of a new entrant, drive the entrant out of busi-
ness, and then raise their price back up to the profit
maximizing level.
“So, they have a temporary price cut just to get
rid of a new competition, then they go back to the
profit maximizing level.’’
To state the point mildly, the jury’s finding that
there, in fact, existed a collusive arrangement within the
non-automotive aftermarket for refrigerant gas, pursuant
to which Daiflon was expelled therefrom, may reflect the
jury’s acceptance of Dr. Jadlow’s testimony. This is
especially true because of the’ strong similarity between the
relevant economic theory, as explained by Dr. Jadlow,
and the background of the industry, including (a) the
54a
history of price levels in the refrigerant gas industry, (b)
the history of parallel pricing activities as the price of
refrigerant gas rose, (c) the dramatic across-the-board
price cut by industry members in 1971 in face of growing
concern about Daiflon, (d) the second price reduction
which occurred in the spring of 1972, and (e) the
immediate increase of prices to the highest level authorized
by the then existing price controls, immediately upon
Daiflon’s departure from the industry.
C. Evidence of parallel conduct
Conspiracy need not be proved by direct evidence and
may be inferred on the basis of various forms of indirect
evidence. United States v. Columbia Steel Co., 334 U.S.
495 (1948); American Tobacco Co. v. United States, 329
U.S. 781 (1946); United States v. Masonite Corporation,
316 U.S. 265 (1942); Eastern States Retail Lumber Dealers
Association v. United States, 234 U.S. 600 (1914). The
classic statement as to the right of the trier of fact to infer
the existence of an understanding from indirect evidence
was set forth by the Supreme Court over sixty years ago.
In Eastern States Retail Lumber Dealers Association,
supra, it was stated:
‘**But it is said that in order to show a combination
Or conspiracy within the Sherman Act, some agree-
ment must be shown under which the concerted action
is taken. It is elementary, however, that conspir-
acies are seldom capable of proof by direct testi-
mony, and may be inferred from the things actually
done.. .’’ (34S.Ct. at 934)
Of course, a highly significant form of indirect
evidence of collusion is proof that the defendants engaged
in On-going similar or parallel behavior. Daiflon has never
contended that it could prevail under the Section 1, Sher-
man Act, claim on the basis of proof standing alone that
the defendants engaged in parallel conduct. However,
55a
while not in itself a violation, parallel conduct is a proper
basis for the trier of fact to conclude, as the jury did here,
that a conspiracy did, in fact, exist. Cackling Acres, Inc.,
et al. v. Olson Farms, Inc., 541 F.2d 242 (10th Cir., 1976)
and cases cited therein; United States v. General Motors
Corporation, 284 U.S. 127 (1966). As stated by the Court
of Appeals for the Tenth Circuit in its Olson Farms case:
‘‘We agree that price parallelism, standing alone,
does not necessarily prove a conspiracy to fix prices
(citing authority). However, the fact that price paral-
lelism exists becomes a significant factor and may
help to support a finding of conspiracy ... A con-
spiracy must be judged on its constituent parts and
the jury must look at the alleged conspiracy in its
totality. A conspiracy may be implied from a course
of conduct and other circumstantial evidence.’’ (241
F.2d at 245; emphasis added)
A factor which lends particular significance to
parallel conduct also exists if the parallelism occurs
against a background of contacts among the defendants so
that the circumstances demonstrate an opportunity for
collusion. See, e.g., Michaelman v. Clark-Schwebel
Fiberglass Corporation, 1975-2 Tr. Cases, paragraph 60,
550 (S.D., N.Y., 1975).
When the parallel conduct is not limited to one facet
of the parties’ business operations but is widespread and
encompasses several elements of behavior, such is
especially persuasive evidence of an express or tacit agree-
ment. Report of the Attorney General’s National Commit-
tee to Study the Antitrust Laws, p. 39. Moreover,
parallelism as to pricing alone takes on added importance
and persuasiveness when it exists in the context of both up-
ward and downward price trends within a given industry.
Oppenheim and Weston, Federal Antitrust Laws, West,
1968, citing D. B. Cole, et al. v. Hughes Tool Co., 215
56a
F.2d 924 (10th Cir., 1954), cert. den., 348 U.S. 927, reh.
den., 348 U.S. 965.
A listing of the types of defendants’ identical parallel
behavior is impressive, indeed, when viewed against the
background of these authorities. The elements of
parallelism in defendants’ conduct as revealed by
Daiflon’s evidence include:
All members of the industry have consistently fol-
lowed the practice. of channelling their sales of
refrigerant gas only through ‘‘full line’’ air-condi-
tioning and refrigeration wholesalers, most of whom
are members of the Air Conditioning and Refrigera-
tion Wholesalers Association.
The consistent on-going refusal of the defend-
ants to sell refrigerant to end users.
Parallel conduct by defendants with respect to
monitoring and policing the distribution of containers
in order to inhibit the practice of refilling containers.
Undertaking various acts and practices to preclude
‘‘unauthorized’’ vendors from selling refrigerant
gas directly to consumers.
Parallel busines behavior in terms of the efforts of
the defendants to induce the wholesalers to utilize
the defendants’ price concessions to reduce prices
at the level at which Daiflon was attempting to
compete.
Parallel pricing behavior, including parallel pricing
both during those periods when the industry price
was rising, and after Daiflon’s entry into the market,
when the prices were characterized by a dramatic
downward trend.
Of course, parallel behavior is also especially suggestive of
collusion if it occurs against a factual background sug-
. gestive of the existence of a motive and an opportunity for
a conspiracy, the extensive evidence in these matters being
discussed herein.
57a
One of the most remarkable facets of the defendants’
brief is their attempt (Brief, p. 4) to suggest that it was the
‘‘unanimous conclusion’’ of all the economists who
testified in the case that parallel business behavior by the
defendants could not be indicative of collusion in the cir-
cumstances of the present case, viz., an oligopolistic in-
dustry consisting of a homogeneous product. Defendants’
assertion is remarkable because Dr. Jadlow specifically
addressed the matter of conscious parallelism, and the
question of whether, in the context in which it occurred in
the present case, the parallelism was likely to be indicative
‘of collusion. (Tr. pp. 1168-1170) In so doing, Dr. Jadlow
pointed out that, to evaluate the significance of
parallelism, one must look at the context of the parties’
conduct and,
‘* .. try to evaluate whether these seem likely to
happen through independent decision making by the
individual firms.’’ (TR. p. 1169)
Then, following the approach thus suggested, Dr. Jadlow
further explained:
‘‘For example, if you find a situation where, say,
the costs of the firms in the market are all known
to be going up, and maybe demand is also going up
for the products of the firms, if these firms all lower
prices in unison, that would make us suspicious.
‘*That would not seem to be the economically rational
thing for the individual firms to do through inde-
pendent decision making.
“Tt would make us wonder if there was some price
fixing going on, and with some possible ulterior
motive, such as possibly to eliminate some rival
competitor, some small entrant;, maybe’. . .’”’ (Tr.
pp. 1169-1170; emphasis added)
The proposition that conduct contrary to normal,
reasonably anticipated business behavior further increases
the persuasiveness of parallelism has similarly been
58a
recognized and articulated by the courts. See, e.g., United
States v. Eli Lilly & Co., (1969), Tr. Cases, paragraph 69,
411 (D.C., N.J., 1959).
An argument identical to defendants’ attempt to sug-
gest that parallelism cannot be significant evidence of col-
lusion where, as here, the industry setting in which the
practice occurs is that of a homogeneous product was ad-
dressed by the Court of Appeals for the Tenth Circuit. In
Morton Salt Co. v. United States, 235 F.2d 573 (10th Cir.,
1956), where an appellate court addressed an identical
contention in the context of an antitrust case involving
salt, the Court pointed out that parallelism is not always
necessarily itself conclusive evidence of a conspiracy.
