[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
U.S. COURT OF APPEALS
No. 95-6234 ELEVENTH CIRCUIT
10/23/98
D.C. Docket No. CV 92-G-1614-S THOMAS K. KAHN
CLERK
CITY OF TUSCALOOSA; MUNICIPAL UTILITIES
BOARD OF ALBERTVILLE; et al.,
Plaintiffs-Appellants,
AUBURN WATER WORKS BOARD; JASPER
WATER WORKS AND SEWER BOARD, INC., et al.,
Plaintiffs-Intervenors-Appellants,
versus
HARCROS CHEMICALS, INC.; JONES
CHEMICALS, INC.,et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Alabama
(October 23, 1998)
Before TJOFLAT and COX, Circuit Judges, and WELLFORD*, Senior Circuit Judge.
_____________________________________________
*Honorable Harry W. Wellford, Senior U.S. Circuit Judge for the Sixth Circuit, sitting by
designation.
TJOFLAT, Circuit Judge:
In the instant case, thirty-nine Alabama municipal entities brought suit in the United
States District Court for the Northern District of Alabama, alleging that five defendant chemical
companies engaged in a conspiracy to fix prices for repackaged chlorine in Alabama in violation
of both federal and state antitrust law. The plaintiffs also asserted claims for fraud under
Alabama law. In a memorandum opinion, the district court ruled much of the plaintiffs’
evidence inadmissible and granted summary judgment to all five defendants on the antitrust
claims and the fraud claims. See City of Tuscaloosa v. Harcros Chems., Inc., 877 F. Supp. 1504
(N.D. Ala. 1995). We review the district court’s evidentiary rulings, reversing in part and
affirming in part. We then review the district court’s summary judgment rulings. We reverse
the district court’s entry of summary judgment with regard to three of the five defendants on the
antitrust claims, and remand for further proceedings. We also vacate the district court’s entry of
summary judgment on most of the fraud claims, and remand for further proceedings.
I.
A.
The plaintiffs and plaintiffs-intervenors in this case are thirty-nine Alabama municipal
entities that purchase repackaged chlorine for the treatment of drinking water, sewage, and
swimming pools. Repackaged chlorine is liquid chlorine that has been pressurized and stored in
1
containers for delivery to, and use by, chlorine consumers. The five defendant corporations are
chemical companies that repackage or distribute chlorine in Alabama.1
At the core of the plaintiffs’ claims are their allegations that the defendants colluded with
each other to set prices for repackaged chlorine distribution contracts. During the period of the
alleged collusion, many Alabama municipal entities purchased chlorine by auction.2 An entity
seeking to purchase chlorine would solicit sealed bids from companies that had submitted bids in
the past. Once the bids were received, the buyer would publicly open the bids and announce
what
each competitor had bid. The buyer would then award its contract to the lowest bidder. The
plaintiffs allege that the defendants submitted sealed bids based on “list prices” previously
1
Defendant Harcros Chemicals, Inc., is a chlorine repackager organized under the laws
of Delaware with its principal place of business in Kansas. Harcros was formerly known as
Thompson-Hayward Chemical Co. For purposes of this opinion both Thompson-Hayward and
Harcros will be referred to as “Harcros.”
Defendant Van Waters & Rogers, Inc., is a chlorine repackager organized under the laws
of the State of Washington with its principal place of business in Washington. In 1986, Van
Waters & Rogers acquired the Moreland-McKesson Chemical Company. For purposes of this
opinion, both companies are referred to as “Van Waters.”
Defendant Jones Chemicals, Inc., is a chlorine repackager organized under the laws of
the State of New York with its principal place of business in New York.
Defendant PB & S Chemical Company, Inc., is a chlorine repackager organized under the
laws of the State of Kentucky with its principal place of business in Kentucky.
Defendant Industrial Chemicals, Inc., a chlorine distributor for defendants Jones
Chemicals and PB & S Chemical Company, is organized under the laws of the State of Alabama
with its principal place of business in Alabama.
The repackaging, distribution and sale of chlorine in Alabama takes place within the flow
of interstate commerce, as is necessary for the plaintiffs to bring this action. See infra notes 5-7.
Chlorine is imported into Alabama for repackaging and is then distributed and sold to Alabama
municipal entities and to other customers in Alabama and elsewhere.
2
A minority of municipal entities negotiated chlorine prices with one or more suppliers.
2
determined amongst themselves, and in this way allocated the repackaged chlorine contracts as
they wished.
