Petition — GEORGIA PACIFIC CORP v. LYMAN LAMB CO (No. 81-1619)

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Tree

81-1619 wa

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—

IN THE

Supreme Court of the Anited States

Octoser Term, 1981

GeorGia-PaciFic CORPORATION,

Petitioner,

Vv.

LYMAN LamB COMPANY, et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Freperick P. Furtu

(Counsel of Record)

Tuomas R. FAHRNER ~

DanieL S. MASON

Of Counsel: MICHAEL P. LEHMANN

; James M. NICHOLSON Craic C. Corsitt

4 Tuomas E. WITHYCOMBE Furtu, FAHRNER, BLUEMLE

Wiutam E. Craic & Mason

GeorGia-Paciric 201 Sansome Street, Suite 1000

CORPORATION San Francisco, California 94104

900 S.W. Fifth Avenue Telephone: (415) 433-2070

Portland, Oregon 97204

Telephone: (503) 222-5561 Attorneys for Petitioner

Georgia-Pacific Corporation

Dated: March 2, 1982

we

QUESTIONS PRESENTED

Conspiracy:

1. Can a conspiracy to fix one element of a price be

inferred from conscious parallel conduct plus direct commu-

nications, where it is not shown that such communications

involved discussion or agreement concerning that element?

2. Can absent parties be held to be antitrust co-

conspirators with parties before the court, where the only

evidence relied upon by the ‘rial court in connecting those

absent parties to the conspiracy found by the jury is conscious

parallel conduct?

Damages:

3. In a “single-element” price-fixing case, can the measure

of damages be based solely upon consideration of the only

element which allegedly has been fixed?

4. Must the trial court instruct the jury that the measure of

damages in a price-fixing case is based upon the difference

between the total price paid and what the total price would

have been absent a conspiracy?

PARTIES TO THE PROCEEDINGS

In addition to petitioner, appellants below were Weyer-

haeuser Company and Willamette Industries, Inc.

In addition to Lyman Lamb Company, appellees below

were Plywood Distributing Company, Baton Rouge Lumber

Company, and the City of Arkadelphia, Arkansas. The remain-

ing plaintiffs in the cases consolidated for trial in Jn re Plywood

Antitrust Litigation, Multidistrict Litigation No. 159, and the

remaining membeis of the plaintiff class, consisting of all

persons who purchased softwood plywood directly from the

manufacturers during the period from February 23, 1968

through December 31, 1973, also had an interest in the

outcome of the appeal.*

* The following entities are subsidiaries and affiliates of Georgia-

Pacific Corporation: Ashley, Drew & Northern Railway Company;

California Western Railroad; Fordyce and Princeton R.R. Co.; Four

Hundred Health Club, Inc.; Georgia-Pacific Export, Inc.; Georgia-

Pacific Finance Company; Georgia-Pacific Leasing Corporation; Az-

tec Trading Company, S.A.; Compania de Navegacion Arboreous,

S.A.; Exchange Oil & Gas Corporation; Bayou Hydrocarbons, Inc.;

Georgia-Pacific International Corporation; Anaconias Compensados e

Laminados, Limitada; Beaver Wood Fibre Company, Limited ( The);

Federal Packaging and Partition Company Limited; G-P Inveresk

Corporation; Georgia-Pacific Building Materials Sales, Ltd.; Georgia-

Pacific GmbH; Georgia-Pacific S.A.; Georgia Steamship Company,

Inc.; Inveresk Group Limited; Lianga Bay Logging Company, Inc.;

Magallanes Trading Company, S.A.; Metro Steamship Company; P.T.

Georgia-Pacific Indonesia; P.T. Kalimanis-Plywood Industries;

Georgia-Pacific Investment Company; National Management, Inc.;

St. Croix Pulpwood Company; St. Croix Pulpwood, Limited; Holly

Hill Lumber Company; Hudson Pulp & Paper Corp.; Hudson Ameri-

can Corp.; O.P.M. Co., Inc.; Montana Pacific International; Rex

Timber Inc.; Saint Croix Water Power Company—New Brunswick

(The); The Sprague’s Falls Manufacturing Company ( Limited); St.

Croix Water Power Company—Maine; and Thacker Land Company.

iii

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTED ............0ccssccocccscsscccsccessscsesceseres i

PARTIES TO THE PROCEEDINGS ...000........ccccccsceeseeeeeees i

TA FRU BEBO EEE onsscccccccccscassoscescccescescsssoesesesessese iv

casa ptbasuatieseonions l

I a ssemncnsisconnse 2

STATUTORY PROVISIONS INVOLVED ........................ 2

STATEMENT OF THE CASE .......ccscocescoccocscesesosesesesescesosees 3

I = EY IRIE cass tepmabecompecsnncesce 3

II. History Of The Proceedings ..................ccsceeeeeeeeeees 5

Bie: EE IIE scccetthvvsessanshituconssndsnsexoscotes 5

B. The FTC Proceeding And The Ninth Circuit

a cleassoutnidaion 6

C. The Present Case: Trial And Affirmance By

Sf SRR TR A Se 8

REASONS FOR GRANTING THE WRIT........................ 12

I. The Fifth Circuit Applied Erroneous Legal Stan-

dards In Upholding The Conspiracy Verdict........ 12

A. The Holding Conflicts With The Rule In Other

Circuits That Conscious Parallelism Plus

Opportunity Contacts Will Not Support A

Finding Of Conspiracy .................cccecceeeeeeseees 12

B. The Courts Below Erred In The Application Of

The “Slight Evidence” Rule To The Alleged

Co-Conspirator Abseni Parties....................... 17

Il. The Fifth Circuit Erred In Upholding The Single-

Element Measure Of Damages. .....................00000++ 19

A. Damages In Single-Element Price-Fixing

Cases Must Be Measured With Reference

To The Price Of The Whole Product............. 19

B. The Trial Court’s Failure To Instruct The Jury

On Measure Of Damages Was Reversi’ le

NINN scxedclso i cieni cared tneciadenasaieieibokersiapsdbaibiiaitedee 25

8” IRE RR SEC EDIE N = Pe, cA MRO SOAS OO 28

ADDENDUM ( Excerpts Of Jury Instructions )................... a

Note: A Joint Appendix, containing all material required by

Supreme Court Rule 21(k), has been filed by petitioner,

Weyerhaeuser Co. and Willamette Industries, Inc.

ag

iv

TABLE OF AUTHORITIES

CASES PaGeE(S)

Albertson’s, Inc., v. Amalgamated Sugar Co., 62 F.R.D. 43

(D.Utah 1973), aff'd in part, vacated reytaale 503 F.2d 459 ( 10th

CE: FIMO P ccicensrtiscctiavevapesosnpisovepretdnsnesesbatssouteinenecreouncenecsueesesoceioovased 22

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir.

1979), cert. denied, 444 U.s. 1093 (1980) ehdtnyiiabendipenencenintamneins 19, 23

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946)......... 20, 22

Boise Cascade Corp., 91 F.T.C. 1 (1978) ....cccccccceceeserseeseseesensencnnees 6,7

Boise Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir. 1980) ......... 2, 4,

6, 7, 8, 16,21

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 ( 1980)....... 4, 22, 23

Chagas v. Berry, 369 F.2d 637 (Sth Cir. 1966), cert. denied, 389

Se FS CCE D screserwinsentiennnitneceneniastiinetipinnpeennreiansanineameceessntins 26

City of Mishawaka, Ind. vy. American Electric Power Co., 616 F.2d

976 ( 7th Cir. 1980), cert. denied, 449 U.S. 1096 (1981) ......... 20, 21

Gainesville Utils. Dept. v. Florida Power & Light Co., 573 F.2d 292

(Sth Cir. ), cert. denied, 439 U.S. 966 (1978) .......cccccccseseesesereesenees 14

Hanson v. Shell Oil Co., 541 F.2d 1352 (9th Cir. 1976), cert.

I a SI OT O Dcihlek secnsictheticeee tient scsascntichinetonnetbeinrenes 16

Herman Schwabe, Inc. v. United Shoe Mach. Corp. 297 F.2d 906

(2d Cir. ), cert. denied, 369 U.S. 865 (1962 )........ccccccccceeseeseeeereeeee 23

Hunt v. Mobil Oil Corp., 465 F Supp. 195 (SD.N.Y. 1978), of’.

ERA AI ARG ALN ena

ILC Peripherals v. IBM “™ 458 bows 423 (N. D. Cal. ey

d nom. Memorex Corp. v. 1BM , 636 F.2d 1188 (9th

ir. 1980), cert. denied, 101 S.Ct. 3126 (1 81) OETA Ao 24

In — Carton Antitrust Litigation, 83 F.R.D. 251 (N.D. a

| ESSERE SET SOME SSE SOR ee os ea a ee ee Oe

In re Folding Carton Antitrust Litigation (Dean Foods Co. v. Alton

ret Bd. Co.), 1980-2 CCH Trade Cas. 963,460 ( N.D. Ili. :

OEE AEE AIL ESTE SC

In re Plywood Antitrust Litigation, 76 F.R.D. 570 (E.D. La. 1976)..

