Petition for Writ of Certiorari — Gangi Bros. Packing Co. v. Cargill, Inc.

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No. 99-

991218 Jan / 2000

CITE UF THE Ci fp.

IN THE

Supreme Court of the United States

GANG! Bros. PACKING COMPANY, 7-Up BoTTLING COMPANY OF

PHILADELPHIA, INC., 7-Up BOTTLING COMPANY OF SAN FRANCISCO,

SOUTHEASTERN SPECIALTY Foops Corp., TRANS-PACKERS SERVICES

Corp., and VARNI BROTHERS CorPORATION, dba SEVEN-UP BoTTLiING

oF MopesTo, on behalf of themselves and all others similarly

situated,

Petitioners,

CARGILL, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court Of Appeals For The Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

JEROME B. FALK, JR.

Counsel of Record

THERESE M. STEWART

HowarbD, RICE, NEMEROVSKI,

CANADY, FALK & RABKIN

A Professional Corporation

Three Embarcadero Center

7th Floor

San Francisco, CA 94111-4065

Telephone: 415/434-1600

Facsimile: 415/217-5910

Gu1Do SAVERI

R. ALEXANDER SAVERI

SAVERI & SAVERI

One Embarcadero Center

Suite 1020 :

San Francisco, CA 94111-4065

Telephone: 415/217-6810

JosEPpH W. COTCHETT

Bruce L. SIMon

Marie S. WEINER

COTCHETT, PITRE & SIMON

San Francisco Airport Office Center

840 Malcolm Road

Suite 200

Burlingame, CA 94010

Telephone: 415/697-6000

LEONARD BARRACK

STEVEN A. ASHER

BARRACK, Ropos & BACINE

3300 Two Commerce Square

2001 Market Street

Philadelphia, PA 19103

Telephone: 215/963-0600

Attorneys for Petitioners

QUESTIONS PRESENTED

Ordinarily, the inferences to be drawn from circum-

stantial evidence are to be viewed in the light most favorable

to the party opposing a motion for summary judgment.

Matsushita Electrical Industrial Co. v. Zenith Radio Corp.,

475 U.S. 574 (1986) established special rules applicable to

summary judgment motions in certain antitrust cases. Where

Matsushita applies, a defendant may present evidence refut-

ing the adverse inferences that would otherwise be drawn

from the circumstantial evidence; those adverse inferences

may not then be drawn, and summary judgment may then be

granted, unless the plaintiff is able to present evidence that

tends to exclude the possibility that the defendant’s conduct

was the result of non-concerted lawful action. However, in

Eastman Kodak Co. v. Image Technical Services, Inc., 504

U.S. 451 (1992), the Court refused to apply Matsushita’s

special summary judgment standard where the antitrust claim

was not implausible and the defendant’s conduct was not

inherently procompetitive.

The question presented is whether Matsushita’s special

summary judgment standard applies in cases where (as in

Kodak but unlike Matsushita) the antitrust claim asserted by

the plaintiff is neither implausible nor based on conduct by

the defendant that is inherently procompetitive.

PARTIES TO THE PROCEEDING

1. Gangi Bros. Packing Company, 7-Up Bottling

Company of Philadelphia, Inc., 7-Up Bottling Company of San

Francisco, Southeastern Specialty Foods Corp., Trans-Packers

Services Corp., and Varni Brothers Corporation, U.S. soft

drink bottlers and food processors that purchase citric acid,

are the Petitioners here and were the Plaintiffs and class rep-

resentatives below.

Z Cargill, Inc., a U.S. manufacturer of citric acid,

is the Respondent here and was the Defendant below.

3. | Archer Daniels Midland Company (“ADM”),

Jungbunzlauer International AGL (“JBL”), F. Hoffman-La

Roche, Ltd. (““HLR”), Haarman & Reimer Corp. (““H&R”),

U.S. and foreign manufacturers of citric acid, were

Defendants in the District Court. Plaintiffs’ claims against

ADM, JBL, HLR and H&R were resolved prior to briefing

in the Court of Appeals.

4. Coopers & Lybrand, L.L.P., a non-party in the

District Court from which records were sought to be

obtained, was made a party to the appeal in the Ninth Circuit

on the limited issue of whether it was required to produce

documents of an affiliated Swiss entity.

RULE 29.6 DISCLOSURE

None of the Petitioners has a parent company and no

publicly held company owns 10% or more of the shares of

stock of any Petitioner.

iil

TABLE OF CONTENTS

QUESTIONS PRESENTED

PARTIES TO THE PROCEEDING

RULE 29.1 DISCLOSURE

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

JURISDICTION

STATUTORY PROVISIONS INVOLVED

STATEMENT OF THE CASE

A. Statement Of Facts.

B. Proceedings Below.

REASONS FOR GRANTING THE PETITION

THE NINTH CIRCUIT PANEL

ADOPTED AND APPLIED A

SUMMARY JUDGMENT

STANDARD THAT IS

INCONSISTENT WITH _ THIS

COURT’S HOLDING IN KODAK.

A. In Kodak, This Court Clarified

Matsushita, Stating That An

Extraordinary Showing Was

Required Of The Plaintiffs In

That Case Because Their

Antitrust Theory Was

“Economically Senseless” And

Predicated On Beneficial

Procompetitive Conduct.

Page

Cn he Re

II.

TABLE OF CONTENTS

B. The Ninth Circuit Panel In This

Case Disregarded Kodak’s

Holding That Where’ The

Plaintiffs’ Antitrust Theory Is

Neither “Economically

Senseless” Nor Based On

Beneficial Procompetitive

Conduct, Ordinary Summary

Judgment Standards Apply.

THERE IS A SHARP CONFLICT

BETWEEN THE CIRCUITS

CONCERNING THE STANDARD

GOVERNING SUMMARY

JUDGMENT IN - ANTITRUST

CASES.

A. The Third And Seventh (And

Until Recently, Ninth) Circuits

Have Followed Kodak And Held

That Plaintiffs Need Only Make

The Extraordinary Showing

Demanded In Matsushita Where

The Antitrust Claims Asserted

Are Implausible And Based On

Inferences Drawn From

Beneficial Procompetitive

Conduct.

B. Like The Ninth Circuit Panel In

This Case, Courts In Other

Circuits Have Chosen To Ignore

Kodak And Continued To Read

Matsushita As __ Requiring

Plaintiffs’ Evidence To

Outweigh Defendants’ Evidence

To Survive Summary Judgment

In All Antitrust Cases.

Page

TABLE OF CONTENTS

Page

CONCLUSION | 30

TABLE OF AUTHORITIES

Cases

Advo, Inc. v. Philadelphia Newspapers, Inc.,

51 F.3d 1191 (3d Cir. 1995)

Alvord-Polk, Inc. v. F. Schumacher & Co., 37

F.3d 996 (3d Cir. 1994)

American Society of Mechanical Engineers,

Inc. v. Hydrolevel Corp., 456 U.S. 556

(1982)

Atonio v. Wards Cove Packing Co., 810 F.2d

1477 (9th Cir. 1987) (en banc)

Blomkest Fertilizer, Inc. v. Potash Corp., Inc.,

176 F.3d 1055 (8th Cir. 1999), reh’g en

banc granted (July 16, 1999)

California v. American Stores Co., 495 U.S.

271.(1990)

City of Tuscaloosa v. Harcros Chemicals,

Inc., 158 F.3d 548 (11th Cir. 1998), cert.

denied, 145 L. Ed. 2d 42 (1999)

Corner Pocket of Sioux Falls, Inc. v. Video

Lottery Techs., Inc., 123 F.3d 1107 (8th

Cir. 1997), cert. denied, 522 U.S. 1117

(1998)

Eastman Kodak Co. v. Image Technical

Services, Inc., 504 U.S. 451 (1992)

Forsyth v. Humana, Inc., 114 F.3d 1467 (9th

Cir. 1997) aff'd, 525 U.S. 299 (1999)

Page

28, 29

passim

eee ee ee

Vil

TABLE OF AUTHORITIES

Page

H.L. Hayden Co., Inc. v. Siemens Med. Sys.,

Inc., 879 F.2d 1005 (2d Cir. 1989) 16

Helicopter Support Sys., Inc. v. Hughes

Helicopter, Inc., 818 F.2d 1530 (11th Cir.

1987) 16

High Tech. Careers v. San Jose Mercury

News, 996 F.2d 987 (9th Cir. 1993) 26

In re Abbott Labs. Antitrust Litig., 51 F.3d |

524 (Sth Cir. 1995) 12

In re Baby Food Antitrust Litig., 166 F.3d 112

(3d Cir. 1999) 25

In re Brand Name Prescription Drugs

Antitrust Litig., 123 F.3d 599 (7th Cir.

1997), cert denied, 522 U.S. 1153 (1998) 12, 26, 27

In re Coordinated Pretrial Proceedings in

Petroleum Products Antitrust Litig., 906

F.2d 432 (9th Cir. 1990) 9, 25

In re Medical X-Ray Film Antitrust Litig., No.

CV93-5904, 1997 U.S. Dist. LEXIS

21936 (E.D.N.Y. Dec. 10, 1997) 12

In re Methionine Antitrust Litig., MDL No.

