Appendix — U. S. Anchor Manufacturing, Inc. v. Rule Industries, Inc.

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Filed November 23, 1993

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 91-8854

U.S. ANCHOR MFG., INC., PLAINTIFF,

COUNTERCLAIM DEFENDANT, APPELLEE,

CROSS-APPELLANT,

V.

RULE INDUSTRIES, INC., DEFENDANT-

APPELLANT, CROSS-APPELLEE,

TIE DOWN, INC.,

A/K/A TIE DOWN ENGINEERING, INC.,

DEFENDANT, COUNTERCLAIM PLAINTIFF,

APPELLANT, CROSS-APPELLEE,

WILLIAM CHAPMAN, COUNTERCLAIM

DEFENDANT.

On Appeal from the United States District Court

for the Northern District of Georgia

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(1:86-cv-2447-JTC)

Anchor manufacturer brought action against

competitor and distributor alleging violation of antitrust law

and tortious interference with business relationships in

violation of Georgia law. The United States District Court

for the Northern District of Georgia No. 1:86-cv-2447-JTC,

Jack T. Camp, J., imposed civil liability for alleged

predatory pricing. Defendants appealed. The Court of

Appeals, Dubina, Circuit Judge, held that: (1) defendants

could not be held liable for antitrust violations in the absence

of showing that they had dangerous probability of success in

monopolization; (2) distributor could not be held liable for

conspiracy; and (3) pendent jurisdiction would be exercised

over Georgia claim.

Reversed and rendered in part and questions certified.

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COX and DUBINA

Circuit Judges

and GODBOLD,

Senior Circuit Judge

(Filed November 23, 1993)

HAROLD T. DANIEL, JR.

LAURIE WEBB DANIEL

WEBB & DANIEL

Atlanta, GA

for Tie Down, Inc.

CHARLES M. SHAFFER, JR.

J. KEVIN BUSTER

SEAN R. SMITH

Atlanta, GA

for Rule Industries, Inc.

J. ALEXANDER PORTER

SIMUEL F. DOSTER, JR.

PORTER & BARRETT

Atlanta, GA

for U.S. Anchor Mfg., Inc.

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TABLE OF CONTENTS

PROCEDURAL HISTORY ...........

CONTENTIONS OF THE PARTIES

STANDARD OF REVIEW ...........

ATTEMPTED MONOPOLIZATION

A Dangerous Probability of Success

|. Defining the Market ........

2. Measuring Power in the Market .

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B Anticompetitive Conduct, Specific

Intent and Damages ..........

(RIDES cceeseeeceeocreese

CLAIMS UNDER GEORGIA LAW .....

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OPINION OF THE COURT

DUBINA, Circuit Judge.

This is an appeal from a jury verdict imposing civil

liability for alleged predatory pricing in violation of the

antitrust laws. More specifically, appellants Rule Industries,

Inc. ("Rule") and Tie Down Engineering, Inc. ("Tie

Down"), defendants below, appeal the district court’s denial

of their motions for judgment notwithstanding the verdict on

claims by U.S. Anchor Manufacturing, Inc. ("U.S. Anchor”)

that Rule and Tie Down attempted and conspired to

monopolize the United States market for light weight fluke-

style anchors for small boats by means of below-cost pricing

intended to drive out competition. U.S. Anchor cross-

appeals the district court’s order of a directed verdict on its

state law claims arising from the same allegations. We

reverse the denial of defendants’ motions concerning the

federal claims. With respect to the state law claims, we

certify the dispositive issues for authoritative resolution by

the Supreme Court of Georgia.

I. FACTS

This case involves several manufacturers and

suppliers of light weight anchors for ultimate retail purchase

by owners of recreational boats and small commercial fishing

craft. As the district court observed in denying cross-

motions for summary judgment,

{a]nchors and other marine industry products

are generally sold by suppliers to wholesale

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distributors, who in turn sell the anchors to

boat Jealers, marinas, and other retailers for

ultimate resale to the consumer, the boat

owner. The supplier may either manufacture

its own anchors, as does U.S. Anchor, or

purchase them from another domestic

manufacturer, as [Rule] does from Tie Down,

or import them from abroad.

U.S. Anchor Mfg. v. Rule Indus., 717 F. Supp. 1565, 1568

(N.D. Ga. 1989).

Within the general category of fluke anchors are four

distinct product groups recognized in the industry:

(1) expensive premium anchors, (2) the "Danforth Standard"

brand line of anchors sold only by Rule, (3) so-called

"generic" versions of the Danforth Standard, and

(4) inexpensive economy anchors used primarily for lake

boating.

Rule is a diversified Massachusetts firm that sells an

assortment of marine, hardware and automotive products to

wholesale distributors. It entered the fluke anchor industry

in 1983 when it obtained the rights to sell the Danforth

brand line of anchors. Prior to 1985, Danforth anchors were

manufactured for Rule exclusively by the Jacquith Company

("Jacquith") in New York. Tie Down is a smaller

manufacturing firm in Georgia that began selling generic and

economy fluke anchors in the late 1970s under the "Hooker"

brand name. In May 1985 Rule obtained the Hooker

trademark and the exclusive nght to purchase and distribute

Tie Down’s anchor production in a transaction that U.S.

Anchor has characterized as a "merger." After it sold the

right to market its own anchors, Tie Down agreed to

manufacture both generic/economy and Danforth brand

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anchors for Rule. Tie Down’s only role in the fluke anchor

industry since 1985 has been as one of Rule’s suppliers.

U.S. Anchor is a Georgia company founded in 1985

by William Chapman ("Chapman"), the immediate past

president of Tie Down whose responsibilities there had

recently ended. U.S. Anchor both manufactures and

distributes generic and economy fluke anchors under the

"Sentinel" brand name. Between August 1985 when it first

sent out price lists and December 31, 1990, its market share

increased to between 45 and 68%, depending on how the

relevant product market is defined and measured.

Shortly after U.S. anchor entered the market in

August 1985, on the eve of the 1985-86 marine products

season,’ Rule and U.S. Anchor engaged in a price war.

Following publication of U.S. Anchor’s August price list,

Rule published prices in September that were approximately

11 to 18% higher than U.S. Anchor’s. Thus, U.S. Anchor’s

prices were 10 to 15% lower than Rule’s. (R30-27;

compare USTX 343 with USTX 345.) In October, after

U.S. Anchor had received substantial orders from Rule

customers, Rule cut its prices by 20%, i.e., to levels 6 to

12% below U.S. Anchor’s August prices (R49-28; RTX

584.) U.S. Anchor then matched Rule’s October prices. In

a written report to Rule, USTX 683, Tie Down’s president

Charles MacKarvich ("MacKarvich") estimated U.S.

Anchor’s costs of production and hypothetical projected sales

for a twelve-month period. He theorized that if Rule

lowered its prices further and offered extended credit terms

The annual marine products selling season begins each September with

a trade show.

U.S. Anchor’s tnal exhibits will be cited as "USTX__,” Rule’s tral

exhibits as "RTX_ " and Tie Down’s trial exhibits as “"TDTX_ *

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to customers, U.S. Anchor would be forced to adopt even

more attractive terms in order to compete. From his

estimates of cash flow and net revenue derived from these

cost and sales projections, he predicted that such terms

would subject U.S. Anchor to a negative cash flow and an

actual net loss over the 1985-86 marketing year. Rule

implemented price reductions consistent with MacKarvich’s

report in November 1985. In December, U.S. Anchor

merely matched Rule’s prices and did not attempt to

undercut them. (R30-39-40, USTX 351, 353, 543.) U.S.

Anchor contends that Rule’s first price cut in October was

predatory and that all subsequent sales at or below that level

were also predatory.

After the pricing conduct at issue in this case began,

distributors’ prices for generic brands in the smaller, popular

sizes ranged between $3 and $14 depending on weight, and

prices for Danforths were spread 50 to 96% higher.’

Among the more expensive, larger anchors the spread

between Danforth and generic brands was even greater.

Excluding premium anchors,‘ annual unit sales of fluke

> (USTX 372 (Rule’s 1989-90 price list; 50.4 to 96.2% spread); USTX

368 (Rule’s 1988-89 price list; 49.7 to 96.2% spread); USTX 362

(Rule’s 1987-88 price list; 73.4 to 91.7% spread); USTX 355 (Rule’s

1986-87 price list; 61.0 to 76.1% spread); see also USTX 371 (U.S.

Anchor’s 1989-90 price list); USTX 367 (U.S. Anchor’s 1988-89 price

list); USTX 365 (U.S. Anchor’s 1987-88 price list).) U.S. Anchor

repeatedly opened the marine season with prices higher than Rule’s only

to reduce its prices when Rule failed to follow U.S. Anchor’s pricing

strategy.

* The parties have treated this appeal as though premium fluke anchors

were irrelevant. They have also ignored other types of anchors designed

for holding on different bottom conditions (fluke anchors are most useful

on sandy bottoms and least effective in gripping grassy bottoms). We do

the same.

i

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anchors in the United States during the time relevant to this

case was varied from 232,000 to 347,000. (USTX 479.)

At trial the parties noted differing possible measures

of Rule’s share of the relevant product market after the

acquisition of Tie Down’s anchor line in May 1985, four

months before the close of the 1984-85 marine season at the

end of August. This dispute encompassed two aspects of

market share: whether to define the product market as

including the high priced Danforth anchors or only the less

expensive generic and economy models, and whether to

measure market shares in terms of unit sales or dollar

revenues. Including the Danforth line and measuring market

shares in revenue, U.S. Anchor asserts that Rule and Tie

Down together controlled 90.5% of the fluke anchor market

during the 1984-85 season, the last year before Rule’s

alleged predation began and the last year before the merger

with Tie Down, and that Rule possessed 60.0% of the

market during the 1985-86 selling year. (USTX 467.)

Using Rule’s most favorable calculation, which measures

share in units and excludes Danforths from the market, Rule

contends that the combined Rule/Tie Down market share in

1984-85 was only 61.5%, (RTX 674), and that Rule’s

aggregate 1985-86 share was 30.1%, (id.: RTX 675 at 1).°

Pale on:

AD NR ay AE a

* Although neither party adduced direct evidence of the combined

Rule/Tie Down unit market share on 1984-85 with Danforths included,

the jury must have concluded that the firms’ combined unit share for that

season with the higher-priced anchors included was somewhat greater

than the 61.5% unit share they garnered in the non-Danforth market

because only Rule marketed the Danforth line. U.S. Anchor’s USTX

467 indicates that Rule itself had no 1984-85 revenues in the non-

Danforth market. But Rule’s RTX 674, which appears to represent the

non-Danforth unit market (compare RTX 674, col. 1985-86 with RTX

675 at 1, rows 1985-86), shows Rule with 12.6% of that market in 1984-

85. We assume that RTX 674 attributes to Rule the non-Danforth

(continued...)

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Rule also submitted evidence that its 1985-86 unit market

share, including Danforths, was 43.1%. (RTX 675 at 1.)

Notably, all of these figures encompass an entire season and

none of them attempts to pinpoint Rule’s share at the exact

date when the alleged predation began in October 1985,

several months after U.S. Anchor entered the market. The

evidence shows, and the parties agree, that the Rule/Tie

Down market share consistently decreased after August 1985

when U.S. Anchor first began to solicit orders. The parties

also agree that the relevant geographic market was the

United States.

Il. PROCEDURAL HISTORY

In November 1985 Rule filed suit against U.S.

Anchor for various violations of state and federal law not

involving predatory pricing. The suit was settled on March

19, 1986, when U.S. Anchor and Rule executed an

agreement releasing each other from liability for all events

occurring prior to the date of the release. Tie Down was a

party to neither the litigation nor the ensuing release.

On November 13, 1986, U.S. Anchor sued Rule and

Tie Down, alleging that Rule had attempted to monopolize

the fluke anchor market in violation of section 2 of the

Sherman Act® beginning in October 1985 by engaging in

> (...continued)

production of Tie Down following the Rule-Tie Down transaction in the

final quarter of the 1984-85 season.

® Section 2 provides: “Every person who shall monopolize, or attempt

to monopolize, or combine or conspire with any other person or persons,

to monopolize any part of the trade or commerce among the several

(continued...)

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predatory pricing. U.S. Anchor also alleged that Rule and

Tie Down had conspired to restrain trade in violation of

section 1 of the Sherman Act’ and conspired to attain a

monopoly in violation of section 2, by agreeing to charge

predatory prices, also beginning in October 1985. U.S.

Anchor asserted an illegal tying arrangement by Rule,

whereby its newly patented and supposedly revolutionary

"Deepset” anchors allegedly were sold only to distributors

who abstained from buying generic fluke anchors from

suppliers other than Rule, in violation of section | of the

Sherman Act and section 3 of the Clayton Act, as amended

by the Robinson-Patman Act.’ U.S. Anchor further alleged

® (...continued)

States, or with foreign nations, shall be deemed guilty of a felony... .

15 U.S.C. § 2.

’ Section 1 provides in_ relevant part: “Every contract,

combination . . ., or conspiracy, in restraint of trade or commerce

among the several States, or with foreign nations, is declared to be

illegal.” 15 U.S.C. § 1.

* Section 3 of the Clayton Act provides in relevant part:

It shall be unlawful for any person engaged in commerce...

to lease or make a sale or contract for sale of goods.. .,

whether patented or unpatented, fcr use, consumption, or resale

within the United States . . . on the condition, agreement, or

understanding that the lessee or purchaser thereof shall not use

or deal in the goods . . . of a competitor or competitors of the

lessor or seller, where the effect of such lease, sale or contract

for sale or such condition . . . may be to substantially lessen

competition or tend to create a monopoly in any line of

commerce.

15 U.S.C. § 14. Among other possible differences between the Sherman

Act and Robinson-Patman Act tying provisions is that the Sherman Act

prohibition extends to arrangements affecting the sale of services and

(continued...)

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that Rule and Tie Down had conspired to restrain trade in

violation of Georgia law. The district court denied the

parties’ cross-motions for summary judgment. 717 F. Supp.

1565. A jury trial followed during which the defendants

moved for directed verdicts’ as to all claims. The court

granted their motions on the state law claims because it

concluded that Georgia law did not permit damages to be

recovered for a conspiracy in restraint of trade. The jury

found Rule solely liable for attempted monopolization and

jointly liable with Tie Down on both conspiracy counts. The

verdict exonerated Rule of illegal tying. (R10-321). The

jury set damages for each of the three violations at

$1,638,028, which the court trebled to $4,914,084. Tie

Down and Rule both moved for judgment notwithstanding

the verdict on liability and for a new trial on the issue of

damages. (R11-348, 349.) The district court denied these

motions, awarded U.S. Anchor statutory attorney fees in the

stipulated amount of $800,000 and entered judgment

accordingly. (R14-382.) Rule and Tie Down appealed, and

U.S. Anchor cross-appealed with respect to the state law tort

claims. U.S. Anchor does not appeal the judgment on the

tying claim.

§ (...continued)

realty as well as goods. See, e.g. Tie-X-Press, Inc. v Omni Promotions

Co. , 815 F.2d 1407 (1 ith Cir. 1987) (tying arrangement conditioning the

lease of coliseum theater space upon the employment of a ticket-selling

agency affiliated with the lessor); see generally Thompson vy.

Metropolitan Multi-List, Inc. , 934 F.2d 1566, 1574-79 (11th Cir. 1991),

cert. denied, _U.S._ _, 113. S.Ct. 295, 121 L.Ed.2d 219 (1992).

* A motion for directed verdict is now deemed a motion for judgment

as matter of law, and motions for judgment notwithstanding the verdict

are now renewed motions for judgment as a matter of law. See Fed. R.

Civ. P. 50.

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III. CONTENTIONS OF THE PARTIES

Rule contends that it engaged in no predatory conduct

and disputes U.S. Anchor’s showing of Rule’s and Tie

Down’s costs of producing the anchors. Since a predatory

pricing claim requires proof that defendants attempted or

conspired to drive a competitor out of the relevant market by

"pricing below some appropriate measure of cost,” the issue

of which costs to count may be vital. Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585 n. 8,

106 S.Ct. 1348, 1355 n. 8, 89 L.Ed.2d 538 (1986) (noting

but not resolving debate over which costs are "relevant"), on

remand, In re Japanese Elec. Prods. Antitrust Litig., 807

F.2d 44 (3d Cir. 1986), cert. denied, 481 U.S. 1029, 107

S.Ct. 1955, 95 L.Ed.2d 527 (1987). Rule advances

numerous criticisms of U.S. Anchor’s expert testimony on

this point. Tie Down contends that U.S. Anchor failed to

adduce any evidence that Tie Down’s prices to Rule were

below Tie Down’s cost, that Tie Down had any knowledge

of (or control over) Rule’s other costs, or that it had any

control over Rule’s prices.

Rule also contends that it had no dangerous

probability of successfully achieving a monopoly. The

parties first dispute the existence of barriers to entry in the

relevant market. Rule and Tie Down contend that without

high barriers, a successful monopolist would not have been

able to recoup the foregone profits inherent in below-cost

pricing by charging supra-competitive prices following the

end of the victim’s competitive presence.” U.S. Anchor

contends that there was sufficient evidence of entry barriers

10

A predatory pricing scheme could be successful by driving the victim

out of business or by coercing him to reduce output to levels consistent

with profit-maximization by a firm or syndicate possessing monopoly

power. Either result would eliminate the victim's competitive presence.

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to permit the jury to find them and that in any case actual

recoupment is not required as a matter of law before the jury

may find an attempt or conspiracy to monopolize. Second,

Rule points to U.S. Anchor’s own success and Rule’s

declining fortunes in the anchor market as evidence that it

could not have monopolized.

Rule and Tie Down also challenge the sufficiency of

the evidence of unlawful conspiracy. The parties dispute the

inference to be drawn from plaintiff's exhibit 683, the

MacKarvich market report. U.S. Anchor contends that

MacKarvich was proposing to drive the new entrant from the

marketplace. Defendants offered expert testimony,

corroborated by MacKarvich himself, that studies of

competitors’ costs and revenues are common in competitive

industries and that a projected loss after the first year of

operation is ordinarily not enough to drive any new entrant

from the market, since start-up companies must generally

expect early losses. In its cross-appeal U.S. Anchor

challenges the district court’s exclusion of certain evidence

that allegedly supports the existence of a conspiracy.