‘But ... such behavior is another item to be
weighed, and generally to be weighed heavily in
the determination. The Intermountain Market in salt
is served by only a few suppliers, an oligopoly in
economic terms and the product is a standardized
one ... In such a situation, it is almost inevitable
that the pricing policies of one company will be
influenced and to some perhaps, detracts from the
weight we should give to parallel pricing. But the
presence of only a few friendly sellers and the stable
demand for the product presents a great opportunity
and temptation to combine. . .’’ (235 F.2d 477)
Then, weighing the inherent persuasiveness of parallelism
and its significance in the setting of the salt industry, the
Court concluded that, on balance, there was a basis to
believe that the parallelism was not merely a product of
happenstance or economic force, but indicated actionable
collusion. Thus, the Court declared:
‘‘The compelling inference from the evidence already
recited above would indicate that the instant case
presents more than an example of conscious parallel
business behavior.”’
59a
D. Testimony of Harold David Gresham
The testimony of Mr. Gresham which has been refer-
red to above is highly significant and is fully supportive of
the jury’s finding that defendants entered into a con-
spiracy to manipulate the prices in the non-automotive
aftermarket for refrigerant gas in order to drive Daiflon
therefrom. This is true in both of two respects: First, as far
as defendants even address the jury’s finding of a con-
spiracy, their primary attack on this finding is in the con-
tention, advanced in various forms, that the record shows
‘*undisputedly’’ not collusive behavior, but vigorous price
competition, the sort of which is antithetical to collusion.
Second, the Gresham testimony is significant, also,
because it reveals, most specifically, collusive conduct
among defendants of a price-oriented nature, and the
courts recognize that collusive conduct, in one respect,
may be highly persuasive evidence that the collusion ex-
tended to a different facet of the defendants’ business
practices. Continental Ore Co. v. Union Carbide & Car-
bon Corp., 370 U.S. 690 (1962); Panotex Pipe Line Co.
v. Phillips Petroleum Co., 457 F.2d 1279 (Sth Cir., 1972),
cert. den., 409 U.S. 845. Accordingly, although Daiflon
has not premised its case on the proposition that it was
damaged by reason of a conspiracy among the defendants
to alloate markets, evidence of such a conspiracy is per-
suasive to show the likelihood of collusion to engage in the
exclusionary or ‘‘credible threat’’ pricing to which Dr.
Jadlow referred.
As noted above, Mr. Gresham was formerly
employed as a salesman for the defendant Kaiser (Tr. 7)
and in this capacity had responsibility for the business
operations of the company in several cities, including
Houston, Corpus Christi, San Antonio, Beaumont, and
Port Arthur, Texas, and Lake Charles, Louisiana (Tr. 7).
Mr. Gresham worked for a short period with the salesman
whom he subsequently replaced, a Mr. Sharp, and had fre-
60a
quent contacts with Kaiser’s refrigerant sales manager,
Frank Rose, (Tr. 8,16). Mr. Gresham’s testimony dealt
with the ‘‘training’’ which he received from Kaiser’s ex-
isting sales representative, Mr. Sharp, and his dealings
with Mr. Rose, with respect to the matter of selling prac-
tices in the markets which Mr. Gresham covered. Mr.
Gresham referred to a customer ‘‘Standard Brass’’ which
operated outlets in several cities in Texas. In so doing, he
described an arrangement whereby Kaiser was to supply
an outlet of Standard Brass in one community (Port
Arthur) while recognizing that other Standard Brass
outlets were deemed by the members of the industry to be
the ‘‘exclusive property’’ of other manufacturers. In this
regard, Mr. Gresham was examined as follows:
Q. What, if any, understanding did you have
through conversations with Mike (Sharp)?
A. Well, again, that store was selling DuPont
and Allied.
Q. With respect to other allocations of business,
would you state what, if any, conversations
you had with Mike Sharp in connection with
allocations?
A. Well, our understanding with Mike Sharp is
that — as explained to me — that we would get
the business in Port Arthur and the other various
larger companies —
Q. With what other company in Port Arthur?
A. The Standard Brass outlet in Port Arthur, and
the other larger companies had the other stores,
and this is what was allotted.
And what was your allotment?
About every fourth truckload.
. And how were the other three truckloads
divided, if you recall?
I understand that DuPont got about two to one
of the various other companies.’’ (Tr. 15)
> OP
6la
Mr. Gresham also testified about similar information
received directly from Mr. Rose, during a week’s ‘‘indoc-
trination period’’ in Dallas which he spent under the
tutelage of Mr. Rose. Mr. Gresham testified at length con-
cerning ‘‘training’’ and ‘‘instruction’’ about the sales
practices which defendants now attempt to characterize as
unfettered ‘‘vigorous competiiicn’’, and the inclusion of a
substantial amount of this testimony would further
lengthen the brief. However, the following declarations
are sufficient to indicate the tenor of Mr. Gresham’s
overall testimony with respect to ‘‘competition’’, as he
knew it, in the industry:
Q. And would you state what occurred during that
week with Mr. Rose?
A. Well, we went through the product manual and
- then through the customer files, as to who we
were selling, and customers to call on and who
we were to solicit from, and spend our time with.
And it was basically a recap of what Mike Sharp
had done.
Q. Well, just state, as best you can recall, in sub-
stance what Mr. Rose stated to you at that time?
A. Well, in substance, as I understood Frank Rose,
that Kaiser was a smaller manufacturer of gas,
and we were allotted a percentage of the market,
and that the various customers had been estab-
lished and we were to work with these cus-
tomers.’’ (Tr. pp. 15 to 16)
Mr. Gresham testified further about the pricing prac-
tices which Kaiser and the manufacturers employed with
regard to their sales ‘‘efforts’’. In one instance, Mr.
Gresham described communications with Frank Rose
about a competitive situation which he had encountered
where Gresham believed he could successfully obtain an
account by meeting the price offering of a manufacturer-
62a
competitor. Mr. Gresham furnished the following
testimony:
Q.
A.
What G_ you mean, a competitive account?
Well, we had to match a price. I turned in the
information of what the competition was selling
for and what we had to do.
Q. What did you tell him, just report what you
told him.
A. I went and gave them a price. I called Frank,
>O
told him what the situation — what we had to
do to meet competition to get some business.
He said, ‘We cannot meet competition in that
situation’, that we would gain no business from
them.
. Did he explain why?
He didn’t have to, I knew why ... [I]n my
understanding, in essence what they told me
was that we had a certain percentage of the
market, and if we tried to get more than that
percentage, that we would suffer the conse-
quences .. . (Tr. p. 49)
In response to questions as to which companies he
had been told would take retaliatory action, should Kaiser
actually engage in vigorous price competition, Mr.
Gresham identified DuPont and Allied. He was then ex-
amined as follows:
Q.
A.
Q.
A. Yes, by Frank Rose and Mike Sharp, and all of
Was there any unusual phrase that was used
with respect to competing with these people that
you recall?
In our industry, DuPont was the largest com-
pany and we had a little saying, we said, ‘don’t
kick the giant in the shins’.
Was this ever stated to you by anyone at —
the salesmen used this phrase.’’ (Tr. p. 48)
. Gresham’s testimony and other evidence as to the
63a
behavior of the defendants before and after Daiflon left
the market thus ‘‘dovetails’? remarkably with the
testimony of Dr. Jadlow. To return again to his testimony,
Dr. Jadlow described a pattern of conduct, identical to
that suggested by other evidence of record, as a likely and,
indeed, predictable form of behavior from firms compris-
ing an industry so anticompetitive in structure as the
refrigerant gas industry. Thus, Dr. Jadlow testified:
‘*A third possible strategy would be collusion. Even
a firm with monopoly power might practice collusion
because, as I said before, if it charges a high price,
its competitors mizht undercut it in price and take
some of its market share, so it would — it might
possibly practice price-fixing with these other firms.
