Opposition Brief — Neumann v. Reinforced Earth Co.

Supreme Court, U.S,

FILED

SEPH F. SPANIOL, JR,

No. 86-132 0

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

ALBERT NEUMANN, et al.,

Petitioners,

Vv.

REINFORCED EARTH COMPANY,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

RESPONDENT’S BRIEF IN OPPOSITION

RICHARD MCMILLAN, JR.*

CLIFTON S. ELGARTEN

DAVID B. SIEGEL

LAURIE T. BAULIG

CROWELL & MORING

1100 Connecticut Avenue, N.W.

Washington, D.C. 20036

Attorneys for Respondent

The Reinforced Earth Company

* Counsel of Record

ERA TRE A RAE A

WILSON - Erase Printinc Co... Inc. - 789-0096 WasHinctron. D.C. 20001

TABLE OF CONTENTS

Page

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COUNTERSTATEMENT OF THE CASE.........000..0.... 1

REASONS FOR DENYING THE WRIT ...................... 4

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TABLE OF AUTHORITIES

CASES Page

American Bearing Co. v. Litton Indus., 729 F.2d

943 (3d Cir.), cert. denied, U.S. ——, 105

Re By Bh | | ements 6

Domed Stadium Hotel, Inc. v. Holiday Inns, Inc.,

732 VDE 400 (Be Che. TDG nccecccccecccccersetenerterniees 7

E.J. Delaney Corp. v. Bonne Bell, Inc., 525 F.2d 296

(10th Cir. 1975), cert. denied, 425 U.S. 907

CTBT) eriseirniinnnernacennenscinsenstsnanimasiiioicaina 7-8

FLM Collision Parts, Inc. v. Ford Motor Co., 543

F.2d 1019 (2d Cir. 1976), cert. denied, 429 U.S.

BODE CIF ) evssiersicninnnccsoreocnenantorcenneapnaniaeee 7

Hiland Dairy, Inc. v. Kroger Co., 402 F.2d 968 (8th

Cir. 1968), cert. denied, 395 U.S. 961 (1969) __.... 6

Jayco Systems v. Savin Business Mach. Corp.,

wiper ti: 8: Sl eee eee 7

Olsen v. Progressive Music Supply, Inc., 703 F.2d

432 (10th Cir.), cert. denied, 464 U.S. 866

OC RIDIIE D » ncenssitscdapecissecscnisaniasiahadsamcaa a 7

Rothery Storage & Van Co. v. Atlas Van Lines,

Kne., T0B F.24G SIO CDA. Che. TOD cciccsccicccsacserres. 6

Shoppin’ Bag of Pueblo, Inc. v. Dillon Cos., 783

P26 160 (0 Cit. TRG) cic 7

Spectrofuge Corp. v. Beckman Instruments, Inc.,

575 F.2d 256 (5th Cir. 1978), cert. denied, 440

Ce DO CIID cissisicenensccceatcsipnagsv eee 7

Swift & Co. v. United States, 196 U.S. 375 (1905) 5

United States v. Grinnell Corp., 384 U.S. 563

CIID is ciniecincssscicssansssincasnetansieesiioamaloestoneuaenene aanaaaanane 6

Walker Process Equip., Inc. v. Food Mach. & Chem.

Cors., HB US. IIR CRE) cee 6

Yoder Bros. v. California-Florida Plant Corp., 537

F.2d 1347 (5th Cir. 1976), cert. denied, 429 U.S.

i by | enero te new E EN Shane: 6

STATUTES

Sherman Act, 15 U.S.C. §2 (1982) _................... 5

OTHER AUTHORITIES

3 P. Areeda & D. Turner, Antitrust Law { 831

RTPI =< sccccscnscsneconscisnegacnceincetetea bela paliananntiae een 5, 6

16B J. Von Kalinowski, Antitrust Laws and Trade

Regulation § 901[2] (1986) 2....0000002222222222-eeeeeeeee 6

serene

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

No. 86-132

ALBERT NEUMANN, et al.,

Petitioners,

Vv.

REINFORCED EARTH COMPANY,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

RESPONDENT’S BRIEF IN OPPOSITION

COUNTERSTATEMENT OF THE CASE

Petitioners brought this action in the United States

District Court for the District of Columbia, alleging that

Respondent * had “monopolized” or “attempted to monop-

olize” by prosecuting a sham patent protest in the Patent

and Trademarl Office and related court litigation. The

jury rejected the monopoly claim and a common law

abuse of process claim, but found for Petitioners on the

1 Pursuant to Supreme Court Rule 28.1, Respondent Reinforced

Earth Company (RECO) has no parent or subsidiary corporation.