1311, 1999 U.S. Dist. LEXIS 19206

(J.P.M.L. Dec. 8, 1999) 12

In re Plastic Cutlery Price Fixing, No. 96-

CV-728 1998 U.S. Dist. LEXIS 3628

(E.D. Pa. March 20, 1998) 12

Vill

TABLE OF AUTHORITIES

Page

In re Vitamin Antitrust Litig., MDL No. 1285, \

1999 U.S. Dist. LEXIS 8599 (J.P.M.L.

June 7, 1999), 1999 U.S. Dist. LEXIS

12405 (D.D.C. July 29, 1999) 12

JTC Petroleum Co. v. Piasa Motor Fuels,

Inc., 190 F.3d 775 (7th Cir. 1999) 26

Long Beach v. Standard Oil Co., 872 F.2d

1401 (9th Cir. 1989) 25

Lovett v. General Motors Corp., 998 F.2d 575

(8th Cir. 1993), cert. denied, 510 U.S.

1113 (1994) 29

Market Force, Inc. v. Wauwatosa Realty Co.,

906 F.2d 1167 (7th Cir. 1990) 17

Matsushita Electrical Industrial Co. v. Zenith

Radio Corp., 475 U.S. 574 (1986) passim

Merck-Medco Managed Care, LLC v. Rite

Aid Corp., No. 98-2847, 1999 U.S. App.

LEXIS 21487 (4th Cir. Sept. 7, 1999) 28

Midwest Radio Co. v. Forum Publishing Co.,

942 F.2d 1294 (8th Cir. 1991) 16

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985) 13

Parkway Gallery Furniture, Inc. v.

Kittinger/Pennsylvania House Group,

Inc., 878 F.2d 801 (4th Cir. 1989) 17

Petruzzi 's IGA Supermarkets, Inc. v. Darling-

Delaware Co., 998 F.2d 1224 (3d Cir.

1993) 19, 22, 23, 24

a iX

TABLE OF AUTHORITIES

Reiter v. Sonotone Corp., 442 U.S. 330

(1979)

Rossi v. Standard Roofing, Inc., 156 F.3d 452

(3d Cir. 1998)

Super Sulky, Inc. v. United States Trotting

Ass'n, 174 F.3d 733 (6th Cir.), cert.

denied, 145 L. Ed 2d 146 (1999)

Thompson Everett, Inc. v. National Cable

Advertising, L.P., 57 F.3d 1317 (4th Cir.

1995)

Todorov v. DCH Healthcare Authority, 921

F.2d 1438 (11th Cir. 1991)

United States v. Nippon Paper Indus. Co., 109

F.3d 1 (1st Cir. 1997), cert. denied, 522

U.S. 1044 (1998)

Valley Liquors, Inc. v. Renfield Importers,

Ltd., 822 F.2d 656 (7th Cir. 1989)

Statutes

15 U.S.C. §1

28 U.S.C. §1254(1)

Other Authorities

1 ABA SECTION OF ANTITRUST LAW,

ANTITRUST LAW DEVELOPMENTS (4th ed.

1997)

Page

1, 6, 10, 16

16, 17

TABLE OF AUTHORITIES

Calkins, Supreme Court Antitrust 1991-92:

The Revenge of the Amici, 61 ANTITRUST

L.J. 269 (1993)

DeSanti & Kovacic, Matsushita: Its

Construction and Application by the

Lower Courts, 59 ANTITRUST L.J. 609

(1991)

Hofer, The Practitioner Antitrust Law,

Remarkable Recovery, S.F. DAILY J.,

Dec. 13, 1999

H. HOVENKAMP, FEDERAL ANTITRUST

POLICY: THE LAW OF COMPETITION AND

ITS PRACTICE §16.8b (1994)

Hughes, The Left Side of Antitrust: What

Fairness Means and Why It Matters, 77

MARQ. L. REV. 265 (1994)

Judson, Note: Kodak v. Image Technical

Services: The Taming Of Matsushita And

The Chicago School, 1993 Wis. L. REV.

1633 (1993)

Katz & Amold, Eastman Kodak v. ITS: The

Downfall of the Chicago School, THE

COMPUTER LAW., July 1992

McQueen, Comment: The Summary

Judgment Standard in Antitrust

Conspiracy Cases and In re Travel

Agency Commission Antitrust Litigation,

62 J. AiR. L. & Com. 1155 (1997)

Page

16, 17

TABLE OF AUTHORITIES

Prepared Testimony of Joel I. Klein Before

the Subcomm. On Antitrust of the Senate

Comm. On the Judiciary, FED. NEWS

SERV., Feb. 26, 1998

Protos, Kodak v. Image Technical Services: A

Setback for the Chicago School of

Antitrust Analysis, 43 CASE W. RES. L.

REV. 1199 (1993)

2 I. SCHER, ANTITRUST ADVISOR §10.35 (4th

ed. 1998)

Statement of Joel L. Klein on Antitrust

Enforcement Before the Subcomm. on

Antitrust, Business Rights and

Competition of the Senate Comm. on the

Judiciary, May 4, 1999

Susman, Plaintiff's Strategies and Tactics—

Pretrial and Trial, 58 ANTITRUST L.J. 277

(1989)

The Supreme Court: Leading Cases, 106

HARV. L. REV. 163 (1992)

Weber, Summary Judgment After Kodak,

ANTITRUST 10 (Fall/Winter 1992)

Page

13,14

16, 17

A ty AS

PETITION FOR A WRIT OF

CERTIORARI

Petitioners respectfully petition for a writ of certiorari

to review the judgment of the United States Court of Appeals

for the Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals, as entered on

September 1, 1999, is reported at 191 F.3d 1090 and is

reprinted in the Appendix at pages Al-A32. The opinion of

the Court of Appeals denying rehearing and rehearing en

banc is reprinted in the Appendix at page A67. The opinion

of the District Court granting summary judgment is reported

at 996 F. Supp. 951 (N.D. Cal. 1998) and is reprinted in the

Appendix at pages A47—A66. The opinion of the District

Court granting class certification is reported at 1996 U.S.

Dist. LEXIS 16409 (N.D. Cal. Oct. 1, 1996), and is reprinted

in the Appendix at pages A33—A46.

JURISDICTION

The opinion of the United States Court of Appeals for

the Ninth Circuit was entered on September 1, 1999.

App. Al. The Court of Appeals denied Petitioners’ timely

petitions for rehearing and rehearing en banc on October 21,

1999. App. A67. The jurisdiction of this Court is invoked

under 28 U.S.C. §1254(1).

STATUTORY PROVISIONS

INVOLVED

This case concerns Section 1 of the Sherman Act, 15

U.S.C. §1 (A69).

STATEMENT OF THE CASE

A. Statement Of Facts.

This case involves an international price-fixing and

market allocation conspiracy between domestic and foreign

producers of citric acid. Citric acid is used worldwide in

foods, beverages, detergents, cleaning products, cosmetics,

pharmaceuticals and industrial applications. In the early

1990s, a relatively small number of companies, including

ADM, HLR, JBL and H&R, produced most of the citric acid

sold commercially throughout the world. In 1996 and 1997,

those four producers and their officers pled guilty to partici-

pating in an international conspiracy to fix prices and allo-

cate sales volumes of citric acid. Subsequently, the initial

four Admitted Conspirators settled civil cases brought by

Plaintiffs against them and Cargill.

Cargill did not settle and denied it had ever joined the

conspiracy. In the summary judgment motion it filed, it

relied heavily on deposition testimony by the CEO of

Admitted Conspirators H&R (Hans Hartmann), which it

claimed showed there were only four conspirators. While

the appeal was pending, however, a fifth citric acid manu-

facturer, Cerestar, and one of its officers refuted Cargill’s

“Group of Four” theory by admitting that Cerestar, too, had

participated in the conspiracy.

The initial four conspirators admitted participating in

the conspiracy from mid-1991 to mid-1995,' while Cerestar

participated from late 1992 to mid-1994. These “Admitted

Conspirators” admitted that “[t]he purpose of the scheme

was to restrict the output and raise the price of citric acid in

the United States and elsewhere.”

The conspirators formed a trade association for

European producers (ECAMA), which they used in part as a

cover for their conspiratorial activities. Members reported

‘The conspiracy ended in June 1995, when the Justice Department

announced its investigation.

3 ——

confidential sales figures to ECAMA, which its Swiss audi-

tors verified through on-site inspections of members’ confi-

dential business records. Detailed and accurate information

about members’ sales was needed to police the market share

allocation part of the conspiracy.”

Cargill began producing citric acid in 1990. Until mid-

1993, it competed with the Admitted Conspirators. It

brought new capacity on stream, marketed vigorously,

undercut Admitted Conspirators’ prices and, by 1993, had

earned a 22% market share in the U.S.—all to the Admitted

Conspirators’ great annoyance. Indeed, its entry into the

market in 1990 had caused a price slump. Further, its com-

petitive conduct took market share away from the Admitted

Conspirators and put downward pressure on pricing, under-

mining the conspiracy.