Rule and Tie Down challenge the sufficiency of U.S.

Anchor’s proof concerning damages. They argue that at

least some of their price cuts were instituted to meet

competition from foreign fluke anchor manufacturers and

any loss of sales by U.S. Anchor resulting from such

reductions is not antitrust injury. Moreover, they contend,

the base price from which U.S. Anchor’s revenue losses

were calculated should have reflected competitive levels as

shown by Rule’s and U.S. Anchor’s early, allegedly non-

predatory reductions rather than prices prevailing before

U.S. Anchor’s entry into the market.

Rule and U.S. Anchor dispute the scope and effect of

their settlement agreement in the prior litigation. Rule

.

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contends that liability for all predatory sales before the date

of the release was discharged. Moreover, Rule maintains

that the alleged predatory scheme was ongoing at the time

the contract was executed and therefore all post-release

liability was discharged as well. U.S. Anchor contends that

a general release is ineffective to discharge undiscovered

antitrust liability as a matter of law and, moreover, that post-

release damages were not waived. We do not reach this

dispute as it applied to the federal antitrust claims.'' As

applied to the state law claims, we certify the question, along

with the substantive issues of Georgia law, for resolution by

the Supreme Court of Georgia.

In its cross-appeal U.S. Anchor also argues that the

district court should not have granted a directed verdict on

its state law claims because Georgia law allows private

damage actions for conspiracies in restraint of trade. Rule

and Tie Down disagree with U.S. Anchor’s interpretation of

Georgia law.

IV. STANDARD OF REVIEW

We review rulings on motions for judgment as a

matter of law by applying de novo the same legal standards

used by the district court. Miles v. Tennessee River Pulp &

Paper Co., 862 F.2d 1525, 1528 (11th Cir. 1989). Both

courts consider all the evidence, but all reasonable inferences

must be drawn in the nonmovant’s favor. If the jury verdict

is supported by substantial evidence—that is, enough evidence

that reasonable minds could differ concerning material

11

Federal common law, not the state law of contracts, determines the

effect of settlement agreements alleged to release federal antitrust claims.

Redel’s Inc. v. General Elec. Co., 498 F.2d 95, 98 & n. 2 (Sth Cir.

1974).

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facts—the motion should be denied. A mere scintilla of

evidence in the entire record, however, is insufficient to

support a verdict. See Hessen ex rel. Allstate Ins. Co. v

Jaguar Cars, Inc., 915 F.2d 641, 644 (11th Cir. 1990).

Denial of a motion for a new trial is reviewed for clear

abuse of discretion. /d. at 644-45. A district court’s

evidentiary rulings are not disturbed unless there is a clear

showing of abuse of discretion. /d. at 645.

V. ATTEMPTED MONOPOLIZATION

There are three essential elements of a claim alleging

attempted monopolization under section 2 of the Sherman

Act. First, the plaintiff must show that the defendant

possessed the specific intent to achieve monopoly power by

predatory or exclusionary conduct. Second, the defendant

must in fact commit such anticompetitive conduct. Third,

there must have existed a dangerous probability that the

defendant might have succeeded in its attempt to achieve

monopoly power. Spectrum Sports, Inc. v. McQuillan,

ia , 113 S.Ct. 884, 890, 122 L.Ed.2d

247 (1993); see McGahee v. Northern Propane Gas Co., 858

F.2d 1487, 1493 (11th Cir. 1988), cert. denied, 490 U.S.

1084, 109 S.Ct. 2110, 104 L.Ed.2d 670 (1989); 3 Phillip

Areeda & Donald F. Turner, Antitrust Law {4 820 at 312

(1978) [hereinafter Areeda & Turner, Antitrust Law]. We

address these elements in reverse order.

es *y.

A. Dangerous Probability of Success

To have a dangerous probability of successfully

monopolizing a market the defendant must be close to

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achieving monopoly power.’* Monopoly power is "the

power to raise prices to supra-competitive levels or . . . the

power to exclude competition in the relevant market either

by restricting entry of new competitors or by driving existing

competitors out of the market." American Key Corp. v.

Cole Nat’l Corp., 762 F.2d 1569, 1581 (11th Cir. 1985).

Most attempts to measure monopoly power involve

quantifying the degree of concentration in a relevant market

and/or the extent of a particular firm’s ability to control

productive capacity in that market. In anaiyzing attempted

monopolization’s dangerous probability of success element,

the estimate of market power is necessarily speculative to

some extent because it requires an evaluation of future

behavior by market participants viewed at the time the

alleged attempt began. We are not without guideposts,

however.

Relevant determinants of the market power of

a prospective predator in this regard include

its absolute and relative market shares, and

those of competing firms; the strength and

Capacity of current competitors; the potential

for entry; the historic intensity of

competition; and the impact of the legal or

natural environment.

International Tel. & Tel. Corp., 104 F.T.C. 208, 412 (1984)

(citation and footnotes omitted). Despite the seemingly

broad array of factors employed by the Federal Trade

Commission, the principal judicial device for measuring

actual or potential market power remains market share,

typically measured in terms of a percentage of total market

12

The terms "monopoly power" and "market power” are synonymous

and are used interchangeably in this opinion.

18a

sales. Thus, at the outset the appropriate market must be

defined or identified."

Defining the market is a necessary step in any

analysis of market power and thus an indispensable element

in the consideration of any monopolization or attempt case

arising under section 2. Walker Process Equip., Inc. v.

Food Mach. & Chem. Corp., 382 U.S. 172, 177, 86 S.Ct.

347, 350, 15 L.Ed.2d 247 (1965); American Key, 762 F.2d

at 1579. Although the issue is fully developed in the fact

section of Rule’s brief, the argument section does not

address the precise question of market definition. U.S.

Anchor, in the fact section of its brief, contends that the

question of market definition is not appropriately before us

because Rule does not argue the point. (U.S. Anchor’s Br.

at 3 n. 1.) We must consider the question nevertheless

before passing on the legal significance of evidence

concerning Rule’s potential market power. As the issue of

Rule’s dangerous probability of success has been preserved

through argument, the subsidiary question of market

definition is also preserved because it is set forth fully in the

13

This inquiry may be labelled more appropriately as “market

estimation.” See Herbert Hovenkamp, Economics and Federal Antitrust

Law 59 (1985).

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fact section of Rule’s brief.'* The issue was fully argued

before the district court.'*

The definition of the relevant market is essentially a

factual question, so the precise issue we first must address

is whether U.S. Anchor introduced sufficient evidence to

raise a jury question on the inclusion of Danforths. See,

e.g. Yoder Bros. v. California-Florid.: Plant Corp. , 537 F.2d

1347, 1366 (Sth Cir. 1976), cert. denied, 429 U.S. 1094, 97

S.Ct. 1108, 51 L.Ed.2d 540 (1977).'*

‘* See Fed. R. App. P. 28(a)(4) (brief shall include “a statement of the

facts relevant to the issues presented for review, with appropriate

references to the record"); of. Harris v. Plastics Mfg. Co., 617 F.2d 438,

440 n.1 (Sth Cir. 1980) (per curiam) (brief that merely stated an issue,

without providing any argument or facts, deemed to waive it). For

instance, the plaintiff's brief in American Key raised the question of

market definition but failed to raise, inter alia, the existence of monopoly

power. Although the omission technically “abandoned” the issue of

market power, the court addressed it anyway. 762 F.2d at 1579-81. We

believe Rule’s brief puts this case closer to American Key than cases in

which a brief merely stated an issue without fact and argument, or

actually ignored an entire claim or defense. Cf Joe Regueira, Inc. v.

American Distilling Co. , 642 F.2d 826, 833 n. 16 (Sth Cir. Unit B April

1981); In re Municipal Bond Reporting Antitrust Litig., 672 F.2d 436,

439 n. 6 (Sth Cir. 1982).

'S (See R10-301-4, Memo at 28-30 (Rule’s Motion for Directed Verdict

and Memorandum in Support); R9-299 Br. at 3-6 (Tie Down’s Motion

for Directed Verdict and Brief in Support).)

‘* Decisions of the iormer Fifth Circuit rendered before October 1,

1981, are binding upon panels of this court. Bonner v. City of Prichard,

661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).

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l. Defining the Market

"Defining a relevant product market is primarily ’a

process of describing those groups of producers which,

because of the similarity of their products, have the

ability—actual or potential—to take significant amounts of

business away from each other.’" General Indus. Corp. v.

Hartz Mountain Corp., 810 F.2d 795, 805 (8th Cir. 1987)

(quoting SmithKline Corp. v. Eli Libby & Co., 575 F.2d

1056, 1063 (3d Cir.), cert. denied, 439 U.S. 838, 99 S.Ct.

123, 58 L.Ed.2d 134 (1978)). The reasonable

interchangeability of use or the cross-elasticity of demand”

between a product and its substitutes constitutes the outer

boundaries of a product market for antitrust purposes.

Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82

S.Ct. 1502, 1523, 8 L.Ed.2d 510 (1962).

[Within the broad market, well-defined

submarkets may exist which, in themselves,

constitute product markets for antitrust

purposes. The boundaries of such submarket

may be determined by examining such

practical indicia as industry or public

recognition of the submarket as a separate

economic entity, the product’s peculiar

characteristics and uses, unique production

facilities, distinct customers, distinct prices,

sensitivity to price changes, and specialized

vendors.... The cross-elasticity of

production facilities may also be an important

factor in defining a product market... .

'T Also known as “demand substitution.”

a

21a

Id. at 325 & n. 42, 82 S.Ct. at 1523-24 & n. 42 (citations

and footnotes omitted). As the Supreme Court’s language

itself suggests, defining a "submarket" is the equivalent of

defining a relevant product market for antitrasi purposes. ----

International Telephone & Telegraph adequately summarizes

our view of the relevant proof:

Reliable measures of supply and demand

elasticities provide the most accurate estimates

of relevant markets. However, it is ordinarily

quite difficult to measure cross-elasticities of

supply and demand accurately. Therefore, it

is usually necessary to consider other factors

that can serve as useful surrogates for cross-

elasticity data. ... In the case of product

market definition, these factors may include

whether the products and services

have sufficiently distinctive uses and

characteristics; whether industry firms

routinely monitor each other’s actions

and calculate and adjust their own

prices (at least in part) on the basis of

other firms’ prices; the extent to

which consumers consider various

categories of sellers... as

substitutes; and whether a sizeable

price disparity between different types

of... sellers . . . persists over time

for equivalent amounts of comparable

goods and services.

104 F.T.C. at 409 (quoting Grand Union Co., 102 F.T.C.

812, 1041 (1983)) (footnotes omitted).

-

22a

We note that Danforth brand anchors are functionally

interchangeable with their equivalent counterparts among the

generic brands. Indeed, among smaller sized anchors the

Hooker and Danforth anchors have always been virtually

identical. (R30-131-33; R33-129-31.) This

interchangeability suggests a likelihood that consumers of

generic brands would willingly switch to Danforths in the

event of significant price increases among generics.

Similarly, Danforth customers might switch to generic

brands if Rule implemented a significant increase in the price

of Danforths. The likelihood of demand substitution, if

proven, weighs strongly in favor of including the two

categories of product within a single market for antitrust

analysis. This is so because the very purpose of defining the

relevant market under section 2 is to determine whether a

monopolist, cartel or oligopoly in that market would be able

to reduce marketwide output simply by cutting its own

Output, and thereby raise marketwide prices above

competitive levels. United States v. E.l. du Pont de

Nemours & Co. (The Cellophane Case), 351 U.S. 377, 395,

76 §.Ct. 994, 1007, 100 L.Ed. 1264 (1956); Satellite

Television & Associated Resources, Inc. v. Continental

Cablevision, Inc., 714 F.2d 351, 356 (4th Cir. 1983), cert

denied, 465 U.S. 1027, 104 S.Ct. 1285, 79 L.Ed.2d 688

(1984)."*

We hold, however, that the relevant market in this

case constituted light weight generic and economy fluke

anchors. Four of the Brown Shoe factors weigh strongly in

favor of excluding Danforths from the relevant market;

distinctly higher prices, a distinct group of customers,

strongly inelastic demand and limited substitution of supply.

'* See also, e.g., Richard A. Posner, Antitrust Law: An Economic

Perspective 125-26 (1976); Hovenkamp, supra at 59.

23a

Moreover, the higher prices charged for Danforths are

evidence that a distinct group of customers was unwilling to

switch away from the prestigious branded product in

response to price increases above competitive levels. The

fact that this group remained loyal to Danforths despite

prices 50 to 96% and more above prices for functionally

interchangeable alternative products shows inelastic demand

and limited demand interdependence. More importantly,

U.S. Anchor showed no reasonably possibility that a

significant number of consumers would have switched to

Danforths, many of which were offered at nearly double the

price of their generic substitutes, in response to more modest

increases in generic prices. And as more fully discussed

below, there is no evidence that Rule had (or would have)

varied its output of Danforths in response to price changes

in the broader market. We hold, therefore, that the record

provides no support for finding significant cross-elasticity of

demand or supply between Danforths and generic anchors.

First, U.S. Anchor’s evidence was insufficient for a

reasonable juror to conclude that there was a significant

cross-elasticity of demand. U.S. Anchor’s evidence

demonstrated that an increase in the spread between prices

for Danforths and other anchors had coincided with lower

sales of Danforths. During the period from September 1985

until August 1990, sales of Danforths fell by 61.5% while

the spread between the prices of Danforths and other anchors

increased by 9.1%. (USTX 638; R40-106.) (According to

the exhibit, Danforth prices rose while Sentinel and Hooker

prices fell). Although we recognize that correlation is often

relied upon to infer causation, see, e.g., Cellophane, 351

U.S. at 400, 76 S.Ct. at 1010, we do not believe that this

aggregation of sales data over five years provided a

sufficiently close correlation between changes in demand and

price to justify the inference that consumers were willing and

able to switch away from Danforths because of increasing

24a

price differences. The exhibit wholly fails to take account

of factors other than price (or quality) which may have

affected demand for Danforths. If changes in relative prices

had been more closely correlated in time with shifting

purchases than it might have been reasonable to infer that the

demand shifts were caused by the price differences. As the

evidence stands, however, the datum aggregating demand

behavior from 1985 to 1990 fails to provide any basis from

which the jury could have inferred that the demand shifts

were caused by prices instead of other factors. Those non-

price, non-quality factors might well have included

consumers’ increased awareness of the similarities between

Danforths and other brands (perhaps caused by U.S.

Anchor’s successful promotion of its own products),

changing attitudes concerning thrift and the value of money,

the decline in demand for fluke anchors generally after the

1987-88 season, (see USTX 479), or competition from

Rule’s own more expensive premium Deepset line. Over

time the shape of a demand curve changes independently of

variations in the pricing and quality of particular substitute

products. Aggregate (or average) evidence of demand over

too long a period of time provides no support for inferring

that changes apparently correlated with substitute price

movements represent shifts in the curve caused by those

variations in prices. Given the changes in the behavior of

competitors that occurred over the five years in question,

namely the development of fierce price competition between

Rule and U.S. Anchor in the generic and economy market

and the introduction of Deepsets, we conclude that the

average Danforth sales statistic was insufficient evidence

from which the jury could have inferred demand cross-

elasticity in October 1985 or thereafter. Cf Yoder Bros.,

537 F.2d at 1367-68. This conclusion is buttressed by the

more precise sales data provided by USTX 508. Comparing

the 1985-86 and 1986-87 seasons, which are the two closest

in time to the date when the alleged predation began in

25a

October 1985 for which data were offered, the exhibit shows

that unit sales of Danforths fell 5.4%" despite a price

reduction of 0.5% and a simultaneous increase in the prices

of generic anchors of 0.8%. Id. at 2. Danforths suffered

this decline while the overali demand for fluke anchors

jumped 19%, from 273,000 to 325,000 in annual unit sales.

(USTX 479.)”

Just as an increase in Danforth prices might have

been expected to drive customers away from Rule and into

the arms of generic manufacturers, an increase in prices for

generic brands would likely cause some otherwise price-

sensitive Customers to prefer the more expensive Danforths.

Nonetheless, the present record provides no basis other than

guesswork for concluding that a shift away from generics

would have been significant in magnitude;” the large spread

in prices between generic anchors and Danforths tends to

suggest that the shift would not have been great. Thus, we

conclude that the record provides no support for finding

significant cross-elasticity of demand between Danforths and

generics.

'? U.S. Anchor’s unit sales exhibit, USTX 479, shows an even more

marked decrease in Danforth sales for the two seasons: a 7.8% drop

from 56,431 in 1985-86 to 52,035 in 1986-87. This is only one example

of inconsistency in the evidence offered by U.S. Anchor, but we assume

that the jury credited the version least favorable to Rule.

» Faced with this evidence, we can only note that the absence of proof

concerning changes in prices and sales before the Rule-Tie Down

transaction is an especially prominent flaw in U.S. Anchor’s case.

*' By “significant in magnitude” we refer to a shift that is large enough

to render unprofitable a monopolistic price increase in the broader

market. Again, we defer the task of establishing criteria for testing the

quantitative significance of changes in this variable.

26a

Second, the evidence was insufficient for a reasonable

juror to find a significant cross-elasticity of supply. The

jury could not reasonably have found that the manufacturing

capacity used to make Danforths likely would have been

switched to making generic anchors in response to moderate

price increases by a sole seller of the lower priced products.

To be sure, the productive processes employed in

manufacturing Danforths were virtually identical to those

used for generics. (R33-145-50.) Yet it defies logic to

suggest that a rational supplier” would switch from selling

branded products at high prices to selling equally costly

equivalent products at lower prices, even assuming that the

lower prices would yield significant supranormal profits.