In re Plywood Antitrust Litigation, 1979-1 CCH Trade Cas. 962, og

(E.D. La. 1978) 2, 17, 25

In re Plywood Antitrust Litigation, 655 F.2d 627 (Sth Cir.), reh.

denied, 663 F.2d 101 (Sth Cir. 1981)...........00000- 1, 13, 14, 16, 18, 24

Jacobi v. Bache & Co., 377 F Supp. 6 (SDNY. 1974), aff'd, 520

F.2d 1231 (2d Cir. 1975), cert. denied, 423 U.S. 1053 ( 1976)..... 24

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

(1981) 20, 23

Landy v. FAA, 635 F.2d 143 (2d Cir. 1980) 26

Cases PaGe( s)

Mid-West Paper Prods. Co. v. Continental Group, inc., 596 F.2d

ee CEU ccicstuteceneieviessibitaipicndicdinh diteincibtuneteriseaisbciabitadinmnians 18

Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490 (1980) .0..........ccccccee 26

Ohio ex rel. Brown v. Mahoning County Medical Soc y, 1980-1 CCH

Trade Cas. 763,100 ( N.D. Ohio BP RETA RES ES A 18

Oreck Corp. v. Whi Corp., 639 F.2d 75 (2d Cir. 1980), cert.

EE ERICA MEEE O DUNE Diccihicicteckchdctsckcecenenteds tasseccinbeocedmubiioens 16

Overseas Motors, Inc. v. I Motors, Lid., 375 F.Supp. 499

(E.D. Mich. 1974), aff'd, 519 F.2d 119 (6th Cir.), cert. denied,

Se OUD icictenedcnesccoiadibiiasemaseciicielitaitibigienhanineratelbiniaind 16

Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134

6 RANE IRR SARA AIOE "SESE ENE LPN Oa Sank WE 22

Pevely Dairy Co. v. United States, 178 F.2d 363 (8th Cir. 1949).

cert. denied, 339 U.S. 942 (1950), overruled on other , In

re Coca Cola Bottling Co. of Black Hills vy. Hubbard, 203 F.2d

IS DOIN cicisccincbicnvinlinvenigiisiblaskbnetiicndnisvcsseteddeoomscnmdintionat 14

Reiter v. Sonotone Corp., 442 U.S. 330 (1979) .....cccccccccecseeseseeeee 19, 20

iis v. Brown & Williamson Tobacco Corp., 483 F.Supp.

1185 (E.D. Pa.), aff'd, 637 F.2d 205 (3d Cir. 1980) .........0.......0. 16

iv. Chicken Delight, Inc., 448 F.2d 43 (9th Cir. 1971), cert.

SO EER, GIDE 0 IO Gd Ds ceeccsnndicbcrbiesanatetirhenenesnapiteeccceetinnmnanelin 23

Story Parchment Co. vy. Paterson Parchment Paper Co., 282 US.

SE ETAT Libri ac sasdhentintinadigitodsininaeprapiibnslegalisansiveenieeminbbenintietedagie 20

Theatre Ent , Inc., v. Paremeate Film Distributing Corp.,

ST ASI GENIE P<: iccoeentibacicsgtnapuitiantidnnbintlbdhdecnsesiisiteshenytelasetins 4,17

Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879 (3d Cir. ), cert.

I, Se Aes FU CRIED pcccccthsenicenseshclcnistathevactitndostinstvenctiidege 16

. Union Carbide and Carbon Corp. v. Nisley, 300 F.2d 561 (10th

Cir. ), cert. dismissed, 371 U.S. 801 (1962) ..........cccccecerserseevers 23,24

United Shoppers Exclusive v. Broadway-Hale Stores, Inc., 1966

CCH Trade Cas. 971.727 (N.D. eS, Slt a I aR ee 16

United States v. Borden Co., 111 F.S $62 (N.D.IIl. 1953),

aff'd and remanded per curiam, 347 U 514 (1954) Ta et Sa 14

United States vy. Cadillac Overall Co., 568 F.2d 1078 (Sth

Cir. ), cert. denied, 437 U.S. 903 (1978) 18

- United States v. Consolidated Packaging Corp., 575 F.2d 117 (7th

” CR SOI ces ipnsctecenand ote 18

United States vy. FMC Corp., 306 F.Supp. 1106 (E.D.Pa. 1969).......16

United States y. General Motors Corp., 1974-2 CCH Trade Cas.

975,253 (E.D.Mich. 1974) 16

United States v. United States Gypsum Co., 438 U.S. 422 (1978).....14

CASES PaGe(s)

Vandervelde v. Put & Cail Brokers’ & Dealers’ Ass'n, 344 F Supp.

118 (S.D.N.Y. 1972) 18

Venzie Corp. v. United States Mineral Products Co., 521 F.2d 1309

(3d Cir. 1975) 13, 14, 15

Wall Products Co. v. National Gypsum Co., 357 F.Supp. 832 (N.D.

A ecbiniitinssctiicemiendiiiiinonitieianithiinabequnvecsidanheon 24

Weit v. Continental Ill. Nat'l Bank & Trust Co., 641 F.2d 457 (7th

Cir. 1981), petition for cert. pending ( No. 81-152) ........... 13, 14, 15

Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 513 om 4

I To co rtceenrechpatatarccnstipeenpaiessbine 18, 19

STATUTES

Clayton Act, Section 4, 15 U.S.C. Section 15 ..............ccccceeceseeeeseeeees 8

Federal Trade Commission Act, Section 5, 15 U.S.C. Section 45. 6, 12

Judiciary Act, 28 U.S.C. Section 1254( 1) ...........ccccccccssseseseseneneeseenees 2

Sherman Act, Section 1, 15 U.S.C. Section 1 ..............ccccccceeeeeee y oe

RULES

Federal Rules of Civil Procedure, 23 ..............c.ccccccceceeseeceeeeeeeees 4, 5,20

Federal Rules of Civil Procedure, Rule 49( a ).............ccccecceesesseeeeeeees 26

Rules of the United States Supreme Court, Rule 21(k)................00+ iii

OTHER AUTHORITIES

Wall Street Journal, Sept. 9, 1981, at 56, 6.2 ....cccccccccseeseeseeneeseenees 4

en oe

No.

IN THE

Supreme Court of the Bnited tates

Octoser Term, 1981

GeorGia-PaciFic CORPORATION,

Petitioner,

Vv.

LYMAN LamMB COMPANY, et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioner Georgia-Pacific Corporation respectfully prays

that a writ of certiorari issue to review the judgment of the

Court of Appeals for the Fifth Circuit entered on September 8,

1981.

OPINIONS BELOW

The opinion of the Court of Appeals for the Fifth Circuit,

In re Plywood Antitrust Litigation, 655 F.2d 627 (Sth Cir. ), reh.

denied, 663 F.2d 101 (Sth Cir. 1981) appears, along with the

judgment denying rehearing en banc, as Appendices A and G,

respectively. The unreported judgment and order of the

District Court for the Eastern District of Louisiana appear as

Appendix B. The order denying the motion for j.n.o.v. and a

new trial, unofficially reported at 1979-1 CCH Trade Cas.

7 62,459 (E.D.La. 1978), appears as Appendix C. Because of

2

its direct application to the issues raised in this petition, the

opinion of the Court of Appeals for the Ninth Circuit in Boise

Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir. 1980) is also

included as Appendix J.

JURISDICTION

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1). The judgment of the Court of Appeals was entered

on September 8, 1981, and timely petitions for rehearing and

rehearing en banc were denied on November 3, 1981. On

January 18, 1982, this Court extended the time for filing this

petition to March 3, 1982.'

STATUTORY PROVISIONS INVOLVED

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

pertinent part:

“Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce

among the several States, or with foreign nations, is

declared to be illegal.”

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

pertinent part:

“Any person who shall be injured in his business or

property by reason of anything forbidden in the anti-trust

laws may sue therefor in any district court of the United

States in the district in which the defendant resides or is

found or has an agent, without respect to the amount in

controversy, and shall recover threefold the damages by

him sustained, and the cost of suit, including a reasonable

attorney’s fee...”

' Petitioner joins in the separate petition for certiorari filed by

Weyerhaeuser Company and Willamette Industries, Inc., who also

were defendants at the trial below and appellants in the Court of

Appeals, and adopts the reasons for granting the writ set forth in that

petition.

a.

3

STATEMENT OF THE CASE

L.

PRELIMINARY STATEMENT.

This case involves an aspect of the pricing practices of the

plywood industry which was simultaneously the subject of a

Federal Trade Commission proceeding and this civil antitrust

suit under Section | of the Sherman Act. The challenged

practice is the industry’s use of a pricing system in whicii the

delivered price of plywood was the sum of (1) an individually

negotiated mill price; and (2) freight charges, either based

upon the rail freight rate from the West Coast, or computed at

“standard” rather than actual weights. Thus, the total deliv-

ered price was determined by inclusion of a freight charge

which generally exceeded the actual cost of shipment; the mill

price component (and thus the total delivered price) was

determined on a competitive basis.

The Fifth Circuit left standing a jury verdict against

Georgia-Pacific Corp., Weyerhaeuser Company, and Will-

amette Industries, Inc. (plus dozens of other alleged co-

conspirators who settled prior to trial), for fixing the price of

the freight element of the total purchase price of plywood. The

Fifth Circuit held that a conspiracy was properly inferred,

despite the lack of any evidence beyond conscious parallel

conduct plus contacts providing an opportunity to conspire; it

thus applied a legal standard directly in conflict with recent

decisions of the Third and Seventh Circuits. Moreover, the

verdict joining absent parties to this conspiracy was allowed to

stand on the basis of “slight evidence” consisting only of

conscious parallel conduct; this ruling is totally unprecedented.