Following investigations of the chlorine industry in the Southeast by the United States
Department of Justice and the State of Florida,3 Alabama’s former Attorney General requested
authority from a number of Alabama municipal entities to bring an antitrust action against
chlorine companies on their behalf. His successor, however, changed course and declined, on
behalf of the state, to participate in the proposed litigation. See Harcros, 877 F. Supp. at 1511
n.19.
Fifteen Alabama municipal entities then decided to proceed independently and brought
this action in July 1992. Numerous other municipal entities intervened, and several original
plaintiffs withdrew from the case. The complaints filed by the final thirty-nine plaintiffs,4 as
amended, presented four counts. The first count alleged that the defendants had engaged in a
conspiracy to fix prices, allocate customers or markets, and rig bids in violation of section 1 of
the Sherman Act, 15 U.S.C. § 1 (1994).5 The second count asserted that the defendants had
3
The Justice Department convened a grand jury to investigate the chlorine industry,
including the defendants and others, but eventually dropped its investigation. Florida’s separate
investigation yielded two federal antitrust suits: the “peninsula” case, filed in Jacksonville, and
the “panhandle” case, filed in Pensacola. The district court assigned to the “panhandle” case
announced that it would grant defendants’ motion for summary judgment, at which point the
State of Florida agreed to settle both cases. See Harcros, 877 F. Supp. at 1511.
4
The plaintiffs and plaintiffs-intervenors did not consolidate their two complaints into
one. The two complaints, however, are largely identical.
5
Section 1 provides:
§ 1. Trusts, etc., in restraint of trade illegal; penalty
Every contract, combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with foreign nations,
3
engaged in a conspiracy to monopolize the chlorine market in Alabama in violation of section 2
of the Sherman Act, 15 U.S.C. § 2 (1994).6 The plaintiffs sought treble damages as relief on
these federal antitrust claims pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15 (1994),
and requested a permanent injunction preventing future collusion pursuant to section 16 of the
Clayton Act, 15 U.S.C. § 26 (1994).7
is hereby declared to be illegal. Every person who shall make any contract or
engage in any combination or conspiracy hereby declared to be illegal shall be
deemed guilty of a felony, and, on conviction thereof, shall be punished by fine
not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or
by imprisonment not exceeding three years, or by both said punishments, in the
discretion of the court.
6
Section 2 provides:
§ 2. Monopolizing trade a felony; penalty
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 States, or with foreign nations, shall be deemed
guilty of a felony, and, on conviction thereof, shall be punished by fine not
exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by
imprisonment not exceeding three years, or by both said punishments, in the
discretion of the court.
7
Section 4 of the Clayton Act provides in relevant part:
[A]ny person who shall be injured in his business or property by reason of
anything forbidden in the antitrust laws may sue therefor in any district court of
the United States in the district in which the defendant resides or is found or has
an agent, without respect to the amount in controversy, and shall recover threefold
the damages by him sustained, and the cost of suit, including a reasonable
attorney’s fee.
Section 16 of the Clayton Act provides in relevant part:
Any person, firm, corporation, or association shall be entitled to sue for and have
injunctive relief, in any court of the United States having jurisdiction over the
parties, against threatened loss or damage by a violation of the antitrust laws,
including sections 13, 14, 18, and 19 of this title, when and under the same
4
The third count of the complaints asserted that the defendants conspired to restrain trade
in violation of Alabama Code § 8-10-1 et seq. (1993). The plaintiffs sought actual damages and
$500 in statutory liquidated damages for each instance of injury or damage resulting from the
alleged conspiracy pursuant to Alabama Code § 6-5-60 (1993).8 The fourth count of the
conditions and principles as injunctive relief against threatened conduct that will
cause loss or damage is granted by courts of equity[.]
8
Price-fixing conspiracies are made unlawful by § 8-10-3 of the Alabama Code, which
provides:
§ 8-10-3 Restraint of trade or production; misdemeanor.
Any person or corporation, domestic or foreign, which shall restrain, or attempt to
restrain, the freedom of trade or production, or which shall monopolize, or
attempt to monopolize, the production, control, or sale of any commodity or the
prosecution, management, or control of any kind, class, or description of business
or which shall destroy, or attempt to destroy, competition in the manufacture or
sale of a commodity shall be guilty of a misdemeanor and, upon conviction, shall
be fined not less than $500 nor more than $2,000 for each offense.
Section 6-5-60(a) provides:
§ 6-5-60 Generally.