Put another way, it would be unreasonable to expect Rule to

lower the price of Danforths and abandon its ability to

discriminate against brand-conscious boaters solely to earn

smaller profits. There was insufficient evidence of likely

supply substitution from which to conclude that any portion

of Danforth output would have served to constrain price

increases among the generic anchors.”

Moreover, the record demonstrates that the Danforth

line, although functionally equivalent to their counterparts,

may have constitutes its own market based on consumer

brand loyalty. The fluke anchor industry presented the

unusual circumstance of severe price discrimination against

a distinct group of consumers based solely on brand

2 There is no evidence that Rule was irrational in its pricing strategies,

although it may well have been misinformed or overly optimistic

concerning U.S. Anchor’s staying power in the market.

> Of course, Rule’s exclusive control over the Danforth trademark also

eliminated the possibility of supply substitution by other firms making

Danforths. This observation by itself, however, would not be sufficient

to show that Danforths and generics represented distinct markets.

27a

preference. U.S. Anchor’s expert, Dr. Williard F. Mueller,

testified on direct examination that "people have gotten an

attachment to the Danforth Standard in this case, it had kind

of a mystique about it at one time, . . . what happens in one

year, simply a price difference, doesn’t result in an

immediate king of shift." (R40-106.) Although interbrand

competition generally restrains the pricing behavior of

individual brand sellers, Continental T.V., Inc. v. GTE

Sylvania Inc., 433 U.S. 36, 52 n. 19, 97 S.Ct. 2549, 2558

n.19, 53 L.Ed.2d 568 (1977), on remand, 461 F. Supp.

1046 (N.D. Cal. 1978), affd, 694 F.2d 1132 (9th Cir.

1982), it is settled that customer brand loyalty may constitute

an impediment to competition and thus an aid in the exercise

of market power. See. e.g., United States v. Pabst Brewing

Co., 384 U.S. 546, 559-61, 86 S.Ct. 1665, 1672, 16

L.Ed.2d 765 (1966) (Harlan, J., concurring), on remand,

296 F. Supp. 994 (E.D. Wis. 1969).* A single branded

product may, in rare cases, constitute its own relevant

market. Los Angeles Mem. Coliseum Comm’n v. National

Football League, 726 F.2d 1381, 1393 (9th Cir.), cert.

denied, 469 U.S. 990, 105 S.Ct. 397, 83 L.Ed.2d 331

(1984).

The understanding that brand loyalty may facilitate

monopolization is consistent with the general proposition that

the ability to discriminate against a distinct group of

customers by charging higher prices for otherwise similar

products demonstrates the existence of market power with

respect to that group. See United States V. Grinnell Corp.,

* See also Cellophane. 351 U.S. at 392-93, 76 S.Ct. at 1005-06; Ware

v. Trailer Mart, Inc., 623 F.2d 1150, 1154 (6th Cir.1980); of. Justice

Department Guidelines, supra § 3.3 n. 33 (noting that case or difficulty

of long-term committed entry into a market may depend upon "the

relative appeal, acceptability and reputation of incumbents’ and entrants’

products”).

28a

384 U.S. 563, 574, 86 S.Ct. 1698, 1706, 16 L.Ed.2d 778

(1966).* The existence of such market power may, a a

practical matter, remove the higher priced product from the

broader market composed of its functional substitutes. See

C.E. Services, Inc. v Control Data Corp., 759 F.2d 1241,

1246 (Sth Cir.), cert. denied, 474 U.S. 1037, 106 S.Ct. 604,

88 L.Ed.2d 583 (1985) (holding that "a ubiquitous price

differential of some 20-25%" between branded and

unbranded services, combined with other Brown Shoe

factors, could justify finding a separate market for the

unbranded services and thus precluded summary judgment on

the issue of market definition).

We do not suggest that the existence or hypothetical

possibility of monopoly power over one _ product

automatically excludes it from a broader market.

"[SJubmarkets are not a basis for the disregard of broader

line of commerce that has economic significance.” United

States v. Phillipsburg Nat’l Bank & Trust Co., 399 U.S.

350, 360, 90 S.Ct. 2035, 2041, 26 L.Ed.2d 658 (1970). We

do hold, however, that regardless of which party in the case

bears the ultimate burden of persuasion, the broader

economic significance of a submarket must be supported by

demonstrable empirical evidence. Although perhaps difficult

to come by, evidence that the dominant firm within a

submarket costs of production were insensitive to changes in

the quantity of goods sold, suggesting that its only rational

response would be to increase output to satisfy the higher

demand in the event of price increases above competitive

levels in the broader market, might show that submarket

*% See also, e.g., 2 Areeda & Turner, Antitrust Law, supra { 514;

Phillip E. Areeda & Herbert Hovekamp, Antitrust Law {518.1d

(Supp. 1991) [hereinafter Areeda & Hovekamp, Antitrust Law]; Gregory

J. Werden, Market Delineation and the Justice Department's Merger

Guidelines, 1983 Duke L.J. 514, 522, 529-30.

29a

production in fact disciplined price leve:s in the broader

market. Especially if the submarket represents a premium-

priced segment of the broader market, the relevance of proof

regarding elasticity of supply would depend on the validity

of the assumption that significant numbers of consumers

would switch in response to significant price increases in the

broader market, an assumption that may or may not be

supported by evidence or common experience. In the

present case U.S. Anchor can rely upon neither evidence nor

inference. Simpler evidence of supply and demand

substitution, like proof that producers in the submarket had

actually increased or decreased their sales in response to

corresponding price changes in the broader market, would

also suffice. As we have pointed out, however, U.S.

Anchor failed to meet its burden of proving interdependent

market behavior by this method as well.

Considering all the evidence in light of the factors

identified by Cellophane and Brown Shoe and explained in

subsequent decisions, we conclude as a matter of law that the

relevant product market was light weight generic and

economy fluke anchors.

2. Measuring Power in the Market

The principal measure of actual monopoly power is

market share, and the primary measure of the probability of

acquiring monopoly power is the defendant’s proximity to

acquiring a monopoly share of the market. Thus, a

sufficiently large market share may alone create a genuine

dispute over whether the defendant possessed a dangerous

probability of successfully monopolizing a market despite the

existence of other facts tending to make monopolization

unlikely, thereby precluding summary judgment for the

defendant. McGahee v. Northern Propane Gas Co., 858

F.2d at 1506. When assessing market shares for the purpose

30a

of ascertaining market power the appropriate measure of a

firm’s share is the quantity of goods or services actually sold

to consumers. Although revenues are often relied upon as

a surrogate for quantity, actual unit sales must be used

whenever a price spread between various products would

make the revenue figure an inaccurate estimator of unit

sales. Brown Shoe, 370 U.S. at 341 n. 69, 82 S.Ct. at 1533

n. 69.

In McGahee we noted in dicta that several factors

may be relevant to whether a particular market share

evidences a dangerous probability of success. 858 F.2d at

1505 (citing McGahee v. Northern Propane Gas Co., 658 F.

Supp. 189, 196-97 (N.D. Ga. i987), rev’d, 858 F.2d 1487

(11th Cir. 1988)). In finding no dangerous probability of

success the district court had relied upon the ease of entry by

new firms and expansion from adjacent geographic markets,

the number and size of alleged victims of the predation and

the defendant’s declining market share during the alleged

attempt to monopolize. 658 F. Supp. at 196-97.

Nevertheless, we held:

Without examining any factors to determine

what market share would be necessary for

Northern Propane’s alleged predatory pricing

to present a dangerous probability of success,

we can say that a sixty or sixty-five percent

market share is a sufficiently large platform

from which such a scheme couid be launched

to create a genuine issue of material fact as to

whether there was a dangerous probability

that Northern Propane would succeed in

achieving a monopoly.

McGahee, 858 F.2d at 1506. Finding it “undisputed” that

the defendant possessed such a share, we reversed the

\

3la

district court’s order of summary judgment for the defendant

and remanded for further proceedings. Our holding in

McGahee ihat market share estimated with reasonable

confidence to fall between 60 and 65% suffices to raise a

jury question concerning dangerous probability of success is

binding circuit precedent. Sherry Mfg. Co. v. Towel King,

Inc., 822 F.2d 1031, 1034 n. 3 (11th Cir. 1987). We do

note, however, the tension between McGahee’s bright-line

approach and Cliff Food Stores, Inc. vy. Kroger, Inc., 417

F.2d 203 (Sth Cir. 1969), in which the court noted that "one

must be particularly wary of the numbers game of market

percentage when considering an ’attempt to monopolize’

suit” under the dangerous probability standard. 417 F.2d at

207 n. 2; cf. United States v. Columbia Steel Co., 334 U.S.

495, 528, 68 S.Ct. 1107, 1124, 92 L.Ed. 1533 (1948) ("the

relative effect of percentage command of a market varies

with the setting in which that factor is placed") (actual

monopolization case). We believe the cases may be

reconciled by requiring a careful definition of the relevant

market (as mandated by Walker Process and American

Key)” and an assessment of each firm’s ability to vary its

Output in calculating the size of the market and attributing

individual market shares. See, €.g., United States y.

General Dynamics Corp., 415 U.S. 486, 499-504, 508-10,

94 S.Ct. 1186, 1194-97, 1199-1200, 39 L.Ed.2d 530 (1974)

(measuring power in market for coal in terms of possession

or likely near-term acquisition of uncommitted reserves

* Notably, in McGahee itself the district court had observed that

despite the defendant’s concession for summary judgment purposes

concerning the relevant product market, "there is, at the very least, an

issue of fact as to whether propane constitutes a distinct product market.”

658 F. Supp. at 192 n. 3 (citing United States v. Empire Gas Corp. , 537

F.2d 296, 303-304 (8th Cir. 1976), cert. denied, 429 U.S. 1122, 97

S.Ct. 1158, 51 L.Ed.2d 572 (1977)).

32a

instead of overall sales, because most sales represented

fulfillment of existing long-term requirements contracts).

In Cliff Food Stores the former Fifth Circuit stated

that something more than 50% market share would be

required to show actual monopoly, at least in the absence of

collusive price leadership or tacit coordination in an

industry. 417 F.2d at 207 n. 2. The Second Circuit in

Broadway Delivery Corp. v. United Parcel Service of

America, Inc., 651 F.2d 122 (2d Cir.), cert. denied, 454

U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981), similarly

suggested that the absence of actual monopoly power could

be found as a matter of law when the defendant supplies only

50% of the market, “or even somewhat above that figure,

{when} the record contains no significant evidence

concerning the market structure to show that the defendant’s

share of that market gives it monopoly power." 651 F.2d at

129. Despite these suggestions, we have discovered no cases

in which a court found the existence of actual monopoly

established by a bare majority share of the market.

Nevertheless, a dangerous probability of achieving monopoly

power may be established by a 50% share. For this reason,

it is usually necessary to evaluate the prospects for

monopolization as they existed when the alleged attempt

began. As shown by the undisputed facts discussed infra,

Rule never possessed a dangerous probability of success

during the time for which U.S. Anchor seeks damages.

U.S. Anchor points to the combined market shares of

Rule and Tie Down at the end of the 1984-85 season,

immediately before the transaction that eliminated Tie Down

as a supplier and transferred its production to Rule.

Accepting arguendo the implicit contention that Tie Down’s

pretransaction market share should be attributed to Rule, we

conclude from the undisputed evidence that Rule’s market

share on August 31, 1985, the eve of the 1985-86 season,

33a

was 61.5%, (RTX 674), and its aggregate (average) share

over the entire season was 30.1%, (id., RTX 675 at 1).

Rule has argued that we should not attribute all of Tie

Down’s pre-transaction market share to it. After the

transaction Tie Down had no need for its anchor sales

representatives, many of whom found engagements with

U.S. Anchor and employed their connections and reputation

on behalf of the newcomer’s selling efforts. Moreover, U.S.

Anchor’s Chapman was well known to customers from his

days with Tie Down. Thus, according to Rule, U.S. Anchor

stepped into Tie Down’s shoes and inherited at least some of

Tie Down’s pre-transaction market share, presumably that

portion which U.S. Anchor had the productive capacity to

satisfy. This argument is persuasive, although it may be

subject to rebuttal on at least two grounds. Cf. American

Academic Suppliers, Inc. vy. Beckley-Cardy, Inc., 922 F.2d

1317, 1321-22 (7th Cir. 1991). First, the depth of Rule’s

product line and the expertise of its own sales force

conferred competitive advantages which might have induced

some of Tie Down’s former customers to stay with the

Hooker line. Second, the anchor industry was highly

concentrated and customers had few alternative sources of

supply, a factor that is especially important in view of Rule’s

effort to link purchase of the Deepset anchors to exclusive

dealing arrangements with distributors. We need not reach

the merits of Rule’s contention, however, because even if we

consider Rule to have had 61.5% of the market on

August 31, 1985, there was insufficient evidence from which

the jury could have found a dangerous probability of

monopolization in October.

As we have outlined above, Rule’s average market

Share for the 1985-86 season was 30.1%, a fact which

strongly indicates that Rule’s share declined sharply from

61.5% after U.S. Anchor’s entry into the market in August.

34a

For the month of October, U.S. Anchor’s sales of generic

and economy anchors exceeded Rule’s by 5.7%. (RTX 675

at 15). Prior to October U.S. Anchor had no sales at all,

but the firm was accepting orders during this time and

apparently possessed the capacity to fill them. Thus, Rule

was never able to maintain a majority position in the market

during the 1985-86 season. Cf. General Dynamics, 415

U.S. at 501-02, 94 S.Ct. at 1196. Accordingly, because

Rule possessed less than 50% of the market at the time the

alleged predation began and throughout the time when it was

alleged to have continued, there was no dangerous

probability of success in October 1985 as a matter of law.

3. Recoupment

Rule argues that the district court should have granted

its motion for judgment notwithstanding the verdict based on

its contention that there can be no dangerous probability of

successful monopolization by predatory pricing unless it is

shown that the defendant would have recouped the foregone

revenues associated with its price-cutting strategy.” Our

disposition of this case, however, makes it unnecessary to

address Rule’s recoupment argument.

B. Anticompetitive Conduct, Specific Intent and

Damages

Our conclusion that U.S. Anchor failed to show a

dangerous probability of success makes it unnecessary for

purposes resolving its attempt claim to evaluate the evidence

of Rule’s and Tie Down’s costs, as would be required to

77 If we accepted Rule’s argument we could simply remand for a new

trial with directions to instruct the jury concerning this “element” of the

plaintiff's case, or we could evaluate the record to see whether the jury

could have found the element proven.

35a

classify its pricing conduct as anticompetitive. See

Matsushita, 475 U.S. at 585 n. 8, 106 S.Ct. at 1355 n. 8;

International Air Industries, Inc. v. American Excelsior Co..,

517 F.2d 714, 723-25 (Sth Cir. 1975). The same is true

with respect to the evidence of specific intent to achieve

monopoly power by unlawful conduct, although we note that

such intent may sometimes be inferred from predatory

conduct itself. Spectrum Sports, __' U.S. at_, 113

S.Ct. at 892; International Tel. & Tel., 104 F.T.C. at 401-

02; see also McGahee, 858 F.2d at 1503-04. Nor must we

decide whether to parse this evidence for the precise level

during each season at which Rule’s prices unlawfully

dropped below its costs in order to assess U.S. Anchor’s

proof of damages, as requested by Rule. See MCI

Communications Corporation v. American Telephone and

Telegraph Company, 708 F.2d 1081, 1162, 1165 (7th Cir.

1983).

VI. CONSPIRACY

U.S. Anchor’s conspiracy claims are distinct from its

attempted monopolization claim. The elements of a

conspiracy to monopolize under Section 2 are (1) an

agreement to restrain trade, (2) deliberately entered into with

the specific intent of achieving a monopoly rather than a

legitimate business purpose, (3) which could have had an

anticompetitive effect, and (4) the commission of at least one

overt act in furtherance of the conspiracy. Seagood Trading

Corp. v. Jerrico, Inc., 924 F.2d 1555, 1576 (11th Cir.

1991). The elements of a conspiracy to restrain trade under

Section 1 are (1) an agreement to enter a conspiracy

(2) designed to achieve an unlawful objective. Bolt v.

Halifax Hosp. Medical Ctr., 891 F.2d 810, 820 (11th Cir.),

cert. denied, 495 U.S. 924, 110 S.Ct. 1960, 109 L.Ed.2d

322 (1990), appeal after remand, 980 F.2d 1381 (11th Cir.

36a

1993). The plaintiff must also prove (3) "actual unlawful

effects [or] facts which radiate a potential for future harm”

to competition. Times-Picayune Publishing Co. v. United

States, 345 U.S. 594, 622, 73 S.Ct. 872, 888, 97 L.Ed.

1277 (1953).

There is no requirement, however, that a conspiracy

under either provision have a dangerous probability of

successfully achieving its objectives. Copperweld Corp. v.

Independence Tube Corp., 467 U.S. 752, 767-68, 104 S.Ct.

2731, 2740, 81 L.Ed.2d 628 (1984). Moreover, "[aj section

1 plaintiff . . . need not prove an intent on the part of the

co-conspirators to restrain trade or to build a monopoly. So

long as the purported conspiracy has an anticompetitive

effect, the plaintiff has made out a case under section 1."

Bolt, 891 F.2d at 819-20 (citations omitted). We have said,

however, that "a section 1 claim and a section 2 conspiracy

to monopolize claim require the same threshold showing—the

existence of an agreement to restrain trade." Seagood, 924

F.2d at 1576.

U.S. Anchor points to evidence of the unlawful intent

necessary to create such an agreement. We have reviewed

this evidence and find it sufficient to show an intent to

achieve an unlawful objective on Rule’s part, namely the use

of predatory means to monopolize the fluke anchor market.

Nevertheless, there is insufficient evidence linking Tie Down

to Rule’s efforts to support a finding of conspiracy between

them. Federal antitrust law requires a plaintiff to introduce

evidence that tends to exclude the possibility that the

defendants acted independently or legitimately. Bolt, 891

F.2d at 819; see also Monsanto Co. v. Spray-Right Serv.