The Fifth Circuit also approved a “single-element” for-

mula, based upon the freight factor alone, for the measure of

damages to plywood purchasers—a formula submitted to the

jury sua sponte by the trial court, through “all or nothing”

special interrogatories, without instructions that any other ele-

ment of the price could be considered. As a result, the entire

amount by which this one element (the freight cost of ply-

wood ) allegedly was artificially raised was held to be the exact

4

amount by which the total purchase price of plywood was

raised. This damage measure conflicts not only with the

decisions of other circuits which have considered the issue, but

with the decision of the Ninth Circuit, in reviewing a parallel

action against the same defendants initiated by the Federal

Trade Commission, that the challenged practices had no ad-

verse effect on the total purchase price. Boise Cascade Corp. v.

FTC, 637 F.2d 573 (9th Cir. 1980), App. J.

The incongruent result of the Ninth and Fifth Circuit

decisions is that in the former proceeding, the court found no

evidence that purchasers of plywood had paid higher prices as a

result of the practices at issue, while in the latter proceeding,

petitioner and its co-defendants were found liable under a

damage measure which could result in enormous payments to

those same purchasers. Estimates of damages reported in the

press are truly staggering—ranging as high as two billion

dollars.2, According to respondents’ counsel, “[i]f the formula

( for assessing damages ) reached by the jury is applied, this will

probably represent the largest antitrust verdict in history.”

Review by this Court is particularly important because this

petition presents antitrust issues which the Court has never

directly addressed, including the standard of proof beyond

conscious parallel conduct necessary to permit an inference of

conspiracy (see Theatre Enterprises, Inc. v. Paramount Film

Distributing Corp., 346 U.S. 537 (1954)), and the appropriate

standard for measuring damages in antitrust cases involving

products with multiple pricing elements. Although the Court

considered the issue of liability for fixing a single element of a

total purchase price in Catalano, Inc. v. Target Sales, Inc., 446

U.S. 643 (1980), the issue of measuring damages in such cases

was not resolved.

These issues assume further significance because they arise

in the context of a large, multidistrict class action. The tension

between the policy of Rule 23 of the Federal Rules of Civil

2 Wall Street Journal, Sept. 9, 1981, at p.56, c.2. Petitioner does

not concede that the total damages will be anywhere near this

amount, even should the result below stand. There is no doubt,

however, that the total liability will be substantial if the verdict below

is upheld.

5

Procedure, which encourages the aggregation of individual

claims, and the rights of individual defendants to insist upon

reasonable proof before entry of the enormous judgments made

possible by this procedural device—judgments which are

trebled under the antitrust laws—is sharply presented by the

facts of this case.

HISTORY OF THE PROCEEDING.

A. The Plywood Industry.

In the years prior to 1964, when virtually all plywood was

manufactured in the Pacific Northwest, the practice developed

of quoting a purchase or “delivered” price consisting of two

parts: (1) an individually negotiated “mill” price (also known

as the “base” or “index” price), plus (2) a freight charge based

upon the rail freight rate from the West Coast to the geographic

zone of delivery (“West Coast freight”). Since the ICC tariffs

resulted in identical freight costs for all sellers to ship to a given

geographic area, it was the variation in mill prices which

resulted in variations in delivered prices. Because most ply-

wood was sold before its weight was known, the practice also

developed of quoting freight according to “standard” rather

than actual weights, so that the purchaser could be provided

with a firm delivered price at the time of quotation.

In 1964, following technological advances which made

possible the use of Southern pine to make plywood, petitioner

Georgia-Pacific opened the first plywood mill in the South.

Other plywood producers soon followed. In the early years of

the Southern plywood industry, the Western mills remained the

dominant suppliers, even in the South, and Western plywood

comimonly was perceived as the superior product. Southern

producers attracted customers for their newer product by

quoting prices that were generally lower than those for Western

plywood. To provide ease of comparison for buyers, Southern

producers adopted the same manner of price quotation as their

Western competitors: individually negotiated mill prices plus

West Coast freight calculated according to standard weights.

As explained by the Ninth Circuit, and confirmed by the record

below:

6

“The use of West Coast freight enabled buyers to

compare western and southern plywood prices by refer-

ence to a single mill or index price, knowing that the

precise difference would be reflected in a total delivered

price. Without West Coast freight, comparison would also

have been more cumbersome because southern freight

rates are point-to-point rather than zone rates and vary

according to the weight of the load.” (637 F.2d at 574 n.1,

App. at J-2 to J-3.)

Not only were Southern prices generally lower than West-

ern prices, but the delivered prices among both Southern and

Western producers differed from seller to seller and from

transaction to transaction, fluctuating according to supply and

demand, and in response to changing market conditions. /d. at

577, App. at J-9.

B. The FTC Proceeding And The Ninth Circuit Decision.

The Federal Trade Commission initiated an action in April

1974, against the three trial defendants below, Georgia-Pacific,

Weyerhaeuser and Willamette, plus two additional plywood

producers, Boise Cascade Corp. and Champion International

Corp. That complaint charged these producers with violating

section 5 of the FTC Act (15 U.S.C. §45) by their use,

individually and in combination, of the West Coast freight and

standard weight systems described above. Following an initial

decision of the Administrative Law Judge in 1976, the Commis-

sion issued an Opinion and Order in January 1978, which

directed the producers to cease and desist from quoting West

Coast freight, on the ground that “the concurrent although non-

collusive adoption by competitors of an artificial method of

pricing which restrains competition” was unlawful under sec-

tion 5. Boise Cascade Corp., 91 F.T.C. 1, 103 (1978).

However, the Commission found that the practices in question

had arisen innocently. The Commission concluded that the

producers were “obviously not” engaged in “a price fixing

cartel” (id. at 99 n.10, 102, 105), and declined to adopt the

ALJ’s alternative finding that a Sherman Act conspiracy could

be inferred. The Commission added: “[W]e hasten to note

“ae

7

that the practice of including West Coast freight in delivered

price quotations is only one of many factors affecting the price

of southern plywood.” /d. at 98.

In May 1980, the Ninth Circuit denied enforcement of the

Commission’s Order, holding that there was no evidence that

the challenged practices had undermined price competition or

had artifically raised the purchase price of plywood. Boise

Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir. 1980), App. J.

The Court of Appeals found that petitioner’s delivered pricing

practice was “a natural and competitive development in the

emergence of the southern plywood industry” (id. at 582, App.

at J-18), observing that the purchase price of plywood ap-

peared to have been unaffected by the practice:

“Over the long run, the price for plywood sheathing

rises or falls in response to market factors affecting supply

and demand: housing starts, weather conditions, box car

shortages and strikes. We have found no evidence in the

record suggesting that the price of plywood has been

unresponsive to market conditions.

“We need not discuss all the evidentiary disputes

between the parties to determine that there is not substan-

tial evidence in the record, considered as a whole, to sustain

the Commission’s finding that petitioners’ delivered pricing

methods stabilized prices in the plywood industry at supra-

normal levels. In truth, the Commission has provided us

with little more than a theory of the likely effect of the

challenged pricing practices.

“In light of the precedents and the statements of leading

authorities on delivered pricing, including the Commission

itself, the existence of substantial bargaining in the base

price of plywood provides at least a prima facie inference

that competition has not been affected by the use of West

Coast freight.” (Id. at 577, 578, 579-580, App. at J-9, J-11

to J-12, J-13 to J-14; emphasis added. )%

In addition, the Ninth Circuit found no basis to suspect

that the purchase price would have differed, had “actual”

rather than “West Coast” freight been quoted:

“The Commission has cited no evidence that tends to

disprove the common-sense proposition that southern pro-

ducers would simply adjust the index { mill] price upwards if

they were quoting delivered prices in terms of actual

freight.” (Id. at 580, App. at J-14; emphasis added. )

This “common sense” proposition directly contradicts the

assumption implicit in the measure of damages approved by the

Fifth Circuit—that the mill price would have been exactly the

same had actual freight been quoted. Moreover, the Ninth

Circuit’s conclusion that the record did not evidence an anti-

competitive increase in purchase prices is directly contradicted

by the Fifth Circuit’s approval of a measure of damage formula

that those prices were raised by exactly the amount by which

West Coast freight exceeded actual freight.

C. The Present Case: Trial And Affirmance By The Fifth

Circuit.

The trial of the private actions, filed under section 4 of the

Clayton Act (15 U.S.C. §15), commenced in October 1978,

after the FTC decision but before the Ninth Circuit announced

its decision refusing to enforce the FTC’s order.

Four points about the record are necessary to an under-

standing of the questions presented by this petition.

First, the evidence of a conspiracy or agreement to utilize

the delivered price system was entirely circumstantial. No

witness testified to any such agreement and no document

3 The Ninth Circuit also found “a complete absence of evidence

implying overt conspiracy” (id. at 582, App. at J-18), and declined

“to follow the Commission’s suggestion that industry-wide adoption

of an artificial method of price-quoting should be deemed a per se

violation of section 5 by analogy to section | price-tampering cases.”

Id. at 581, App. at J-16.

9

reflected one. Although there were minor differences from the

FTC record, the substance of the evidence in the trial below

was identical. Respondents introduced voluminous findings of

fact from the FTC proceeding, and repeatedly stressed the

parallel to the Commission’s action. Vol. 45, Tr. 152-83; Vol.

56, Tr. 3244. Respondents’ only live witness was an economist

who conceded that the West Coast freight system had no

impact whatsoever on delivered prices at the outset of the

Southern plywood industry, but contended that the freight

“overcharge” should have “evaporated” over some unspecified

period of years to reflect the differences between West Coast

and actual freight; he insisted that the supply and demand

characteristics of the plywood industry were irrelevant to his

analysis. Vol. 53, Tr. 2464-72. No plywood purchaser testified

that the West Coast freight system had adversely affected

delivered prices.