(a) Any person, firm, or corporation injured or damaged by an unlawful trust,
combine or monopoly, or its effect, direct or indirect, may, in each instance of
such injury or damage, recover the sum of $500 and all actual damages from any
person, firm, or corporation creating, operating, aiding, or abetting such trust,
combine, or monopoly and may commence the action therefor against any one or
more of the parties to the trust, combine, or monopoly, or their attorneys, officers,
or agents, who aid or abet such trust, combine, or monopoly. All such actions may
be prosecuted to final judgment against any one or more of the defendants thereto,
notwithstanding there may be a dismissal, acquittal, verdict, or judgment in favor
of one or more of the defendants.
Under Alabama law, federal antitrust law “prescribe[s] the terms of unlawful monopolies
and restraints of trade as they should . . . be administered in Alabama.” Ex parte Rice, 67 So. 2d
825, 829 (Ala. 1953); see also McCluney v. Zap Prof’l Photography, 663 So. 2d 922, 926 (Ala.
1995) (citing Rice for the proposition that federal law relating to monopolization governs actions
5
plaintiffs’ complaints asserted fraud claims under Alabama law. See Ala. Code § 6-5-100 et seq.
(1993). The plaintiffs sought compensatory and punitive damages for these claims.
After discovery, the defendants moved to exclude the testimony of two of the plaintiffs’
three expert witnesses, and to exclude several pieces of evidence that they asserted were
inadmissible hearsay. The defendants also moved for summary judgment.
The district court, in a lengthy memorandum opinion, excluded the purported hearsay
testimony, see Harcros, 877 F. Supp. at 1518-21, 1538, and much of the plaintiffs’ expert
testimony. See id. at 1524-30, 1532. The district court then granted summary judgment for the
defendants on all claims. See id. at 1521-24, 1532-38. The plaintiffs now appeal, asserting that
the district court improperly excluded their proffered evidence and that summary judgment was
erroneously entered.
B.
We first review the district court’s rulings on the admissibility of the purported hearsay
evidence. Rulings on the admissibility of evidence are reviewed for abuse of discretion. See
Walker v. NationsBank of Fla. N.A., 53 F.3d 1548, 1554 (11th Cir. 1995) (“The admissibility of
evidence is committed to the broad discretion of the district court, and the decision to exclude
certain evidence will be reversed only upon a clear showing of abuse of discretion.”); see also
Hines v. Brandon Steel Decks, Inc., 886 F.2d 299, 302 (11th Cir. 1989) (applying abuse of
discretion standard to hearsay admissibility determination). “A district court by definition
brought under section 6-5-60). Our discussion of the relevant federal law, see infra part III,
therefore applies to and controls our disposition of the plaintiffs’ state-law antitrust claims as
well as their federal antitrust claims.
6
abuses its discretion when it makes an error of law.” Koon v. United States, 518 U.S. 81, 100,
116 S. Ct. 2035, 2047, 135 L. Ed. 2d 392 (1996). Thus, when the district court misinterprets the
Federal Rules of Evidence or controlling case law, our review is plenary. Cf. Joiner v. General
Elec. Co., 78 F.3d 524, 529 (11th Cir. 1996), rev’d on other grounds, — U.S. —, 118 S. Ct. 512,
139 L. Ed. 2d 508 (1997).
The factual findings of the district court that underlie its decisions regarding the
admissibility of the purported hearsay evidence – such as its findings regarding whether a
statement was made in furtherance of a conspiracy, or whether a particular document is a regular
business record – are reviewed for clear error. See United States v. Bazemore, 41 F.3d 1431,
1434 (11th Cir. 1994); United States v. Turner, 871 F.2d 1574, 1581 (11th Cir. 1989). A finding
of fact is clearly erroneous when, after reviewing the entirety of the evidence, the reviewing
court “is left with the definite and firm conviction that a mistake has been committed.”
Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S. Ct. 1504, 1511, 84 L. Ed. 2d 518
(1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525,
542, 92 L. Ed. 746 (1948)).
After reviewing the district court’s rulings on the admissibility of the purported hearsay
evidence, we turn to that court’s rulings on the admissibility of the plaintiffs’ expert testimony.