Co., 465 U.S. 752, 764, 104 S.Ct. 1464, 1470, 79 L.Ed.2d

775 (1984). U.S. Anchor did not meet this heightened

standard of proof. Cf Boczar v. Manatee Hosps. & Health

Sys., Inc., 993 F.2d 1514, 1518-19 (11th Cir. 1993) (finding

37a

sufficient evidence when defendant's supposed legitimate

reasons for acting were shown to be fabricated and

contrived). The MacKarvich market report, USTX 683,

for instance, does not show that Tie Down desired to employ

predatory means to drive U.S. Anchor from the market.

Rather, it merely shows the prices at which it would be

possible to inflict losses on the newcomer. It Says nothing

about Rule’s costs, and U.S. Anchor does not dispute that

Tie Down had no knowledge of Rule’s costs other than the

price paid for anchors. Tie Down’s experts and MacKarvich

himself testified that such studies are common in competitive

industries and consistent with legitimate competition based

on price. MacKarvich’s recommendation to set prices low

enough to inflict losses on U.S. Anchor merely shows a

desire to win on the basis of efficiently producing a product

and selling it at a lower price than less efficient rivals. It is

not unlawful to slash prices in an attempt to obtain more

sales, even if the result is that a competitor happens to be

driven out of business. Ball Mem. Hosp., Inc. v. Mutual

Hosp. Ins. Inc., 784 F.2d 1325, 1338-39 (7th Cir. 1986).

Moreover, to suffer a loss in the first year of operation is

common in competitive industries, and for MacKarvich to

anticipate that U.S. Anchor would be temporarily

unprofitable does not necessarily show a desire or

expectation that the firm would be driven from the

* We have considered U.S. Anchor’s contention that the district court

abused its discretion by excluding certain evidence that Rule’s customers

perceived an attempt by Rule to eliminate U.S. Anchor from the market.

a perception based upon reported statements made by a Rule employee.

(See USTX 206.) This evidence has such little bearing on the existence

of an agreement between Rule and Tie Down that its exclusion on

hearsay grounds, even if erroneous, see United States v. Pendas

Martinez, 845 F.2d 938, 942-43 (1 1th Cir. 1988); Southern Stone Co. vy.

Singer, 665 F.2d 698, 703 (Sth Cir. Unit B Jan. 1982), was harmless.

Fed. R. Evid. 103(a). We see no abuse of discretion.

38a

marketplace. In short, we have examined the record closely

and find there is insufficient evidence linking Tie Down with

Rule’s scheme to constitute a conspiracy under the

substantive proof requirements of federal antitrust law.

Without Tie Down, there was no one with whom

Rule could have conspired. Hence, its unilateral conduct

was not actionable as a conspiracy under federal antitrust

law. The district court erred in denying judgment as a

matter of law for Rule and Tie Down on the Sherman Act

conspiracy claims.

VII. CLAIMS UNDER GEORGIA LAW

U.S. Anchor’s complaint alleged violations of article

Ill, § VI, 4 5 of the Georgia constitution and O.C.G.A.

§ 13-8-2(a)(2), which invalidate certain contracts in restraint

of trade. (R1-1, {4 60-62.) U.S. Anchor concedes that

these provisions merely render such agreements

unenforceable and provide no cause of action for damages to

those who are parties thereto, see E.T. Barwick Indus. v.

Walter E. Heller & Co., 692 F. Supp. 1331, 1349 (N.D.

Ga. 1987), but argues that Georgia recognizes a common

law tort action in favor of third parties who are injured by

a conspiracy in restraint of trade. We agree with U.S.

Anchor that its complaint stated a valid claim for damages as

a result of a conspiracy in restraint of trade. See Blackmon

v. Gulf Life Ins. Co., 179 Ga. 343, 175 S.E. 798, 802-03

(1934) (holding that allegations of predatory pricing

conspiracy with intent to monopolize stated a cause of

action); Atlanta Association of Fire Ins. Agents Vv.

McDonald, 181 Ga. 105, 181 S.E. 822, 828 (1935)

(awarding nominal damages and injunction for group

boycott); see also Harrison Co. v. Code Revision Comm’n,

244 Ga. 325, 260 S.E.2d 30, 34 (1979). The district court

SS

39a

erred in failing to perceive “the distinction between a

contract or agreement merely on restraint of trade as

between the parties, and a combination or contract to stifle

competition, or a conspiracy to ruin a competitor." Brown

v. Jacobs Pharmacy Co., 115 Ga.429, 41 S.E. 553, 556

(1902) (suit for damages and injunction). Although we have

found insufficient evidence of a conspiracy under federal law

standards, this does not answer the question of whether

Georgia courts would find sufficient evidence of conspiracy

under their substantive law. Cf. Sachdeva v. Smith, 167 Ga.

App. 80, 306 S.E.2d 19, 20 (1983).

We have previously held that Georgia law provides

a cause of action for tortious interference with the business

relationships between a plaintiff and its customers, suppliers

or representatives. To be held liable the defendant "must

have (1) acted improperly and without privilege,

(2) purposely and with malice with the intent to injure,

(3) induced a third party or parties not to enter into or

continue a business relationship with the plaintiff, and

(4) [caused] plaintiff [to] suffer[ ] some financial injury."

DeLong Equip. Co. v. Washington Mills Abrasive Co., 887

F.2d 1499, 1518 (11th Cir. 1989) (quotation omitted). , cert.

denied, 494 U.S. 1081, 110 S.Ct. 1813, 108 L.Ed.2d 943

(1990), appeal after remand, 990 F.2d 1186 (11th Cir.

1993), amended, 997 F.2d 1340 (llth Cir. 1993) (per

curiam); see also NAACP v. Overstreet, 221 Ga. 16, 142

S.Ed.2d 816, 822 (1965), cert. dismissed, 384 U.S. 118, 86

S.Ct. 306, 16 L.Ed. 2d 409 (1966). The defendant may

show that competitive conduct is privileged by establishing

that it used no improper means. Integrated Micro Sys., Inc.

v. NEC Home Elecs. (USA), Inc., 174 Ga. App. 197, 329

S.E. 2d 554, 559 (1985), cert. denied, No. 69405 (Ga.

Apr. 24, 1985).

40a

U.S. Anchor’s complaint adequately pleads a claim

for relief under this theory to present it for adjudication by

the district court. Count V gave full notice to the defendants

that U.S. Anchor sought recovery under Georgia law for

"Unfair Methods of Competition and Unfair Acts and

Practices," including conduct which was "inequitable, unfair,

unscrupulous, in violation of public policy and

unconscionable and tend[ing] to defeat or lessen

competition... ." (Rl-1 44 59-60.) The fact that

paragraph 60 of the complaint also refers to the

constitutional and statutory provisions which U.S. Anchor

concedes confer no independent damages remedy does not by

itself deprive the defendants of "fair notice of what the

plaintiff's claim is and the grounds upon which it rests."

Quality Foods de Centro Am., S.A. v. Latin Am.

Agribusiness Dev. Corp., 711 F.2d 989, 995 (11th Cir.

1983) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct.

99, 103, 2 L.Ed.2d 80 (1957)); see Fed. R. Civ. P. 8(a)(2).

The issue of whether the tort theory is applicable to the facts

of this case was adequately argued to the district court in

connection with U.S. Anchor’s requested jury instructions,

(R28-136-45), and thus preserved for appellate review. Cf.

Weaver v. Casa Gallardo, Inc., 922 F.2d 1515, 1519 (11th

Cir. 1991).

The novel questions presented are whether below-cost

pricing can satisfy the improper action element of the tort

and whether low prices, standing alone, can constitute a

prohibited inducement of the plaintiff's customers. C7.

Parks v. Atlanta News Agency, Inc., 115 Ga. App. 842, 156

S.E.2d 137, 140 (1967) (holding that solicitation of

competitor’s customers is not itself tortious, even when

combined with "preferential" prices), cert. denied, No.

42624 (Ga. July 14, 1967). We regard it as unclear whether

tortious interference with business relations under Georgia

law may be established by a showing of predatory pricing

4la

and, if so, what sort of pricing conduct would be deemed

predatory. We also have some doubt as to whether

intentional interference with business relations is a distinct

cause of action from the tort of conspiracy in restraint of

trade, or whether there is only a single theory of relief, so

that proof of a conspiracy to interfere with the plaintiff’s

business relations would be actionable as U.S. Anchor’s sole

remedy for the alleged joint conduct of Rule and Tie Down.

Compare Cook v. Robinson, 216 Ga. 328, 116 S.E.2d 742

(1960) with Jacobs Pharmacy, 41 S.E. at 554-57 (quoting

Doremus v. Hennessy, 176 Ill. 608, 52 N.E. 924 (1898));

see also Overstreet, 142 §.E.2d at 822. This is not a matter

of mere semantics, for while it appears settled that predatory

pricing by a group or conspiracy is actionable, we have

found no Georgia authority addressing predation by a single

defendant acting unilaterally.

Another issue affecting the outcome of U.S. Anchor’s

state law claims is the validity and effect of its settlement

agreement with Rule, executed on March 19, 1986. The

agreement provided that each party would release the other

from any and all actions, demands, claims or

causes of action whatsoever, which now exist

or which may arise in the future, as a result

of events which occurred prior to the

execution of the Settlement Agreement,

including, without limitation, any claims

which were or could have been presented by

way of complaint or counterclaim in Civil

Action Number C85-4466A.

(RTX 457.) Because the predatory pricing scheme allegedly

began in October 1985, Rule contends that the settlement

agreement operated as a release of U.S. Anchor’s cause of

action. U.S. Anchor contends that its predatory pricing

42a

claims were undiscovered at the time the release was

executed and therefore were not intended to be released. In

addition, it contends that injuries caused by predatory

conduct occurring after the release would not have been

discharged even if they arose as a result of a scheme or

conspiracy that was ongoing when the release was signed.”

The district court concluded that the federal predatory

pricing claims were undischarged because the agreement

unambiguously applied only to causes of action related to the

prior litigation. It also relied on Chapman’s oral testimony

concerning his intent at the time he signed the agreement and

on Covington v. Brewer, 101 Ga. App. 724, 115 S.E.2d

368, 372-73 (1960), in which the court held that the scope

of a release as intended by the parties could not be presumed

to encompass rights respecting a subject matter not clearly

referred to in the body of the agreement. But cf. Ingram

Corp. v. J. Ray McDermott & Co., 698 F.2d 1295, 1311-12

(Sth Cir. 1983).

The doctrine of pendent jurisdiction as outlined in

United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct.

1130, 16 L.Ed.2d 218 (1966), gives the district court power

to decide claims arising under the state law as to which there

was no independent basis for federal jurisdiction but which

* Compare Imperial Point Colonnades Condominium, Inc. yv.

Mangurian, 549 F.2d 1029, 1043-44 (Sth Cir. 1977), cert. denied, 434

U.S. 859, 98 S.Ct. 185, 54 L.Ed.2d 132 (1977), Poster Exchange, Inc.

v. National Screen Serv. Corp. , 517 F.2d 117, 127 (Sth Cir. 1975), cert.

denied, 423 U.S. 1054, 96 S.Ct. 784, 46 L.Ed.2d 643 and 425 U.S.

971, 96 S.Ct. 2166, 48 L.Ed.2d 793 (1976), appeal after remand, 542

F.2d 255 (Sth Cir. 1976) (per curiam), cert. denied, 431 U.S. 904, 97

S.Ct. 1697, 52 L.Ed.2d 388 (1977), and Redel’s Inc. v. General Elec.

Co., 498 F.2d 95, 99 (Sth Cir. 1974) with Record Club of Am., Inc. v.

United Artists Records, Inc., 611 F. Supp. 211, 217 & n. 8 (S.D.N.Y.

1985).

43a

share a common nucleus Of operative fact with federal

claims. The court also has discretion not to hear such state

law claims.

Under Gibbs, a federal court should consider

and weigh, in each case, and at every stage of

the litigation, the values of judicial economy,

convenience, fairness, and comity in order tc

decide whether to exercise jurisdiction over a

case brought in that court involving pendent

state-law claims. When the balance of these

factors indicates that a case properly belongs

in state court, as when the federal-law claims

have dropped out of the lawsuit in its early

Stages and only state-law claims remain, the

federal court should decline to exercise its

jurisdiction by dismissing the case without

prejudice.

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350, 108

S.Ct. 614, 619, 98 L.Ed.2d 720 (1988) (footnote omitted).

While the doctrine is flexible one according great leeway to

the court, see id. at 350 n. 7, 108 S.Ct. at 619 n. 7, we

have found an abuse of discretion in failing to dismiss a case

when the federal claims were resolved early in the

proceedings and the state law claims posed issues of first

impression. See Hardy v. Birmingham Bd. of Educ., 954

F.2d 1546 (11th Cir. 1992).

In the present case, the federal claims have survived

through trial and have only been resolved on appeal. Thus,

the parties have already tried the state law claims in federal

court, although the district court’s ruling prevented the jury

from considering them. The legal issues have been decided

by the district court and are now properly before us for

review, so that judicial economy and convenience weigh in

44a

favor of retaining jurisdiction. On the other hand some of

the state law issues are novel, and comity between federal

and state judicial systems weighs in favor of determination

by state courts. Moreover, a ruling by this court in favor of

U.S. Anchor’s position would require a new federal trial in

which only state law claims would be put in issue. Fairness

to U.S. Anchor, however, prevents us from dismissing the

state law claims. Dismissal would require the plaintiff to re-

file its action in state court more than eight years after the

allegedly tortious conduct began, thereby losing a substantial

portion of its rights (if any) by application of Georgia’s four-

year statute of limitations.” We might have reached a

© The mechanics of Georgia’s statute of limitations have been explained

as follows:

The test to be applied in determining when the statute of

limitations begins to run against an action sounding in tort is in

whether the act causing the damage is in and of itself an

invasion of some right of the plaintiff, and thus constitutes a

legal injury and gives rise to a cause of action. If the act is of

itself not unlawful in this sense, and a recovery is sought only

on account of damage subsequently accruing from and

consequent upon the act, the cause of action accrues and the

statute begins to run only when the damage is sustained; but if

the act causing such subsequent damage is of itself unlawful in

the sense that it constitutes a legal injury to the plaintiff, and is

thus a completed wrong, the cause of action accrues and the

statute begins to run from the time the act is committed,

however slight the actual damage then may be.

Fox v. Ravinia Club, Inc., 202 Ga. App. 260, 414 S.E.2d 243, 244

(1991) (quotation omitted), cert. denied, No. A91A1136 (Ga. Feb. 4,

1992). As we understand the test, U.S. Anchor’s cause of action (if any)

continued to accrue with each predatory sale, and would be time-barred

under O.C.G.A. § 9-3-31 with respect to each transaction occurring more

than four years before commencement of the new action in state court.

See Cleveland Lumber Co. v. Proctor & Schwartz, Inc., 397 F. Supp.

(continued. ..)

45a

different result under the Judicial Improvements Act of 1990,

Pub.L. No. 101-650, § 310, 104 Stat. 5089, 5113-14,

codified at 28 U.S.C. § 1367. Under 28 U.S.C. § 1367(d),

the statute of limitations would be tolled while the claims

were pending until 30 days after an order of dismissal, thus

allowing the plaintiff time for filing a new action in state

court without a lapse of its rights. But the present case was

commenced before the statute’s effective date on December

1, 1990, and § 1367 is not retroactive. Yanez v. United

States, 989 F.2d 323, 327 n. 3 (9th Cir. 1993). In view of

the fact that the case may be certified to the Supreme Court

of Georgia for interlocutory resolution of the state law

issues, we conclude that the balance of factors involved in

the discretionary decision to retain pendent jurisdiction

weighs clearly against dismissal.”

Accordingly, we respectfully certify the following

questions of law to the Supreme Court of Georgia and the

Honorable Justices of that Court.

Questions for Certification

3 DOES A GENERAL RELEASE UNDER

GEORGIA LAW DISCHARGE LIABILITY FOR INJURY

CAUSED BY SUBSEQUENT ACTS IN THE COURSE OF

A SCHEME OR CONSPIRACY THAT WAS ONGOING

* (...continued)

1088, 1094 (N.D. Ga. 1975) (citing Georgia Power Co. v. Moore, 47

Ga. App. 411, 170 S.E. 520 (1933)); accord Zenith Radio Corp. v.

Hazeltine Research, Inc., 401 U.S. 321, 338, 91 S.Ct. 795, 806, 28

L.Ed.2d 77 (1971) (federal antitrust law).

We need not decide whether § 1367 would allow the court of appeals

to decide the propriety of exercising supplemental jurisdiction or whether

such discretion is vested in the district court alone.

46a

AT THE TIME THE RELEASE WAS EXECUTED BUT

UNKNOWN TO THE RELEASING PARTY?

y B DOES A GENERAL RELEASE UNDER

GEORGIA LAW DISCHARGE LIABILITY FOR INJURY

CAUSED BY TORTIOUS CONDUCT ALREADY

COMMITTED THAT WAS UNKNOWN TO THE

RELEASING PARTY AT THE TIME THE RELEASE

WAS EXECUTED?

> DOES THE TORT OF INTENTIONAL

INTERFERENCE WITH BUSINESS RELATIONS

ENCOMPASS PREDATORY PRICING BELOW SOME

MEASURE OF THE DEFENDANT’S COSTS?

4. IF THE ANSWER TO QUESTION 3 IS YES,

THEN IN A CASE OF ACTIONABLE PREDATORY

PRICING BELOW SOME MEASURE OF COST BY A

CONSPIRACY OR A SINGLE DEFENDANT, WHAT IS

THE APPROPRIATE MEASURE OF THE

DEFENDANTS’ COSTS?

Our statement of the questions is not designed to limit

the inquiry of the Supreme Court of Georgia. Instead, the

Supreme Court has the widest possible latitude to consider

the problems and issues involved in this case as it perceives

them to be. Martinez v. Rodriquez, 394 F.2d 156, 159 n. 6

(Sth Cir. 1968), conformed to certified answer, 410 F.2d 729

(Sth Cir. 1969). To assist the Supreme Court, the entire

record in this case and copies of the parties’ briefs are

transmitted herewith.