In 1991, the Admitted Conspirators began recruiting

Cargill into ECAMA. Although Cargill did not produce cit-

ric acid in Europe and thus was not eligible for membership,

the Admitted Conspiraters changed ECAMA’s bylaws to

eliminate that obstacle and pressed Cargill to join. Several

known conspirators—employees of H&R and HLR who

have been identified as participants—recruited Cargill. The

recruitment lasted more than a year until finally, in late 1992,

Cargill informed ECAMA’s Chairman (a major player in the

conspiracy) that if the “terms of membership” could be

agreed upon, it would join. Thereafter, ECAMA members

voted unanimously to invite Cargill to join, and an HLR

executive (also a participant in the conspiracy) flew from

Europe to the United States for the sole purpose of discuss-

ing with Cargill its joinder in ECAMA. Cargill officially

joined ECAMA in May, 1993.

Until then, Cargill had been able to compete with the

*Although the auditing firm was part of an international organiza-

tion (Coopers & Lybrand) with offices in the U.S., it refused to produce

its records in response to a subpoena served on its U.S. affiliate. See

note 4, infra.

Admitted Conspirators for market share without substantially

eroding the prices set by the conspirators. By the time it

decided to join ECAMA, however, the U.S. market had

weakened. Chinese producers had entered the market and

were expanding their market share and selling at prices far

below those set by the conspirators. The Chinese threatened

the conspiracy and the high prices it had managed to sustain.

When Cargill joined, ECAMA’s entire membership

consisted almost entirely of the Admitted Conspirators.

ECAMA’s Chairman was a high-level participant in the con-

spiracy. ECAMA meetings were regularly attended by rep-

resentatives of the Admitted Conspirators, who personally

participated in the conspiracy. Price-fixing and sales volume

allocation meetings were often held in conjunction with

ECAMA meetings.

After announcing it would join ECAMA, Cargill

pursued a strategy described in its own internal documents as

one of “[s]electively compet[ing] at strategic accounts” while

generally “[s]upport{ing] industry price increase[s].” li

increased its own prices in tandem with the Admitted

Conspirators. Cargill also dramatically scaled back its plans

to double its U.S. production capacity and abandoned plans

to acquire production capacity in Europe. Most telling,

Cargill’s market share, which until 1993 had misen

meteorically, dipped slightly and then remained flat. Cargill

attended numerous ECAMA meetings with representatives

of the Admitted Conspirators who were key participants in

the conspiracy. Cargill provided confidential sales data and

submitted to audit by ECAMA’s Swiss auditors—a process

whose only rational purpose was to facilitaie policing of the

conspiracy.

In documents from related criminal proceedings that

first became available while the appeal was pending, Barrie

Cox, an ADM executive deeply involved in the conspiracy,

revealed information directly contradicting Cargill’s denials

that it fixed prices or participated in the conspiracy:

Noel Wale SC se eae

“Between 1992 and 1995, COX had

approximately a dozen conversations with

[Cargill National Sales Manager for citric acid]

BILL GRUBER of Cargill on what COX called a

‘day-to-day level’ regarding pricing for specific

Pai MBebemts: “In “e f "as pS

COX and GRUBER discussed what each would

be bidding on particular CA [citric acid]

accounts, including, Lever, Schreiber, M&M

Mars, Coca-Cola, and P&G (Proctor and

Gamble).” (See App. A70)

Cox stated that these discussions “usually occurred toward

the end of the year when contracts came up for renewal.” /d.

Cargill and ADM “would bid at close to the same price, but

not the identical price, as that would look suspicious.” Jd.*

Further, Gruber called Cox when Cargill “was consid-

ering leading a CA price move... to see if ADM would be

supportive.” Jd. Cox also admitted that the Admitted

Conspirators how to “get messages to Cargill” during the

conspiracy period that it should “back off’ and “not rock the

boat,” and that ADM agreed to get the message to Cargill.

App. A71. Cox also admitted discussing with Gruber, at a

time when the market had “‘started to flatten out,” that each

of the companies would have to “‘absorb some of the hurt.’”

This evidence strongly suggested that, at a minimum, Cargill

participated in the conspiracy via communications with

Admitted Conspirator ADM.

The Admitted Conspirators viewed Cargill as a mem-

ber of the conspiracy. An internal document from the files

of Admitted Conspirator H&R dated 1994, which expressed

*As the Justice Department officials have observed, a significant

feature of the international cartels like those it uncovered in citric acid

has been not only agreed upon prices and market share allocations on a

world wide and country-by-country basis, but also agreement on “prices

to be charged (or bid) to specific customers.” Statement of Joel I. Klein

on International Antitrust Enforcement before the Subcomm. on

Antitrust, Business Rights and Competition of the Senate Comm. on the

Judiciary (May 4, 1999) (“Klein Statement’).

concerns that the supply of citric acid was “in significant

excess over demand” with resulting “downward pressure on

price,” stated as an action item that H&R would seek to

“gain share at accounts where [it] has no significant effect on

ADM, Cargill, JBL share.”

The inference from this evidence was that H&R intended to

avoid competing for market share with, and therefore to pre-

serve the agreed-upon volume allocations of, the other con-

spirators—including Cargill.

B. Proceedings Below.

These consolidated civil antitrust class actions were

brought in 1995 by Plaintiffs (U.S. soft drink bottlers and

food processors that purchase citric acid) against ADM, JBL,

HLR, H&R and Cargill—all of which are U.S. or foreign

manufacturers of citric acid. Plaintiffs alleged that

Defendants engaged in an international conspiracy to fix

prices and allocate market share for sales of citric acid, in

violation of Section 1 of the Sherman Act. The actions were

consolidated by the Judicial Panel for Muitidistrict Litigation

and assigned to the Northern District of California. The

District Court thereafter certified a class. In late 1996,

Plaintiffs entered settlements with ADM, HLR, H&R and

JBL, which were approved by the District Court.

After these cases were filed, and while an FBI investi-

gation and criminal proceedings focused on the citric acid

and related conspiracies were underway but far from com-

plete? Cargill sought summary judgment. It relied on

‘Given the pendency of the FBI investigation and criminal pro-

ceedings, discovery in this case was fraught with difficulty. The deposi-

tions of all but one of the individuals affiliated with the Admitted

Conspirators were fruitless because the executives and employees of the

Admitted Conspirators asserted the Fifth Amendment privilege against

self-incrimination. Further, most of the potential witnesses were located

outside of the United States, including the accounting firm that had

audited the sales volume data of the ECAMA members and communi-

(continued ... )

denials by Cargill executives and employees of any

participation in the conspiracy and on the deposition

testimony of Hans Hartmann (the former President of

Admitted Conspirator HLR, who had himself pled guilty) in

which he claimed to be unaware of any Cargill presence (or

the presence of anyone other than ADM, HLR, H&R and

JBL) at conspiratorial meetings and referred to the

conspirators as a “group of four.”

Relying heavily on Hartmann’s testimony about the

“group of four” and the lack of “direct evidence that Cargill

was involved in [the] conspiracy” (App. A53), the District

Court granted Cargill’s motion and entered judgment for

Cargill. Plaintiffs timely appealed to the United States Court

of Appeals for the Ninth Circuit.

While the appeal was pending, there were significant

developments in the related criminal proceedings, and both

Plaintiffs and Cargill requested that the Court of Appeals

take judicial notice of new evidence developed in connection

with the criminal cases, which it did. First, a fifth manufac-

turer of citric acid, Cerestar, was indicted and almost imme-

diately pled guilty to criminal price fixing. Cerestar’s

admission of guilt completely undercut Hartmann’s testi-

mony suggesting that the conspiracy was limited to a “group

of four” consisting only of ADM, H&R, HLR and JBL.

Further, since Hartmann had testified that the latter four were

the only companies to send representatives to the price fixing

meetings he attended, Cerestar’s plea suggested either that

Hartmann had lied or that it was possible to participate in the

conspiracy while keeping the appearance of arms length

from it—i.e., through conversations with individual members

of the conspiracy rather than attendance at the large group

meetings.

(.. . continued)

cated with them about the audit. That firm, which was located in

Switzerland, refused to produce any documents, and the District Court

and the Ninth Circuit declined to require its U.S. affiliate to obtain and

produce the requested information.

PN cE eae

Second, in a sentencing memorandum filed with a

District Court in Illinois, it was revealed that a high level

executive of Admitted Conspirator ADM who was deeply

involved in the conspiracy had a series of conversations with

Cargill’s National Sales Manager for citric acid during the

conspiracy period in which the two rigged bid prices for key

citric acid accounts and thereby allocated those accounts.

See pp.4-5, supra.

Despite the strong circumstantial evidence of Cargill’s

participation in the conspiracy, the Ninth Circuit affirmed the

grant of summary judgment. In doing so, it relied on

Matsushita (App. A4-A5), and repeatedly accepted Cargill’s

proffered explanations for its conduct and for other items of

evidence over the reasonable inference of conspiracy that

Plaintiffs requested be drawn.? Notably, Cargill had no

explanation for the price fixing ADM-executive Cox

“See, e.g., App. Al4-A15 (rejecting inference that detailed and

highly specific data in Cargill’s files regarding market shares of its com-

petitors was provided by ECAMA or co-conspirators for policing the

volume allocation agreement, in favor of Cargill’s unsupported assertion

that the data had been generated through its own market research); App.