The Supreme Court recently has clarified the standard of review applicable to appellate
consideration of determinations regarding the admissibility of expert testimony. See General
Elec. Co. v. Joiner, — U.S. —, 118 S. Ct. 512, 139 L. Ed. 2d. 508 (1997), rev’g 78 F.3d 524, 529
(11th Cir. 1996). In Joiner, the Court noted that a district court’s evidentiary rulings are
reviewed for abuse of discretion. See id. at —, 118 S. Ct. at 517. The Court then held that
7
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469
(1993), did not alter this long-standing rule in the specific context of expert testimony, and in
fact did not address the standard of appellate review of such rulings at all. See Joiner, — U.S. at
—, 118 S. Ct. at 517. The Court went on to note that a court of appeals should apply this abuse
of discretion standard of review uniformly, without regard to whether the district court ruling
under review allowed or disallowed the expert testimony at issue. Id. We therefore review the
district court’s rulings excluding the plaintiffs’ expert testimony for abuse of discretion. To the
extent that a ruling of the district court turns on an interpretation of a Federal Rule of Evidence
or on the court’s decision to apply Daubert, however, our review is plenary. See Joiner v.
General Elec. Co., 78 F.3d at 529, rev’d on other grounds, — U.S. —, 118 S. Ct. 512, 139 L. Ed.
2d 508 (1997); Carmichael v. Samyang Tire, Inc., 131 F.3d 1433, 1435 (11th Cir. 1997), cert.
granted sub nom. Kumho Tire Co. v. Carmichael, — U.S. —, 118 S. Ct. 2339, 141 L. Ed. 2d 711
(1998).
Having examined the district court’s evidentiary rulings, we finally proceed to review the
district court’s entry of summary judgment on the basis of the admissible evidence. This review
proceeds de novo. See Southern Card & Novelty, Inc. v. Lawson Mardon Label, Inc., 138 F.3d
869, 873 (11th Cir. 1998); Uniforce Temp. Personnel, Inc. v. National Council on Compensation
Ins., Inc., 87 F.3d 1296, 1299 (11th Cir. 1996). “Summary judgment is proper ‘if the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.’” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct.
2548, 2552, 91 L. Ed. 2d 265 (1986) (quoting Fed. R. Civ. P. 56(c)). “The party seeking
8
summary judgment [must] identify[] for the district court those portions of the record ‘which it
believes demonstrate the absence of a genuine issue of material fact.” Cohen v. United Am.
Bank of Cent. Fla., 83 F.3d 1347, 1349 (11th Cir. 1996) (quoting Cox v. Administrator United
States Steel & Carnegie 17 F.3d 1386, 1396 (11th Cir. 1994) (in turn quoting Celotex Corp., 477
U.S. at 323, 106 S. Ct. at 2552). “There is no genuine issue for trial unless the non-moving
party establishes, through the record presented to the court, that it is able to prove evidence
sufficient for a jury to return a verdict in its favor.” Cohen, 83 F.3d at 1349.
II.
A.
We consider first the district court’s rulings regarding the admissibility of testimony that
the defendants moved to exclude as inadmissible hearsay. We reverse in part and affirm in part.
1.
The plaintiffs proffered testimony regarding an alleged admission by the late Robert
Jones (“Jones”), the former chairman, chief executive officer, and president of defendant Jones
Chemicals. Loraine and Peter Cassassa, friends of Jones during the period of the alleged
conspiracy, testified in depositions that on several occasions in the mid-1980s, Jones admitted to
them that he was at that time involved in fixing chlorine prices in the Southeast. Loraine
Cassassa testified that Jones told her that he “got together with the people [who were] submitting
the bids and they knew what each other were going to bid before that bid was ever submitted.”
9
She also testified that Jones told her that he knew such conduct was illegal, but that “[t]hat’s how
big business goes.” Peter Cassassa gave substantially identical testimony.
The district court excluded the testimony of the Cassassas as “hearsay.” See infra note
10; Harcros, 877 F. Supp. at 1518-19, 1538. We conclude that the court erred as a matter of law
by making this determination and therefore abused its discretion. Accordingly, we reverse the
ruling excluding that testimony.
Under the Federal Rules of Evidence, “‘[h]earsay’ is a statement, other than one made by
the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the
matter asserted.” Fed. R. Evid. 801(c). In general, “[h]earsay is not admissible except as
provided by [the federal] rules . . . .” Fed. R. Evid. 802. A “statement by [a] party’s agent or
servant concerning a matter within the scope of the agency or employment, made during the
existence of the relationship,” however, is deemed an admission by a party opponent and is
excluded from the definition of hearsay. Fed. R. Evid. 801(d)(2)(D); see Zaben v. Air Prods. &
Chems., Inc., 129 F.3d 1453, 1456 (11th Cir. 1997).