47a

VIII. CONCLUSION

The judgment of the district court is reversed with

respect to all federal law causes of action and judgment is

rendered in favor of the defendants thereon. Dispositive

questions of law respecting the plaintiff’s state law causes of

action are certified to the Supreme Court of Georgia.

REVERSED and JUDGMENT RENDERED in part

and QUESTIONS CERTIFIED.

48a

U.S. ANCHOR MANUFACTURING,

INC., Plaintiff,

v.

RULE INDUSTRIES, INC. and Tie

Down, Inc., a/k/a Tie Down

Engineering, Inc., Defendants,

v.

William CHAPMAN and U.S. Anchor

Manufacturing, Inc., Defendants in

Counterclaim.

Civ. A. No. 86-CV-2447-JTC.

United States District Court,

N.D. Georgia,

Atlanta Division.

June 27, 1989.

49a

JAMES ALEXANDER PORTER

PORTER & DOSTER

ATLANTA, GEORGIA

for plaintiff.

JOHN A. CHANDLER,

KIMBERLY LOGUE WOODLAND

SUTHERLAND ASBILL & BRENNAN

ATLANTA, GEORGIA

for defendant Rule Industries, Inc.

HAROLD TURNER DANIEL, JR.

LAURIE WEBB DANIEL

WEBB & DANIEL

ATLANTA, GEORGIA

for Tie Down, Inc.

50a

ORDER OF COURT

CAMP, District Judge

This matter is before the Court on defendant Tie

Down, Inc.’s Motion for Summary Judgment; defendant

Rule Industries, Inc.’s Motion for Summary Judgment and

the motion of William Chapman and U.S. Anchor for

Summary Judgment. For the following reasons, the above

motions for summary judgment are DENIED. Defendant

Tie Down’s motion to file a supplemental brief and an

amendment to this motion is GRANTED.

This is an action for treble damages and injunctive

relief for alleged antitrust violations under Sections 1 and 2

of the Sherman Act, and Section 3 of the Clayton Act.

Plaintiff also alleges that defendants’ actions constitute an

unfair restraint of trade in violation of Article 3, Section VI,

Paragraph V of the Georgia Constitution and O.C.G.A.

§ 13-8-2. Defendants seek summary judgment on all of

plaintiff's theories for relief. Defendant Tie Down, Inc.,

a/k/a/ Tie Down Engineering, Inc. ("Tie Down") brings a

counterclaim against plaintiff U.S. Anchor Manufacturing,

Inc. ("U.S. Anchor") and William Chapman. This

counterclaim alleges a breach of ffiduciary duty;

misappropriation of confidential business information;

tortious interference with business relations; and common

law fraud and deceit. U.S. Anchor and William Chapman

seek summary judgment on Tie Down’s theories for relief in

its counterclaim.

I. FACTS

The present action involves several manufacturers and

suppliers of fluke anchors. Anchors and other marine

S5la

industry products are generally sold by suppliers to

wholesale distributors, who in turn sell the anchors to boat

dealers, marinas, and other retailers for ultimate resale to the

consumer, the boat owner. The supplier may either

manufacturer its own anchors, as does U.S. Anchor, or

purchase them from another domestic manufacturer, as Rule

Industries, Inc. ("Rule") does from Tie Down, or import

them from abroad.

In 1974, defendant Tie Down decided to expand its

business of manufacturing anchoring mechanisms for mobile

homes into the marine anchor business. Tie Down thus

began manufacturing and selling inexpensive "generic"

anchors under the "Hooker" tradename. These anchors were

among the earliest fluke style anchors. In 1974, Tie Down

expanded its Hooker line of anchors to include a fluke Style

anchor called the Danforth. Tie Down inexpensively

duplicated the Danforth anchor, whose patent had expired,

and sold it cheaply under the Super Hooker tradename.

Defendant Rule entered the recreational marine

anchor business in 1983 when it acquired the Danforth line

of anchors from the Eastern Company. In May 1985, Rule

agreed to acquire Tie Down’s marine anchor division,

including its anchor inventory, certain machinery and

equipment used in the manufacture of marine anchors, and

a license to exclusive use of Tie Down’s marine anchor trade

names ("Hooker", "Super Hooker", and "Hugger") for seven

years. In addition, Tie Down agreed not to sell anchors in

competition with Rule for at least five years. Tie Down

maintains that it negotiated this manufacturing agreement to

recoup losses it suffered at this time.

Plaintiff U.S. Anchor was organized by William

Chapman, Tie Down’s former President, in the Spring of

1985 to compete with Rule and Tie Down in the sale of

52a

inexpensive generic anchors. William Chapman was

employed by Tie Down in January, 1979, and appointed

President in July, 1984. Chapman maintains that he resigned

in January, 1985, as President of Tie Down because of

disagreements with Tie Down’s owner, Chuck MacKarvich,

over the proper methods of running the company and

Chapman’s lack of managerial authority. | Chapman

maintains that he did not contemplate starting a marine

anchor company until after his January resignation, at which

time, he generally advised MacKarvich that he might end up

with some form of competition with Tie Down. Chapman

maintains that it was not until April, 1985, when Tie Down

entered into an agreement to sell its marine anchor division

to Rule Industries, that he saw an opportunity to start a

marine anchor company.

Defendant Tie Down, however, contends that

Chapman actively prepared to go into business__in

competition with Tie Down while still serving as President

of Tie Down. Tie Down alleges that in early 1985, while

still employed by Tie Down, Chapman used Tie Down’s

resources, personnel and confidential business information to

set up his competing business, U.S. Anchor. These

allegations form the basis of Tie Down’s counterclaim.

MacKarvich testified that when he fired Chapman in late

April, 1985, for making disparaging remarks about Tie

Down, he did not know of Chapman’s plans to compete in

the marine anchor business.

Plaintiff now alleges that defendants have conspired

to engage in, and have engaged in, predatory pricing and

unlawful tying arrangements to eliminate plaintiff as a

competitor and to achieve a monopoly in the reievant product

market. Plaintiff maintains that it originally intended to set

its prices at 10-12% below that of the previous season’s

prices; however, these prices never went into effect because

a De es

Es

53a

Rule immediately reduced its prices by 15% to undercut

plaintiff's pricing. Plaintiff then maintains that it cut its

prices and, in response, Rule lowered its prices by an

additional 20%. Rule, however, argues that its price

reductions were in response to the influx of cheaper anchors

by foreign competitors.

Il. SUMMARY JUDGMENT STANDARD

Rule 56(c), Fed. R. Civ. P., defines the standard for

summary judgment: Courts should grant summary judgment

when "there is no genuine issue as to any material fact ...

and the moving party is entitled to judgment as a matter of

law." In Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct.

2548, 2554, 91 L.Ed.2d 265 (1986), the Supreme Court

interpreted Rule 56(c) to require the moving party to

demonstrate that the nonmoving party lacks evidence to

support an essential element of his claim. Thus, the

movant’s burden is easily "discharged by showing—that is,

pointing out to the district court—that there is an absence of

evidence to support the nonmoving party’s case." Once the

movant has met this burden, the opposing party must then

present evidence establishing a material issue of fact. Id.

The nonmoving party must go beyond the pleadings and

submit evidence in the form of affidavits, depositions,

admissions and the like, to demonstrate that a genuine issue

of material fact does exist. Jd. The Supreme Court stated

in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct.

2505, 2514, 91 L.Ed.2d 202 (1986), "that the plaintiff, to

survive the defendant’s motion, need only present evidence

from which a jury might return a verdict in his favor. If he

does so, there is a genuine issue of fact that requires a trial.”

"[S]ummary judgment may be especially appropriate

in an antitrust case because of the chill antitrust litigation can

54a

have on legitimate price competition." McGahee v. Northern

Propane Gas Co., 858 F.2d 1487, 1493 (11th Cir. 1988),

cert. denied, _U.S.__, 109 S.Ct. 2110, 104 L.Ed.2d

670 (1989), citing, Matsushita Electric Industrial Co. v.

Zenith Radio Corporation, 475 U.S. 574, 595, 106 S.Ct.

1348, 1360, 89 L.Ed.2d 538 (1986). Thus, an antitrust

plaintiff must present evidence that tends, when interpreted

in a light most favorable to plaintiff, to exclude the

possibility that defendant’s conduct was consistent with

permissible competition as with illegal conduct. Jd.

Il. SHERMAN ACT CLAIMS

Plaintiff alleges a claim for attempted monopolization

pursuant to §2 of the Sherman Act; conspiracy and

combination to monopolize pursuant to § 2 of the Sherman

Act; and conspiracy to eliminate competitors in violation of

§ 1 of the Sherman Act. See 15 U.S.C. §§ 1, 2.

A § 1 Sherman Act claim for conspiracy to eliminate

a competitor requires (1) an agreement to engage in

anticompetitive conduct and (2) an adverse impact on the

relevant market as an “unreasonable restraint of trade". Hill

Aircraft & Leasing Corporation v. Fulton County, 561

F. Supp. 667, 676 (N.D. Ga. 1982), aff'd, 729 F.2d 1467

(11th Cir. 1984).

To sustain a § 2 Sherman Act claim of attempted

monopoly, a plaintiff must show: (1) the relevant product

and geographic markets; (2) that the defendant had the

specific intent to gain a monopoly position in the market;

and (3) that there was a dangerous probability of de facto

monopolization. See American Tobacco Co. v. United

States, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946);

Bill Beasely Farms, Inc. v. Hubbard Farms, 695 F.2d 1341,

\

55a

1342 (11th Cir. 1983); Photovest Corporation vy. Fotomat

Corporation, 606 F.2d 704, 711-21 (7th Cir. 1979), cert.

denied, 445 U.S. 917, 100 S.Ct. 1278, 63 L.Ed.2d 601

(1980). A §2 claim for combination or conspiracy to

monopolize requires proof of the same elements involved in

an attempt claim with the exception that it is not necessary

to show that the scheme to monopolize was ever "attempted

to any harmful extent." American Tobacco Co., 328 U.S.

at 811, 66 S.Ct. at 1139.

All of the plaintiff's Sherman Act claims require

defendant’s intent to engage in anticompetitive conduct.

Proof of predatory pricing can satisfy this element of intent

for all three of plaintiff’s Sherman Act claims. Cargill v.

Monfort of Colorado, Inc., 479 U.S. 104, 107 S.Ct. 484,

493, 93 L.Ed.2d 427 (1986); McGahee 858 F.2d at 1493.

To establish a claim for predatory pricing, the plaintiff may

show (1) that the defendants sold their product below the

average total cost of its production; and (2) that because of

such pricing, the defendants had a dangerous probability of

success on their Sherman Act claims. McGahee, 858 F.2d

at 1493.

A. The Areeda-Turner Average Variable Cost and The

Eleventh’s Circuit’s Test of Average Total Cost

The Eleventh Circuit has recently rejected the test of

Professors Areeda and Turner for determining predatory

pricing claims. See McGahee, 858 F.2d at 1487, citing,

Areeda & Turner, Predatory Pricing and Related Practices

Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697,

56a

733 (1975). In the past, binding authority’ required that

courts in this Circuit apply the Areeda & Turner test, and

thus subjective intent was irrelevant. Instead, intent to

engage in anticompetitive conduct through predatory pricing

was determined through comparison between prices and

average variable cost. See International Air Industries v.

American Excelsior Co. , 517 F.2d 714 (Sth Cir. 1975), cert.

denied, 424 U.S. 943, 96 S.Ct. 1411, 47 L.Ed.2d 349

(1976). The average variable cost of production is "the costs

associated with producing each individual unit of

output"... "which do vary with production and roughly

equal the cost of the resources necessary to produce

additional units of output." Adjusters Replace-A-Car v.

Agency Rent-A-Car, Inc., 735 F.2d 884, 889 (Sth Cir.

1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 910, 83

L.Ed.2d 924 (1985).

The Eleventh Circuit, however, has recently held that

circumstantial evidence of subjective intent to predatorily

price for the purposes of monopolization is also relevant in

determining antitrust injury. McGahee, 858 F.2d at 1487.

The Eleventh Circuit also now determines predatory pricing

by examining the "full" or "total" costs, the "average total

costs." Average total cost is the sum of average variable

cost and average fixed cost, and equates to the total

economic cost of selling and delivering a product.

McGahee, 858 F.2d at 1496, n. 22. To constitute a

meaningful economic concept, total economic cost must also

include a necessary minimum profit. /d. at 1503.

' See Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981)

(decisions rendered by the former Fifth Circuit before October 1, 1981,

are binding upon courts of the Eleventh Circuit).

S7a

The Eleventh Circuit three-part test that uses average

total cost to infer predatory pricing is as follows:

(1) "If a defendant’s prices were above average total

cost then there is no predatory pricing and thus no

circumstantial evidence of predatory intent. Average

total cost means the average of the total economic

cost, which includes the necessary minimum profit.

Average total cost should theoretically be measured

by long run marginal cost, but in appropriate cases a

surrogate for total cost may be used.”

(2) "If a defendant's prices were below average total

cost and above short run marginal cost, then there is

circumstantial evidence of predatory intent... . To

withstand judgment as a matter of law, a plaintiff

must have other evidence, either objective or

subjective of predatory intent.”

(3) “If a defendant’s prices were below short run

marginal cost, then the circumstantial evidence is

strong enough to create a rebuttable presumption of

predatory intent. ... If a defendant’s prices were

below short run marginal cost and the other evidence,

subjective or objective, is sufficiently probative of

defendant’s predatory intent, then as a matter of law,

defendant has the predatory intent required to

establish the attempt to monopolize element of a

Sherman Act claim .

McGahee, 858 F.2d at 1503-04.

As to parts (2) and (3) of this test, “average variable

cost" may be used as a surrogate for short min marginal

costs. Jd. at 1504.

58a

Applying this test, the Eleventh Circuit found that

McGahee had presented sufficient evidence to create an issue

of fact as to whether Northern Propane had the intent

necessary for an attempt to monopolize claim. /d. at pp.

1504-05. The defendant did not maintain that its sales were

above its average total cost during price wars. /d. at 1505.

The defendant’s own documents indicated that in some

months it sold propane to commercial customers at prices

below average variable cost. Jd. at 1492, 1495, n. 12.

Circumstantial evidence of predatory intent included the

defendant’s (1) investigation of McGahee’s financial

position; (2) its new policy of rent-free tanks designed to

take advantage of McGahee’s weak financial position; (3) its

internal memoranda declaring a goal of contributing to

McGahee’s financial problems; and (4) its price reductions

to particular customers. /d. at 1504, n. 41. This was

sufficient evidence from which a fact finder could infer

predatory intent.

Plaintiff has presented evidence from which a fact

finder could infer predatory intent under both the Areeda-

Turner test and the Eleventh Circuit’s test in McGahee.* An

issue Of fact exists as to whether Rule sold certain anchor

models below average variable cost. See Andrews First

Affidavit { 9; Moody Deposition, pp. 55-63, 99; Anastoes

Affidavit, 44. A question of fact also exists as to whether

defendant Tie Down was selling to Rule at prices below Tie

Down’s average variable costs on certain anchor models.

? The court notes that the standard for cost analysis to determine

predatory pricing changed from the Areeda-Turner average variable cost

to average total cost, as announced in McGahee while the motions for

summary judgment were pending in this court. Therefore, the parties

first submitted evidence in accordance with the average variable cost.

The parties have subsequently presently evidence in accordance with the

average total cost standard.

59a

See Andrews Affidavit, { 6-9, Exhs B-D; Appendix I to Tie-

Down’s Brief in Support of Summary Judgment. The

Eleventh Circuit specifically stated in McGahee that a district

court must not resolve factual disputes by weighing

conflicting evidence of average variable costs. McGahee,

858 F.2d at 1495, n. 12.

Under the less stringent test of McGahee, plaintiff has

also presented enough evidence to withstand summary

judgment on the issue of predatory intent. As seen, this test

is based on sales below average total costs. Jd. at 1503.

Plaintiff has submitted a second affidavit of its expert, John

Andrews, that analyzes defendants’ pricing in relation to

their average total costs. The second affidavit analyzes

defendants’ average total costs, which includes both variable

costs and fixed costs as well as a reasonable profit or return

on shareholder equity.’ Dr. Andrews concluded that Rule

consistently sold every single anchor model to its customers

at prices that were less than Rule’s average total cost for

each model from December, 1985, through April, 1988.

In rebuttal, Tie-Down contends that Andrews’

calculations for both average variable cost or average total

costs are erroneous because he did not consider the quantity

of units produced. Because the per unit cost varies with the

quantity of units produced, a costing analysis that does not

consider the quantity of units produced cannot provide an

accurate average variable cost or average total cost

computation.

_ _—

* Andrews’ first affidavit analyzed average variable costs, which

excluded any consideration of indirect or fixed costs or of any profit

margin.

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Andrews’ analysis of both the average variable costs

under the Areeda-Turner test and under the Eleventh

Circuit’s average total costs test takes output into account.

In calculating both average variable cost and average total

cost, Andrews arrived at the total costs of parts required for

each anchor by examining the actual manufacturing invoices

of the steel, galvanizing, slitting services, and related freight

costs at varying points in time from Tie Down’s steel and

galvanizing vendors. andrews Affidavit pp. 6-7, and

Deposition, p. 38. From these invoices, Andrews

determined the steel cost per part by multiplying the steel

required to produce the part by the steel cost per pound. See

Exhibits B-D to Andrews Deposition, filed March 6, 1989.

Andrews obtained the figure for the steel cost per pound

from weights from Tie Down’s cost analyses. See Andrews

Deposition, p. 27; Exh. 9; and Mackarvich Exh. 31.

Therefore, Andrews took into account the output by

determining from the actual invoices for raw materials the

price of steel used per part, based on Tie Down’s own

figures.