RECO is a 50% owner of “RECOSOL,” a joint venture.

— —

2

“attempt to monopolize’ claim. Nonetheless, the trial

court held the jury verdict on “attempt to monopolize”

was not supported by the evidence.

In granting judgment for Respondent, the trial court

held that Petitioners had failed to demonstrate that Re-

spondent’s conduct fell within the sham exception to First

Amendment protection for access to the courts and fed-

eral agencies because (1) the litigation had been at least

partially successful, App. at 22a,? and (2) there was no

evidence that Respondent had prosecuted the protest with

knowledge that its claims were without merit. App. at

21a. In addition, the court held that Petitioners lacked

standing to bring an antitrust suit because Petitioners

never possessed the resources or ability to begin market-

ing their product, App. at 26a-27a, and therefore were

not injured by any action of Respondent.* Finally, the

district court held that the “attempt to monopolize” claim

could not be sustained by the evidence because of Peti-

tioners’ failure to demonstrate a dangerous probability of

monopoly in the relevant market. App. at 24a.

Two points, not emphasized by the Petitioners, bear

emphasis. First, the jury returned a verdict rejecting

Petitioners’ claim that Respondent had the power to con-

trol prices and restrict entry. Second, the jury was

asked to return a series of special interrogatory answers

with its verdict. Those interrogatory answers provided

some assistance in interpreting the verdict on the issue

of attempted monopolization. Using those special inter-

rogatories as a guide, the district court found it evident

that the jury had adopted precisely the definition of the

2The decisions of the court of appeals and the district court

are found in Petitioners’ Petition for Writ of Certiorari (“Pet.’’)

in Appendices B and C, herein referred to as “App.”

3 The court also held that Petitioners’ damages proof was specula-

tive as a matter of law. In so holding, the district court found a

complete absence in the trial record of “any competent evidence

upon which a damage calculation could be based.” App. at 29a.

3

relevant market that Respondent had proposed. App.

at 23a.

Under that definition of the relevant market, Petition-

ers had not sustained their burden of demonstrating that

Respondent used sham litigation in an attempt to monop-

olize. Even assuming that Respondent had acted with

some form of predatory intent, Respondent’s actions

nevertheless did not present a dangerous probability of

monopoly, an established element to a charge of attempted

monopolization. The district court, therefore, granted

judgment notwithstanding the verdict to Respondent on

the attempt to monopolize count. App. at 24a.

On appeal, Petitioners challenged each of the four in-

dependent bases supporting the district court’s entry of

judgment: specifically, the district court’s conclusion that

there had been no evidence to support a “sham litigation”

challenge, that Petitioners lacked standing to maintain

the action, that they had failed to demonstrate a danger-

ous probability of monopoly, and that their damages

proof was incompetent as a matter of law. On the dan-

gerous probability point now pressed in this Court, Peti-

tioners raised various challenges to the district court’s

market analysis, eventually raising a procedural question

about the district court’s reliance on the jury’s interroga-

tory answers, claiming that the layout of the special in-

terrogatory form did not allow sufficient room to describe

alternative markets.

The court of appeals declined to reach the sham litiga-

tion, standing or damages issues, each of which remains

an independent basis for the district court’s entry of a

judgment notwithstanding the verdict. App. at 5a. The

court of appeals found that legal deficiencies in Petition-

ers’ market definition were alone sufficient to sustain the

district court’s judgment. App. at 13a. The appellate

court had no difficulty recognizing that if the jury found

4

that the relevant market was simply “retaining walls’—

as the jury stated in the special verdict form, as Re-

spondent had proposed, as Respondent’s experts had testi-

fied, as Petitioners initially conceded,‘ and as the trial

judge concluded that the jury expressly found—then Peti-

tioners had failed to demonstrate that Respondent’s con-

duct presented a dangerous probability of monopoly: Re-

spondent’s share of that market was miniscule.’ But con-

cerned about the manner of evaluating the technical chal-

lenge to the layout of the interrogatory form, the court

went on to find a more fundamental defect in Petitioners’

“attempt to monopolize” theory. Even assuming that the

trial court erred in relying on the jury’s finding that the

market was “retaining walls,” or that that finding was

improperly rendered, the court held that the alternative

theories of the relevant market advanced by Petitioners

were not legally viable on their own terms. App. at 1la-

13a. It appears to be primarily this aspect of the court of

appeals’ opinion on which Petitioners focus their challenge.