Second, the jury in effect was instructed that it could find

an unlawful conspiracy to maintain the freight pricing practices

from no more than (| ) the parallel use of these practices by the

producers; and (2) proof of lawful contacts between some of

them.

Third, at the close of evidence, the trial court submitted

special interrogatories to the jury on the appropriate measure of

damages, despite the fact that no direct evidence had been

presented and no jury instructions had been submitted on this

issue by either side. In fact, the trial court had previously

bifurcated damage issues from liability issues, and subsequently

acknowledged that petitioners had understood that the measure

of damages would not be tried in the liability phase.* The

special interrogatories, however, combined the issue of measure

of damages with the preliminary fact of damage question:

4 See Vol. 59, Tr. 656. The measure of damages ultimately

adopted was specifically disclaimed by respondents during the class

certification proceedings in 1976, a position which the district court

relied upon in part in ordering class certification: “There is no

contention that defendants added a uniform freight charge to a

uniform base price to arrive at their delivered prices.” Jn Re Plywood

Antitrust Litigation, 76 F.R.D. 570, 581 (E.D. La. 1976), App. at D-

17. Consistent with this position, respondents submitted the following

proposed jury instruction:

footnote continued on following page

10

“2. (a) Did the use of ‘West Coast freight’ in the

pricing of Southern Pine plywood during the period from

February 23, 1968, to December 31, 1973, cause financial

damage to the purchasers of such plywood?

“(b) if 2(a) is answered ‘yes’, was that damage equal

to the amount by which ‘West Coast freight’ exceeded the

actual freight charge (or the pick-up allowance )?

“4. (a) Did the use of ‘standard weights’ in the

pricing of Western fir plywood during the period from

February 23, 1968, to December 31, 1973, cause financial

damage to the purchasers of such plywood?

“(b) If 4(a) is answered ‘yes’, was that damage

equal to the amount by which freight calculated on the

basis of ‘standard weight’ exceeded the actual freight

charge?” ( App. at I-2 to I-3.)

These interrogatories did not provide the jury with a

means by which it could indicate that damages were incurred in

some amount /ess than the entire amount of the freight

“overcharge.” For exa-nple, if the jury had found that, without

the delivered price system, an amount equal to 70% of the

footnote continued from previous page

“In this part of the case, all that you are called upon to

decide is whether the defendants did combine to fix prices, or any

part of the price they charged; and, second, whether what they

did had any influence or effect on that aspect of the price. You

will not now be asked to determine the specific amount of damage

suffered by any plaintiff or plaintiffs as a whole, but only whether

the acts of defendants did some damage to one or more of the

plaintiff class in some amount, however large or small. If you find

that they did combine and there was any such effect on what the

plaintiffs or any of them paid, then you must find in favor of

plaintiffs and against defendants, leaving for further proceedings

the specific amount to be determined.” (Pls. Proposed Inst. No.

45, emphasis added. )

Until the windfall opportunity presented by the trial court's

interrogatories, respondents gave no indication that they had changed

their position.

freight “overcharge” would have been added to the mill price

and 30% would have been passed through to the purchasers in

the form of lower net prices, there was no means provided for

the jury to communicate that conclusion. Instead, the jury

would have been compelled to give a “no” answer to the

damages interrogatories. In this way, the form of the submis-

sion implied to the jury that unless it answered “yes,” defend-

ants would have no damage liability whatever, even if the jury

concluded that some ( but not all) of the “overcharge” did add

to the ultimate delivered price to plywood purchasers.

Fourth, the trial court altogether failed to instruct the jury

in any respect as to the law governing the measure of damages,

or the legal principles applicable to the aamage interrogatories;

it merely observed that plaintiffs sought “yes” answers, and

defendants sought “no” answers to the above questions. Spe-

cifically, it did not tell the jurors that they should consider

whether, had the plywood producers not utilized the delivered

price system, the mill price of plywood would have increased to

some extent; and that if it would have increased, then the

damages due to the freight “overcharge” would be diminished

to that extent. See Addendum, pp. d-f.

In November 1978, the jury returned a verdict that

Georgia-Pacific, Weyerhaeuser and Willamette had engaged in

(1) a conspiracy with all other Southern pine plywood manu-

facturers to use “West Coast freight” in plywood pricing, and

(2) a conspiracy with all other softwood plywood manufac-

turers to use the “standard weight” system in the pricing of

Western fir plywood. Not surprisingly, the jury adopted the

only measure of damages (apart from zero) suggested by the

trial court’s interrogatories: the differences between West Coast

freight and actual freight, and between standard weights and

actual weights.5

On September 8, 1981, the Fifth Circuit affirmed in all

respects the trial court’s judgment entered from the jury verdict.

5 Thereafter, the trial court granted summary judgment to

respondents, four sample plaintiffs, and fixed the amounts of their

individual damages, which total more than $1.1 million. The

calculation of individual damages for other class members is the

subject of current proceedings in the trial court.

12

REASONS FOR GRANTING THE WRIT

The decision of the Fifth Circuit finds antitrust liability

under Section | of the Sherman Act for practices which the

Ninth Circuit held could not be restrained under the less

exacting standard of Section 5 of the Federal Trade Commis-

sion Act. And while the Ninth Circuit found unrefuted the

“common-sense proposition” that without use of the industry’s

freight pricing system, plywood producers would have in-

creased their mill prices, in the present case the courts below

found that plywood purchasers have been damaged by the

entire amount of the freight “overcharge.” As a result, the

petitioners stand exposed to massive treble damages—by re-

spondents’ own estimate as much as two billion dollars.

As will be shown, these anomalous determinations are not

the result of inconsistent factfinding upon different records.

Rather, the judgment in the present case is the product of

fundamental errors of law by the trial court and the Fifth

Circuit which in turn led to a judgment differing dramatically

from that of the Ninth Circuit. Both in finding a violation of

Section | and in determining the measure of damages, the

courts below proceeded in < manner contrary to the prevailing

rules of law. Review of the important legal questions presented

does not require scrutiny of the factual record, for the issues

arise from the basis upon which the case was submitted to the

jury, and the Fifth Circuit’s affirmance.

THE FIFTH CIRCUIT APPLIED ERRONEOUS

LEGAL STANDARDS IN UPHOLDING THE

CONSPIRACY VERDICT.

A. The Holding Conflicts With The Rule In Other Circuits

That Conscious Parallelism Plus Opportunity Contacts

Will Not Support A Finding Of Conspiracy.

This case was submitted to the jury on instructions which

permitted it to find an unlawful conspiracy based upon no more

than: (1) the defendants all utilized the challenged West Coast

freight system; and (2) some of the defendants communicated

13

with one another with respect to various matters, occa ‘‘onally

including West Coast freight, but never agreed as to any of

those matters. The Fifth Circuit affirmed, on the basis that

evidence of that and no more is legally sufficient to establish a

conspiracy or agreement to restrain t ide. The lower courts’

understanding of the law squarely conflicts with decisions of th

Seventh and Third Circuits. See Weit v. Continental Ill. Nat'l

Bank & Trust Co., 641 F.2d 457 (7th Cir. 1981), petition for

cert. pending (No. 81-152); Venzie Corp. v. United States

Mineral Prods. Co., 521 F.2d 1309 (3d Cir. 1975). The

standard employed authorizes a finding of conspiracy unjusti-

fied by rational inferences from the evidence, thereby per-

mitting the imposition of massive treble damages upon sheer

speculation by the jury.

1. Submission To The Jury. The Fifth Circuit’s incorrect

ruling stemmed directly from the trial court’s error of omission

in instructing the jury. The trial court failed to instruct the jury

that mere parallel conduct does not warrant the inference of

conspiracy, when it is coupled only with communications which

do not concern the subject matter of the conspiracy, or which

do not indicate agreement about that subject matter. No

limiting instructions to this effect were given to the jury. The

jury was told of other factors it could consider, e.g., the

existence of intercompetitor sales agreements which used West

Coast freight or standard weights, whether the parallel pricing

practice “made sense in light of the economic industry condi-

tions,” etc. See Addendum, pp. b-d. However, these factors

were not identified as limitations or conditions upon a finding of

liability, but only as permissible subjects of jury consideration.

Thus, the jury remained free to return a verdict of liability even if

none of these other factors were found applicable, and it found

nothing more than parallel pricing behavior and an opportunity

for competitors to communicate.

2. The Fifth Circuit Opinion. The Court of Appeals

upheld the jury’s verdict on the basis of a record consisting of

two primary items of evidence: First, conscious parallel behav-

® Appropriate objections to the court’s instructions were made at

trial. Vol. 56, pp. 3574-77. Petitioners submitted proposed instruc-

tions which would have cured the defects. Defs. Supp. Inst. 8, 8(a),

8(b).

14

ior among plywood manufacturers in the use of West Coast

iceight ard standard weights. Second, petitioner, its co-

defendants at trial, and a few other producers occasionally

communicated with each other, and some of those commu-

nications involved some aspect of pricing. The evidence did not

show that the so-called conspirators ever discussed standard

weights, or that they conspired with respect to West Coast

freight.” On this record, the Fifth Circuit applied the following

legal standard:

“The parallel pricing conduct clearly demonstrated in the

record plus the numerous items of direct evidence of

communication between high-level personnel on pricing

policy adequately support the jury’s verdict.” (655 F.2d at

634, App. at A-9.)