Andrews followed a similar method for determining

the amount of labor expended on each anchor part. See

MacKarvich Exh. 31. By adding together these amounts,

Andrews then came up with the total cost of parts for each

anchor. To this amount, Andrews added the cost of direct

labor to weld the anchor parts together and the galvanizing

cost. Andrews also determined the cost of this direct labor

from Tie Down’s internal numbers. Andrews Affidavit { 7;

Andrews Deposition, p. 41. He then calculated the cost of

galvanizing, slitting services, and related freight costs at

varying points in time from a review of all actual invoices

from Tie Down’s steel and galvanizing vendors. Andrews

Affidavit { 7 and Deposition p. 38. While defendants may

contest the evidence upon which these calculation are based,

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this manner of calculation considers Tie Down’s actual

output.

To this total cost for material and direct labor,

Andrews then added a variable overhead cost factor which

was derived from the financial statements, trail balances and

work papers prepared by Tie Down’s independent accounting

firm. d.; Affidavit ¢ 7; and Deposition pp. 41-44.

Defendant’s have not contested the computation of this

variable overhead cost calculation.

Defendants also maintain that Andrews’ calculations

for average total cost are inaccurate because they are based

on speculation and erroneous assumptions. Defendants

allege Andrews selectively picked the highest coil steel

prices from Tie Down’s invoices upon which to base his

calculations of steel costs; therefore, Andrews’ coil steel

costs are not representative of the costs actually experienced

by Tie Down. Defendants also maintain that Andrews’

average total cost calculations are based on an erroneous

scrap factor, arbitrarily selected by Andrews based on the

scrap factor of U.S. Anchor, a smaller company which does

not have the same purchasing power or efficiency as Tie

Down. Andrew’s coil steel cost also allegedly include

incorrect shipping costs from the steel company to the slitter

and incorrect freight cost from the slitter to Tie Down, and

erroneous slitting and galvanizing costs. Defendants further

allege that Andrews has used an erroneous "imputed profit"

in his calculations of average total cost.

Again, the contested evidence about calculations of

average total cost is exclusively for the jury. McGahee, 858

F.2d at 1495, n. 12. Moreover, several instances in which

sales were below average variable costs, and presumably

average total costs, are sufficient to overcome summary

judgment and create an issue of fact under the Eleventh

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Circuit test for predatory pricing. Jd. The amount of profit

to be calculated into total economic costs is also an issue of

fact. Id. at 1503, n. 35. Andrews expert opinion about the

amount of profit to be included in average total cost is based

on the average operating results for profitable companies

engaged in the business of manufacturing fabricated metal

products. See Exh. D attached to Andrews Second

Affidavit. This evidence is sufficient to create a fact

question as to the amouni of profit to be included in average

total costs.

The Eleventh Circuit’s adoption of an average total

cost standard in McGahee came at the close of discovery and

after motions for summary judgment had been filed in this

case. The average total cost is a more liberal standard than

the Areeda-Turner average variable cost standard because it

takes into account total cost. Plaintiff has presented

sufficient evidence to create an issue of fact about below

average variable cost. The Eleventh Circuit notes that

average variable costs may be used as a substitute for short

run marginal costs. McGahee, 858 F.2d at 1504. Andrews’

First and Second Affidavits support such a substitution in the

present case. /d. at n. 38. Therefore, under the Eleventh

Circuit test, an issue of facts exists as to whether defendants

priced below the short run marginal cost, based on the

contested evidence of pricing below average variable cost.

Under McGahee, subjective evidence of predatory

pricing must also be considered, in addition to cost analysis.

Subjective evidence exists in the present case similar to that

which existed in McGahee. Plaintiff has raised evidence that

defendants investigated plaintiff's financial position and that

defendants instituted new credits and discounts that plaintiff

could not match. Webb Affidavit, ¢ 7; Humphrey

Deposition, pp. 87-92; Gardner Deposition, p. 28; Hymel

Deposition, pp. 19-20; Pressman Deposition, pp. 17-18;

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Read Deposition, pp. 39, 67; Chapman 7/15/87 Deposition,

p. 56. Defendants’ internal memoranda reflect a goal of

contributing to U.S. Anchor’s financial problems. Bracco

Deposition, Exh. 6, p. 2; Anastoes Deposition, Exhs. 11 and

2; and defendant reduced its prices to particular customers

and offered new discounts. Anastoes Deposition Exh. 14.

B. Dangerous Probability of Success

The second requirement of an attempt to monopolize

claim is "a dangerous probability of the defendant would

succeed." McGahee, 858 F.2d at 1493. "[A] court must

examine the relevant market and defendant’s market power

before the attempt to monopolized began . . . . The best test

from which market power may be inferred is relative Size,

i.é., the percentage of market share." Jd. at 1505. In

McGahee, the court held that "a sixty or sixty-five percent

market share is sufficient to create an issue of fact as to

whether there was a dangerous probability” that the

defendant could succeed in achieving monopoly. /d. at

1506.

Defendants argue that they are entitled to summary

judgment because they do not possess nor do they come

close to possessing monopoly power in the relevant market.

An issue of fact, however, exists as to the relevant product

and geographic markets.‘ The relevant geographic market

* Defendants maintain that plaintiff's evidence is not expert economic

evidence of the relevant market share because James Webb and Gary

Potter are not economists. American Key Corporation v. Cole National

Corporation, 762 F.2d 1569 (11th Cir. 1985). Federal Rule of Evidence

702, however, provides that a witness may qualify as an expert "by

knowledge, skill, experience, training, or education." (emphasis added).

Potter and Webb’s affidavits reflect extensive knowledge, skill,

(continued. ..)

64a

area is in dispute. Plaintiff maintains that the geographic

market is the continental United States. See Response to

Second Interrogatories, No. 5; Chapman Deposition 7/15/87,

p. 131. In contrast, defendants contend that the relevant

geographic market is the United States and Canada. See

Anastos Deposition, p. 97.

The parties also dispute the relevant product market

with evidence, based on affidavits and depositions. Plaintiff

claims that the relevant product market includes lightweight,

galvanized penetrating anchors sold by U.S. Anchor and by

Rule, including Rule’s trademarked Danforth Standard

models. Defendant's limit this product market definition to

"generic" galvanized penetrating fluke-style anchor.

Defendants’ definition includes only seventeen anchor models

manufactured by Tie Down, falling into the Super Hooker,

Hooker Economy, and Hooker Slip-Ring anchors, [the

"Hooker" line] and includes all anchor models manufactured

by U.S. Anchor. Defendants’ product market definition,

however, excludes the Danforth Standard models.

The existence of a monopoly power is intertwined

with the definition of the relevant product and geographic

market. The question of relevant markets is ordinarily one

for the jv °. Associated Radio Service, 624 F.2d 1342, 1357

(Sth Cir. 1980). The court agrees with plaintiff that these

factual issues are disputed. Since the relevant markets are

contested, the court cannot assess the defendants’ arguments

that low entry barriers and foreign competition preclude

plaintiffs monopolization claims. Summary judgment, based

on defendants’ argument that they lacked a monopoly power

-

(...contunued )

experience, and training in determining markets in the marine anchor

industry. Accordingly, the court finds their evidence to be sufficient

expert testimony.

65a

in the relevant market, must be denied on plaintiff's Sherman

Act claims.

IV. EXCLUSIVE DEALING CLAIM

UNDER § | OF SHERMAN ACT

AND § 4 OF CLAYTON ACT

Plaintiff also alleges that Rule imposed an exclusive

dealing arrangement upon its customers in violation of § 1

of the Sherman Act and § 4 of the Clayton Act. Plaintiff

maintains that this tying arrangement further evidences

Rule’s intent to monopolize and to eliminate U.S. Anchor in

violation of § 1 and § 2 of the Sherman Act. This alleged

tying arrangement would also constitute an independent

violation of § 3 of the Clayton Act.

Exclusive dealing arrangements violate § 3 of the

Clayton Act, 15 U.S.C. § 14. Section 3 of the Clayton Act

makes it unlawful to sell goods on the condition, agreement,

or understanding that the purchaser shall not use or deal in

the goods of a competitor of the seller, where the effect may

be to substantially lessen competition or tend to create a

monopoly. These types of tying arrangements are

recognized as "inherently anticompetitive” because they tend

to shut other sellers out of the market by "tying up” potential

distributors or buyers. Brown Shoe Co. v. United States,

370 U.S. 294, 330, 82 S.Ct. 1502, 1526, 8 L.Ed.2d 510

(1962); United States v. Loew’s, Inc., 371 U.S. 38, 44-45,

83 S.Ct. 97, 101-102, 9 L.Ed.2d 11 (1962): Barry Wright

Corporation v. ITT Grinnel Corporation, 724 F.2d 227, 236

(1st Cir. 1983).

In the present case, the plaintiff alleges that Rule

engaged in an "exclusive dealer” tying arrangement. In this

type of illegal tying arrangement, the seller conditions the

66a

sale of his product upon the buyer’s promise not to buy

similar products from the seller’s competitors. Northern

Pacific Railway v. United States, 356 U.S. 1, 5-6, 78 S.Ct.

514, 518, 2 L.Bd.2d 545 (1958).

Plaintiff's tying claim is based on the fact that

defendant Rule allegedly conditioned the sale of its new

"Deepset" anchor upon the customer’s promise not to buy

galvanized penetrating fluke-style anchors from any other

manufacturer. In September, 1985, Rule introduced the

Deepset anchor line, which it described as a new and

revolutionary product. Anastos Affidavit, {4 5-6. For two

years thereafter Rule refused to sell this product to any

customer who bought galvanizing penetrating fluke-style

anchors from any source other than Rule. This fact has been

confirmed by Rule’s literature and Rule’s customer’s.

Anastos Deposition, Exh. 11, 21, 22; York Deposition, pp.

23-26, 46; Howerth Deposition, pp. 12-14 and Exh. 1;

Pressman Deposition, \pp. 15-16 and Exh. 1; Landrith

Deposition, pp. 35, 44-46 and Exh. 1; Bouchard Deposition

pp. 28-29.

An exclusive dealership is illegal if it is probable that

the arrangement will foreclose competition in a substantial

share of the line of commerce affected. Tampa Electric Co.

v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623,

627, 5 L.Ed.2d 580 (1960). To determine whether this has

occurred, it is necessary to (1) identify the “line of

commerce” involved; (2) identify the market area in which

the defendant selier operates; and (3) determine whether the

opportunities foreclosed by the exclusive dealing

arrangement constitute a "substantial share” of the market in

that area. Id. at 327-28, 81 S.Ct. at 627-28.

As seen, the evidence regarding the appropriate

product and geographic markets is a contested factual issue

67a

appropriate for the jury’s determination. Plaintiff's exclusive

dealing arrangement claim is intertwined with these

definitions. Accordingly, summary judgment on plaintiff's

exclusive dealing claim under § 1 of the Sherman Act and

§ 3 of the Clayton Act would be inappropriate.

V. PLAINTIFF’S OTHER CLAIMS

In Count V, plaintiff incorporates its previously stated

allegations to state a claim under Georgia law for conspiracy

to restrain trade in violation of Article 3, Section Vi,

Paragraph V of the Georgia Constitution and O.C.G.A.

§ 13-8-2. Plaintiff also seeks injunctive relief under the

federal antitrust laws. Because issues of fact appropriate for

the jury exist regarding whether there has been any unlawful

conspiracies to restrain trade, threat of anticompetitive effect

in the marketplace, or injury caused by any illegal conduct,

defendants’ motion for summary judgment on these claims

must be denied.

VI. DEFENDANT TIE DOWN’S COUNTERCLAIM

Defendant Tie Down brings a counterclaim against

plaintiff U.S. Anchor and William Chapman. This

counterclaim alleges a breach of fiduciary duty;

misappropriation of confidential business information;

tortious interference with business relations: and common

law fraud and deceit. U.S. Anchor and William Chapman

seek summary judgment on Tie Down’s theories for relief in

its counterclaim.

Defendant Tie Down contends that C hapman actively

prepared to go into business in competition with Tie Down

while still serving as President of Tie Down. Tie Down

68a

alleges evidence that in early 1985 while still employed by

Tie Down, Chapman used Tie Down’s resources, personnel

and confidential business information to set up his competing

business, U.S. Anchor. These allegations form the basis of

Tie Down’s counterclaim.

A. Breach of Fiduciary Duty

As an officer of Tie Down and possibly as an

employee of Tie Down, Chapman would have owed the

corporation and his principal a fiduciary duty of good faith

and loyalty. See O.C.G.A. § 14-2-152; O.C.G.A. § 23-2-

58; General Information Processing Systems, Inc. Vv.

Sweeney, 176 Ga. App. 315, 316, 335, S.E.2d 722 (1985);

Cochran v. Murrah, 235 Ga. 304, 219 S.E.2d 421 (1975).

An employee breaches no fiduciary duty to the employer

simply by making plans to enter a competing business while

he is still employed. -E.D. Lacey Mills, Inc. v. Keith, 183

Ga. App. 357, 362, 359 S.E.2d 148 (1987). However, an

employee is not "entitled to solicit customers for [a] rival

business before the end of his employment nor can he

properly do other similar acts in direct competition with the

employer’s business." /d. at 363, 359 S.E.2d 148, citing,

Restatement 2nd of Agency, § 393 (1958). This fiduciary

duty is also violated by making numerous arrangements for

the competing business while still employed and by soliciting

the employer’s customers and sales representatives for the

rival business. /d.

Chapman maintains that he did not contemplate

Starting a marine anchor company until after his January

resignation, at which time he generally advised MacKarvich

that he might end up in some form of competition with Tie -

Down. It was not until April 1985, when Tie Down entered

into an agreement to sell its marine anchor division to Rule

Industries, that he allegedly saw an opportunity to start a

69a

marine anchor company. Chapman contends that he did not

solicit orders for U.S. Anchor from Tie Down’s customers,

or any potential customer, until approximately July, 1985, at

least three months after the termination of his employment

at Tie Down. Statement 4 30.

Tie Down has presented evidence that Chapman made

significant business arrangements to organize a competing

business and solicited Tie Down’s sales agents while still

employed by Tie Down. This evidence raises a genuine

issue of fact for trial as to Tie Down’s amended

counterclaim breach of fiduciary duty. Accordingly, U.S.

Anchor’s and Chapman’s motion for summary judgment on

Tie Down’s counterclaim is denied.

B. Misappropriation of Confidential Business

Information and Common Law Fraud and Deceit

U.S. Anchor and Chapman also seek summary

judgment on Tie Down’s amended counterclaim for

misappropriation about confidential business information and

common law fraud and deceit. These claims are based on

similar facts of whether Chapman obtained Tie Down’s

confidential business information through fraudulent

misrepresentations or theft.

A cause of action for misappropriation of confidential

business information exists when "[o]ne who, for the

purposes of advancing a rival business interest, procures by

improper means information about another’s business . . can

Restatement of Torts § 759. Wesley-Jessen, Inc. vy.

Armento, 519 F. Supp. 1352, 136i (N.D. Ga. 1981);

Durham v. Stand-by Labor, Inc., 230 Ga. 558, 563, 198

S.E.2d 145 (1973). "Improper means" may include theft or

fraudulent misrepresentation.

70a

To establish a claim for fraud, a party must prove the

following elements:

(1) | The defendant made the representations;

(2) At the time the representations were made,

the defendant knew they were false;

(3) The defendant made the representations with

the intention and purpose of deceiving the

plaintiff;

(4) ‘The plaintiff relied on the representations;

(5) The plaintiff sustained the alleged loss and

damage as the proximate result of the

representations having been made.

Bragg v. Sirockman, 169 Ga. App. 643, 314 S.E.2d 478

(1984).

A. cause of action for fraud may also arise when the

failure to perform the promised act, even as to a future

event, is coupled with a present intention not to perform.

Hayes v. Irwin, 541 F. Supp. 397, 438 (N.D. Ga. 1982),

citing Dye v. Dye, 231 Ga. 533, 202 S.E.2d 418 (1973);

Cowart v. Gay, 223 Ga. 635, 157 S.E.2d 466 (1967). An

opinion as to a legal matter is actionable if there is a

fiduciary relationship between the parties. See Capriulo v.

Bankers Life Co., 178 Ga. App. 635, 637-38, 344 S.E.2d

430 (1986); Clinton v. State Farm Mutual Automobile

Insurance Co., 110 Ga. App. 417, 138 S.E.2d 687 (1964).

U.S. Anchor and Chapman have presented evidence

by affidavit that Chapman did not possess or use any of Tie

Down’s confidential or proprietary business information.

Tla

Chapman also maintains that his knowledge of manufacturing

anchors, as well as the identity of potential anchor

customers, was subjective knowledge, and was not derived

from any confidential documents wrongfully obtained or

retained outside the course of his normal employment.

Statement, 29.

in rebuttal, Tie Down has presented evidence that

Chapman obtained access to Tie Down’s costing information

for use in U.S. Anchor’s business plan and gross profit

analysis by misrepresenting to MacKarvich that he wanted to

help recost Tie Down’s products for Tie Down’s benefit.

MacKarvich Affidavit, ¢ 8. Tie Down also points to

circumstantial evidence that Chapman misappropriated Tie

Down’s marine anchor engineering drawings, which were

discovered missing upon Chapman’s discharge from Tie

Down. MacKarvich Affidavit, ¢ 9. U.S. Anchor’s

machinist, however, testified that the tooling and dies were

not made or based on any of Tie Down’s engineering

drawings. Accordingly, there is an issue of fact that

precludes summary judgment as to whether Chapman

obtained confidential business information by improper

means.

c. Tortious Interference With Business Relations

U.S. Anchor and Chapman seek summary judgment

on Tie Down’s amended counterclaim for tortious

interference with business relations. A Claim based on

tortious interference with business relations does not require

evidence of a binding contract. Integrated & Micro Systems

Inc. v. NEC Home Electronics, 174 Ga. App. 197, 200, 329

S.E.2d 554 (1985). Instead, the party charged with tortious

interference with business relations must have "(1) acted

improperly and without privilege, (2) purposely and with

malice with the intent to injure, (3) induced a third party or

72a

parties not to enter into or continue a business relationship

with the plaintiff, and (4) for which the plaintiff suffered

some financial injury." /d., quoting, Hayes v. Irvin, 541 P.