REASONS FOR DENYING THE WRIT

This Petition raises no novel or important question of

law, nor any issue upon which the courts of appeals have

divided, nor upon which this Court has rendered direc-

tions contrary to those followed by the courts below. On

the contrary, the judgment below is grounded firmly on

well-established antitrust principles. It concerns only the

case-specific issues of reconciling a jury verdict with the

4In raising the issue in the circuit court, Petitioners took a

position directly contrary to that taken in the district court, where

Petitioners’ counsel conceded that “the jury has chosen defendant’s

definition of the market.” App. at 10a (citing Brief for Appellee

at 39).

5 The testimony was that the retaining wall market had sales

of approximately $500 million, and that Respondent’s total sales

ranged from 1.8%-4.5% of this figure during the relevant period.

App. at 10a.

5

absence of evidence that would support that verdict, and

of reconciling special jury interrogatory answers with a

verdict facially inconsistent with those interrogatory an-

swers. The alleged error in interpreting the jury’s find-

ings, Pet. at 5-8, presents no issue of law, and does not

raise the kind of issue that this Court generally reviews.

Equally important, given the case-specific issue that Peti-

tioners seek to raise, it is plain that the case was care-

fully and correctly decided below.

Although Petitioners intimate that the offense of “at-

tempt to monopolize” requires “clarification,” Pet. at 11,

Judge Bork’s opinion makes it clear that there is sub-

stantial unanimity of opinion on the principal character-

istics of the offense. Among the uniformly recognized

elements of the offense is that the predatory action in

question must have created a “dangerous probability”

that a monopoly would be achieved. The “dangerous prob-

ability” requirement was established by this Court more

than eighty years ago in Swift & Co. v. United States,

196 U.S. 375, 396 (1905). The existence of this require-

ment of the offense is not challenged by Petitioners.

The rationale for that requirement is also relatively

clear. Section 2 of the Sherman Act is concerned only

with real or threatened monopolies. 15 U.S.C. § 2 (1982).

Before it can be said that a competitor’s act might result

in a monopoly, that competitor must have some consider-

able significance in the market. See 3 P. Areeda & D.

Turner, Antitrust Law {| 831 at 335-36 (1978). If it does

not present a threat of monopoly—whatever the nature of

the act alleged and whatever remedies may be afforded

by other laws for such conduct—it is not something about

which the federal courts are concerned under the Sher-

man Act. See App. at Ya.

Thus, before Petitioners can make out a case of attempt

to monopolize, “the would-be monopolist must possess ‘a

measure of power in the relevant market.’” App. at 8a

6

(quoting 3 P. Areeda & D. Turner, Antitrust Law { 831

at 336). Absent the most exceptional circumstances, the

potential power to monopolize could not realistically be

present absent some meaningful market share. Indeed,

it is uniformly recognized that market power is deter-

mined, at least in large measure, by the share of the mar-

ket held. See United States v. Grinnell Corp., 384 U.S.

563, 571 (1966). It was on these shoals that Petitioners’

claim necessarily foundered.

As Judge Bork noted, Professors Areeda and Turner

have concluded that a market share of less than 30% is

presumptively inconsistent with any suggestion that a

competitor will, through his anticompetitive acts, make

a monopoly “dangerously probable.” App. at 8a. The

cases and other commentators agree that a competitor

with minimal market share poses no threat of monopoly

as a matter of law. See Yoder Bros. v. California-Florida

Plant Corp., 587 F.2d 1847, 1368-69 (5th Cir. 1976),

cert. denied, 429 U.S. 1094 (1977); Hiland Dairy, Inc. v.

Kroger Co., 402 F.2d 968, 974 (8th Cir. 1968), cert.

denied, 395 U.S. 961 (1969), 16B J. Von Kalinowski,

Antitrust Laws and Trade Regulation § 9.01[2] (1986) ;

cf., Rothery Storage & Van Co. v. Atlas Van Lines, Inc.,

792 F.2d 210, 216-17 (D.C. Cir. 1986). The less than

5% that Respondent held in the market apparently

chosen by the jury was not close to the threshold market

share.