Robert Jones, as president of Jones Chemicals from 1986 to 1989, and as the chairman
and CEO of the company from 1986 to 1993, clearly was an “agent or servant” of the company.9
9
Because Fed. R. Evid. 801(d)(2)(D) does not define the term “agent,” we must assume
that Congress intended to refer to general common law principles of agency when it used the
term. See United States v. Saks, 964 F.2d 1514, 1523-24 (5th Cir. 1992) (citing Community for
Creative Non-Violence v. Reid, 490 U.S. 730, 109 S. Ct. 2166, 2172-73, 104 L. Ed. 2d 811
(1989)). At common law, senior officers of a corporation normally are agents and servants of
the corporation. See 2A C.J.S. Agency § 4 (1972) (“An agent is . . . a person employed or
authorized by another to act for him, or to transact business for him[, or] one entrusted with
another’s business . . . .”) (citing cases); Restatement (Second) of Agency § 2 cmt. c (1958)
(“[T]he officers of a corporation or a ship, . . . all of whom give their time to their employers,
are servants equally with the janitor.”); see also, e.g., Shelter Modular Corp. v. Cardinal Enters.,
Inc., 347 So. 2d 1334, 1338 (Ala. 1977) (vice-president of corporation is agent thereof); Ex parte
10
Moreover, the record on appeal establishes that Jones set chlorine prices for Jones Chemicals
throughout the period of the alleged conspiracy. His purported statements regarding Jones
Chemical’s chlorine pricing practices thus “concern[ed] a matter within the scope of [his] agency
or employment, made during the existence of the relationship.” See, e.g., Guccione v. Hustler
Magazine, Inc., 632 F. Supp. 313, 320 (S.D.N.Y.), rev’d on other grounds, 800 F.2d 298 (2d Cir.
1986) (statements made by chief executive officer of defendant corporation, within scope of his
authority, held admissible). Jones’ purported statements to the Cassassas are therefore
admissible as non-hearsay party admissions under Fed. R. Evid. 801(d)(2)(D).10
Board of Sch. Comm’rs of Mobile County, 178 So. 63, 64 (Ala. 1937) (“It is the general rule of
the common law that the relationship of master and servant exists whenever the employer retains
the right to direct the manner in which the business shall be done, as well as the result to be
accomplished, or, in other words, not only what shall be done, but how it shall be done.”).
10
The district court found the testimony inadmissible as to Jones on two grounds: (1) that
“the president of a corporation is not the ‘alter ego’ of the corporation,” and that Jones therefore
did not “speak for” the corporation, as the court believed was required by controlling Alabama
evidence law; and (2) that the purported statements did not fall under the co-conspirator hearsay
exception found in Fed. R. Evid. 801(d)(2)(E). See Harcros, 877 F. Supp. at 1518-19. Both of
these rulings are in error.
First, it is well settled that the Federal Rules of Evidence, not state evidence law, govern
the admissibility of evidence in cases in federal court. See Fed. R. Evid. 1101; Johnson v.
William C. Ellis & Sons Iron Works, Inc., 609 F.2d 820, 821 (5th Cir. 1980). Under the Federal
Rules, “it is [not] necessary to show that an employee or agent declarant possesses ‘speaking
authority,’ tested by the usual standards of agency law, before a statement can be admitted
against the principal.” Wilkinson v. Carnival Cruise Lines, Inc., 920 F.2d 1560, 1565 (11th Cir.
1991). Instead, it is necessary that the content of the declarant’s statement concern a matter
within the scope of his employment or agency. See Fed. R. Evid. 801(d)(2)(D); Wilkinson, 920
F.2d at 1565. The district court therefore erred as a matter of law in holding otherwise.
Second, Rule 801(d)(2)(E) establishes that “a statement by a coconspirator of a party
during the course and in furtherance of the conspiracy” is non-hearsay evidence. Fed. R. Evid.
801(d)(2)(E). As discussed below, we agree with the district court’s conclusion that Jones’
purported statements were not made “during the course and in furtherance of the conspiracy.”
That the Cassassas’ testimony is not made admissible by Rule 801(d)(2)(E), however, does not
change the fact that the testimony is admissible as a party admission under Rule 801(d)(2)(D).
11
The appellants argue that the Cassassas’ testimony ought also to be admitted against the
other defendants, on the ground that Jones’ purported statements were made “during the course
and in furtherance of the conspiracy” and therefore fall within the exemption contained in Rule
801(d)(2)(E). Declarations by one defendant in a conspiracy case may be admissible against
other defendants as non-hearsay upon sufficient showing that the statement was made by a co-
conspirator during the course and in furtherance of the conspiracy. See Fed. R. Evid.