They all keep their prices at the monopoly level, and
in this way, they all maintain about the same market
shares that they started out with, and they don’t
change these market shares . .. and then an entry
may occur and they stand by the high profits, and
after entry has occurred, the established firm or
firms may cut their price down to below the cost of
a new entrant, drive the new entrant out of business,
and then raise their price back up to the profit
maximizing level.’’ (Tr. 116-67)
In their discussion (Brief, pp. 41-42) of plaintiff’s
contentions with respect to the restrictive distribution pat-
terns existent in the refrigerant gas industry, defendants
also utilize the tactic of defining conspiracy (expressly or
by implication) as requiring a showing of a specific agree-
ment among the parties. Purporting to find no express
agreement with respect to refusals to deal or allocate
business, defendants contend (Brief, p. 41) that the alloca-
tion of customers and business was not of the type
prescribed by the antitrust laws, and that the refusal to
deal with the non-full-line wholesalers was, by definition,
64a
a legitimate exercise of the right of a businessman to select
his customers.
With respect to the manufacturers’ consistent and
ongoing refusal to deal with non-‘‘full-line’’ wholesalers,
it has never been Daiflon’s contention that the mere
unilateral action of one or more defendants to decline to
deal with a specific wholesaler for a legitimate business
reason (e.g., credit) would constitute an antitrust viola-
tion. However, it does not follow from this that, as
asserted by the defendants, that defendants’ action is ipso
facto legal. First, it is basic and fundamental antitrust law
that, while a truly unilateral refusal to deal may sometimes
be lawful, refusals to deal are never lawful, and indeed
become per se illegal conspiracies to boycott, if they are
accomplished collusively. Most significantly, however, it
is also fundamental antitrust law that, notwithstanding the
abstract right of businessman to select their customers for
legitimate business reasons, such conduct also becomes
unlawful when it has as its real objective a monopolistic or
market control purpose. Adolph Coors v. Federal Trade
Commission, 497 F.2d 1178 (10th Cir., 1974), cert. den.,
419 U.S. 105 (1975); Colorado Pipe and Supply Co. v.
Febco, Inc., 472 F.2d 637 (10th Cir., 1973), cert. den., 411
U.S. 987 (1973):
Again, however, defendants’ discussion of the
absence of specific evidence of an agreement to refuse to
deal, or to allocate customers, appears to be a tactical
maneuver designed to draw the Court’s attention away
from the real issue. As suggested by plaintiff during the
trial, the significance of the refusals to deal, and the adop-
tion of restrictive distribution patterns, is not that they
necessarily demonstrate in and of themselves con-
spiratorial conduct, but rather that the system thus created
lends character and understanding to plaintiff’s other
evidence of collusive conduct to exclude Daiflon from the
industry. Specifically, even assuming, arguendo, that
65a
defendants’ parallel behavior in refusing to deal with the
non-full-line wholesalers was indeed solely unilateral, such
conduct of the defendants is still highly significant in the
context in which Daiflon actually offered the evidence,
viz., a showing that the manufacturers had — or thought
they had — a motive to engage in predatory conduct
toward Daiflon.
With respect to the defendants’ suggestion (N.O.V.
Brief, p. 41, n. 12) that Mr. Gresham’s testimony is of lit-
tle or no significance because market allocation is not
shown in the antitrust sense, such contention is subject to
the same misconceptions as have characterized other
arguments of defendants. Initially, it is clear from a com-
parison of the testimony of Mr. Gresham above, with the
portion referred to in defendants’ footnote 12, that, when
he subsequently eschewed testimony with respect to an
‘‘agreement’’ among the manufacturers, Mr. Gresham
had been led in cross-examination to use agreement in the
context defendants had invited, viz., a specific expressed
contract. Under the correct legal standard, and especially
taking account of the standards by which a motion for a
judgment N.O.V. us evaluated, the jury was clearly en-
titled to determined that there was indeed a common com-
mitment among the defendants to allocate business.
Beyond this, however, the testimony of Mr. Gresham was
significant, and entirely proper for the jury’s considera-
tion, since, at the minimum, it is in fundamental con-
tradiction of defendants’ essential position that all the
evidence revealed tht conduct within the industry, in-
cluding the predatory price reduction, was necessarily the
product solely of an wholly unfettered and vigorously
competitive industry.
2. Defendants’ Attack on the Jury’s Finding
of Conspiracy
We have alluded above to the fact that defendants’
66a
brief in support of their motion for a judgment N.O.V. (a)
clearly and flagrantly violates the standards applicable to
motions for a judgment N.O.V. and (b) is permeated with
false declarations and misrepresentations as to the record.
Perhaps nowhere is this more clear than in defendants’
discussion (Brief, pp. 31 to 44) of their contention that
there is no evidentiary support for the jury’s finding as to
the nature of the industry’s actions. Defendants contend
that there is no evidence in support of the jury’s finding
that the price reductions were a collusive industry reaction
to a threat Daiflon posed to the carefully established in-
dustry pricing and distribution patterns. Rather, they said
it was shown by all the evidence to have been a non-
collusive reaction of the defendant companies to other
vague and ill-defined business conditions existing in the
refrigerant industry. Without exaggeration, upon ex-
amination, this contention is ludicrous.
A main thrust of defendants’ present attack on the
finding of a conspiracy is the attempt (Brief, pp. 32-33) (a)
to suggest, without so stating, that a conspiracy would ex-
ist if and only if there were a specific before-the-fact agree-
ment to cut prices to expel Daiflon from the industry and
(b) to further suggest that because — apparently contrary
to normal practice — DuPont kept its pricing plans secret
before the March, 1971, price moves, the same absolutely
and conclusively disproves any possible conspiracy theory.
Legally, and as a matter of common logic, defendants’
argument is fallacious.
First, clarifying the applicable legal standard, there is
no requirement that plaintiff show an advance agreement
among the defendants to cut prices. A conspiracy in viola-
tion of §1, and indeed constituting a per se violation, is
formed if, after DuPont’s March, 1971, price reduction,
“the other defendants, knowing the’nature and: purpose of
it, lent their support thereto. /nterstate Cement v. United
States, 306 U.S. 108 (1939); Wall Products Co. v. Na-
67a
tional Gypsum, 326 F.Supp. 295 (N.D., Cal., 1971). As
the Supreme Court responded to an identical argument in
the Interstate Circuit case, wherein defendants contended
that there could be no §1 Sherman Act violation because
there was no proof of a before-the-fact conspiracy:
**It was enough that, knowing that concerted action
was contemplated and invited, the [defendants] gave
their adherence to the scheme and participated in it
. It is elementary that an unlawful conspiracy may
be and often is formed without simultaneous action
Or agreement on the part of the conspirators.’’
(306 U.S. 226-27)
As further pointed out by the Supreme Court in United
States v. Singer Mfg. Co., 374 U.S. 174 (1962), which is
quoted in Wall Products Co., supra:
‘*Whether the conspiracy was achieved by agreement,
by tacit understanding, or by ‘acquiescence’
coupled with assistance in effectuating its purpose
is immaterial.’’ (374 U.S. at 193)
It was by no means unreasonable for the jury to conclude,
on the basis of the record, that DuPont’s lowering of its
prices did have a predatory motivation and that other
members of the industry recognized this and were thereby
invited to lend their support to DuPont’s effort by,
likewise, reducing prices to a level at which the plaintiff
could not survive.