This standard is contrary to the prevailing rule of law.

3. The Law Of Other Circuits. The result below cannot be

reconciled with the decisions of the Seventh and Third Circuits

in the Weit and Venzie cases cited above. In Weit, it was

alleged that various banks conspired to fix the interest rate paid

by a class consisting of certain consumer credit card holders.

The evidence consisted, inter alia, of parallel interest rates,

business contacts between officials of the banks, and meetings

7 The discussions among the plywood producers arguably evi-

dence price information exchanges. Standing alone, however, such

exchanges are not per se violations, but must be judged under the

Rule of Reason. United States v. United States Gypsum Co., 438 U.S.

422, 441 n.16 (1978). Indeed, routine monitoring of rival business

practices (which the evidence here reflects) is fully consistent with

competition. See Pevely Dairy Co. v. United States, 178 F.2d 363,

368-69 (8th Cir. 1949), cert. denied, 339 U.S. 942 (1950); United

States v. Borden Co., 111 F.Supp. 562, 576 (N.D.Ill. 1953), aff'd in

part and remanded in part per curiam, 347 U.S. 514 (1954).

This case is thus quite unlike Gainesville Utils. Dept. v. Florida

Power & Light Co., 573 F.2d 292 (Sth Cir. ), cert. denied, 439 U.S. 966

(1978), upon which the Fifth Circuit relied. 655 F.2d at 634, App. at

A-9. In Gainesville, the evidence consisted of parallel refusals to deal

plus communications between the alleged conspirators which “bor-

der[ed] on a blatant agreement to divide the market.” 573 F.2d

at 301.

15

among bank officials to plan a compatible credit card system;

during some of these meetings the subject of the alleged

conspiracy (interest rates) was discussed. 641 F.2d at 460, 462.

The Seventh Circuit affirmed the trial court’s entry of summary

judgment against plaintiffs, on the ground that this evidence

showed nothing more than “opportunity to cnspire,” and thus

was not probative of a conspiracy. Jd. at 462-65.

Weit stands for the proposition that evidence of parallel

activity plus the opportunity to conspire, where the parallel

activity is in the independent business interest of each alleged

co-conspirator, will not permit the inference of a conspiracy.

Moreover, direct communications among alleged co-

conspirators engaging in identical pricing conduct will not

support a finding of conspiracy where there is no evidence that

the communications reflected any agreement concerning the

subject matter of the purported conspiracy.

In an analogous holding, the Third Circuit in Venzie

affirmed the entry of a j.n.o.v. on a refusal to deal claim. The

alleged evidence of conspiracy consisted, as in Weit, of parallel

conduct, opportunity contacts among alleged co-conspirators

and proof of actual meetings among the defendants at which

they purportedly discussed the subject of the alleged con-

spiracy, plaintiffs’ trade inquiries. 521 F.2d at 1312-13. The

defendants rebutted this evidence with denials that any con-

spiratorial agreement had been reached. The Court of Appeals

agreed that the evidence of conspiracy was insufficient to go to

the jury, explaining:

“While the jury was free to disregard the defendants’

testimony that no agreement of any kind was formulated

during the course of these contacts, mere disbelief could

not rise to the level of positive proof of agreement to

sustain plaintiffs’ burden of proving conspiracy. Further-

more, while proof of contacts between the manufacturer

and its licensee during the crucial summer period may

demonstrate an opportunity for formation of a conspiracy,

16

such an opportunity is significant only if other evidence

permits an inference that an agreement did in fact exist.”

(/d. at 1313, emphasis added ).®

4. Need For Review By This Court. Under the standard

adopted by the Third Circuit in Venzie and the Seventh Circuit

in Weit, the evidence in this case would be insufficient as a

matter of law to support an inference of conspiracy. “Commu-

nication between high-level personnel on pricing policy” (655

F.2d at 634; App. at A-9) is no stronger evidence than the

communications between high-level personnel on credit terms

and purchase inquiries found inadequate in Weit and Venzie,

respectively. Indeed, the evidence in Weit and Venzie was

stronger than in Plywood, since the alleged subject matters of

the conspiracy clearly were discussed. The standard applied by

the Fifth Circuit and endorsed implicitly by the trial court in its

jury instructions is nothing more than the “conscious paral-

lelism plus opportunity contacts” rule rejected by the Third and

Seventh Circuits. Particularly in light of the Ninth Circuit's

observation that the parallel conduct at issue here was con-

sistent with each plywood manufacturer’s individual self-

interest (637 F.2d at 578, App. at J-11), the evidence of

additional opportunity contacts should not have permitted the

inference of conspiracy.

8 Numerous other cases support the above analysis. See, e.g.,

Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 894-95 (3d

Cir.), cert. denied, 102 S.Ct. 390 (1981); Oreck Corp. v. Whirlpool

Corp., 639 F.2d 75, 79 (2d Cir. 1980), cert. denied, 102 S.Ct. 639

(1981); Hanson v. Shell Oil Co., 541 F.2d 1352, 1359 ( 9th Cir. 1976),

cert. denied, 429 U.S. 1074 (1977); In re Folding Carton Antitrust

Litigation (Dean Foods Co. v. Alton Box Bd. Co.), 1980-2 CCH Trade

Cas. 963,460 at 76,431 (N.D.IIl. 1980); Schoenkopf v. Brown &

Williamson Tobacco Corp., 483 F.Supp. 1185, 1189-92 (E.D. Pa.),

aff'd, 637 F.2d 205 (3d Cir. 1980); Hunt v. Mobil Oil Corp., 465

F.Supp. 195, 231 (S.D.N.Y. 1978), aff'd, 610 F.2d 806 (2d Cir.

1979); United States v. General Motors Corp., 1974-2 CCH Trade

Cas. 4 75,253 at 97,667 (E.D.Mich. 1974); Overseas Motors, Inc. v.

Import Motors, Lid., 375 F.Supp. 499, 535 (E.D.Mich. 1974), aff'd,

519 F.2d 119 (6th Cir.), cert. denied, 423 U.S. 987 (1975); United

States v. FMC Corp., 306 F.Supp. 1106, 1124-25, 1129 (E.D. Pa.

1969); United Shoppers Exclusive v. Broadway-Hale Stores, Inc., 1966

CCH Trade Cas. ¥ 71,727 at 82,271 (N.D. Cal. 1965).

17

The conflicting legal standards concerning the evidence

beyond parallel conduct necessary to show antitrust conspiracy

should be resolved by this Court. In the 28 years since Theatre

Enterprises, Inc., v. Paramount Film Distributing Corp., 346

U.S. 537 (1954), when this Court held that conscious paral-

lelism alone cannot prove a conspiracy, the Court has not

directly addressed the question of what “plus factors,” or proof

beyond conscious parallelism, suffice to show one. Unless

antitrust liability is to be left to subjective, impressionistic or

capricious factfinding by juries—exonerating some while hold-

ing others liable—guidance from this Court is urgently re-

quired.

B. The Courts Below Erred In The Application Of The

“Slight Evidence” Rule To The Alleged Co-Conspirator

Absent Parties.

The trial court applied the so-called “slight evidence” rule

to link many of the absent parties (previously settled defend-

ants) to the conspiracies found by the jury, thereby increasing

the joint and several liability of petitioner and the trial defend-

ants.? The slight evidence upon which it relied, however, was

that “the challenged practices were industry-wide in scope and

were employ 4 by all manufacturers.” 1979-1 CCH Trade Cas.

at 76,697, App. at C-3; emphasis added. In other words, the

trial court held ( and the Fifth Circuit affirmed sub silentio) that

once a conspiracy is established, only conscious parallelism

need be shown in order to connect additional co-conspirators.

To our knowledge, no other reported antitrust decision

applying the slight evidence rule has ever held that mere

® The first of these conspiracies (involving West Coast freight)

allegedly included the three trial defendants and 16 other Southern

softwood plywood manufacturers who were named as defendants but

who settled prior to trial. The second (involving standard weights)

allegedly included the three trial defendants and 19 other Western fir

plywood manufacturers who were again named as defendants but

who settled prior to trial, as well as the 16 Southern plywood

producers mentioned above.

For a few of these absent parties there was evidence of direct

communications in addition to conscious parallelism; but for the vast

majority of them, the evidence relied upon in linking them to either of

the alleged conspiracies was parallel conduct.

conscious parallelism will link an alleged co-conspirator to a

conspiracy. '©

Important policy reasons justify the Court’s granting a writ

of certiorari to review this issue. As the Third Circuit observed

in an analogous context (denying standing to purchasers from

defendants’ competitors based upon an alleged overall industry

price rise caused by defendants’ conspiracy ):

“Allowing recovery for injuries whose causal link to

defendants’ activities is as tenuous as it is here could

subject ant’'rust violators to potentially ruinous liabilities,

well in exc:ss of their illegally-earned profits, because .. .

price fixers would be held accountable for higher prices

that arguably ensued in the entire industry. Notwithstand-

ing the seriousness of the per se violation present in this

case, the judiciary should not be hasty to allow the treble

damage action to become so destructive a force, when

Congress intended only that it be used as a weapon to

enforce the antitrust laws.” (Mid-West Paper Prods. Co. v.

Continental Group, Inc., 596 F.2d 573, 586-87 (3d Cir.

1979).)