801(d)(2)(E); Bourjaily v. United States, 483 U.S. 171, 175-76, 107 S. Ct. 2775, 2778-79, 97 L.
Ed. 2d 144 (1987); United States v. Young, 39 F.3d 1561, 1571 (11th Cir. 1994). “For a
declaration by one defendant to be admissible against other defendants . . . , the [plaintiffs] must
establish by a preponderance of the evidence: (1) that a conspiracy existed, (2) that the
defendant and the declarant were members of the conspiracy, and (3) that the statement was
made during the course and in furtherance of the conspiracy.” United States v. Van Hemelryck,
945 F.2d 1493, 1497-98 (11th Cir. 1991); see also, e.g., United States v. Byrom, 910 F.2d 725,
734 (11th Cir. 1990); United States v. Allison, 908 F.2d 1531, 1533 (11th Cir. 1990) (citing
Bourjaily, 483 U.S. at 175, 107 S. Ct. at 2778-79). In determining the admissibility of co-
conspirator statements, the court may consider both the co-conspirator’s hearsay statement and
independent external evidence. See Bourjaily, 483 U.S. at 181, 107 S. Ct. at 2781; United States
v. Chestang, 849 F.2d 528, 531 (11th Cir. 1988).
This circuit applies “a liberal standard in determining whether a statement is made in
furtherance of a conspiracy.” United States v. Santiago, 837 F.2d 1545, 1549 (11th Cir. 1988).
The statement need not be necessary to the conspiracy, but must only further the interests of the
conspiracy in some way. See United States v. Caraza, 843 F.2d 432, 436 (11th Cir. 1988) (per
12
curiam). Statements made to solicit membership or participation in the conspiracy, for example,
see United States v. Montes-Cardenas, 746 F.2d 771, 780 (11th Cir. 1984), or statements
explaining the conspiracy to a new member, see United States v. Reyes, 798 F.2d 380, 384 (10th
Cir. 1986), are made in furtherance of the conspiracy. The determination of whether a statement
is made in furtherance of a conspiracy is a finding of fact subject to review for clear error. See
United States v. Ayarza-Garcia, 819 F.2d 1043, 1050 (11th Cir. 1987).
Jones’ purported statements do not satisfy even this liberal standard. The purported
statements were made to friends, who were neither involved in the alleged conspiracy nor invited
to participate therein, over drinks or on the golf course. The statements could not have furthered
the interests of the alleged conspiracy in any way. A statement that merely discloses the
existence of a conspiracy to a non-conspirator, that merely “spills the beans,” with no intention
of recruiting the auditor into the conspiracy does not further the conspiracy. See United States v.
Posner, 764 F.2d 1535, 1538 (11th Cir. 1985) (holding that a letter written by a co-conspirator,
containing preliminary appraisals of real estate, was not made in furtherance of a conspiracy to
overvalue the real estate and thus was not admissible as the statement of a co-conspirator
because the letter was not written to conceal the conspiracy and served only to disclose the
scheme); see also United States v. Moss, 138 F.3d 742, 744 (8th Cir. 1998) (holding that “[a]
statement made in furtherance of a conspiracy ‘must somehow advance the objectives of the
conspiracy, not merely inform the listener of the declarant’s activities,’” in order to be
admissible under Rule 801(d)(2)(E) (citation omitted)).
We conclude that the district court did not err in finding that Jones’ purported statements
were not made in furtherance of the alleged conspiracy, and that the Cassassas’ testimony is
13
therefore not admissible against the alleged co-conspirators. Because Jones’ purported
statements were non-hearsay party admissions, however, we conclude that the statements do fall
within the exception contained in Rule 801(d)(2)(D), and that the Cassassas’ testimony is
therefore admissible against Jones Chemicals.
2.
The district court also excluded as inadmissible hearsay a typewritten notation on a bid
tabulation compiled by one of the appellant municipal entities, the Board of the Mobile Water
and Sewer Commission. The bid tabulation lists the bids received by Mobile for a chlorine
contract in April of 1987, and shows that Industrial Chemicals and Jones Chemicals submitted
tie bids for the contract in question. The typewritten notation on the bid tabulation sheet, which
appears next to the Industrial bid, reads: “This is a complimentary bid for Jones. As per O. W.