Two additional arguments of the defendants can also
be addressed on the basis of the correct statement of the
law of conspiracy, as set forth above. First, defendants’
argument as to the ostensible absence of a before-the-fact
price reduction agreement (N.O.V. Brief, 33-35) is a mere
smoke screen. Even conceding, arguendo, that the
evidence did, in fact, fail to show simultaneous or before-
the-fact communications among the defendants, (direct
evidence of such communications is discussed above) such
fails to address the conspiracy theory which Daiflon
68a
actually advanced. Second, defendants’ argument as to
DuPont’s ‘‘elaborate efforts’? to avoid before-the-
fact communications of its intent to implement the March,
1971, price reductions also misses the mark. Defendants’
argument places DuPont in this interesting dilemma. If it
was DuPont’s normal practice to carefully safeguard its
intent with respect to anticipated price changes, the fact
that it also did so (assuming, arguendo, such to be a fact)
on this occasion is irrelevant. On the other hand, if such
secretive measures were not DuPont’s normal practice,
one wonders what made the March, 1971, price reduction
**special’’.
It would not have been irrational for the jury to have
had such questions, and to have concluded that DuPont
indeed anticipated the consequences of their drastic price
reduction and, on this occasion, took special pains to
avoid industry communications concerning its intent, still
knowing full well that achievement of the hoped-for
result of its conduct did not require any advance
communications.
It follows, also, that, when defendants argue (N.O.V.
Brief, p. 35) that the price moves were not entirely
simultaneous, they do not help themselves in the least. The
fact that a short period of time may have elapsed before
each of the other defendants followed DuPont’s lead is en-
tirely consistent with Daiflon’s conspiracy contention.
Certainly, the jury could properly infer that there may
have existed a short time before each defendant
understood why — in the face of industry-wide increased
costs and a growing demand — DuPont had elected to im-
plement the drastic 13% reduction. The fact that the other
companies lent their support to the plan slightly later,
after the nature and purpose was fully understood by them
is of no assistance to the defendants. To repeat, the other
companies’ subsequent ‘‘acceptance’’ of the plan ‘‘is suf-
ficient to establish an unlawful conspiracy under the Sher-
69a
man Act.’’ /nterstate Circuit, supra, 306 U.S. at 227.
Defendants’ argument (N.O.V. Brief, pp. 35-36) that
no finding of collusion was warranted because, in the face
of DuPont’s drastic reduction, ‘‘the other defendants had
little choice but to reduce their list price in response to Du-
Pont’s actions’’ (quoting Professor Hibdon) is interesting
indeed. Such a declaration wholly contradicts DuPont’s
frequent denials that it had monopoly power in the in-
dustry since one essential definition of monopoly power is
merely the ability to substantially influence the price level
in the industry. (See discussion, infra, pp. to .)
However, acknowledging that the declaration may be fac-
tually correct does not help defendants, provided only that
— as is abundantly clear — the jury was not wholly un-
warranted in finding (a) that the price reduction was
predatorily motivated and (b) the other defendants
understood, or came to understand, the purpose of the
price reduction. Indeed, if some of the defendants did
enter into the scheme only as a matter of economic necessi-
ty because of DuPont’s conduct, that fact is wholly im-
material to the conspiracy claim, because it is basic that it
is no defense that one entered a conspriacy reluctantly,
even in response to economic coercion. See, e.g., Flintkote
Co. v. Lysfjord, 246 F.2d 368 (9th Cir., 1957).
Returning again to defendants’ authority, Mr. Von
Kalinowski, with respect to the conspiracy element of a §1
Sherman Act case:
‘* . . all that must be shown is that each party acted
(1) with the intention that his acts have the conse-
quences they did have, and (2) with the knowledge
that at least one other party would act in conjunction
‘with him.’’ (Von Kalinowski, supra, Voi. i§,
§6.01 (3))
Defendants’ argument as to the ostensible ‘‘failure’’
of plaintiff’s proof of conspiracy also conveniently
misconceives the applicable rule with respect to the burden
70a
to come forward with evidence. Having shown a drastic
industry-wide price reduction in the fact of rising costs and
an expanding market, together with motive and oppor-
tunity for collusion, Daiflon had, most clearly, presented
evidence from which the jury could — as it did — properly
infer a conspiracy. At that point, the burden to come for-
ward with believable evidence shifted to the defendants.
As also stated by Mr. Von Kalinowski:
* .. if it can be shown that (1) a restraint of the
type contemplated by Section | exists, and (2) there
was some contact between the parties alleged to have
conspired, then unity of action can be inferred
absent a showing of extenuating facts.’’ (Von
Kalinowski, Vol. 16, §16.01(3); emphasis added)
In the present case, the defendants might have attempted
to meet the responsibility of showing ‘‘extenuating facts’’
by producing their executives responsible for the price
reductions and endeavoring to show that there were, in-
deed, industry business considerations which mandated
the drastic price reductions. (Of course, in the present con-
text, had such a showing, in fact, been made, it would not
save the defendants under the applicable standards for
evaluating the jury’s contrary finding in the present con-
text.) However, rather than producing their own ex-
ecutives and thus subjecting them to cross-examination,
they relied solely on the testimony of Professor Hibdon,
the weakness of whose testimony generally is discussed
above, and who also did not even purport to have had per-
sonal knowledge of the business considerations actually
behind the drastic price reductions, and who, further, only
reviewed a few select depositions provided to him by the
defendants, the depositions of witnesses such as Gresham
having been excluded. In a similar situation in the /n-
terstate Circuit case, supra, the Supreme Court had under
consideration a situation where the defendant companies,
rather than producing as witnesses the high-level manage-
Tla
ment personnel responsible for the decisions in question,
called instead only local managers whose knowledge of the
situation was more remote and general. The Court ad-
dressed this situation as follows:
**When the proof supported, as we think it did, the
inference of [collusive action], the burden rested on
appellants of going forward with the evidence to
explain away or contradict it. They undertook to
carry that burden by calling upon local managers of
their distributors to testify that they had acted inde-
pendently of the other distributors ... The failure
under the circumstances, to call as witnesses those
officers who. . . were in a position to know whether
they had acted in pursuance of agreement, is itself
persuasive that their testimony, if given, would have
been unfavorable to appellants. The production of
weak evidence when strong is available can lead only
to the conclusion that the strong would have been
adverse. Silence then becomes evidence of the most
convincing character.’’ (306 U.S. at 225-226;
emphasis added)
PROPOSITION IV
THERE IS A SOUND BASIS IN FACT AND LAW
FOR THE JURY’S FINDINGS THAT DEFENDANTS
CONSPIRED TO MONOPOLIZE THE NON-
AUTOMOTIVE REFRIGERANT GAS AFTER-
MARKET, THAT DEFENDANT, DUPONT, _IN-
DIVIDUALLY, ATTEMPTED TQ MONOPOLIZE
SUCH MARKET AND THAT DUPONT, IN FACT,
ACTUALLY MONOPOLIZE SUCH MARKET
In that portion of their brief attacking plaintiff’s
causes of action under Section Two of the Sherman Act
(N.O.V. Brief, pp. 531), defendants utilize the same ap-
proach employed in other portions of their brief. Most
72a
fundamentally through implication and by the omission of
basic legal principles, Defendants attempt to obfuscate the
existence of plaintiff’s three separate and distinct bases for
recovery under Section Two. They do this by suggesting
that the same legal standards apply in the attempt to
monopolize cause of action as with respect to actual
monopolization, by ignoring the jury’s finding that they
conspired to monopolize the non-automotive refrigerant
gas aftermarket.
The conspiracy to monopolize cause of action will be
discussed in more depth subsequently. Generally,
however, the defendants’ failure to attack, or indeed
allude to, the finding of a conspiracy to monopolize is in-
and-of-itself fatal to the defendants’ attack on plaintiff’s
cause of action under Section Two. Since there was a
proper legal and factual basis for the jury to find a con-
spiracy to exclude Daiflon from the industry, defendants’
arguments pertaining to market shares and the geographic
market become irrelevant. The balance of this portion of
the brief deals first with general principles regarding Sec-
tion Two of the Sherman Act and, thereafter, with plain-
tiff’s attempted monopolization, actual monopolization,
and conspiracy to monopolize claims individually.
A. General
In this context, it is helpful to re-examine the
language of Section Two of the Sherman Act, 15 U.S.C.,
§2. It states:
‘*Every person who shall monopolize, or attempt
to monopolize, or combine or conspire with any
person or persons to monopolize any part of the
trade or commerce ... shall be deemed guilty of
a felony.’’