But even if some alternative market proposed by Peti-

tioners had been chosen by the jury, the verdict could not

stand. Petitioners’ two proffered definitions were not

legally viable and, therefore, Petitioners failed in their

well-recognized burden of demonstrating power in the rel-

evant market by a preponderance of the evidence. Walker

Process Equip., Inc. v. Food Mach. & Chem. Corp., 382

U.S. 172, 177-78 (1965) ; American Bearing Co. v. Litton

Indus., 729 F.2d 948, 949 (38d Cir.), cert. denied,

U.S. ——, 105 S. Ct. 178 (1984). The first choice of

7

Petitioners, “retaining walls in all federal and state high-

way projects where Reinforced Earth is specified as a

sole product or alternate,” App. at lla, was “arbitrarily

circumscribed,” App. at 12a, because the proposed market

merely counts successes (when Respondent was permitted

to bid) and ignores failures (when it was not allowed to

bid® or did not even know of the competition). Judge

Bork aptly summarized the state of the record by conclud-

ing that “[i]t makes no sense to say that an entrant with

a new technology has monopoly power by defining the

market as those customers whom the entrant has so far

managed to persuade.” App. at 12a. Accordingly, the

market share data created by this definition was mean-

ingless. See, e.g., Jayco Systems v. Savin Business Mach.

Corp., 777 F.2d 306, 319-20 (5th Cir. 1985); Domed

Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480,

487-89 (5th Cir. 1984).

The final alternative suggested by Petitioners—retain-

ing walls over 20 feet—was equally unavailing, for in

this market Petitioners had failed to offer any evidence

whatsoever of Respondent’s share of the market. The

failure to offer any evidence of market share is well-

established as a failure to meet the burden of proof im-

posed by the cases on a plaintiff presenting an “attempt

to monopolize” theory. App. at 18a. See Shoppin’ Bag

of Pueblo, Inc. v. Dillon Cos., 788 F.2d 159, 161-62 (10th

Cir. 1986) ; Olsen v. Progressive Music Supply, Inc., 703

F.2d 482, 436-37 (10th Cir.), cert. denied, 464 U.S. 866

(1983) ; Spectrofuge Corp. v. Beckman Instruments, Inc.,

575 F.2d 256, 276, 284-86 (5th Cir. 1978), cert. denied,

440 U.S. 989 (1979); FLM Collision Parts, Inc. v. Ford

Motor Co., 543 F.2d 1019, 1080 (2d Cir. 1976), cert.

denied, 429 U.S. 1097 (1977); E.J. Delaney Corp. v.

® One of Petitioners’ own witnesses, for example, testified that

systems of Respondent’s general type “will not be broadly accepted

for another five to 15 years.” App. at 12a (citing Brief for Appel-

lants at 18).

8

Bonne Bell, Inc., 525 F.2d 296, 306-07 (10th Cir. 1975),

cert. denied, 425 U.S. 907 (1976).

Significantly, Judge Bork disdained absolute reliance

on the market share theory and proof of market share,

leaving open alternative avenues of proof of market

power. App. at 13a. But the only alternative avenue of

proof cited by Petitioners—the alleged proof that Re-

spondent could control prices and restrict entry, Pet. at

9—was inconsistent with the jury’s special findings: the

jury expressly found that Petitioners did not have this

power. App. at 13a (citing Appellants’ Record Excerpts

at 70). With respect to this jury finding, Petitioners

could not make the argument that the layout of the jury

form did not allow the jury adequately to express itself.

Petitioners point out that whereas the offense of monop-

olization requires the power “to control prices and exclude

competition,” the offense of attempted monopolization

does not. In this regard, Petitioners argue that the court

below erred in holding that only if a competitor has

achieved the power to control prices and exclude competi-

tion can it be guilty of the offense of attempted monop-

olization.

The court of appeals did not make the error of which

it is accused. The court of appeals implicitly recognized

that a market share less than that required to “mono-

polize” would suffice for the offense of attempt. And it

even recognized that under some circumstances, no proof

of market share might be required. The court merely

held that in the circumstances of this case, those special

conditions were not present. App. at 13a. The court of

appeals’ only reference to the “ability to control price and

exclude competition,” App. at 13a, was in reference to

Petitioners’ own contention that it had established that

Respondent had that power, and that Petitioners were

thereby relieved of the burden of showing that Respondent

had a significant market share. It was only to respond

9

to Petitioners’ ineffectual choice of alternative theories

that the court was required to i ake reference to the jury

interrogatory on the ability to “control price and exclude

competition.” App. at 13a. The court below did not fail

to appreciate the distinction between “monopolization”

and “attempt to monopolize.”

CONCLUSION

For the above-stated reasons, it is respectfully sub-

mitted that the Petition for Writ of Certiorari should be

denied.

Respectfully submitted,

RICHARD MCMILLAN, JR.*

CLIFTON S. ELGARTEN

DAVID B. SIEGEL

LAURIE T. BAULIG

CROWELL & MoRING

1100 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 452-5800

Attorneys for Respondent

The Reinforced Earth Company

* Counsel of Record

August 26, 1986