We recognize that “solemnized covenants to conspire are

difficult to come by in any price fixing case.” 655 F.2d at 633,

App. at A-6. Surely it is not a corollary, however, that evidence

10 Cf. United States v. Consolidated Packaging Corp., 575 F.2d

117, 126 (7th Cir. 1978) (in a base price-fixing conspiracy case, proof

of discussions regarding prices, and advance exchanges of bids

constitute slight evidence); United States v. Cadillac Overall Supply

Co., 568 F.2d 1078, 1087 ( Sth Cir. ), cert. denied, 437 U.S. 903 (1978)

(proof of conversations regarding the switching of suppliers and

agreements as to allocations of accounts constitute slight evidence);

Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 513 F.Supp. 1100,

1169-70, 1265-98 (E.D.Pa. 1981) (proof of intercompany export

agreements, membership in trade associations and parallel use of

rebates do not constitute slight evidence); Ohio ex rel. Brown v.

Mahoning County Medical Soc, 1980-1 CCH Trade Cas. 4 63,100 at

77,504 (N.D. Ohio 1979) (proof of efforts to get non-conspiring

doctors fired and membership and participation in the illegal practices

of committees constitute slight evidence); Vandervelde v. Put & Call

Brokers’ & Dealers’ Ass'n, 344 F Supp. 118, 155 (S.D.N.Y. 1972)

(mere membership in a professional association does not constitute

slight evidence ).

19

such as that found sufficient in this case constitutes “proof of

knowing, intentional participation in illegal activities.” Zenith

Radio Corp. v. Matsushita Elec. Indus. Co., 513 F.Supp. 1100,

1149 (E.D.Pa. 1981). This Court should address the

fundamental issues of antitrust conspiracy law presented here.

THE FIFTH CIRCUIT ERRED IN UPHOLDING THE

SINGLE-ELEMENT MEASURE OF DAMAGES.

A. Damages In Single-Element Price-Fixing Cases Must Be

Measured With Reference To The Price Of The Whole

Product.

The second important issue raised by this petition is the

appropriate measure of damages in single-element price-fixing

cases.

In a price-fixing case, it is fundamental that “[t]he mea-

sure of damages to one of the conspirators’ customers is the

difference between the price actually paid and the one at which

the product would have sold absent the conspiracy.” Berkey

Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 297 (2d Cir.

1979), cert. denied, 444 U.S. 1093 (1980), citing Reiter v.

Sonotone Corp., 442 U.S. 330 (1979).

The product purchased by the plaintiffs in this case was

plywood, not the freight charge for delivering plywood; the

latter is merely one component of the total price. If the

plaintiffs have in fact been injured, the measure of their

damages is the difference between the total price (including

freight) which they paid for plywood, and the total price

(including freight) at which plywood would have sold absent

the conspiracy. The measure of damages in this case is

erroneous because it only focuses on the freight element of the

price, improperly assuming that the overail purchase price of

plywood was raised ipso facto by an amount equal to the

amount by which the freight element allegedly was raised. The

mill price is assumed to be a constant by this analysis,

regardless of the existence or absence of a conspiracy. The

Fifth Circuit’s approval of this automatic, “one element” rule of

20

damages is not only economically irrational, but conflicts with

the holdings of other circuits and the past guidelines of this

Court.

Petitioner recognizes this Court’s long-standing admonition

that a distinction exists “between the measure of proof neces-

sary to establish the fact [of] some damage, and the measure of

proof necessary to enable the jury to fix the amount.” Story

Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555,

562 (1931). Nevertheless, “even where the defendant by his,

own wrong has prevented a more precise computation, the jury

may not render a verdict based on speculation or guesswork.”

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264 (1946).

Moreover, in the 36 years since Bigelow, when this Court last

fully addressed the standards for measuring damages in anti-

trust cases, private antitrust litigation has significantly ex-

panded, spurred especially by the advent of Rule 23 of the

Federal Rules of Civil Procedure. See Reiter v. Sonotone Corp.,

supra, 442 US. at 343 n.6.

In view of the procedural short cuts that allow for class-

wide proof of impact and encourage class-wide damage for-

mulas, it is particularly important that the measurement of .

damages in class actions reflect, as accurately as possible, the

actual injury suffered by class members. The staggering

amounts typically at stake in such cases call for, at a minimum,

the most accurate measure reasonably possible—one which at

least considers all elements of the price.

This Court must rearticulate the appropriate antitrust

damage standards. The policies that liability should not go

unpunished, and that it “does not ‘come with very good grace’

for the wrongdoer to insist upon specific and certain proof of

the injury which it has itself inflicted” (J. Truett Payne Co. v.

Chrysler Motors Corp., 451 U.S. 557, 566-67 (1981)), are

rightfully strong. However, they do not justify the substitution

of speculative, incomplete theories in place of proof which

reasonably relates damages awarded to actual injury suffered.

The Legal Standard. The fallacy of uncritical reliance on

automatic damage formulas was well illustrated in City of

Mishawaka, Ind. v. American Electric Power Co., 616 F.2d 976

21

(7th Cir. 1980), cert. denied, 449 U.S. 1096 (1981). There, a

private utility company and its affiliates were found by the

district court to have violated the Sherman Act by charging

excessive “wholesale” rates to municipal customers, in com-

parison with the rates charged to their retail customers. In the

words of the Court of Appeals:

“[ T]he [district] court found that the municipalities

had been overcharged by the amount the wholesale rates

charged them exceeded the amounts which they would

have been charged under the utility’s retail rates actually in

effect. The court proceeded to award damages based

solely on a tripling of the difference between the higher

wholesale rates paid by the municipalities and the lower

retail rates which the utility actually charged its retail

customers... No other factor entered into the compu-

tation.” (616 F.2d at 987.)

Observing that “[t]he formula used by the trial court is

recommended by its simplicity, but the computation of dam-

ages should not be expected to be quite that much easier than

the rest of this case,” the Seventh Circuit rejected the above

measure of damages, and held that the district court had

improperly assumed that the wholesale and retail rates charged

by the utility would have been equivalent in the absence of the

antitrust violation. Jd. The district court’s assumption was

found to be “totally without foundation” since, apart from the

different methods of calculating rates imposed by regulatory

authorities, “in all likelihood, the utility has dissimilar fixed and

variable cost requirements which it must seek to cover in its

respective wholesale and retail rates.” /d.

Likewise, the measure of damages approved by the courts

below is premised on the unsupported assumption that the mill

price of Southern plywood would have been identical absent

the use of West Coast freight and standard weights. The trial

court’s “all or nothing” damage interrogatories did not permit

the jury to question this assumption, which not only is unsup-

ported by the record, but was rejected by the Ninth Circuit as

defying “common sense.” Boise Cascade Corp. v. FTC, 637

F.2d at 580, App. at J-14.

22

A similar point was made by the district court in Albert-

son’s, Inc. v. Amalgamated Sugar Co., 62 F.R.D. 43 (D.Utah

1973), aff'd in relevant part, vacated in part, 503 F.2d 459, 463

(10th Cir. 1974), where the plaintiffs alleged that a zone

delivered pricing system unlawfully fixed the freight element of

the purchase price of sugar. The district court observed that the

very assumption made by plaintiffs and the lower courts in this

case—th..: the base-price level was a constant—was untenable:

“| Plaintiffs ] assumed that their cost of sugar would be

lowered by an amount equal to the phantom freight they

now pay. If base point pricing were to be abandoned, it is

clear that [defendants] would have to raise their base

price.... The evidence indicates that some new basis price

would have to be set... .” (62 F.R.D. at 53.)"'

This Court has also recognized that damage inquiry cannot

end with a simple, mechanical determination that isolates only

one aspect of a supposed restraint of trade; rather, all relevant

factors bearing on the amount of plaintiffs’ claimed damages

must be considered. “The possible beneficial byproducts of a

restriction from a plaintiff's point of view can of course be taken

into consideration in computing damages....” Perma Life

Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 140

(1968). Reasonable estimates of damages by antitrust plain-

tiffs are acceptable so long as they are “not shown to be

attributable to other causes.” Bigelow v. RKO Pictures, supra,

327 US. at 264.

The Court in Catalano, Inc. v. Target Sales, Inc., 446 U.S.

643 (1980), clarified the issue of liability in cases invo!ving

products with multiple pricing components, holding that a

The assumptions by the courts in Alberison’s and Boise

Cascade that base prices would be raised if freight prices were

lowered is supported by the record in this case, which indicates that

prices did not drop when the West Coast freight system was aban-

doned. Vol. 56, Tr. 3168-70. Base prices necessarily must have been

revised in order to compensate for the lowered freight rates. Cf. In re

Folding Carton Antitrust Litigation, 83 F.R.D. 251, 254 (N.D.IIL.

1978) (“If an economically effective price conspiracy takes place over

a long period of time and the industry suddenly becomes competitive,

then profits and prices are expected to fall.”’).

23

conspiracy to fix one element alone is a per se violation of the

Sherman Act. Catalano did not directly address the issue

presented by this petition: whether damages in such cases can

be measured solely by considering the single element. Never-

theless, this Court implicitly recognized that the damages to

purchasers under the alleged agreement to eliminate credit

terms would not automatically equal the amount of the credit

eliminated: “[{I]t may be that the elimination of a practice of

giving variable discounts will ultimately lead in a competitive

market to corresponding decreases in the invoice price [i.e.,

purchase price].” /d. at 648-49. The fact that agreements such

as those alleged in Catalano and this case may have diverse

economic results should preclude the “all or nothing” rule

adopted in this case.