A16-Al17 (rejecting inference that Cargill was wooed to and did join

European trade association (ECAMA)—despite that it never produced or

sold citric acid in Europe—in order to join the international conspiracy,

in favor of Cargill’s contention that it joined because it desired to enter

European market); App. A18-A19 (rejecting inference that Cargill scaled

back by half its previously publicized plan to expand production of citric

acid because it had joined conspiracy and ceased competing for market

share, in favor of Cargill’s unsupported assertion that it simply changed

its mind and decided full expansion would cause price war); App. A1l9-

A22 (rejecting evidence contained in expert report showing Cargill’s

market share flattened after 1992, in favor of inference from internal

H&R memos reporting sporadic incidents of competition by Cargill

thereafter that Cargill generally continued to compete for market share);

App. A23-A24 (rejecting inference from Admitted Conspirators’ price

lists found in Cargill's files, including one received on date issued, that

Cargill was exchanging price information with other conspirators, in

favor of Cargill’s assertion that it obtained competitor price lists from

customers); App. A24-A25 (rejecting inference from H&R 1994 memo

indicating that despite oversupply problem it would not compete with

ADM, JBL or Cargill that Cargill was viewed as and was member of

conspiracy, in favor of Cargill’s speculative assertion that H&R’s reason

for not competing with Cargill was its prior lack of success).

admitted he and Cargill’s Gruber engaged in, other than to

deny that it occurred. Nonetheless, the court dismissed this

evidence on the ground that it failed to show that Cargill was

part of the “group of four” companies that attended the large

group meetings of the Admitted Conspirators and thus was

not probative of whether Cargill participated in the indus-

trywide conspiracy. See App. A26-A27.

The court declined to apply the rule of an earlier Ninth

Circuit case that it was improper on summary judgment to

reject circumstantial evidence that supports an inference of

conspiracy in favor of explanations suggesting innocent con-

duct unless drawing the inference of conspiracy would sig-

nificantly deter beneficial procompetitive conduct. Jn re

Coordinated Pretrial Proceedings in Petroleum Products

Antitrust Litig., 906 F.2d 432 (9th Cir. 1990) (“Petroleum

Products”). The panel dismissed the Petroleum Products

analysis as “dicta.” App. A9-A10.°

More importantly, the court failed even to mention the

Kodak decision (Eastman Kodak Co. v. Image Technical

Servs., Inc., 504 U.S. 451 (1992)), in which this Court simi-

larly held that the Matsushita “presumption in favor of sum-

mary judgment for the defendant” (504 U.S. at 478), applies

only where (a) the plaintiff's evidence consists of conduct by

the defendant “that appears always or almost always to

enhance competition” (id. at 479) and inferring an antitrust

violation from it would thus pose “a significant risk of

°The panel’s explanation for _ its rejection of Petroleum

Products—that its discussion of the treatment of circumstantial evidence

in a summary judgment context was dicta—was ill-considered and incor-

rect. In fact, the Petroleum Products court’s discussion of the summary

judgment standard in a circumstantial evidence case was a considered

and detailed holding that it stated was “crucial to a proper resolution of

th{at] case” (906 F.2d at 437), as is further evidenced by its comprehen-

sive articulation of the standard (id. at 437-41) and its application of that

standard to the evidence before it (id. at 441-65). The refusal of the

pane! to follow Petroleum Products violated the Ninth Circuit's rule that

where a panel wishes to depart from prior Circuit precedent it must call

for an en banc review. Atonio v. Wards Cove Packing Co., 810 F.2d

1477, 1478-79 (9th Cir. 1987) (en banc).

deterring procompetitive conduct” (id. at 478), and (b) the

plaintiffs’ theory “ma[kes] no _ practical sense, [is]

‘speculative,’ and [is] not ‘reasonable.’” /d. at 468.

In their Petition for Rehearing and Suggestion for

Rehearing En Banc, Plaintiffs pointed out the Court’s failure

to consider Kodak and its application of a summary judg-

ment standard that is inconsistent with the one prescribed by

this Court in Kodak.’ The Ninth Circuit panel finally

addressed Kodak, but gave it short shrift. The panel pur-

ported to distinguish Kodak as relating to “tying and market

power’ and not “the sufficiency of evidence of conspiratorial

acts alleged under §1 of the Sherman Act.” App. A68. The

petition for rehearing and rehearing en banc were thus sum-

marily denied. Jd.

REASONS FOR GRANTING THE

PETITION

In Matsushita, the plaintiffs asserted a decades long

predatory pricing conspiracy that the Court found was “eco-

nomically senseless”; moreover, they sought an inference of

conspiracy from inherently procompetitive activities such as

price cutting and rebates. In that context, this Court held that

the defendants were entitled to summary judgment unless the

plaintiff “present[ed] evidence that ‘tend[ed] to exclude the

possibility’ that the alleged conspirators acted independ-

ently.” 475 U.S. at 588, 597-98. Matsushita did not decide

whether the summary judgment burden it articulated applied

in all antitrust cases or only in those cases in which the

plaintiffs’ theory was “implausible” and the requested infer-

ences of unlawful conduct were predicated on inherently

procompetitive conduct. Six years later, in Kodak, this Court

answered that question, holding that the “presumption in

favor of summary judgment” Matsushita applied only

Plaintiffs had previously cited Kodak in both their opening and

reply briefs.

governs antitrust cases in which the theory alleged is

implausible and the inferences sought to be drawn are based

on procompetitive conduct, and that absent such cir-

cumstances the ordinary summary judgment rules apply.

504 U.S. at 467-71, 478-79.

It is uniformly agreed that in cases like Matsushita—

that is, in which the defendants lack a rational motive to vio-

late the antitrust laws or for other reasons the plaintiffs’

antitrust theory is implausible (475 U.S. at 587) and the

inference of unlawful conduct is based on activities that are

inherently procompetitive (id. at 594)—the plaintiffs “must

come forward with more persuasive evidence to support their

claim than would otherwise be necessary.” /d. at 587, 593.

However, there remains a profound split among the lower

courts as to whether, in cases where the antitrust theory

asserted is plausible and the activities challenged are facially

anticompetitive, ordinary summary judgment standards

apply.® Kodak should have ended this discussion, for it

resolved that question in the affirmative-— it held that a

defendant in an antitrust case “bears a substantial burden”

and must demonstrate that an inference of unlawful conduct

is “unreasonable” to obtain summary judgment. 504 U.S. at

469. It further held that when the preconditions of

Matsushita are not met, ordinary summary judgment stan-

dards govern. Id. at 468-70.

The Seventh and Third Circuits have faithfully applied

Kodak, employing ordinary summary judgment standards in

all antitrust cases except those based on “economically

senseless” theories and procompetitive conduct. The Ninth

‘Commentators have noted the confusion in the lower courts

regarding the summary judgment standard applicable in antitrust cases.

See, e.g., Fhe Supreme Court: Leading Cases, 106 HARV. L. REV. 163,

328, 337 (1992); McQueen, Comment: The Summary Judgment

Standard in Antitrust Conspiracy Cases and In re Travel Agency

Commission Antitrust Litigation, 62 J. AiR. L. & COM. 1155, 1157, 1172,

1174, 1193-94 (1997); Hughes, The Left Side of Antitrust: What

Fairness Means and Why It Matters, 77 MARQ. L. REV. 265, 284 (1994).

Circuit, too, had adopted a rule consistent with Kodak even

before this Court decided that case. However, other circuits,

and in this case a different panel of the Ninth, have disre-

garded or purported to distinguish Kodak and held that the

Matsushita standard applies irrespective of whether the

plaintiff's theory is plausible or rests on procompetitive con-

duct. Some have imposed standards even more stringent

than that articulated in Matsushita, making it virtually

impossible for a plaintiff to withstand summary judgment in

a circumstantial evidence case.

Enforcement of the antitrust laws is crucial to the

integrity of domestic markets. Without it, anticompetitive

activities such as the price fixing and volume allocation con-

spiracy in this case, which drive up the prices of literally

thousands of products purchased by American businesses

and consumers, would be allowed to go undeterred and

unremedied. Indeed, large-scale anticompetitive cartels

between major international companies like those involved

in this case have flourished in recent years, as the criminal

prosecutions and civil litigation involving lysine, fructose,

potash and vitamins (to name a few) show.”

Although the criminal division of the Justice

*See Klein Statement, supra, at 3-4 (massive international cartels

in “citric acid, lysine (important livestock and poultry feed additive),

sodium gluconate (industrial cleaner), and graphite electrodes (used in

steel making)); see, e.g., /n re Methionine Antitrust Litig. MDL No.