It follows from the fact that the statutory language is in
the disjunctive that each of the three separately stated pro-
scriptions are separate and independent offenses under the
73a
statute. As stated in Von Kalinowski, Federal Antitrust
Laws, §8.01:
‘*By its express language (§2) establishes three
separate offenses. They are
(1) actual monopolization,
(2) attempted monopolization, and
(3) combination or conspiracy to monopolize.”’
Numerous decisions of the Federal courts, including the
Supreme Court as well as our Court of Appeals, substan-
tiate this proposition and demonstrate that the offenses
enumerated are separate and independent. See, e.g.,
United States v. Griffith, 334 U.S. 100 (1948); Continental
Ore Co. v. Union Carbide & Carbon Co., 370 U.S. 690
(1962); Lorain Journal Co. v. United States, 342 U.S. 143
(1951); Union Carbide & Carbon Corp. v. Nisley, 300
F.2d 561 (10th Cir., 1961). It is plain that an antitrust
plaintiff is entitled to combine in a single suit a cause of
action predicated on each of the separate offenses
enumerated in Section Two. Continental Oil Co. v. Union
Carbide & Carbon Co., 370 U.S. 690 (1962); American
Tobacco Co. v. United States, 328 U.S.781 (1946); Perma
Life Mufflers, Inc. v. International Parts Co., 392 U.S.
134 (1948).
B. Actual Monopolization by Defendant DuPont,
Individually
Monopolization by a single defendant under Section
Two requires that two elements be established: First, the
possession of monopoly power; and, second, the pur-
poseful acquisition or maintenance of the monopoly
power. If the plaintiff succeeds in establishing these two
' elements, its Section Two cause of action is complete,
there being no requirement that the plaintiff demonstrate
that the a¢quisition or maintenance of the power was ac-
complished through conduct which is unlawful in-
dependently of Section Two. American Tobacco Co. v.
74a
United States, supra. The two forms of deliberate exclu-
sionary conduct which are most clearly demonstrated in
the evidence regarding defendant DuPont are exclusionary
pricing and disparagement.
1. Exclusionary Conduct
The dispositive question, in Daiflon’s view, as to
whether defendant DuPont engaged in deliberate exclu-
sionary practices in relation to it is whether DuPont in-
stituted pricing policies having as their objective the
sacrificing of normal profits in the immediate or the short
run in order to be able to maximize profits in the long run,
after Daiflon had been excluded from the market. Since
DuPont did initiate the price reduction in March, 1971,
the basis questions raised are simply (1) whether the jury
could rationally find that the DuPont price reductions
were, in fact, related to a predatory disposition toward
Daiflon, and (2) whether the utilization of such prices by
DuPont, including those after the subsequent reduction of
1972, constituted a deliberate program of sacrificing pro-
fitability to achieve higher monopolistic prices in the long
run. In this regard, much of the evidence, discussed above,
demonstrating an industry awareness of Daiflon’s
emergence as a competitor, together with a willingness to
undertake action with respect to it, is directly in point.
There are, however, numerous additional items of direct
evidence bearing upon the purpose and significance of the
price reduction.
Numerous documents of various forms provide a
foundation for the jury’s determination that DuPont did,
indeed, engage in the conduct Daiflon alleged. Indicative
of the sort of attitude which apparently permeated the
non-automotive refrigerant gas aftermarket and provided
the background against which the price reduction occurred
is Plaintiff’s Exhibit No. 1005. This document is a letter of
January 13, 1970, from Wittichen Supply Company of
75a
Birmingham, Alabama, to a Mr. Ranson of DuPont, ar-
ticulating Wittichen’s concern about the emergence of
Daiflon in the industry. This communication, over the
signature of the Vice President and General Manager of
the wholesaler, states in part:
**.. This is our problem and I am asking you to
try to come up with an easy answer...
* * *
“MY PROBLEM — How am I going to tell my re-
maining customers about your price increase and
make them think it is smart to trade with me when
their competition is buying ‘Daiflon’ and quoting
on the same jobs.”’
The letter is answered by Mr. Ranson by his letter of
January 26, 1970, wherein he thanks the wholesaler ‘‘for
taking the time to share your thoughts and concerns about
the threat from the Japanese imported refrigerant, ‘Dai-
flon’’’. The letter proceeds:
**As a manufacturer of refrigerant, we, too, are very
concerned over the recent, aggressive activities of
those who are importing and distributing ‘Daiflon’.”’
Mr. Ranson proceeds to raise questions about ostensible
quality control problems associated with Daiflon and
raises the specter of ‘‘liability suits for allegedly faulty
products’’. He then proceeds:
‘*Let me assure you that we will watch the situation
very carefully and will be prepared to take appropri-
ate action when it becomes necessary.”’
Virginia Chemicals, Inc., is a subsidiary of DuPont
which, along with the DuPont sales force, is responsible
for the distribution of DuPont refrigerants. Plaintiff’s Ex-
hibit No. 1062 is a letter memorandum dated after Du-
Pont’s price reduction, viz., April 30, 1971, from one
Luther Cox of Virginia Chemicals to DuPont’s Manager
of Field Distribution, Patrick V. O’Donnell. The letter
reports on Daiflon’s sales activity in the mid-Atlantic
76a
region and revaluates the impact which the price reduction
was said to have had in that section:
‘I! believe that our new pricing policy will be of
great help in combatting the threat of Daiflon.’’
A further after-the-fact document from DuPont’s
files revealing the character and purpose of DuPont’s 1971
price reduction is Plaintiff’s Exhibit No. 1065, a DuPont
field report which is related in time to the above memoran-
dum from Mr. Cox. The report refers to the Birmingham
wholesaler mentioned above and states:
‘‘Mr. Gennett is causing quite a stir in the market in
the Birmingham area. He is passing on the 13% dis-
count which we offered in order to combat the Japan-
ese refrigerant .. . However, he is causing quite a
stir with Wittichen Supply Company as far as pricing
goes. His main concern, however, is not his competi-
tion with Wittichen Supply Company but with the
Japanese refrigerant.’’
The testimony by deposition of Robert Wright, Jr.,
Marketing Manager of Refrigerants for DuPont, also pro-
vides a basis on which the jury could properly have
disbelieved defendants’ assertions that the March, 1971,
price reduction was motivated wholly by other considera-
tions and that there was no concern about Daiflon’s
emergence in the industry. Among other points, Mr.
Wright testified that, after DuPont became aware of
Daiflon’s sales activities, its management caused the
Daiflon gas to be tested, apparently hoping to detect
quality control matters in order to get some basis for
disparaging comments concerning Daiflon (Wright
Deposition, pp. 69-70). Mr. Wright also testified (Deposi-
tion, pp. 67-68) that DuPont investigated Daiflon’s buying
prices in the hope that information could be developed to
support a charge of ‘‘dumping’’ against the plaintiff’s
supplier. Finally, with respect to the particular matter of
the March, 1971, price reductions initiated by DuPont,
77a
Mr. Wright was examined as to whether the recent history
of the refrigerant industry revealed price reductions of the
sort implemented in the period of the plaintiff’s business
operations. He answered, ‘‘Correct’’, to a question in
which it was observed that there had not been past price
reductions that were comparable to those during the
Daiflon period (Deposition, p. 21).
To return again to the testimony of plaintiff's
economisis, Dr. Jadlow, he explained the concept of ‘‘ex-
clusionary’’ or ‘‘credible threat’’ pricing as merely a situa-
tion in which ‘‘the firm foregoes some immediate profits”’
and:
**. , . set[s] [its] price low enough so that a new firm
comes in, it’s not expected to be able to make a profit,
and thus you discourage entry by new firms and you
limit entry in this way.’’