Caine, Sales Manager, pass contract on to Jones Chem.” Caine was a sales manager for
Industrial. The appellants assert that this notation reflects Caine’s, and hence Industrial’s,
intention to forgo the Mobile contract in order to maintain the distribution of contracts
established by the alleged conspiracy.11
The district court excluded the notation as hearsay, apparently on the ground that it did
not qualify as a party admission. See Harcros, 877 F. Supp. at 1520. We do not reach the
11
The plaintiffs assert that complimentary bids, i.e., bids submitted with no intention of
winning the contract in question, were used by the defendants to create the illusion of
competition in the Alabama chlorine market. The defendants reply that, because municipal
entities often would solicit bids only from companies that had bid on previous contracts,
complimentary bids were used merely to stay in the running for future contracts when, for
whatever reason, a company did not wish, or was not able, to pursue a particular contract.
14
question of whether the district court erred in excluding the notation, because the notation adds
nothing to Caine’s affidavit testimony, discussed infra, for purposes of summary judgment.12
12
The district court apparently excluded the Caine notation on the ground that it did not
qualify as a party admission under Rule 801(d)(2)(D); since Caine did not have final authority
over chlorine bids, the court viewed any statement by him regarding the Mobile bid in question
as “unauthorized.” Harcros, 877 F. Supp. at 1520. As discussed in note 10, supra, the Federal
Rules of Evidence do not require that Caine have had “speaking authority” in order for his
statement to be admissible under the party admission exception; the district court’s rationale was
therefore legally erroneous. We could not determine whether the Caine notation is actually
admissible as a party admission under Rule 801(d)(2)(D) even if it were necessary to do so,
however, because the writer of the notation has not been identified and the record on appeal does
not disclose whether the document was properly authenticated in the district court. The district
court excluded the notation without a hearing, solely on the basis of the parties’ briefs.
The plaintiffs also argued that the notation was admissible as a regular business record
under Rule 803(6). Rule 803(6) provides an exception from the general prohibition on hearsay
when the proffered statement is
[a] memorandum, report, record, or data compilation, in any form, of acts, events,
conditions, opinions, or diagnoses, made at or near the time by, or from
information transmitted by, a person with knowledge, if kept in the course of a
regularly conducted business activity, and if it was the regular practice of that
business activity to make the memorandum, report, record, or data compilation,
all as shown by the testimony of the custodian or other qualified witness, unless
the source of information or the method or circumstances of preparation indicate
lack of trustworthiness.
Fed. R. Evid. 803(6). The district court apparently rejected this argument without comment, and
the plaintiffs complain of this holding on appeal. On the basis of the inadequate record on
appeal, the notation appears not to have been a properly authenticated regular business record.
The notation is admissible under Rule 803(6) if it is “[a] memorandum [or] record . . . of acts [or]
events . . . made at or near the time by, or from information transmitted by, a person with
knowledge” of the acts in question, and “if it was the regular practice of the business activity to
make the memorandum [or] record . . . all as shown by the testimony of the custodian or other
qualified witness, unless the source of the information or the method or circumstances of
preparation indicate lack of trustworthiness.” Fed. R. Evid. 803(6) (emphasis added). From the
record on appeal, the Caine notation appears not to satisfy the requirements of the business
records exception because the record reveals no attempt whatsoever to authenticate the notation,
as is explicitly required by Rule 803(6). See Fed. R. Evid. 803(6); United States v. Williams,
837 F.2d 1009, 1013 n.6 (11th Cir. 1988) (proper foundation for admission of 803(6) testimony
should include testimony of witness with personal knowledge of how document was compiled);
Itel Capital Corp. v. Cups Coal Co., 707 F.2d 1253, 1259-60 (11th Cir. 1983) (person who
15
The district court also excluded an affidavit offered by Caine, and provided numerous
reasons for doing so. See Harcros, 877 F. Supp. at 1520. Portions of the affidavit, the court
stated, were “ambiguous” because “none of [the affidavit] testimony establish[ed] conspiracy.”
The court also concluded that “[t]he other portions of Mr. Caine’s affidavit add[ed] nothing”
because they were “inadmissible hearsay” and because the affidavit could not “stand alone.”
All of these grounds for excluding Caine’s affidavit testimony are erroneous. Questions
regarding the weight of the affidavit testimony, such as whether the affidavit is “ambiguous,” are
not matters for consideration by the court on summary judgment. The factfinder at trial will
decide whether to lend credence to the affidavit information. With regard to the portions of the
affidavit that the court ruled were “inadmissible hearsay,” we believe the court erred in its
determination. As noted in part II.A.1, supra, “‘[h]earsay’ is a statement, other than one made by
the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the
matter asserted.” Fed. R. Evid. 801(c). No part of Caine’s affidavit fits this definition. Caine
actually prepared business record need not testify but other circumstantial evidence and
testimony must suggest trustworthiness of documents); United States v. Dreer, 740 F.2d 18, 20
(11th Cir. 1984) (proper foundation for admission of business record must sufficiently indicate
reliability, including “circumstances surrounding the origin and the nature of the compilation”).