1311, 1999 U.S. Dist. LEXIS 19206, at *1-2 (J.P.M.L. Dec. 8, 1999)

(amino acid used in animal feed); /n re Vitamin Antitrust Litig., MDL

No. 1285, 1999 U.S. Dist. LEXIS 8599, at *1-2 (J.P.M.L. June 7, 1999),

1999 U.S. Dist. LEXIS 12405, at *1-4 (D.D.C. July 29, 1999) (vitamins,

vitamin derivatives, and vitamin premixes); Blomkest Fertilizer, Inc. v.

Potash Corp., Inc., 176 F.3d 1055, 1074 (8th Cir. 1999), reh’g en banc

granted (July 16, 1999) (mineral used in agricultural fertilizers); /n re

Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 602-03

(7th Cir. 1997) (prescription drugs); /n re Abbott Labs. Antitrust Litig.,

51 F.3d 524, 525 (Sth Cir. 1995) (infant formula); /n re Medical X-Ray

Film Antitrust Litig., No. CV 93-5904, 1997 U.S. Dist. LEXIS 21936, at

*2-3 (E.D.N.Y. Dec. 10, 1997) (x-ray film); /n re Plastic Cutlerv

Antitrust Litig., No. 96-CV-728, 1998 U.S. Dist. LEXIS 3628, at *3-4

(E.D. Pa. March 20, 1998) (plastic cutlery).

Department has devoted one third of its staff to investigating

such international cartels and has succeeded in prosecuting a

number of companies involved in them, it has described

those prosecutions as reaching “just the tip of the iceberg.”

Klein Statement, supra, at 4. As this Court has recognized,

in enacting the antitrust laws Congress intended that private

lawsuits would serve “‘as a significant supplement to the lim-

ited resources available to the Department of Justice for

enforcing the antitrust laws and deterring violations.” Reiter

v. Sonotone Corp., 442 U.S. 330, 344 (1979)."°

The confusion over the summary judgment standard

and the willingness of many lower courts to dismiss antitrust

cases at the summary judgment stage despite credible evi-

dence of a violation deter private lawsuits and undermine

effective enforcement of the antitrust laws. This is particu-

larly so with respect to violations that span international bor-

ders. The increased complexity of such cases, in which key

witnesses and documents are often located beyond U.S. sub-

poena power, makes them extremely difficult and expensive

to prove. When the vagaries of an ill-defined summary

judgment standard are added to these hurdles, international

conspiracy cases become extremely unattractive to bring

unless the Justice Department has already investigated and

prosecuted them successfully.

Yet international cartels “pose an even greater threat to

American businesses and consumers than domestic conspira-

cies, because they tend to be highly sophisticated and

extremely broad in their impact—both in terms of the

geographic scope and in the amount of commerce affected

by the conspiracy.” Prepared Testimony of Joel I. Klein

Before the Subcomm. On Antitrust of the Senate Comm. On

the Judiciary, FED. NEWS SERV., Feb. 26, 1998, at 5.

' Accord, California v. American Stores Co., 495 U.S. 271, 284

(1990); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473

U.S. 614, 635 (1985); American Society of Mechanical Engineers, Inc. v.

Hydrolevel Corp., 456 U.S. 556, 572-73 n.10 (1982).

Effective enforcement of the antitrust laws against compa-

nies whose activities affect U.S. markets is “central to the

functioning of our economy.” /d. at 1; see also United States

v. Nippon Paper Indus. Co., 109 F.3d 1, 3-4 (1st Cir. 1997),

cert. denied, 522 U.S. 1044 (1998).

For these reasons, the Court should grant review in this

case to resolve the split between the circuits and to clarify

that the conventional summary judgment standard applies in

antitrust cases not predicated on implausible theories or pro-

competitive behavior, and that the more stringent test articu-

lated in Matsushita applies only in cases asserting

implausible claims based on procompetitive activities.

THE NINTH CIRCUIT PANEL

ADOPTED AND APPLIED A

SUMMARY JUDGMENT STANDARD

THAT IS INCONSISTENT WITH THIS

COURT’S HOLDING IN KODAK.

A. In Kodak, This Court Clarified Matsushita,

Stating That An Extraordinary Showing Was

Required Of The Plaintiffs in That Case

Because Their Antitrust Theory Was

“Economically Senseless” And Predicated

On Beneficial Procompetitive Conduct.

In Matsushita, this Court addressed the summary

judgment standard in the context of an alleged predatory

pricing conspiracy. Since the plaintiffs’ theory—that the

defendants charged below-cost prices for an extended period

on the uncertain hope of future profits derived from driving

competitors out of the market—‘‘ma[de] no economic

sense,”'' the Court held that the plaintiffs were required to

‘Indeed, the Court found that the defendants “as presumably

rational businesses, . .. had every incentive not to engage in the conduct

with which they [were] charged, for its likely effect would be to generate

losses for [defendants] with no corresponding gains.” 475 U.S. at 595.

“come forward with more persuasive evidence in support of

their claim than would otherwise be necessary.” 475 U.S. at

587. The Court also held that to withstand summary judg-

ment the plaintiff was required to “show that the inference of

conspiracy [was] reasonable in light of the competing infer-

ences of independent action.” /d. at 588.

The Court emphasized that “court[s] should not permit

factfinders to infer conspiracies when such inferences are

implausible, because the effect of such practices is often to

deter procompetitive conduct.” Jd. at 593. Deterring pro-

competitive conduct was a concern in Matsushita because

the conduct that formed the basis of the plaintiffs’ com-

plaint—‘cutting prices in order to increase business”-—

“often is the very essence of competition.” /d. at 594. As

the Court observed, “mistaken inferences in cases such as

this one are especially costly, because they chill the very

conduct the antitrust laws are designed to protect.” /d. The

Court found the balance between the concern about deterring

procompetitive conduct and the desire to identify and punish

illegal conspiracies “unusually one-sided” in Matsushita (id.

at 594), in which the defendants “had no rational economic

motive to conspire.” Jd. at 595-96. It therefore required the

plaintiffs to present “evidence that is sufficiently unambigu-

ous to permit a trier of fact to find that petitioners conspired

to price predatorily for two decades despite the absence of

any apparent motive to do so.” Jd. at 597. Such evidence,

the Court held, “must ‘ten{d] to exclude the possibility’ that

[defendants] underpriced [plaintiffs] to compete for business

rather than to implement an economically senseless conspir-

acy.” Id. at 597-98.

Following Matsushita, many lower courts read this

Court’s opinion very broadly, in one commentator’s words:

“view[ing] [its] bold language as an invitation to unconven-

tionally examine plaintiffs’ theories critically at an early

stage of the litigation.”'? Some interpreted Matsushita as

holding that a special summary judgment standard applied in

all antitrust cases'’; many interpreted Matsushita to require

that they weigh and choose between inferences of conspiracy

or other unlawful conduct drawn from circumstantial

evidence proffered by plaintiffs and inferences or evidence

proffered by defendants to show their conduct was lawful.'*

"Judson, Note: Kodak v. Image Technical Services: The Taming

Of Matsushita And The Chicago School, 1993 Wis. L. REV. 1633, 1664

(Nov./Dec. 1993); see 1 ABA SECTION OF ANTITRUST LAW, ANTITRUST

LAW DEVELOPMENTS 827-28 (4th ed. 1997); Calkins, Supreme Court

Antitrust 1991-92: The Revenge of the Amici, 61 ANTITRUST L.J. 269,

298 (1993); DeSanti& Kovacic, Matsushita: Its Construction and

Application by the Lower Courts, 59 ANTITRUST L.J. 609, 653 (1991);

Susman, Plaintiff's Strategies and Tactics—Pretrial and Trial, 58

ANTITRUST L.J. 277, 277 (1989); H. HOVENKAMP, FEDERAL ANTITRUST

POLICY: THE LAW OF COMPETITION AND ITS PRACTICE §16.8b (1994).

'°2 I. SCHER, ANTITRUST ADVISOR §10.35, at 10-80 (4th ed.

1998); Katz & Amold, Eastman Kodak v. ITS: The Downfall of the

Chicago School, THE COMPUTER LAW., July 1992, at 2-3 (many lower

courts accepted interpretation of Matsushita as imposing greater burden

on plaintiffs in antitrust cases than in other types of cases); Protos, Kodak

v. Image Technical Services: A Setback for the Chicago School of

Antitrust Analysis, 43 CASE W. RES. L. REV. 1199, 1216 (1993); see,

e.g., H.L. Hayden Co., Inc. v. Siemens Med. Sys., Inc., 879 F.2d 1005,

1019 (2d Cir. 1989) (referring to “special hurdies” of “Monsanto-

Matsushita rule’); Helicopter Support Sys., Inc. v. Hughes Helicopter,

Inc., 818 F.2d 1530, 1532-35 (11th Cir. 1987); App. ASO (district court

opinion below) (referring to “special rule appl[icable] to the use of cir-

cumstantial evidence in antitrust cases”); see also Hofer, The

Practitioner Antitrust Law, Remarkable Recovery, S.F. DAILY J.,

Dec. 13, 1999, at 5 (“The Court in Monsanto and Matsushita substan-

tially increased the burden of proof required te prove the conspiracy or

unlawful agreement element of Section 1 of the Sherman Act for plain-

tiffs who rely on circumstantial evidence to prove the unlawful agree-

ment. Consequently, it became much more difficult for plaintiffs to

survive summary judgment because most civil litigants do rely on cir-

cumstantial evidence”).