Defendants’ primary attack on the jury’s finding that
DuPont did employ such deliberately exclusionary tactics
is found in the contention (N.O.V. Brief, pp. 24-27) that
such conduct by DuPont is merely legally protected
legitimate price competition. Thus, defendants assert,
‘*there is no evidence whatsoever that, as a result of the
March, 1971, price reduction, DuPont was selling its
refrigerant gas below its fully allocated costs or its
marginal or incremental costs’’ (N.O.V. Brief, p. 24).
Again, it appears appropriate to suggest that this assertion
is wrong, as a matter of fact, and that it misconceives the
applicable legal principles. In his deposition (p. 178), Mr.
Wright of DuPont confirmed specifically that, as a result
of the two price reductions in question, DuPont was ‘‘hav-
ing a sale below cost’’, as to at least some lines of
réfrigerant gas. Contrary to the suggestion in defendants’
brief (N.O.V. Brief, p. 24), it would appear, therefore,
that there was, indeed, a ‘‘basis for finding that DuPont
was making other than a reasonable profit’’.
With respect to the legal aspect of defendants’ argu-
78a
ment, plaintiff has no quarrel whatsoever with defend-
ants’ proposition (N.O.V. Brief, pp. 25-26) that the main
concern of the antitrust laws is protecting vigorous com-
petition rather than concerning itself with the economic
health of individual competitors. However, accepting this
observation by no means legitimatizes the present situa-
tion wherein, under plaintiff’s evidence reasonably be-
lieved by the jury, a company with a large percentage of
the market set upon a course of conduct specifically —
designed to eliminate a new entrant having a small per-
centage of the market but being a strong pro-competitive
force in the industry, and did so in order that prices could
be returned to a monopolistic level after the ‘‘threat’’ of
Daiflon was eliminated. What defendants conveniently
overlook, therefore, is that the present case presents not
an ‘‘either-or’’ situation, but rather one wherein protect-
ing a new entrant attempting to exercise a pro-competitive
influence is fully consistent with protecting competition.
When defendants suggest (IN.O.V. Brief, pp. 26-27)
that the Court of Appeals for the Tenth Circuit has ar-
ticulated an inflexible rule protecting predatory pricing
conduct unless sales are made below direct cost, they
misstate the facts. It is indeed true that, in a limited
number of instances, other courts have suggested such a
rule. However, no such inflexible rule applies in this Cir-
cuit, and the weight of even expert commentary on the law
is proceeding in the other direction.
The most significant and prestigious review of the
antitrust laws in recent years is to be found in the Report
to the President and Attorney General of the Naiional
Commission for the Review of Antitrust Laws and Pro-
cedures, January 22, 1979. This blue ribbon commission
of leading antitrust attorneys and economists specifically
addressed holdings of the sort to which the defendants
refer and noted its ‘‘concern’’ that such holdings, if widely
followed, would seriously diminish the proper application
79a
of Section Two. Specifically addressed by the Commission
is defendants’ theory as to a strict cost-oriented rule con-
cerning pricing:
‘‘The second area of the Commission’s concern —
the relevance of below marginal cost pricing -~ is
based on the arguments, most visibly advanced by
Professors Areda and Turner, that pricing at above
marginal costs is necessarily economically efficient
and thus pro-competitive ... This standard is too
restrictive, especially as it applies to conduct by
a firm with a dominant market position, and the
Commission recommends a more flexible analytical
approach ... [W]here there is other evidence of
exclusionary or predatory intent, the fact that prices
are above marginal costs should not absolutely bar
a finding of liability. Rather, the relation of price
to marginal cost should be considered in its context
along with the separate evidence of intent and the
defendants’ market power. For example, where a
firm with a dominant market position undertakes a
pattern of pricing behavior directed at excluding
new entrants from a market ... liability may be
found even if the prices charged were above marginal
cost. . . . Similarly, when a firm undertakes a pat-
tern of pricing behavior intended to ‘police’ competi-
tors by discouraging price-cutting, liability may be
found in spite of prices above marginal costs.’’
Although the Presidential Commission did indeed
recognize that adoption of its views would change the
holdings of certain courts, such is not the situation with
regard to our appellate court, whose decisions evidence
clearly acceptance of the realistic and flexible standards
which the Commission urged. Cackling Acres, Inc. v.
Olson Farms, Inc., 541 F.2d 242 (10th Cir., 1976); Union
Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th
Cir., 1962).
80a
In the Nisley case, the Court commented upon the
nature of Section Two of the Sherman Act in the context
of an assessment of a trial court’s instructions wherein the
jury was directed that the significant issue was whether
the defendant had exclusionary intent and acted on such
intent to the detriment of the plaintiff. The Court
declared:
‘*‘We think the instructions in that regard correctly
stated the law of the case, and we do not think it was
reversibly erroneous to refuse to define ‘attempt to
monopolize’ beyond the point of telling the jury that
the attempt must be accompanied by a specific intent
to acquire market power and exclude others from
competition.’’ (300 F.2d at 586)
In the more recent Cacking Acres case, the Court also
dealt with a defendant’s contention that there were ar-
bitrary pricing standards or elements without which the
plaintiff could not succeed; however, the Court gave only
summary attention to such contentions, saying:
‘*Viewing the evidence in its entirety, it is clear that
‘reasonable minds could find a violation of Section Two
based upon a course of conduct and other circum-
stances which tended to show Olson’s domination
in the Utah-Idaho egg market, its intent to control
the egg producer paying price and therefore dominate
the market and the predatory means used to accom-
plish this purpsoe.’’ (541 F.2d at 246)
Telex v. I.B.M.,.510 F.2d 894 (10th Cir., 1975), cert.
dis., 423 U.S. 802 (1976), (N.O.V. Brief, p. 26), on which
defendants rely, sets forth a general proposition that a
monopolization defendant should not be prohibited from
adjusting price levels within ‘‘reasonable ranges’’. To state
and accept that principle as a generality, however, fails to
provide defendants any real assistance, because such
generality has little or no applicability to the facts of the
present case. Under the teaching of such decisions as
8la
Cackling Acres, Inc. v. Olson Farms, supra, it is clear that
the preliminary determination as to what is ‘‘reasonable’’
behavior for a dominant company will be determined on
the basis of an assessment of the overall record in the case,
rather than from some inflexible standard. Secondly,
whatever the significance of the question of a
**reasonable’’ price range in the abstract, in the present
case, the jury was not unwarranted in finding that DuPont
did not implement its ‘‘adjustments’’ within a ‘‘reasonable
range’’, when, according to the testimony of its own
manager, Mr. Wright, DuPont sold below cost.
Similarly, the Pacific Engineering and Production
Co. v. Kerr-McGee Corp. case, 551 F.2d 790 (10th Cir.,
1976), cert. den., 434 U.S. 897 (1977), is of no help to the
defendants, and, indeed, when properly examined, is vir-
tually dispositive of the monopolization issue in plaintiff’s
favor. Initially, the Court was there called upon to review
a determination by the trial court as to predatory or
monopolistic behavior in the setting of an industry which
had diminished to the point that only a single company
could survive economically, wholly apart from any
predatory practices. Accordingly, the situation there
presented was one constituting or closely akin to the
natural monopoly situation, in which many courts have
recognized that it is not appropriate to apply normal stan-
dards respecting illegal monopolization. Further, in stark
and significant contract to the present situation, however,
the trial court there found the absence of any predatory
pricing conduct by defendants. (551 F.2d at 795). Con-
comitantly, the court also found the presence of a
legitimate, non-predatory motive for the defendant’s price
reductions in the form of persuasive economic data reveal-
ing that the defendant was thereby achieving economies of
scale, this because, by the price reductions, the defendant
was ‘‘expand[ing] output to reach a lower price on its
marginal costs curve’’. (551 F.2d at 796). Finally, and
82a
most importantly, whether correctly or not, the courts
there found the absence of other, non-price, predatory
conduct, creating a situation wherein (1) evidence had not
been presented of sales below direct cost, and (2) there was
a dearth of other evidence revealing predatory intent or
disposition. Properly viewed, the most significant thing
about the Pacific Engineering decision is that, fully consis-
tent with the Cackling Acres and the Union Carbide v.