In J. Truett Payne Co. v. Chrysler Motors Corp., supra, the

Court rejected an “automatic damages” standard under the

Robinson-Patman Act, holding that the amount of the price

discrimination did not automatically equal the amount, if any,

by which the plaintiff had been injured. Rather, the Court

insisted that the “plaintiff must make some showing of actual

injury” (451 U.S. at 562), a burden not satisfied merely by the

testimony of plaintiffs expert that some harm must have

resulted. The one-element damage formula at issue here is as

arbitrary and unconnected to plaintiffs’ actual injury as was the

formula in J. Truett Payne.'2

12 See also Siegel v. Chicken Delight, Inc., 448 F.2d 43, 52-53

(9h Cir. 1971), cert. denied, 405 U.S. 955 (1972) (measure of

damages for illegal tie-in could not be based upon the price rise of tied

item alone, but must include consideration of tying item); Berkey

Photo, Inc. v. Eastman Kodak Co., supra, 603 F.2d at 297-98

(measure of damages for monopolization limited to effect of defend-

ant’s wrongful acts rather than the difference between monopoly price

and competitive price, since monopoly was lawfully acquired); Her-

man Schwabe, Inc. vy. United Shoe Mach. Corp., 297 F.2d 906, 912

(2d Cir.), cert. denied, 369 U.S. 865 (1962) (damage evidence

“convey[ed] a delusive impression of exactness in an area where a

jury’s common sense is less available than usual to protect it”); Union

Carbide and Carbon Corp. v. Nisley, 300 F.2d 561, 576-84 ( 10th Cir. ),

cert. dismissed, 371 U.S. 801 (1962) (relevant economic factors

including existence of negotiated prices must be considered in

footnote continued on following page

24

The Fifth Circuit’s Failure To Analyze The Issue. The

above authorities uniformly recognize that a deceptively simple

formula for computing damages must be closely scrutinized to

ensure that it accurately reflects the true amount of injury

sustained by the plaintiffs. By contrast, the opinion of the Fifth

Circuit, upholding the measure of damages in this case, does

not withstand analysis.

Dismissing the issue of whether the evidence supported the

jury’s verdict on measure of damages with the facile observa-

tion that “[t]}he jury chose to accept the testimony of plaintiffs’

economist and to reject the contrary testimony of defendants’

economist” (655 F.2d at 635, App. at A-11), the Fifth Circuit

skirted the issue raised by this petition—the propriety of a one-

element measure of damages. Instead, the Fifth Circuit (in the

context of rejecting the claim that submission of the issue to the

jury was improper) devised an ill-conceived “estoppel” argu-

ment:

“Defendants tried to convince the jury that their

pricing system caused no economic injury to anyone. The

jury, agreeing with plaintiffs and disagreeing with defend-

ants, returned its special verdict upholding plaintiffs’ theo-

ry. Having failed to persuade the first jury that their

challenged practices caused damage to no one, defendants

now seek the opportunity to convince a different jury that

some other measure of damages is appropriate.” (655 F.2d

at 636, App. at A-11).

footnote continued from previous page

determining damages); Jacobi v. Bache & Co., 377 F.Supp. 86, 93

(S.D.N.Y. 1974), aff'd, 520 F.2d 1231 (2d Cir. 1975), cert. denied,

423 U.S. 1053 (1976) (measure of damages for conspiracy to

eliminate one element of commission payments must include consid-

eration of other elements); JLC Peripherals v. IBM Corp., 458

F.Supp. 423, 434-36 (N.D. Cal. 1978), aff'd sub nom. Memorex Corp.

v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980), cert. denied, 101 S.Ct.

3126 (1981) (damage evidence rejected as speculation where there

was a failure to separate effects of lawful from unlawful competition );

Wall Products Co. v. National Gypsum Co., 357 F.Supp. 832, 836-37

(N.D.Cal. 1973) (multitude of factors considered in determining

amount of overcharge, including decline in price level after con-

spiracy, supply and demand, industry capacity, comparison of freight

rates, etc. ).

25

This argument hopelessly confuses measure of damages

with a preliminary and distinct question: fact of damage (/.e.,

“impact”’) to plaintiffs. The issue of whether members of the

class have been injured at all by the challenged practices is

quite separate from the issue of how those damages are to be

measured, some injury being assumed. The Fifth Circuit

ignored this distinction. Under its analysis, defendants cannot

contest any measure of damages proposed by plaintiffs, how-

ever speculative or improper. if the defendants also opposed the

finding of fact of damage. This reasoning confuses two distinct

concepts, and creates a dangerous precedent barring antitrust

defendants’ rights to contest damage evidence.

Moreover, the Fifth Circuit incorrectly characterized the

measure of damages issue as dependent upon the jury’s belief

as to the relative credibility of the parties’ experts. Petitioner

does not ask this Court to weigh credibility, or to sift conflicting

evidence on what the “competitive” delivered price of plywood

should have been; we recognize that such is not this Court's

function. Plaintiffs’ expert did not consider any factor other

than freight, and the trial court’s interrogatories allowed the

jury to consider no other factor.’ Thus, this case presents a

clear legal issue which this Court must resolve: whether a

measure of damages properly can be based on consideration of

only one variable in the price of a product.

B. The Trial Court’s Failure To Instruct The Jury On

Measure Of Damages Was Reversible Error.

Even if this case presented no other issues of overriding

importance, anc no conflicts between the circuits, the trial

court’s failure to instruct the jury on the proper measure of

damages would warrant the grant of certiorari and summary

reversal.

'3 These interrogatories were given to the jury despite petitioner's

objection, inter alia, that the correct measure of damages was the

difference between the actual price paid for plywood and the price if

the challenged practice had not existed. Vol. 56, Tr. 3572-74.

The trial court’s submission of the “all or nothing” damage

interrogatories is even more remarkable in light of the fact that the

court later stated it did not “necessarily agree” with the jury's finding

that plaintiffs were damaged in the full amount of the freight

differential. 1979-1 CCH Trade Cas. at 76,698; App. at C-4.

26

The Federal Rules recognize the particular importance of

proper explanation by the trial court when special inter-

rogatories are submitted: “The court shall give to the jury such

explanation and instruction concerning the matter thus sub-

mitted as may be necessary to enable the jury to make its

findings upon each issue.” Rule 49(a), F.R.Civ.P.'* At a

minimum, the trial court should have instructed the jury that

the freight element and the standard weights could not be

considered in isolation, but merely as part of the overall price,

and that the measure of damages had to be based upon the

amount by which that overall price was raised by the alleged

conspiracy. '5

The Fifth and the Ninth Circuits have reached conflicting

results on the issue of whether the freight pricing system

adopted by the industry had any effect on the total price

ultimately paid by plywood purchasers. But the conflict

between the decisions below and Boise Cascade goes far deeper

than a mere disagreement over a particular factual issue. The

4 See also Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490, 498

( 1980) (reversible error for trial court to fail to instruct jury regarding

factor to be discounted in computing damages); Landy v. FAA, 635

F.2d 143, 147 (2d Cir. 1980) (“Because the jury below was left

completely at sea concerning the applicable legal standards, its

findings did not constitute a proper and adequate factual basis for the

fine imposed.” ); Chagas v. Berry, 369 F.2d 637, 641 ( Sth Cir. 1966),

cert. denied, 389 U.S. 872 (1967) (failure by trial court in fraud case

to instruct jury on proper measure of damages was reversible error).

'S Failure to instruct the jury only compounded the trial court's

error in even submitting the issue to the jury. The trial court, by a

pretrial order entered in March 1978, “severed for subsequent trial as

appropriate ... amount of damages sustained by individual plaintiffs,

intervenors and class members.” 4 10(d), Supp.Vol. 35, 20416-17.

Petitioners reasonably understood this to mean that measure of

damages would not be tried in the liability phase of the litigation.

As the trial court subsequently acknowledged, petitioners reason-

ably equated “measure” with “amount” of damages, at least for

purposes of the bifurcation order: “It may very well be and the Court

has no reason to doubt [the] sincerity of defense counsel in equating

those two terms.” Vol. 59, Tr. 656.

27

trial court’s submission failed to instruct the jury to consider the

very principle which the Ninth Circuit found dispositive in this

case: the probability that plywood sellers would raise their base

price to correspond to a hypothetical decrease in freight.

We recognize that two fact-finders considering the same

evidence may come to different results, because they have

drawn different conclusions from the same facts. But that is not

what happened here. The differing results flow not from

different factual inferences drawn by different fact-finders, but

because one of the two fact-finders—the jury in the proceedings

below —was not given a correct legal standard against which to

measure the evidence.

Several fundamental errors combined to result in this

erroneous measure of damages: first, the trial court’s failure to

instruct the jury concerning the appropriate standards for

measuring antitrust damages; second, its submission of special

interrogatories which did not permit consideration of more than

a single element of the price; and third, its sua sponte submis-

sion of the damage issue to the jury, contrary to the reasonable

expectations of the defendants.

The issue presented here is simply whether a verdict may

be rendered by a jury which has never been instructed to

consider the applicable legal standard governing antitrust dam-

ages, and whose consideration of the question of damages was

framed by interrogatories which improperly singled out one

element affecting price (the difference between charged and

actual freight) without requiring or even inviting consideration

of other relevant factors. No verdict of any size—let alone one

of this magnitude—should be based on such a procedure, and

the Fifth Circuit’s decision to the contrary should not be

allowed to siand.

: aie .,

28

CONCLUSION

For the foregoing reasons, petitioner respectfully prays that

this Court issue a writ of certiorari to review the judgment of

the Court of Appeals for the Fifth Circuit.