“See, e.g., Midwest Radio Co. v. Forum Pub. Co., 942 F.2d 1294,

1297-98 (8th Cir. 1991) (“When a valid business reason exists for the

conduct alleged to be predatory or anti-competitive, that conduct cannot

support the inference of a section2 violation”); Todorov v. DCH

Healthcare Auth., 921 F.2d 1438, 1456 (11th Cir. 1991) (“when the

defendant puts forth a plausible, procompetitive explanation for his

actions, we will not be quick to infer, from circumstantial evidence, that a

(continued... )

Further, the courts applied Matsushita to choose between

conflicting inferences even in cases in which the antitrust

theory was neither implausible nor based on conduct that

was inherently procompetitive.'° So frequently were

summary judgment motions being granted in antitrust cases

that some commentators suggested the lower courts were

using Matsushita to clear their dockets rather than as a basis

for analyzing the merits of antitrust claims.'°

Six years after deciding Matsushita, this Court revis-

ited “the standard for summary judgment in an antitrust

controversy.” Kodak, 504 U.S. at 454. The Court took that

opportunity to clanfy Matsushita, stating it was not intended

to emasculate the traditional summary judgment standard or

to replace it with a special standard imposing more stringent

burdens on plaintiffs in antitrust cases. Jd. at 468.

In Kodak, the Court explained that the plaintiffs’ anti-

trust theory in Matsushita “made no practical sense, was

‘speculative,’ and was not ‘reasonable.’” /d. at 468 (quoting

and citing Matsushita, 475 U.S. at 588, 590, 593, 595, 597).

It was in that context, the Court observed, that it had held the

(... continued)

violation of the antitrust laws has occurred; the plaintiff must present

more probative evidence that the law has been violated”); Market Force,

Inc. v. Wauwatosa Realty Co., 906 F.2d 1167, 1170, 1173-74 (7th Cir.

1990) (affirming summary judgment where plaintiff's evidence did “not

foreclose the conclusion that the competitors were engaged in a conspir-

acy” and “left open the possibility of independent action,” and where

“even drawing the inferences in favor of [plaintiff], a conspiracy is not

the ‘compelling, if not exclusive, rational inference’ from the record”);

see also Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656,

659-61 (7th Cir. 1989) (summary judgment should be “favored practice”

in antitrust actions and rejecting plaintiffs’ evidence as “too specula-

tive’); Parkway Gallery Furniture, Inc. v. Kittinger/Pennsylvania House

Group, Inc., 878 F.2d 801, 804 (4th Cir. 1989) (requiring “clear evi-

dence” of conspiracy).

'SSee cases cited in note 14, supra; 21. SCHER, ANTITRUST

ADVISOR §10.35, at 10-80 (4th ed. 1998); 1 ANTITRUST LAW

. DEVELOPMENTS, supra, at 826-27 & nn.421-23 (and cases cited therein).

'©De Santi & Kovacic, supra, 59 ANTITRUST L.J. at 653; Weber,

Summary Judgment After Kodak, ANTITRUST 10 (Fall/W inter 1992).

case could not go to a jury unless the plaintiffs “came for-

ward with more persuasive evidence to support their theory.”

Id. The Court distinguished the case before it from

Matsushita because it disagreed with Kodak’s contention

that the plaintiffs’ antitrust theory was “if not impossible, is

at least unreasonable.” /d. at 471; see id. at 477-78.

In Kodak, the Court also emphasized that the

Matsushita plaintiffs had “attempted to prove the antitrust

conspiracy ‘through evidence of rebates and other price cut-

ting activities’” that are “‘the very essence of competition.’”

Id. at 478. In that context, the Court had been “concerned

that mistaken inferences would be ‘especially costly’ and

would ‘chill the very conduct the antitrust laws are designed

to protect.’” Jd. In the case before it, however, the Court

noted, “the facts... are just the opposite. The alleged con-

duct—higher service prices and market foreclosure—is

facially anticompetitive and exactly the harm that antitrust

laws aim to prevent.” Jd. Because of the absence of the

factors that drove the result in Matsushita, the Court held,

“Matsushita does not create any presumption in favor of

summary judgment for the defendant.” /d. On the contrary,

“(ijn this case, when we weigh the risk of deterring procom-

petitive behavior by proceeding to trial against the risk that

illegal behavior will go unpunished, the balance tips against

summary judgment.” Id. at 479 (emphasis added). Compare

id. with Matsushita, 475 U.S. at 594.

Kodak thus teaches that Matsushita does not apply

unless the defendant shows that the inferences the plaintiffs

seeks to have drawn are unreasonable and are based on con-

duct that “appears always or almost always to enhance com-

petition.” See id. at 469, 477, 479.

B. The Ninth Circuit Panel In This Case

Disregarded Kodak’s Holding That Where

The Plaintiffs’ Antitrust Theory Is Neither

“Economically Senseless” Nor Based On

Beneficial Procompetitive Conduct, Ordinary

Summary Judgment Standards Apply.

In this case, the Ninth Circuit panel applied a broadly

construed version of the Matsushita standard that allowed it

to weigh and choose between the Plaintiffs’ and Defendant’s

evidence in a case in which there was an admitted price fix-

ing and volume allocation conspiracy and the issue was

whether the Defendant participated in it. As discussed

above, the evidence showed not only parallel pricing by the

defendant (Cargill), but also actual price fixing and alloca-

tion of accounts by Cargill with an Admitted Conspirator

(ADM), the highly suspect decision by an Admitted

Conspirator (H&R) to refrain from competing for market

share with other Admitted Conspirators and Cargill,"’

extraordinary efforts by the Admitted Conspirators to recruit

Cargill to join a trade association (and changing of its bylaws

to allow Cargill, a non-European producer, to join) that was,

at minimum, used as a cover for conspiratorial activities, and

Cargill’s announcement that it would join in that association

and simultaneous and dramatic rollback of a publicly

announced expansion of capacity. Regardless of Cargill’s

proffered explanations for some of these facts, it could not be

said that drawing an inference from them that Cargill joined

in the conspiracy is unreasonable. The only way the court

could reach the result that it did was by applying a summary

judgment standard different from that applicable in ordinary

cases: one consistently crediting the defendant’s proffered

'’Other courts have held that a company’s decision to refrain from

competing for a competitor’s accounts constitutes a “plus factor’ that

tends to exclude the possibility of independent conduct and support an

inference of conspiracy. See, e.g., City of Tuscaloosa v. Harcros

Chemicals, Inc., 158 F.3d 548, 572-73 & n.36 (11th Cir. 1998), cert.

denied, 145 L. Ed. 2d 42 (1999); Petruzzi’s IGA Supermarkets, Inc. v.

Darling-Delaware Co., 998 F.2d 1224, 1245, 1246 (3d Cir. 1993).

explanations against reasonable competing inferences of

conspiracy.

In engaging in such a weighing and choosing between

the evidence under the auspices of Matsushita, the Ninth

Circuit panel at first disregarded Kodak entirely. See

pp.9-10, supra. In its published opinion, it made no effort to

explain why the analysis prescribed in Kodak did not apply.

It did not determine either that Plaintiffs’ theory (that Cargill

participated in the conspiracy) was “economically senseless”

or that Cargill’s conduct was inherently procompetitive. As

a result of overlooking Kodak, the panel applied a summary

judgment standard that this Court, in Kodak, held should not

be applied in a case like this.

The panel’s decision is directly contrary to Kodak.

First, in failing to address whether the conspiracy alleged by

the Plaintiffs was implausible, the Ninth Circuit applied a

stringent version of the Matsushita standard when a neces-

sary precondition to Matsushita’s application was not estab-

lished. Second, the court neglected to consider whether a

second precondition to Matsushita was met: whether the

conduct of Cargill on which Plaintiffs’ claim was based was

procompetitive—i.e., “‘appear[ing] always or almost always

to enhance competition.” 504 U.S. at 479. Under Kodak,

unless the plaintiffs’ theory is “economically senseless” and

the conduct from which an inference of conspiracy is sought

to be drawn is inherently procompetitive, the ordinary sum-

mary judgment standard must be applied. See pp.17-18,

supra.

Neither of these preconditions for invoking

Matsushita’s burden-shifting analysis existed in this case.

Unlike the predatory pricing conspiracy alleged in

Matsushita, a price-fixing and volume allocation conspiracy

among the predominant manufacturers of a commodity like

citric acid is not implausible; indeed, it is undisputed such a

conspiracy took place between at least the five Admitted

Conspirators. Nor can it be said that Cargill’s participa-

tion—any more than ADM’s, H&R’s, JBL’s, HLR’s, and

later Cerestar’s-—was lacking a rational motive. To be sure,

each would have to trade the ability to compete for more

market share; but in exchange each would receive (1) a cer-

tain market share for which the other conspirators would not

compete and (2) the benefit of steadily increasing above-

market prices.