Nisley cases cited above, the Court specifically rejected
defendant’s invitation to adopt an arbitrary, accounting-
oriented standard as to the presence or absence of
monopolistic behavior. Thus, the Court declared:
‘*Although we do not intend to adopt a solely cost-
based test, [here] there are no other relevant factors
indicating that [the defendant’s] conduct was anti-
competitive... .’’ (551 F.2d at 797; emphasis added)
The fallacy of defendants’ contentions with respect to
the matter of individual monopolization by defendant Du-
Pont — especially as it relates to pricing activity — is ap-
parent upon nothing more than the application of com-
mon logic to legal principles set forth by defendants
themselves. Defendants correctly defined monopolization
(N.O.V. Brief, p. 5) as (1) the possession of monopoly
power, and (2) its willful acquisition or maintenance.
Here, Daiflon has alleged — with the jury’s subsequent
agreement — that defendants, including specifically Du-
Pont, did exclude Daiflon from the non-automotive after-
market for refrigerant gas, inter alia, by its pattern of pric-
ing conduct. Pursuant to which, it (a) set about to and did
ascertain plaintiff’s product costs, knowing full well that
Daiflon could not survive ‘‘price war’’ conditions, (b)
deliberately pegged its own price levels at a level below
Daiflon’s costs, and (c) having achieved the desired objec-
tive of removing Daiflon from the industry, thereafter
restored its prices to the maximum level then permissible.
83a
Thus, correctly viewing the situation, it is fundamen-
tally illogical for defendants to argue that DuPont has not
thereby been guilty of deliberate exclusionary conduct for
the reason asserted, simply because, recognizing that such
was all that was required to achieve the intend result,
DuPont only priced its product below its full costs and not
below its direct costs (i.e., assuming, arguendo, that such
was in fact the circumstances). This does not show —
under defendants’ own standards — that DuPont did not
engage in deliberately exclusionary conduct. Indeed, all
that is actually suggested by DuPont’s argument is that it
behaved as a ‘‘prudent’’ monopolist by avoiding expend-
ing more of its funds than was required to accomplish the
intended objective. Indeed, again accepting the evidence,
it might be argued that DuPont’s actual conduct (assum-
ing, arguendo, the absence of sales below direct costs) was
more antithetical to the public welfare since the public
derives some benefit (albeit very costly and short-term)
from even a predatory price reduction. Thus, by its action
in carefully limiting the reduction to the amount which
would do the job, thus conserving its own resources, Du-
Pont diminished even this artificial, short-term, public
welfare economic benefit.
Defendants’ other challenge to the jury’s finding as to
monopolization by DuPont consists of the argument
(N.O.V. Brief, pp. 6-8) that the jury misconceived the rele-
vant geographic market. Central to this contention is its
characterization of the testimony of Dr. Jadlow (Brief, p.
6) whereby defendants apparently attempt to induce the
Court to believe that plaintiff’s economist defined the
geographic market as a national non-automotive after-
market for refrigerant gas. In reality, it is apparent even
from the portions of Dr. Jadlow’s testimony quoted by
defendants that the question propounded was directed to
the product market, and that Dr. Jadlow testified only
that (as defendants now concede) the non-automotive
84a
replacement market for refrigerant gas was a proper pro-
duct market ‘‘throughout the United States’’. According-
ly, defendants’ first attempt to alter the determination
with respect to the geographic market fails by reason of
the fact that it is premised on a misstatement of the record.
Consideration of the legal arguments pertaining to
the correct definition of the geographic market requires
examination of the nature and purpose for defining the
market. As set forth in United States v. Grinnell Corpora-
tion, 384 U.S. 563 (1966), the essence of the ‘‘geographic
market’’ inquiry is simply to ascertain the geographic
region within which the defendants and plaintiff effective-
ly competed. However, as set forth in Grinnell, the essence
of the issue is simply to determine the factual ‘‘realities’’
as to the area of competition (384 U.S. 577).
It is fundamental antitrust law with which Daiflon
has no quarrel whatsoever that, if it was indeed seeking to
carve from the total applicable area of competition a
smaller area within which the defendants’ conduct was to
be assessed, it would be incumbent upon Daiflon to
demonstrate some practical or economic reason that it was
inappropriate not to consider the entire area of economic
confrontation between the parties. However, acceptance
of such a truism of defendants does not, by any means,
support the conclusion which they seek to draw from it.
Here, treating the thirty-one specifically identified states
in which Daiflon conducted business operations as the ap-
plicable geographic market requires no such development
of a smaller ‘‘submarket’’. Further, the result suggested
by Daiflon is consistent with the nature and purpose cf the
antitrust laws, whereas defendants’ proposition clearly is
not. If, in fact, the courts were required to focus on the
total area in which the defendant operated rather than the
area of effective competition, the result would be totally
inconsistent with antitrust principles and objectives. The
inevitable result of such.a view would be that a localized
85a
seller could be put out of busienss with impunity by a
natural marketer, provided only that the defendant’s posi-
tion in the natural market was not dominant. Moreover,
this would be true even though the defendant could
accomplish his objective by reason of a dominant position
in a regional market.
Again, it is appropriate to refer to the general
priniciples recited above pertaining to a review of the
jury’s fact finding pursuant to a motion for judgment
N.O.V. These standards, viewed in conjunction with
further teachings of the recent case of Cackling Acres, Inc.
v. Olson Farms, Inc., 541 F.2d 242 (10th Cir., 1974),
demonstrate that the matter was properly handled by the
Court and the jury, and the result should not now be
interfered with.
The Court fully and properly instructed the jury on
the matter of the relevant market, both product and
geographic. In response to plaintiff’s evidence and in con-
junction with such proper instructions, the jury found that
DuPont individually, and defendants generally, had been
guilty of monopolization. Inherent in this finding under
the Court’s instructions was, of course, the conclusion
that plaintiff’s evidence set forth an appropriate
geographic market. Accordingly, since the definition of
the market is a fact issue, and plaintiff’s evidence that the
thirty-one states which its evidence identified were, in fact,
those in which Daiflon operated, the basic principles men-
tioned above with respect.to review of the jury’s fact deter-
minations on an N.O.V. motion are conclusive. In
response to a similar dispute in the Olson Farms case,
supra, the Court of Appeals observed that, ‘‘The trial
court in effect submitted to the jury the question as to just
what constituted the relevant geographical market’’, (541
F.2d at 245), and: :
‘*Under the facts of the case we find no error in the
trial court’s handling of the matter.
86a
« * *
‘‘The relevant geographic market is seldom fixed by
meets and bounds. (citing cases) In the case at hand,
there was a difference of opinion as to what consti-
tuted the relevant geographic market, and in such
circumstances it is best left to the plaintiff to estab-
lish by a preponderance of the evidence the area in
which anticompetitive conduct has its impact. it was
clearly proper to submit the issue to the jury.’’
(541 F.2d at 245-46)
Finally, defendants also challenge (N.O.V. Brief, pp.
9-11) the jury’s findings (Special Verdict, Item 3) that
DuPont had over 50% of the pertinent relevant market,
and its further finding (Special Verdict, Item 5) that Du-
Pont had monopoly power in such market during the
1969-72 time period. Defendants do this on the basis of a
premise — which they nowhere state or support — that
plaintiff can prove monopoly power only by showing the
existence of a certain market share, and that that market
share is other than 50%.
Initially, the fact is that market share is not the only
basis on which an antitrust plaintiff may demonstrate the
requisite ‘‘monopoly power’? as indeed defendants
themselves have apparently recognized (N.O.V. Brief, p.