Supp. at 429.

Interference with an employment relationship can be

tortious, even though the employment is at the will of the

employer and employee. See e.g., E.D. Lacey Mills, Inc. v.

Keith, 183 Ga. App. at 362, 359 S.E.2d 148; Nager v.

Lad’N Dad Slacks, 148 Ga. App. 401, 403, 251 S.E.2d 330

(1978); Architectural Manufacturing Co. v. Airotec, 119 Ga.

App. 245, 248, 166 S.E.2d 744 (1969). Interference with

the plaintiff's relationship with its customers, suppliers, or

representatives will support a cause of action for tortious

interference even though such relationships may be

terminable at will. E.D. Lacey Mills, Inc. v. Keith, 183 Ga.

App. at 362, 359 S.E.2d 148.

Interference with business relations may be excused

if privileged. Orkin Exterminating Co., Inc. v. Martin Co.,

240 Ga. 662, 667, 242 S.E.2d 135 (1975). "“[I]n order for

[the defendant] to come under the protection of the

competition privilege, it must establish inter alia that it did

employ improper means." Integrated & Micro Systems Inc.,

174 Ga. App. at 202, 329 S.E.2d 554. The privilege

defense is not available where interference is achieved

through actions taken in violation of a_ confidential

relationship. Haves v. Irwin, 541 F. Supp. at 430; E.D.

Lacey Millis, inc. v. Keith, 183 Ga. App. at 364, 359 S.E.2d

148.

Chapman and U.S. Anchor argue that Tie Down

cannot maintain this claim because Tie Down has only one

marine anchor customer, Rule, since the inception of U.S.

Anchor, and U.S. Anchor has never sold to Rule. Tie

Down allegedly has not pointed to evidence that U.S.

T3a

Anchor and Chapman induced Rule, the only party doing

business with Tie Down, not to enter or to continue the

business relationship.

The disputed evidence, however, is not limited to Tie

Down's relationship with Rule. The parties dispute whether

Chapman wrongfully interfered with Tie Down’s business

relations by soliciting Tie Down’s key employees, mobile

home and marine anchor sales representative, and marine

anchor distributors. Tie Down maintains that Chapman

made such solicitations while still employed at Tie Down in

violation of the confidential relationship owed Tie Down;

therefore, no privilege exists.

Based on the above evidence, factual disputes exist,

which are appropriate for the jury on Tie Down’s amended

counterclaim for tortious interference with business.

Accordingly, summary judgment on this claim is also

denied.

VII. CONCLUSION

In sum, defendant Tie Down, Inc.’s Motion for

Summary Judgment, defendant Rule Industries, Inc.’s

Motion for Summary Judgment, and the motion of William

Chapman and U.S. Anchor for Summary Judgment are all

DENIED. Defendant Tie Down’s motion to file a

supplemental brief and an amendment to this motion is

GRANTED.

SO ORDERED.

74a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

U.S. Anchor Mfg., Inc.

Plaintiff, :

: CIVIL ACTION FILENO.

v. : 1:86-CV-2447-JTC

Rule Industries, Inc. and

Tie Down, Inc. a/k/a

Tie Down Engineering, Inc.,:

Defendants.

ORDER

This action is presently before the court on plaintiff's

emergency motion for expedited ruling on plaintiff's motion

for injunctive relief; on plaintiff's motion for permanent

injunction [#325-1]; on defendant Rule’s motion to stay

execution of judgment without bond [#346-1], or for reduced

bond [#346-2]; on defendant Tie Down’s motion to stay

execution of judgment without bond [#347-1], or in the

alternative for reduced bond [#347-2]; on defendant Tie

Down's motion to stay execution of judgment without bond

[#347-1], or in the alternative for reduced bond [#347-2]; on

defendant Tie Down’s motion for J.N.O.V. [#348-1], or in

the alternative motion for new trial [#348-2]; on defendant

Rule’s motion for J.N.O.V. [#349-1]; on defendant Rule’s

motion for new trial [#350-1]; on the Daniels’ motion to

withdraw as counsel of record for defendant Tie Down

{#351-1]; on plaintiff's motion to register judgments in other

districts [4352-1]; on plaintiff's motion to compel defendants

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to post a supersedeas bond [#353-1]; on defendant Rule’s

motion for attorney’s fees and costs regarding the deposition

of Dr. Willard Mueller [#363-1]; and on plaintiff's motion

to hold defendant Rule in civil contempt [#369-1].

I. MOTION TO WITHDRAW

Harold T. Daniel, Jr. and Laurie Webb Daniel,

attorneys of record for the defendant Tie Down Engineering,

move this court to allow them to withdraw as attorneys of

record.

Pursuant to Local Rule 110-5 of the United States

District Court for the Northern District of Georgia, counsel’s

motion appropriately states that the client has been given ten

days notice of their intention to withdraw, contains copy of

Said notice, and includes a certificate of service upon

opposing counsel.

The reason given for the Daniels’ withdrawal is that

defendant Tie Down is in arrears with its payments to the

firm in excess of $285,000.00. Plaintiff does not object to

the withdrawal so long as the result would not result in any

delay to any post-trial matters or appeals. Tie Down

Engineering, responding through the voice of its president,

Charles MacKarvich, strenuously objects to the Daniels’

withdrawal as counsel to Tie Down. Tie Down points out

that it has already paid the Daniels $690,601.00 and has

offered to pay ali ongoing fees.

While the court sympathizes with the position of Tie

Down, the court cannot force these parties into an amicable

working relationship. On the other hand, it would be

extremely difficult for new counsel to _ undertake

representation of this case for the remaining post-trial

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motions without extensive time and expense needed to

familiarize itself with the case. Accordingly, the court

DENIES the Daniels’ motion to withdraw as counsel for

defendant Tie Down. However, the court will grant the

Daniels leave to renew their motion upon the disposition of

the post-trial motions now pending before this court.

Il. MOTION FOR EXPEDITED RULING ON MOTION

FOR PERMANENT INJUNCTION

Anchor moves the court for an expedited ruling on its

motion for permanent injunction on the grounds that Rule’s

newly published price list remains at the same predatory

price levels as before. Because the court will rule on the

motion for permanent injunction in this order, plaintiff's

motion tor expedited ruling in (sic) DENIED AS MOOT.

Ill. MOTION FOR CONTEMPT AND MOTION FOR

ATTORNEY’S FEES AND COSTS REGARDING

THE MUELLER DEPOSITIONS

The parties have filed a consent order with the court

agreeing to extend the time in which to file briefs on the

motion for costs and attorney’s fees for the Mueller

deposition. In light of this extension of time, the court

DEFERS ruling on this motion until the time agreed to by

the parties to prepare this issue has expired.

The parties have filed a letter with the court dated

August 26, 1991 stating that the motion for contempt is

withdrawn. Accordingly, this motion is MOOT.

T7a

IV. MOTION FOR PERMANENT INJUNCTION

Plaintiff files a motion with the court for permanent

injunction. Specifically, plaintiff seeks to enjoin defendants

from violating Sections | and 2 of the Sherman Act.

Plaintiff contends that it is entitled to this relief in that the

jury verdict found against defendants, that evidence of

predatory pricing was produced at trial, and_ that

overwhelming evidence exists to show that defendants

conspired to monopolize and to eliminate competition.

Finally, plaintiff contends that it will go out of business if it

is not freed from defendants’ unfair pricing.

Courts consistently recognize injunctions as an

extraordinary or drastic remedy. Ritter v. Smith, 811 F.2d

1398 (11th Cir.), cert. denied, 483 U.S. 100 (1987).

Injunctive relief should not be granted unless the movant can

show the threat of irreparable harm and a lack of an

adequate remedy at law. Here, the court finds that

plaintiff's remedy at law is adequate. The jury awarded

plaintiff some $1.6 million dollars, which when trebled will

amount to approximately $5 million in damages. This

Should have some deterrent effect upon defendant.

Generally, if damages are available, the remedy at law is

adequate. United States v. Jefferson County, 720 F.2d 1511.

1519-20 (11th Cir. 1983).

The court has the authority to issue injunctive relief

to restrain the commission of "related unlawful acts" once it

finds that certain acts were committed in violation of the

law. Zenith Radio Corp. v. Hazeltine Research, Inc.. 395

U.S. 100, 133 (1969). The court "has broad power to

restrain acts which are of the same type or class as unlawful

acts which the court has found to have been committed or

whose commission in the future, unless enjoined, may fairly

be anticipated from the defendant’s conduct." /d. at 132.

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While this is true, the court can find no cases, nor does

either party supply the court with any cases, in which a court

issued an injunction under similar circumstances involving

predatory pricing. Plaintiff contends that it is entitled to

injunctive relief because Rule’s 1992 price listing cites prices

identical to the 1991 prices which the jury found to be

predatory.

Even though the prices remain the same, defendant

argues that this does not automatically warrant the conclusion

that the prices are predatory. First, defendant states that

acquisition costs of the Hooker line are now fully amortized

and thus can no longer be considered in assessing

defendant’s average total cost. This amount was included in

the figures assessed and found to be predatory by the jury.

Second, the defendant argues that its market share in 1985

was approximately 80% (based on a combined market share

of Rule and Tie Down), which served as a basis for the

jury’s findings of predatory pricing. However, defendant

asserts that its current market share is somewhere between

25 and 45%, depending upon what factors are included.

This, defendant argues, eliminates its ability to currently

engage in predatory pricing. Finally, defendant asserts that

the substantial jury award to plaintiff strengthens its financial

outlook and presence in the market. The court, in reviewing

these factors, finds that injunctive relief is inappropriate.

The court agrees with defendant that the fact that the

jury found defendant Rule to have engaged in predatory

pricing does not necessarily compel the same result today.

The change in market shares reflects a change in

circumstances which may amount to ordinary competition.

Accordingly, the court finds that there is no threat of

irreparable injury arising from "related unlawful acts."

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The court finds other reasons as well to be persuasive

for denying the injunction. Injunctive relief is generally

denied by courts where the court must continually supervise

the relief. Ramirez de Arellano v. Weinberger, 724 F.2d

143, 148 (D.C. Cir. 1983); Wright & Miller, Federal

Practice & Procedure Civil 2d: § 2942. In this case, to

continually review the setting of Rule’s prices, which

admittedly take into consideration a variety of factors, would

not only require continual court supervision, but would also

require a mini-trial into prices each time an allegation of

non-compliance was made to determine whether Rule was

pricing below the average variable price or the average total

cost of producing the merchandise. This is precisely the

type of situation where injunctive relief becomes

inappropriate because of the extensive court supervision that

would be necessary.

For the foregoing reasons, the court finds that

plaintiff is not entitled to an injunction against Rule

Industries 1992 price list. Accordingly, plaintiff’s motion

for permanent injunction is DENIED.

V. MOTIONS FOR JUDGMENT

NOTWITHSTANDING

THE VERDICT

A. Rule

Defendant Rule states that the evidence is insufficient

as a matter of law to support the jury verdict, which entitles

them to Judgment notwithstanding the verdict. Specifically,

defendant Rule argues six grounds in support of this

contention. First, Rule states that plaintiff failed to establish

any dangerous probability that Rule engaged in below-cost

pricing in the relevant market. Second. Rule argues that

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plaintiff never established the relevant market or the market

share of the parties. Third, Rule contends that plaintiff

failed to present evidence to establish that Rule engaged in

below-cost pricing. Fourth, Rule argues that the weight of

the evidence fails to support a finding of predatory pricing.

Fifth, Rule argues that no plausible evidence was introduced

in support of the conspiracy between Rule and Tie Down.

Finally, Rule contends that the court erred by sending the

release to the jury.

On a motion for JNOV, the court must consider all

of the evidence in the light most favorable to the party

opposed to the motion. Braswell v. Conagra, Inc. , 936 F.2d

1169, 1172 (11th Cir. 1991). The court should grant the

motion only if in so doing the "facis and inferences point so

strongly in favor of one party that reasonable persons could

not disagree... ." Jd. However, "if reasonable persons

could reach different conclusions, the motion will be

denied." /d. The court may not reweigh the evidence or

reassess the credibility of witnesses or evidence. Key

Enterprises of Delaware, Inc. v. Venice Hospital, 919 F.2d

1550, 1556 (11th Cir. 1990).

Defendant argues that it is entitled to a JNOV

because, based on the evidence presented at trial, it was

implausible that Rule attained or maintained a monopoly. In

support of this contention, Rule makes several specific

arguments, each of which the court will address in turn.

3 Dangerous Probability of Success

First, Rule argues that all counts of plaintiff's claims

include the element of "dangerous probability of success”

through the requirement of predatory pricing. While it is

true that all of plaintiff's claims are based upon a predatory

pricing theory of anti-competitive acts, not all counts require

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proof of a dangerous probability of success. Only the

attempt to monopolize claim, brought under Section 2 of the

Sherman Act required a dangerous probability of success.

See Final Jury Charges. The defendant's argument confuses

the issues. Both the attempt to monopolize claim and the

conspiracy to monopolize claim require specific intent on the

part of the defendant, which can be shown by proof of

predatory pricing. See McGahee v. Northern Propane Gas

Co., 858 F.2d 1487, 1493 (11th Cir. 1988), cert. denied,

490 U.S. 1084 (1989).

Predatory pricing can be shown through a variety of

methods. First, if the prices were above Rule’s average total

cost, then there is not evidence of predatory pricing or

predatory intent. If the prices were below average total cost

and above average variable cost, then there is circumstantial

evidence of predatory intent. If prices fell below average

variable cost, then there is a rebuttable presumption that

Rule acted with predatory intent. McGahee, 858 F.2d at

1503. Thus, the court concludes that predatory pricing and

dangerous probability of success are separate, although

interrelated, concepts.

Because dangerous probability of success is not an

element of each claim presented by plaintiff, and because the

jury awarded plaintiff damages as to each claim, the verdict

would stand even if there were no evidence of dangerous

probability of success to support the Sherman Act Section

§ (sic) 2 "Attempt to Monopolize” claim. However, this

court finds that even if this were not so, there was sufficient

evidence before the jury for them to conclude that a

dangerous probability of success existed.

Defendant Rule argues that there could be no

dangerous probability of success for numerous reasons.

First, it argues that the finding of a dangerous probability of

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success depends of (sic) driving Anchor out of business, and

without evidence that Anchor was likely to go out of

business, this element could not be met.

In order to examine the issue of a dangerous

probability of success, courts are to look to the power of the

defendant to achieve the monopoly before the attempt began.

McGahee, 858 F.2d at 1505. "‘Monopoly’ power exists in

a geographic market if one competitor has the power to raise

prices to supracompetitive levels or has the power to exclude

competition in the relevant market either by restricting entry

of new competitors or by driving existing competitors out of

the market." American Key Corp. v. Cole Nat’l Corp. , 762

F.2d 1569, 1581 (11th Cir. 1985). In this case evidence was

produced to show that at the time the predatory pricing

scheme was entered into, defendant Rule, operating in

tandem with its distributor Tie Down, had the majority of

the market share. There was additional evidence before the

jury c. cerning Rule’s ability to monopolize the market,

such as Rule’s multi-product line, and barriers to entry in the

market to name a few. Thus, there was evidence before the

jury that Rule had the power to achieve a monopoly position

in the market.

Furthermore, the position espoused by defendant --

namely that the plaintiff succeeded in responding to the

defendant’s actions, thereby foiling the attempt to

monopolize prevents a finding of dangerous probability of

success -- was rejected in Multiflex v. Samuel Moore, Inc.,

709 F.2d 980, 992 (Sth Cir. 1983), cert. denied, 465 U.S.

1100 (1984). The court agrees with the reasoning that the

effort to monopolize need not have been successful in order

to assess liability under this section of the Sherman Act.

Dangerous probability of success is a jury issue.

General Indus. Corp. v. Hartz Mountain Corp., 810 F.2d

83a

795, 801 (8th Cir. 1987). If any evidence exists to support

a jury finding that the elements of the claiin were proven,

the verdict must be upheld. /d. Here sufficient evidence

exists to support the jury verdict. Accordingly, the court

rejects defendant’s argument that the dangerous probability

of success element of the attempt to monopolize claim was

lacking due to the fact that plaintiff was not driven from

business.

Second, the defendant argues that plaintiff failed to

present evidence to show that it could "recoup" or eliminate

its competition and charge supracompetitive prices and

prevent new entrants to the market. The essence of this

analysis is the entry barriers into the market. Matsushita

Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 592

n. 16 (1986).

Dr. Mueller testified as to entry barriers. Rule

argues that a reasonable person would not place any merit in

his theories. However, other market participants also

testified that it was unlikely that any new entrant would

attempt to penetrate this market following the stronghold

created by the Rule/Tie Down merger. The court finds

ample evidence in the record to support the jury’s implicit

finding that entry barriers exist in the generic anchor market.

Third, defendant argues that Rule’s market share

precluded a predatory pricing claim. The first price cut in

this case was alleged to have occurred somewhere between

October and November of 1985. While market share is a

good indicator of ability to engage in predatory pricing,

McGahee, 858 F.2d at 1505, market share is not the only

indicator of a business’ ability to predatorily price. See

Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104,

119 n. 15 (1986); International Air Indus., Inc. v. American

Excelsior Co., 517 F.2d 724, 725 n. 32 (Sth Cir. 1972),

84a

cert. denied, 424 U.S. 943 (1976). In this instance, plaintiff

argued that defendant had a 90% market share at the time

the 1985-86 anchor season commenced. Plaintiff contended

that the price cut occurred prior to its first anchor sale.

Additional price cuts continued into December of 1985.

This evidence alone would be sufficient for the jury to find

that the defendant had the power to predatorily price its

product.

However, plaintiff also presented evidence in support

of this claim that showed that the power of Rule derived

from its multiproduct line. Thus, plaintiff argued to the jury

that Rule funded the predatory pricing through the prices it

charged on its other products. This theory is plausible

because Rule was the dominant anchor distributor to the

country.

For the foregoing reasons, the court concludes that

ample evidence was presented to the jury from which they

could find that Rule possessed the power to engage in

predatory pricing.