Further, the conduct by Cargill on which Plaintiffs

relied to support an inference that it joined the conspiracy

Was not procompetitive in any sense. Charging above-

market prices in tandem with the Admitted Conspirators

cannot be characterized as procompetitive. Nor can Cargill’s

rigging of bids with Admitted Conspirator ADM. Likewise,

it cannot be said that rolling back a previous, publicly

announced expansion of capacity is “always or almost

always [likely] to enhance competition.”

Since neither the conspiracy nor Cargill’s joinder of it

was “economically senseless,” and since Cargill’s conduct

was not inherently procompetitive, the Ninth Circuit erred in

applying a stringent summary judgment standard derived

from Matsushita and in weighing Cargill’s proffered expla-

nations of the facts against the competing reasonable infer-

ences of conspiracy that could be drawn from Plaintiffs’

evidence. This error will have grave consequences if not

corrected: by neglecting to mention the Kodak case in its

published opinion and failing to apply the summary judg-

ment standard it prescribed, the panel sent a signal to all of

the District Courts in this Circuit and beyond that, in its

view, Kodak has no meaning and a stringent Matsushita-

based summary judgment standard applies in all antitrust

cases, making it virtually impossible for a circumstantial

evidence case ever to survive summary judgment.

In its unpublished order denying rehearing, the panel

finally acknowledged Kodak but sought to distinguish it,

implying that a different summary judgment standard applies

to tying and monopolization claims than to antitrust conspir-

acy claims. See App. A67-A68. But in Kodak this Court

made plain that it was addressing “the standard for summary

judgment in an antitrust controversy” (504 U.S. at 454

(emphasis added))-—not merely in a tying or monopolization

context. If the Court had viewed the summary judgment

standard for tying and monopolization claims as different

from that applicable to conspiracy claims, it could simply

have distinguished Matsushita on that ground. Instead, it

revisited Matsushita and took great pains to explain the

meaning and limits of its decision in that case. The North

Circuit panel’s summary dismissal of Kodak on the spurious

ground that it was distinguishable only exacerbated the

problem created by its published opinion.

THERE IS A SHARP CONFLICT

BETWEEN THE CIRCUITS

CONCERNING THE STANDARD

GOVERNING SUMMARY JUDGMENT

IN ANTITRUST CASES.

A. The Third And Seventh (And Until Recently,

Ninth) Circuits Have Followed Kodak And

Held That Plaintiffs Need Only Make The

Extraordinary Showing Demanded in

Matsushita Where The Antitrust Claims

Asserted Are Implausible And Based On

inferences Drawn From Beneficial

Procompetitive Conduct.

The Third and Seventh (and until this case Ninth)

Circuits have heeded Kodak. In Petruzzi’s IGA

Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224

(3d Cir. 1993), the Third Circuit considered the summary

judgment standard applicable in antitrust cases in light of

Matsushita and Kodak. Petruzzi’s involved an alleged con-

spiracy to allocate customers in the fat and bone rendering

industry. The customers were suppliers of raw materials,

and it was alleged that the defendants conspired to avoid

competing for accounts so as to keep the prices they paid the

supplier-customers for raw materials artificially low.

Despite the circumstantial evidence plaintiffs had proffered

to show that the defendants were engaged in such a conspir-

acy, the district court had granted summary judgment hold-

ing that evidence insufficient. /d. at 1229-30.

Reversing, the Court of Appeals addressed the sum-

mary judgment standard applicable in antitrust cases. /d. at

1230. In general, it observed, “*[a] non-movant’s burden in

defending against summary judgment in an antitrust case is

no different than in any other case.’” /d. Further, it opined,

“where the non-movant has put forward evidence which it

contends allows for an inference of a section | violation, the

movant defendant bears the burden of proving that drawing

an inference of unlawful behavior is unreasonable.” Jd. In

determining which inferences are reasonable and which are

circumscribed, the court found it important to “examine

closely the Supreme Court’s decision in Matsushita.” Id.

The Third Circuit found significant to this Court’s

decision in Matsushita this Court’s (1) conclusion “that the

defendants had no motive to engage in the alleged conspir-

acy,” and (2) observation “that the alleged unlawful behavior

was equally consistent with lawful behavior because ‘cutting

prices in order to increase business often is the very essence

of competition.’” /d. at 1231. Thus, the court held,

“(T]wo important circumstances underlying the

Court’s decision in Matsushita were (1) that the

plaintiffs’ theory of conspiracy was implausible

and (2) that permitting an inference of antitrust

conspiracy in the circumstances ‘would have the

effect of deterring significant procompetitive

conduct.” [citing Petroleum Products, 906 F.2d

at 439]. In particular, the Matsushita Court wor-

ried that if it allowed mistaken inferences to be

drawn from the defendants’ price-cutting poli-

cies, it would chill procompetitive behavior. See

Matsushita, 475 U.S. at 594, 106 S. Ct. at 1360.

Thus, the Court stated that the acceptable infer-

ences which can be drawn from circumstantial

evidence vary with the plausibility of the

plaintiffs’ theory and the dangers associated with

such inferences.” (/d. at 1232)

Citing Kodak, the Third Circuit emphasized that

Matsushita “did not hold that an antitrust defendant is enti-

tled to summary judgment merely by providing an economic

theory to justify its behavior” but “simply stressed that to

survive summary judgment in the absence of direct evidence

or strong circumstantial evidence, a plaintiff must assert a

theory that is plausible.” Jd. at 1231. The issue remains

whether the inferences sought to be drawn are reasonable,

and the focus is not on whether the defendants demonstrate a

plausible rationale for their behavior, but rather whether the

plaintiffs’ evidence “‘tends to exclude the possibility that the

defendants were acting independently.’”” /d. at 1232.

Finally, when the plaintiffs’ antitrust theory is not implausi-

ble and their inferences do not rest on procompetitive

activities, “more liberal inferences from the evidence should

be permitted than in Matsushita because the attendant dan-

gers from drawing inferences recognized in Matsushita are

not present.” Jd.

Applying that standard to the case before it, the Third

Circuit reversed the district court’s grant of summary judg-

ment as to two of the defendants. /d. at 1233-47. In so rul-

ing, it contrasted the case before it—in which “the plaintiff's

theory of conspiracy [was] not implausible” and “the defen-

dants’ challenged activities [were] not procompetitive”’—

with the case this Court faced in Matsushita. Id. at 1232. It

held the plaintiffs’ circumstantial evidence was sufficient to

raise a triable issue of fact. Jd.

In decisions since Petruzzi’s IGA, the Third Circuit has

consistently interpreted Matsushita in the light of Kodak to

impose a higher burden on the non-movant plaintiff on

summary judgment in antitrust cases only when the

plaintiffs theory is implausible and based on _pro-

competitive activities by the defendant.'®

The Third Circuit’s interpretation of Matsushita was,

until the decision in the instant case, similar to that in the

Ninth Circuit. In Petroleum Products, the Ninth Circuit had

similarly held that a court could not grant summary judgment

to a defendant when the evidence was plausibly consistent

with both inferences of conspiracy and inferences of inno-

cent conduct unless drawing the inference would deter

procompetitive conduct. 906 F.2d at 437-41. In so holding,

it observed that “[i]n Matsushita, the Court was unwilling to

permit an inference of predatory pricing in part because the

Court was concerned about the inference’s possible anticom-

petitive side-effects.” Jd. at 439. The Court’s emphasis “on

the dangers of permitting inferences from certain types of

ambiguous evidence” was “key to the proper interpretation

of Matsushita.” Id.

In Petroleum Products, the Ninth Circuit held that

under Matsushita a defendant in an antitrust case based on

circumstantial evidence is entitled to summary judgment

only if: “(1) the defendant’s conduct is consistent with other

plausible explanations, and (2) permitting an inference of

conspiracy would pose a significant deterrent to beneficial

procompetitive behavior.” /d. at 440.'? Further, the Ninth

Circuit has recognized that whether a defendant’s proffered

explanations for its conduct should be accepted—at least

where there is competing evidence—is a question of fact for

the jury.”

'*See, e.g., In re Baby Food Antitrust Litig., 166 F.3d 112, 124 (3d

Cir. 1999); Rossi v. Standard Roofing, Inc., 156 F.3d 452, 466-67, 474

(3d Cir. 1998); Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996,

1001 (3d Cir. 1994); Advo, Inc. v. Philadelphia Newspapers, Inc., 51

F.3d 1191, 1196-97, 1205 (3d Cir. 1995).

"See also Long Beach v. Standard Oil Co., 872 F.2d 1401, 1407

(9th Cir. 1989) (distinguishing Matsushita on ground that case before it

was not based on “legitimate price competition” and did not involve

“implausible” scheme).

See Forsyth v. Humana, Inc., 114 F.3d 1467, 1477 (9th Cir.

(continued .. . )

As discussed above, the Ninth Circuit’s decision in this

case conflicts with Kodak and with Petroleum Products.

The intracircuit conflict underscores the confusion in the

lower courts about the meaning of Matsushita.

The Seventh Circuit, like the Third and formerly the

Ninth, applies conventional summary judgment standards if

the plaintiff's theory is plausible. In JTC Petroleum Co. v.

Piasa Motor Fuels, Inc., 190 F.3d 775, 778-79 (7th Cir.