9), ‘‘monopoly power is ... ‘the power to control
prices’’’ and defendants themselves have concluded that
DuPont had such power when they assert, in connection
with the discussion of conspiracy, that once DuPont
lowered its prices, the other members of the industry had
no alternative but to accede to DuPont’s power.
This definition of monopoly power currently adopted
by defendants is, in fact, the one which plaintiff utilized
and developed through the testimony of Dr. Jadlow.
Defendants’ own executives conceded, in deposition
testimony, that, in the realities of the marketplace,
defendant DuPont is the industry price leader and, in con-
87a
junction with the tests articulated by Dr. Jadlow, that fact
is, in-and-of-itself, sufficient to support the jury’s finding
of monopoly power. As stated by Dr. Jadlow:
‘*. . . We might look to see if there is one firm that
repeatedly has tended to be the price leader that other
firms have followed in a market. If there is such a
firm, there is a very good chance that that firm has
monopoly power. That’s why it’s the price leader.’’
(Tr. p. 1162)
Dr. Jadlow further explained (Tr. pp. 1158-59) that the
fact determination of whether monopoly power exists in a
given industry can be made on any of three bases, ‘‘market
structure’, ‘‘market conduct’’, and ‘‘market perfor-
mance’’. Dr. Jadlow proceeded to explain that a strong in-
dication of monopoly power would arise in an industry
such as the refrigerant gas non-automotive aftermarket if
it was shown that the firm in question ‘‘has over probably
40% of the market’’ (Tr. p. 1159).
Thus, properly viewing the question of monopoly
power as a fact issue — and especially viewing that issue in
conjunction with DuPont’s present admission in its brief
that once it elected to institute the March, 1971, price
reduction, other industry members had no choice but to
concur — it is apparent that the jury’s fact determination
that DuPont did possess monopoly power was, by no
means, irrational.
Defendants’ primary legal challenge to the jury’s
determination in this respect rests upon isolated decisions
that, in the context of the industries there involved, a
larger market share would be required to support a finding
of monopoly power. However, defendants have failed to
show that, in any of the cases relied upon, the plaintiff in
fact put forth either of the other two standards for
monopoly power, and certainly, there was no showing
that, as here, the defendant in question conceded that it
possessed the power to establish the price level in the
88a
industry. As discussed above, all defendants, including
DuPont, endorsed and supported the court’s Special
Verdict, including the one inquiring whether DuPont pos-
sessed a 50% share of the relevant market. If, indeed,
defendants felt that the 50% standard was inappropriate
in the fact of the present case, one wonders why they
affirmatively supported the form of Verdict at the time the
court posed it to the jury.
C. Conspiracy to Monopolize Among the Defend-
ants and Attempted Monopolization by Defendant
DuPont
We suggested above that the defendants’ various
vague and esoteric challenges to Daiflon’s Section Two
Sherman Act cause of action have the ring of a tactical
maneuver, at best, in light of the facts that the issues on
which defendants rely are not even presented by Daiflon’s
additional two theories for recovery under Section Two,
viz., attempted monopolization and conspiracy to
monopolize, both of which the jury also found to be pres-
ent. With respect to these matters, the law is clear.
Although defendants now attempt to challenge the
monopolization finding on the theory that DuPont
individually does not possess monopoly power within the
relevant market, it is clear that, with respect to a
conspiracy to monopolize claim, the relevant issue is not
whether a single defendant possessed such power, but
whether all. parties to the combination, viewed together,
could have possessed such power. United States v.
Consolidated Laundries Corp., 291 F.2d 563 (2nd Cir.,
1961). Further, in a conspiracy to monopolize cause of
action, it is not necessary to define the relevant market.
Salco Corp. v. General Motors Corp., 517 F.2d 567 (10th
‘Cir., 1975). Further, the principles discussed above
concerning the nature and elements of a combination or
conspiracy under Section One of the Sherman Act have
89a
equal applicability to conspiracies to monopolize under
Section Two. American Tobacco Co. v. United States, 328
U.S. 781 (1946).
Similarly, with respect to Daiflon’s claim of at-
tempted monopolization, which the jury also specifically
concurred in, most, if not all, of defendants’ present
arguments are without merit, even if it were conceded,
arguendo, that they otherwise had applicability to the
actual monopolization claim. It is settled, beyond
question, that, in attempted monopolization cases, a
showing of monopoly power is not necessary, and the
requirement is replaced by proof of specific intent to
monopolize, which requirement the finder of fact may
properly infer from the predaiory conduct itself. See, e.g.,
United States v. Columbia Steel Co., 334 U.S. 445 (1948).
The jury correctly determined that Daiflon
successfully established each of its three causes of action
under Section Two, viz., actual monopolization by
DuPont, a conspiracy to monopolize, and attempted -
monopolization by DuPont.
PROPOSITION V
DEFENDANTS UNFAIRLY ATTEMPT TO LIMIT
DAMAGE PROOF SOLELY TO THE TESTIMONY OF
ITS EXPERT WITNESS, DR. BENTON GUP
Defendants have adopted an unsupportable approach
to the question of damges, to-wit: .
1. Daiflon should be limited in its damages to
the fair market value of its business solely as cal-
culated by Dr. Benton Gup;
2. Dr. Gup’s testimony was insufficient, for a
number of reasons, to prove the reasonable value
of such losses (notwithstanding the special v-rdict);
and
3. It was accordingly unnecessary for defend-
90a
ants to present any testimony at trial with regard
to the question of damages; although certain ‘‘dam-
age’’ witnesses were originally listed.
With respect to the first element of defendants’ con-
tention, it is stated in their memorandum that:
‘‘Going into 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 was set out in Plain-
tiff’s Supplemental Response to Defendants’ Third
Set of Interrogatories, filed July, 1977.’ (Judg-
ment n.o.v. Brief, p. 44).
Defendants thereafter refer to Dr. Gup’s damage com-
putations as ‘‘the exclusive basis of Daiflon’s claim for
damages.’’ (/d.) This is the position defendants asserted
throughout trial, and argued to the jury. As Daiflon will
demonstrate, this proposition is totally inaccurate, and
known to be so by defendants.
The operative complaint in this case is Daiflon’s Se-
cond Amended Complaint which was filed of record
March 5, 1973. Following a statement of the offenses
charged in paragraphs 10 through 15 of the complaint,
Daiflon states the injury suffered as follows:
‘*16. By reason of and as a direct and proximate
result of the unlawful conduct alleged in paragraphs
10, 11, 12, 13, 14 and 15, plaintiff has been injured
that:
(a) It has lost profits by reason of lost sales that
it would have made in the absence of these violations.
(b) To the extent that it has been able to make
sales, plaintiff has been obliged to sell at prices
lower than it would have been able to charge under
freely competitive conditions.
(c) It has suffered substantial injury to its good
will as a result of defendants’ violations.
17. As a direct and proximate result of the fore-
9la
going violations, plaintiff’s business has been irre-
vocably and completely destroyed and its value
reduced from a value plaintiff conservatively esti-
mates at $3,000,000.00 to approximately $150,000.00
representing a salvage value.’’ (Second Amended
Complaint, p. 5).
The Second Amended Complaint was filed on March
5, 1973. On December 13, 1976 defendants submitted to
plaintiff their third set of interrogatories which specifically
relate to plaintiff’s claim of damages as set forth in
paragraph 17 of the Second Amended Complaint. On
January 28, 1977 plaintiff stated in answer to defendants’
interrogatories that the sum of $3,000,000.00 was arrived
at in June of 1972, prior to the filing of this action and
represented the combined efforts of Daiflon’s president,
Richard E. Carter and Jerry Reed, one of the attorneys for
Daiflon. Daiflon further identified, in its answer to Inter-
rogatory No. l(c), the specific documents which were
utilized in making the estimate. The steps involved in com-
puting the estimate were outlined for defendants in the
answer to Interrogatory No. 1(d).
On March 3, 1977 counsel for Pennwalt wrote to
Daiflon’s counsel with respect to the answ
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.