DATED: March 2, 1982

Respectfully submitted,

Freperick P. FurtH

(Counsel of Record)

Tuomas R. FAHRNER

Daniet S. MASON

Of Counsel: MicHaet P. LEHMANN

James M. NICHOLSON Craic C. Corsitt

Tuomas E. WiTtHYCOMBE FurTH, FAHRNER, BLUEMLE

Witiam E. Craic & MASON

GeorGia-Paciric 201 Sansome Street, Suite 1000

CORPORATION San Francisco, California 94104

900 S.W. Fifth Avenue Telephone: (415) 433-2070

Portland, Oregon 97204

Telephone: (503) 222-5561 Attorneys for Petitioner

Georgia-Pacific Corporation

_*

ADDENDUM

In THE

UNITED STATES DISTRICT COURT

EASTERN District OF LOUISIANA

)

IN RE

PLYWOOD ANTITRUST , MDL

LITIGATION Docket No. 159

EXCERPTS FROM THE TRIAL TRANSCRIPT

NOVEMBER 14, 1978

1.

(Vol. 56, pp. 3536, line 1

through 3542, line 7)

THE COURT: (Continuing: ) Now, there are some items

of evidence that I want to comment upon because in your

decision as to whether or not there was a conspiracy, contract

here calling for these practices you will be looking at both direct

evidence and circumstantial evidence. I have already explained

earlier both what circumstantial is and how both circumstantial

and direct evidence may be and are due to be considered by

you in making your decision. I want to talk for a few minutes

about some of the evidence in the case that may have some

bearing on this decision of yours. I do so primarily for

illustration and to give some greater understanding, perhaps, as

to how that might relate to your decision.

There has been evidence of manufacturers talking with one

another, obtaining pricing information from one another, buy-

ing from one another, including long term contracts. These

practices, these transactions, these contacts in and of themselves

are not illegal. Indeed, they may be vehicles for fostering

competition. At the same time, such matters may also be

conduct that, when viewed on their own and in the light of the

b

other evidence, indicate that there were agreements, expressed

or implied, reached between manufacturers that they would use

in selling plywood to others West Coast freight or standard

weights. In short, although you should understand that when

one manufacturer buys from another that is a contract, that

contract in and of itself is not a violation of the Sherman

Antitrust Law unless that contract involves and places a

requirement that there will be in the resale of that product the

use of West Coast freight or standard weights.

Now, the fact that manufacturers attended trade meetings,

participated in trade discussions, likewise, in and of itself is not

illegal under the Sherman Antitrust Act and, indeed, may be

evidence or a means for fostering competition. On the other

hand, such evidence is evidence that there was some opportu-

nity for persons to have agreed or to have gotten together to

assure that some previously agreed upon matter was being

carried out. I, of course, would call to your attention that the

mere fact that there be opportunity to meet or to agree does not

mean that any particular agreement was or was not entered. It

is merely one part of the total of the circumstantial evidence

that you will be dealing with.

For example, it has been shown that the Plaintiffs or some

of the Plaintiffs in this area were members of a trade association

themselves, and that, as I say, going back to the question about

the Defendants, is nothing illegal at all about that. There is

nothing wrong in and of itself with either trade association or

with going to trade meetings, but it is part of the facts, the

circumstantial evidence which you are going to be called upon

to make the decisions you are.

Now, there is evidence that plywood prices fluctuate,

perhaps widely, and that there was competition among manu-

facturers in the selling of plywood. Now, those matters, if they

be true, would not in and of themselves mean that there was no

contract or conspiracy to use West Coast freight or standard

weights. There is nothing that says that a conspiracy, for

example, to restrain competition must restrain all competition.

If there is a conspiracy to restrain certain aspects of com-

petition, that is still against the law, against Section | of the

Cc

Sherman Antitrust Act. On the other hand, evidence of

competition in other areas is a part of the circumstantial

evidence that you will be considering in considering well,

nevertheless they would have agreed to have established a

particular form of price or to use particular restraints on

competition. It will be a part of the total evidence in the case.

As I have indicated earlier, the fact that many or all

manufacturers were to adopt the same or similar practices

would not in and of itself mean that there was a conspiracy to

do so. This would be true even if it were shown that they did so

knowing that others were following similar practices. On the

other hand, where it be a fact that similar practices are being

followed by many manufacturers, with each being aware that

the other is doing so, that is a part of the circumstantial

evidence from which a jury may, with other evidence in the

case, look to see whether this was so because of some agree-

ment to do so.

In considering whether or not to draw any such inference,

you would want to consider whether the different manufac-

turers adopting such practices were doing so because of their

own independent best judgment as to what was in their best

economic interest to do so, independent of any commitment or

agreement from other people to do the same thing. In deciding

this issue and in deciding what inference, if any, to draw, you

would want to consider whether the practices that were being

employed made sense in the light of the economic industry

conditions and whether or not the benefits from those practices,

continuation of those practices, were or were not dependent on

other people, other manufacturers doing the same thing. You

would want to consider whether those practices were, on the

one hand, arbitrary and artificial and unduly complicated or, on

the other hand, were helpful and useful and convenient.

Now, the mere fact, if it be a fact, that some practice was

being followed that was artificial or arbitrary or unduly com-

plicated, that fact in and of itself would not mean that it was a

product of a conspiracy any more than would the fact, if it be a

fact, that the practices were logical and convenient and heipful

d

indicate that there wasn’t a conspiracy. These would simply be

factors that you would take into consideration in the totality of

the evidence in deciding whether or not to draw the inference

that these matters came about not as a result of the decision by

the individual companies that it was in their best interest to do

so, but whether they did so because of some expressed or

implied commitment and agreement from others to do likewise.

I do call your attention to the fact that you are not called

into this case to pass judgment on whether the practices of the

manufacturers were wise practices or were fair practices. That

is not what you are called upon to decide. You might conclude

that they were or they weren’t. What you are called upon to do

is to decide whether these practices were or were not the

product of contract, combination or conspiracy as I have

defined that.

(Vol. 56, pp. 3552, line 1

through 3556, line 9)

THE COURT: (Continuing:) Now, you will note that

there are questions 2 and 4, and I haven’t gone into those yet,

nor have f really touched upon them in these instructions. I

started off this second part of the instructions by saying that

there are two elements in the claims that the Plaintiffs make

against the Defendants and that they have a burden of proving

each of the elements to your reasonable satisfaction. Because

they must not only prove that West Coast freight, standard

weights, were a result of a contract, combination or conspiracy

but they must also prove to your reasonable satisfaction that

these practices had a financial damage, caused financial dam-

ages to the people that bought plywood, the Plaintiffs and the

other class members. Now, the Plaintiffs obviously are asking

and insisting that you answer yes to questions 2(a) and 4(a).

The Defendants are saying that you should answer no to those

questions, that the Plaintiffs have not proved that, and that your

decision then ought to be no.

| he al

The questions I think are easy to understand and really

don’t require that much explanation. 2(a), did the use of West

Coast freight in the pricing of southern pine plywood during the

period from February 23, 1968 to December 31, 1973 cause

financial damage to the purchasers of such plywood, answering

either yes or no.

You have a similar question on 4(a). It asks the same

question but with respect to the use of standard weights, as to

whether the use of standard weights during that period of time

caused financial damage to the people buying western fir

plywood.

Now, and again, the Plaintiff [sic] in asking that you

answer that yes has a burden to persuade you to answer yes to

that. The Defendants are asking you to answer no to that. If

you conclude that, yes, the use of southern—of West Coast

freight or of standard weights or both did cause damage to the

people who bought southern pine plywood and western fir

plywood respectively, you are then asked to go on to these

questions 2(b) and 4(b), and that is to say whether the

damage that was caused to the purchasers is, as the Plaintiffs

contend in the case of West Coast freight, the difference

between the West Coast freight and the actual freight. Plain-

tiffs are saying that in the pricing of southern pine plywood that

there was damage caused to people who bought that southern

pine plywood to the extent of the difference between the West

Coast freight and the actual freight.

Now, actually you will remember that there is some

evidence in the case that not in all cases was the manufacturer

involved in the shipping of the plywood to a particular pur-

chaser’s destination but that on some of those that there was an

actual pickup in some way by the purchaser at the mill sight

[sic], for example, or the purchaser arranged for his own

transportation, and that in those situations there was some

allowance given off of the price for picking it up rather than the

manufacturer paying the freight charges. Now, in those

f

situations the Plaintiffs would say that the actual damage

caused was the difference between the West Coast freight and

this allowance that was given as a deduction against the price.

So in question 2(b), if you have answered 2(a) yes, you

are to go on forward and say whether the Plaintiffs are correct

in their contention that the amount of damage that was

sustained by purchasers was equal to the difference between the

West Coast freight and the actual freight or the allowance given

for picking up or handling their own freight. The Plaintiffs are

asking that you answer yes to that question. The Defendants

are saying that—of course they are saying you shouldn't have to

get to that question at all, but they are also saying answer no if

you do get to that question.

4(b) is of a similar form; that is, it is saying that if you

have decided that there was damage caused by the use of

standard weights, damage to the purchasers of western pine

plywood, then was that damage equal to the amount by which

freight calculated on the basis of the standard weight or

estimated weight or association weight, whatever you want to

call it, exceeded the freight that was actually paid. The

Plaintiffs say that is the amount by which the purchasers of

western pine plywood were damaged, the difference between a

freight calculation based on these estimated or standard or

association weights and, on the other hand, the actual freight

incurred. Here again, the Plaintiffs ask that you answer yes to

that, and the Defendants say, Number One, that you shouldn't

have to get to that point but if you do you should answer no.