1999), Chief Judge Posner described Matsushita as

“teach[ing] that an antitrust claim which makes no economic

sense can on that ground be dismissed on summary judg-

ment” and held that even if there was “an innocent explana-

tion for” the defendant’s conduct, the issue on summary

judgment was “whether a rational jury... could conclude

(construing the evidence as favorably to the plaintiff as the

record permits) that the reason for the [defendants’ acts] was

that they were [conspiring].” Jd.

In another case, Chief Judge Posner reversed a district

court’s grant of summary judgment in an antitrust conspiracy

case, rejecting the contention that defendants’ proffered

innocent explanations entitled them to summary judgment,

opining:

“But the issue before us is not whether the

wholesalers were in fact participants in the price-

fixing conspiracy; it is whether there is sufficient

evidence of this to create a triable issue. In

deciding this question we must construe the evi-

dence as favorably to the plaintiffs as the record

permits, not as favorably to the defendants as it

permits. The defendants’ interpretations may be

correct; they are not inevitable.” (Jn re Brand

Name Prescription Drugs Antitrust Litig., 123

F.3d 599, 614 (7th Cir. 1997), cert. denied, 522

U.S. 1153 (1998))

(.. . continued)

1997), aff'd, 525 U.S. 299 (1999); High Tech. Careers v. San Jose

Mercury News, 996 F.2d 987, 992 (9th Cir. 1993) (reversing grant of

summary judgment).

aaa SSeS

The court agreed with defendants that summary judgment

would be proper even if there were some evidence of an

antitrust violation “if the plaintiff's theory of violation makes

no economic sense.” /d. But in the case before it, there was

a plausible conspiracy theory. /d. Whether it was true or not

was “not the issue”; the question (which the court answered

in the affirmative) was whether there was “enough evidence

supporting it to preclude summary judgment.” Jd. In this

context, the defendants’ contrary evidence suggesting that

they had not played a role in the conspiracy did “not erase

the factual question of whether [they] joined the conspiracy.

It is just evidence to be weighed in the balance by the tner of

fact.” Jd. at 615; see also id. at 616.

B. Like The Ninth Circuit Panel In This Case,

Courts In Other Circuits Have Chosen To

Ignore Kodak And Continued To Read

Matsushita As Requiring Plaintiffs’ Evidence

To Outweigh Defendants’ Evidence To

el Summary Judgment In All Antitrust

ases.

In stark contrast to the analysis of the Third and

Seventh Circuits—and the former position of the Ninth—are

the Ninth Circuit’s decision in this case and recent decisions

of the Fourth, Eighth and Sixth Circuits. Even after Kodak,

these circuits have interpreted Matsushita to require weigh-

ing of evidence on summary judgment motions in antitrust

cases and entry of summary judgment when the court views

the evidence as in equipoise or favoring defendant. Disre-

garding Kodak, these circuits have applied this standard in

all cases, regardless of the plausibility of the conspiracy

theory alleged or whether the conduct at issue is

procompetitive.

One example is the Fourth Circuit, which, citing

Matsushita, held that “on summary judgment motions in

antitrust cases, ... when there is evidence of conduct that is

consistent with both legitimate competition and an illegal

conspiracy, courts may not infer that an illegal conspiracy

has occurred without other evidence.” Thompson Everett,

Inc. v. National Cable Advertising, L.P., 57 F.3d 1317, 1323

(4th Cir. 1995) (citing Matsushita and omitting to mention

Kodak) (emphasis added); see also Merck-Medco Managed

Care, LLC v. Rite Aid Corp., No. 98-2847, 1999 U.S. App.

LEXIS 21487, at *21-22 (4th Cir. Sept. 7, 1999) (Eastman

Kodak did not modify Matsushita). The Fourth Circuit stan-

dard goes beyond Matsushita: (1) The high threshold it sets

for plaintiffs is not limited to situations in which the plain-

tiffs theory is inherently “implausible” or “economically

senseless,” or to cases in which the conduct complained of is

procompetitive (such as price-cutting), but is established for

all antitrust cases. (2) Even in Matsushita, the Court did not

suggest that any plausible explanation proffered by the

defendant for its conduct would entitle the defendant to

summary judgment, but held only that where the inferences

of conspiracy and innocence from particular conduct were

equally plausible, the inference of conspiracy could not be

drawn without more evidence (Matsushita, 475 U.S. at 588).

Under the Fourth Circuit standard, if the conduct can be

explained and thus an inference of innocence is even possi-

ble, the court is required to draw it. (3) Only if the plaintiff

proffers evidence that not merely “tends to exclude” but, in

the court’s view conclusively excludes, the possibility of

innocent conduct is there a triable issue of fact. The Fourth

Circuit reading of Matsushita substitutes the judge for the

jury and requires that the claim be dismissed whenever a jury

could find for the defendant—even if it could also rationally

find for the plaintiff.

Similarly, the Eighth Circuit has expressly rejected the

Third and former Ninth Circuit approach, stating that it

“read[s] Matsushita more broadly.” Corner Pocket of Sioux

Falls, Inc. v. Video Lottery Techs., Inc., 123 F.3d 1107, 1109

(8th Cir. 1997), cert. denied, 522 U.S. 1117 (1998). In

Corner Pocket, plaintiffs alleged a conspiracy by a manu-

facturer and distributors of video lottery equipment to

allocate territories and fix prices. Jd. The court accepted the

defendants’ proffered explanations for conduct that sug-

gested an agreement to divide the market and fix prices over

plaintiffs’ evidence of conspiracy. /d. at 1110-14. It can-

didly acknowledged that it viewed Matsushita as requiring it

to “weigh the summary judgment evidence of both parties in

determining whether plaintiffs’ evidence ‘tends to exclude

the possibility that the alleged conspirators acted independ-

ently.’” Jd. at 1112. Further, reversing the ordinary sum-

mary judgment principle that inferences are drawn in favor

of the nonmoving party, the court applied the opposite pre-

sumption, stating it could “not lightly disregard” “legitimate

business reasons” the moving defendants gave for their busi-

ness practices. /d. Going still further in preferring the

defendants’ evidence over the plaintiffs, the court discounted

each item of evidence the plaintiffs offered as “too ambigu-

ous” even when it reasonably supported an inference of con-

spiracy. See id. at 1112-14.

The Eighth Circuit has thus endorsed a summary

judgment standard that entails weighing the plaintiffs evi-

dence against the defendant’s and giving the defendant the

benefit of a presumption of lawfulness that can only be

rebutted by evidence for which it is impossible even to con-

ceive of an innocent explanation. See id.; see also Lovett v.

General Motors Corp., 998 F.2d 575, 579 (8th Cir. 1993).

The Sixth Circuit has likewise interpreted Matsushita

to mean that the plaintiff in an antitrust case, to withstand

summary judgment, “has the burden of showing that the evi-

dence is more consistent with conspiracy than with indepen-

dent action.” See Super Sulky, Inc. v. United States Trotting

Ass'n, 174 F.3d 733, 739 (6th Cir.), cert. denied, 145 L. Ed

2d 146 (1999) (emphasis added). The Sixth Circuit in that

case rejected the plaintiffs circumstantial evidence because

it “d{id] not exclude a non-conspiratorial explanation for the

[group’s] action.” Jd. In applying this standard, the court

discussed Matsushita, but made no mention of Kodak. The

Sixth Circuit standard, like the Fourth’s and Eighth’s, is

applied without regard to whether the plaintiff's theory is

implausible or based on procompetitive conduct. It similarly

substitutes judge for jury: the judge decides whose evidence

is strongest (is the evidence “more consistent” with the plain-

tiffs theory of an antitrust violation or the defendant’s

theory of innocence?) and, if the judge decides the defen-

dant’s evidence is weightier, grants summary judgment.

The courts that, like the Fourth, Eighth and Sixth

Circuit, have continued to read Matsushita as allowing, or

indeed mandating, that courts determine not merely which

inferences are permissible from the evidence, but which are

stronger, represent a drastic departure from the ordinary

summary judgment standard and a serious incursion on anti-

trust plaintiffs’ seventh amendment right to a jury trial. They

also ignore this Court’s holding in Kodak that the high

threshold established for the plaintiff in Matsushita was

intended to apply only in cases in which the plaintiffs theory

is implausible and would necessitate inferring conspiracy

from procompetitive behavior.

CONCLUSION

This Court should grant certiorari and confirm that it

meant what it said in Kodak and that the lower courts must—

absent the extraordinary circumstances present in

Matsushita—apply the ordinary summary judgment standard

in antitrust cases.

DATED: January 18, 2000.

Respectfully,

JEROME B. FALK, JR. JOSEPH W. COTCHETT

THERESE M. STEWART BRUCE L. SIMON

HOWARD, RICE, NEMEROVSKI, MARIE S. WEINER

CANADY, FALK & RABKIN COTCHETT, PITRE & SIMON

A Professional Corporation

GUIDO SAVERI LEONARD BARRACK

R. ALEXANDER SAVERI STEVEN A. ASHER

SAVERI & SAVERI BARRACK, RODOS & BACINE

Attorneys for Petitioners

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