Next, Rule argues that the structure of the anchor

market per se precludes a monopoly. The court finds that

the question of whether a monopoly could be created in the

anchor market was a question of fact for the jury to

consider. The jury could have reasonably concluded from

the evidence presented at trial that a monopoly couid be

formed in the anchor market. Thus, the court rejects this

argument as a basis for granting a JNOV.

Fifth, Rule argues that plaintiff's success confirms

that there is no dangerous likelihood of monopolization. The

court finds this to be a restatement of Rule’s first argument.

Accordingly, for the same reasons, the court rejects this

argument as a basis for supporting a JNOV.

85a

2. Market Share/Relevant Market

Rule’s next argument in support of its motion for

JNOV states that plaintiff faiied to establish its market share

in the relevant market. Plaintiff's witnesses testified that the

effective area of competition was the continental United

States. The evidence showed that 99% of Rule’s products

were sold in the continental United States. The court finds

that ample evidence exists for the jury to define the relevant

market and to determine defendant’s market share therein.

Therefore, the court must deny Rule’s motion for a JNOV

on this ground.

3. Measure of Cost

Rule contends that it is entitled to a JNOV based on

the fact that plaintiff allegedly failed to present evidence

below the legally appropriate measure of cost.

Determination of the measure of cost is a (sic) issue for the

court to determine. MCI Communications v. American Tel.

& Tel. Co., 708 F.2d 1081, 1111 (7th Cir.), cert. denied,

464 U.S. 891 (1983). The purpose of determining cost is to

determine whether the party possessed intent to engage in

predatory pricing. McGahee, 858 F.2d at 1503.

Defendant argues that Dr. Andrews’ study into Rule’s

measure of costs employed the incorrect standard.

Specifically, the Andrews study concerned fully distributed

costs, where Rule argues that the appropriate measure of

cost is the long range incremental cost standard.

The court must reject this argument. There was

sufficient evidence regarding the fact that Rule’s costs fell

below average variable cost for the jury to conclude that

defendant possessed the requisite predatory intent.

Accordingly, the issue of whether long run marginal cost or

86a

fully distributed cost is the appropriate standard is irrelevant

as these costing measures both relate to average total cost.

Average total cost is by definition greater than average

variable cost.

Furthermore, the Eleventh Circuit did not reject

outright the use of fully distributed cost, although it

suggested that long range incremental cost would be the

appropriate measure in most instances. /d. at 1503. The

Eleventh Circuit further states that if the prices fall below

short run marginal cost, or average variable cost, then there

is a rebuttable presumption of predatory intent. Such being

the evidence in this case, the jury was entitled to consider

that a rebuttable presumption of predatory intent was

established. Accordingly the court must reject defendant’s

argument in this instance.

4. Meeting Competition

Rule argues that it is entitled to a JNOV because even

if the jury could reasonably conclude that Rule engaged in

below cost pricing, that the pricing was set only to meet low

price competition. The defense of meeting the competition

is an affirmative defense for which Rule had the burden.

McGahee, 858 F.2d at 1493 n.8. Rule makes the bald

assertion that this defense should be determined as a matter

of law. However, the court finds that this issue presents a

fact question that was appropriate for the jury’s

determination. Because there was sufficient evidence to

support the jury’s conclusion in this regard, the court

declines to issue a JNOV on this basis.

5. The Conspiracy

Rule next argues that it is entitled to a JNOV on the

conspiracy claims because, it asserts, the changing market

l

87a

shares of the Rule/Tie Down competitor in comparison to

Anchor fails as a matter of law to qualify as an

"unreasonable restraint of trade," a necessary element to the

conspiracy verdict.

Because the court finds that the attempted monopoly

verdict is well supported, as discussed in this order, the

court declines to address the specific arguments Rule makes

as to the validity of the conspiracy verdicts. However, in

reviewing those claims, the court remains unpersuaded that

a JNOV on any of Rule’s arguments with respect to the

conspiracy is appropriate, even if the attempt verdict were

invalid.

6. The Settlement Agreement

Rule argues that the 1986 Settlement Agreement,

signed between it and Anchor with regard to the then

pending trademark infringement action, releases all claims of

the plaintiff in this antitrust litigation that occurred prior to

March 19, 1986.

The Settlement Agreement has been reviewed by the

court. The court concludes that the language of the

agreement is not ambiguous. Thus, the interpretation of the

contractual provision at issue is a question of law for the

court to determine. Henderson Mill, Ltd. v. McConnell, 237

Ga. 807, 809, 229 S.E.2d 660, 661 (1976). After careful

consideration of the whole agreement, the court finds that the

parties intended to terminate all claims arising out of the

prior trademark infringement litigation. Parties to a release

are not presumed to contract away rights with regard to a

subject that does not clearly appear from the body of the

agreement. Covington v. Brewer, 101 Ga. App. 724, 729,

115 S.E.2d 368 (1960). Thus, the court finds that the

agreement did not cover these antitrust claims.

88a

However, even if the court found that the agreement

were ambiguous, the evidence was such that the jury could

have reasonably concluded that the parties only intended to

release liability for acts which occurred prior to the

trademark infringement litigation.

For the foregoing reasons, the court DENIES

defendant Rule’s motion for a JNOV.

B. Tie Down

Tie Down files a motion for JNOV on plaintiff's

claims against it for conspiracy to restrain trade and

conspiracy to monopolize in violation of sections | and 2 of

the Sherman Act. First, Tie Down argues that the plaintiff

failed to meet its burden of proof with respect to the

conspiracy claims.

Defendant Tie Down argues that an inference of

conspiracy cannot be taken from "conduct as consistent with

permissible competition as with illegal conspiracy,” standing

alone. Next defendant Tie Down argues that "an inference

of antitrust conspiracy cannot stand in the face of direct,

uncontradicted and reasonable testimony that the conspiracy

did not exist." Third, defendant Tie Down argues that

"there can be no inference of a predatory pricing conspiracy

where the alleged conspiracy is implausible." Tie Down is

not entitled to a JNOV on these points. Tie Down fails to

relate the specific facts of its situation to the arguments

which it presents to the court. The court finds sufficient

evidence in support of the jury’s verdict with respect to the

conspiracy.

Next, Tie Down argues that the evidence does not

support a "conscious commitment to a common scheme

designed to achieve an unlawful objective through a course

89a

of predatory pricing." The court finds that there is sufficient

evidence to support a finding of conspiracy and agreement to

form the conspiracy. Thus, the court must deny Tie Down’s

motion on this basis.

Tie Down argues that any inference of antitrust intent

is negated by the fact that it sold its product above average

total cost. In light of the fact that Tie Down was charged

with engaging in a conspiracy, the conclusion fails to

necessarily flow from the premise. Thus, the conclusion is

not proven.

Nor is the court convinced that Tie Down’s capacity

was so limited as to negate any inference in a conspiracy.

Next, Tie Down argues that its price concessions

were legitimate business practices which cannot support the

inference of an antitrust conspiracy. The court agrees with

the general legal principles cited by the defendant. In fact,

the court instructed the jury the same, stating that "the fact

that a supplier varies its prices in an effort to allow a

customer to respond to price competition is not, by itself,

unlawful. Furthermore, a supplier who grants discounts to

a customer has a legitimate interest in making sure the

customer receiving the discount is passing it on in the

marketplace and not pocketing the price support."

However, there exists other evidence from which the

jury may have found a conspiracy. Thus, the jury could

have reasonably concluded that Tie Down conspired with

Rule. Plaintiff's exhibit 683 presented evidence from which

a jury could have inferred an antitrust conspiracy. The court

finds that an inference of a conspiracy was plausible.

Next, Tie Down argues that the plaintiff failed to

prove damages. Specifically, defendant argues that plaintiff

90a

calculated damages based on plaintiff's total sales from the

time of its inception until trial, despite the fact that plaintiff

testified that sales to its customers based in Florida were in

response to another company’s anchors. Thus, Tie Down

asserts that the damage award was overstated. The court

discusses this point in detail in this order with regard to the

defendants’ motion for new trial. See infra. Based on the

same reasoning, the court finds that defendant Tie Down is

not entitled to a JNOV on this ground.

For the foregoing reasons, defendant Tie Down’s

motion for a JNOV is DENIED.

VI. MOTIONS FOR NEW TRIAL

A. Tie Down

Tie Down moves the court for a new trial, as an

alternative to its motion for a JNOV. Tie Down moves for

the new trial on three grounds. First, Tie Down asserts that

the verdict is contrary to law, as discussed in their motion

for judgment notwithstanding the verdict. As explained in

this order, the court finds that the verdict is supported by

law. Next, Tie Down argues that a new trial is required as

the verdict is against the weight of the evidence. Finally,

Tie Down contends that the damages are speculative and

excessive.

B. Rule

Rule moves the court for a new trial on four grounds.

First, Rule argues that damages are excessive. Second, Rule

contends that the damage award was speculative. These

arguments duplicate Tie Down’s arguments with regard to

damages. Third, Rule asserts that the verdict is the result of

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sympathy and prejudice created by plaintiff's counsel’s

improper trial conduct. Finally, Rule argues that the verdict

is against the weight of the evidence. This also reiterates a

Tie Down ground for new trial.

Because several of the grounds asserted by defendants

overlap, the court will consider the motions for new trial as

one.

ce The Standards

A court may grant a motion for a new trial under

Fed. R. Civ. P. 59(a) when the trial was unfair, or the

verdict is against the great weight of the evidence. Ard v.

Southeast Forest Indus., 849 F.2d 517 (\\th Cir. 1988);

Allstate Ins. Co. v. James, 845 F.2d 315 (11th Cir. 1988).

In considering a motion for new trial, the court must view

the evidence in the light most favorable to the verdict.

Evans v. H.C. Watkins Memorial Hosp., 778 F.2d 1021,

1022 (Sth Cir. 1985). In granting a motion for new trial

based on the weight of the evidence, the verdict must be

against the great weight of the evidence, not just the greater

weight of the evidence. Fondren v. Allstate Ins. Co., 790

F.2d 1533, 1535 (11th Cir. 1986). Nor may the court

Substitute its own credibility choices for the credibility

choices of the jury in making the determination. Id.

As to allegations that the trial was unfair due to

misconduct of counsel, the new trial would be appropriate if

the remarks of counsel "impair{ed] gravely the calm and

dispassionate consideration of the case by the jury." James,

845 F.2d at 319. The district court is given wide discretion

"to control the tone of counsel’s arguments and, absent an

abuse of discretion, the decision of the trial court, which has

had the opportunity to hear the offensive remarks within the

92a

context of the argument and to view their effect on the jury,

should not be disturbed." /d. at 318.

D. DISCUSSION

a Trial Conduct

First, defendants argue that plaintiff's counsel mislead

(sic) the jury from the start during his opening statement.

Specifically, they argue that Mr. Porter deliberately

attempted to mislead the jury and elicit their sympathy for

his client by stating that Rule deliberately withheld

documents from plaintiff, and produced them only by

accident. The court, in response to defendants’ objection to

the comment, instructed the jury that the matter of document

production was a discovery matter which would be handled

by the court and was unrelated to any determination they

were to make. Accordingly, the court instructed the jury to

disregard the comment.

The court finds that the comment was not so

egregious to have infected the trial, and that the instruction

to the jury cured any prejudice that may have been a result

of the comment. As such, the court finds this to be

insufficient grounds to have prejudiced the jury and thus

finds it is insufficient grounds to warrant a new trial.

Next, defendants argue that Mr. Chapmans comment

that he reviewed certain documents only after a protective

order was lifted was an attempt to gain the sympathy of the

jury. Defendants claim that the theme was repeated in Mr.

Porter’s closing argument when he argued that Rule failed to

produce its own costing study which was performed.

Finally, defendants contend Mr. Porter’s closing statement,

where he contended that Rule would gain 94.8% of the

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anchor business if Anchor went out of business in the next

two weeks, was prejudicial.

The court reviewed these statements both individually

and as a group. The court does not find that the effect of

these comments over a seven week period, taking into

consideration any curative instructions, elicited prejudice or

sympathy from the jury. Accordingly, the court denies

defendants’ motions for new trial on this ground.

2 Weight of the Evidence

As formerly discussed in the defendants’ motions for

judgment notwithstanding the verdict, the court finds that the

jury verdict was supported by the weight of the evidence.

Accordingly, the court declines to further address this point.

3. Damages

Defendants argue five bases to show that the damage

award is not supported by the weight of the evidence. First,

they claim that the Andrews’ damage study includes damages

that were not caused by Rule. Second, they argue that the

Andrews’ damage study was grounded on an incorrect

baseline figure. Third, they argue that the Andrews’ damage

Study is flawed in that it is based upon erroneous

assumptions. Fourth, they argue that the damage Study is

erroneous in that is (sic) utilizes an improper method of

calculating damages. Fifth, they assert that the damage

award is insupportable as partially based on projections. The

court will address each of these arguments.

The court first examines the assertion by defendants

that the study includes damages that were not caused by

Rule. Some evidence was introduced at trial to show that

Anchor lowered some of its anchor prices in the Southeast

ee

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in order to compete with KGS imported anchors. The

Southeast constitutes the largest marine anchor market.

Other evidence showed that Rule set the market prices.

Once causation of damages is proven, the amount of

damages must be determined by the jury. MCI

Communications v. American Tel. & Tel. Co., 708 F.2d

1081, 1161 (7th Cir.), cert. denied, 104 S.Ct. 234 (1983).

However, strict proof as to what damages have resulted is

not essential. Jd. Damages must, however, only contain

loss estimates that are "directly attributable to unlawful

competition.” (emphasis deleted). Jd. The more lenient

standard for calculating damages is only available once

"proof of defendant’s wrongful acts and their tending to

injure plaintiffs’ business, . . .evidence in the decline of

prices, profits and values, not shown to be attributable to

other causes" is shown. /d., (quoting Bigelow v. RKO Radio

Pictures, Inc., 327 U.S. 251, 264 (1981)). Where damage

calculations are based in part on lawful competition by the

defendant, without some guidance in the record,

consideration of those figures by the jury would amount to

speculation. Jd. at 1162, (citing Coleman Motor Co. v.

Chrysler Corp., 525 F.2d 1338, 1353 (3d Cir. 1975)).

This court has some reservations about damages.

However, the court finds that the proper law of damages was

applied and that the facts support the jury’s verdict in this

regard.

The court finds that the jury heard and considered the

evidence that anchor prices were reduced for a short time in

reaction to lawful competition by the other competitor. The

jury was carefully informed as to how damages were

calculated. The jury properly considered the issue. The

jury’s verdict is supported by the evidence regarding this

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issue. Thus, the court finds that the damage award is not

erred in this respect.

The second ground that Rule and Tie Down advance

in support of a new trial is that the Andrews’ damage study

Started with an incorrect baseline for calculating damages.

Specifically, Rule argues that Anchor voluntarily reduced its

prices in 1985, which resulted in an entire damage study

premised upon prices that were not the result of

anticompetitive actions. The court finds that evidence in the

record supports the contention that the 1985 price reductions

were not voluntary. If the price reductions were not

voluntary there is little merit to defendants’ argument.

Because the record supports plaintiff’s position, the court

rejects this argument.

Third, defendants assert that the damage calculation

is in error in that it is based on false assumptions. Anchor

contends that the Andrews’ study assumes that Anchor would

have sold the exact same number of anchors at the higher

prices; that foreign and other domestic sellers of anchors

would have not effected the market; that Rule and Tie Down

would never lower their prices; and that Anchor’s cost would

have remained constant regardless of the amount of sales.

Proof of damages may be based on assumptions, so

long as the assumptions rest upon sufficient data. G.M.

Brod & Co. v. U.S. Home Corp., 759 F.2d 1526, 1539

(11th Cir. 1985). Here the court finds that the assumptions

employed by plaintiff's expert were sufficiently supported by

the evidence.

The evidence adduced at trial showed that the demand

for anchors remained relatively constant regardless of price.

This evidence supports the assumption that Anchor’s sales

may have remained constant despite an increase in price.

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The evidence further supports the conclusion that the other

foreign and domestic players in the anchor market were

negligible and would have had little if any effect on the

market. Thus, the assumpticn that the foreign or domestic

competitors would not have effected the market is not

erroneous, based on the evidence adduced at trial. Finally,

the court sees little merit in the arguments that the

assumptions that Rule and Tie Down would never lower

their prices and that Anchor’s costs would have remained

constant regardless of the amount of sales produced a flawed

study. Thus, the court declines to further discuss these

points.

Next, in support of the motion for new trial with

respect to damages, defendants argue that the lost revenue

approach to calculating damages is erroneous. Defendants

argue that the lost revenue figure employed by plaintiff failed

to take into account expenses required to generate that

additional revenue. However, plaintiff's expert testified that

damages were calculated on the basis of lost revenues on

actual sales. This being the case, plaintiff's damages took

into account expenses. Thus, the court rejects the argument

that the damage theory employed by plaintiff was erroneous.

Finally, defendants argue that the damage figure is

insupportable in that it includes damages for 1989-90 and

1990-91 when no cost analysis of Rule was performed.

Andrews testified that he considered Rule’s cost through

1990. Thus, there is no merit to the argument that damages

estimates for the 1989-90 were not based on an actual cost

analysis. The 1990-91 season estimates were not based on

actual figures as Rule had not yet released its financial

information for that period. Thus, this figure was based

upon a projection derived from the past performance.

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The court allows estimations in other contexts with

regard to calculating damages under the antitrust laws. The

court has approved use of the "yardstick theory" for

estimating profits. G.M. Brod, 759 F.2d at 1539. This

theory allows the plaintiff to estimate lost profits based on

the profits of a business that is closely comparable to

plaintiff's. Jd. Although somewhat different, the court finds

this theory to provide some support by analogy.

The court finds that the projections of defendant

Rule’s costs versus revenues for the 1990-91 season are

permissible. The projection is based on a five year pattern

of that business. Furthermore, since no other information

was available at the time of trial, the only method of

calculating damages for this time period would be through

the use of a projected figure. As many courts have stated,

failure of a plain

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