The district court rejected the plaintiffs’ invocation of the business records exception, however,
in the same fashion that it rejected their reliance upon the party admission exception – on the
basis of the parties’ briefs alone. We therefore could not determine whether the district court
erred in concluding that the Caine notation is not admissible under Rule 803(6), even if it were
necessary to do so.
We also note that, even if the notation is determined not to be admissible as hearsay, the
notation might be admissible as non-hearsay insofar as it is not offered to prove the truth of the
matter asserted. See Fed. R. Evid. 801. The Caine notation might be offered for several
purposes other than to prove the truth of the matter asserted. The notation merely could not be
offered to prove that Caine instructed the Mobile board to withdraw Industrial’s bid; the
appellants would have to rely on Caine’s affidavit testimony and other evidence to support that
proposition.
16
testifies in his affidavit regarding the withdrawn Mobile bid, bidding practices at Industrial, and
bidding practices at Harcros – all matters in which he personally participated or which he
personally observed. At no point in the affidavit does Caine relate any statement made by
anyone that constitutes inadmissible hearsay.13 The district court therefore abused its discretion
in excluding Caine’s affidavit testimony. Consequently, we conclude that this testimony is
admissible in its entirety.
3.
13
Two statements in the Caine affidavit may have been the cause of the district court’s
hearsay concerns. In discussing a bid that he participated in submitting to the Mobile Water and
Sewer Board in 1987, while employed as a sales representative for Industrial in the
Mobile/Dothan area, Caine stated: “Mr. William Welch of Industrial Chemicals told me that,
because there was a tie bid and Jones was the incumbent, Industrial needed to bow out
gracefully.” The following sentence of Caine’s affidavit read: “I then communicated that
information to Mrs. Whitworth [of the Mobile Board] . . . .”
The alleged statement of Welch to Caine, however, constitutes a non-hearsay admission
by a party opponent. See Fed. R. Evid. 801(d)(2)(D). Welch, as president of Industrial, was an
agent of the company. In addition, since Welch stated in his deposition that he had sole
responsibility for determining chlorine bid prices during a period that included 1987, his
statement that Industrial should “bow out” of this particular chlorine bid concerned a matter
within the scope of his agency and was made during the existence of that agency relationship.
Cf. supra note 9 and accompanying text.
Caine’s report of his past statement to Mrs. Whitworth also qualifies as a non-hearsay
admission under Rule 801(d)(2)(D). Welch stated in his deposition that Caine was an Industrial
sales representative who served the Mobile area during 1987. As such, Caine was an agent of
Industrial when he communicated Welch’s “bow out” directive to Mrs. Whitworth of the Mobile
Board. Communicating a bid (or the withdrawal thereof) authorized by his supervisor to a
prospective customer in the Mobile area surely was within the scope of Caine’s agency as a sales
representative for that area. We express no opinion on whether this statement would constitute
inadmissible hearsay if it did not qualify as an admission.
17
The district court also excluded the testimony of Barbara Krysti, who offered testimony
against Harcros. See Harcros, 877 F. Supp. at 1520-21. Barbara Krysti is the widow of Lloyd
Krysti, who was a sales manager at Harcros. Barbara Krysti stated in an affidavit that
[i]n 1987 or 1988, Lloyd found out that Joe Ragusa [(Harcros’ vice-president for
the Southeast)] was getting together with his competitors and fixing the price of
chlorine before bids were submitted. Lloyd’s reaction to me was that Joe was
crazy for doing this and that it was illegal and that he could go to jail. . . . Lloyd
first told me about the price fixing in 1988. We talked about it several times after
that.
The proffered testimony is double hearsay; Barbara Krysti relates Lloyd Krysti’s account
of what Joe Ragusa said.14 Such “hearsay included within hearsay is not excluded under the
hearsay rule if each part of the combined statements conforms with an exception to the hearsay
rule provided in these rules.” Fed. R. Evid. 805; see, e.g., Mahlandt v. Wild Canid Survival and
Research Ctr., Inc., 588 F.2d 626, 630 (8th Cir. 1978). Because chlorine pricing and sales were
within the scope of Joe Ragusa’s employment with Harcros, Ragusa’s statements to Lloyd Krysti
clearly fall within the party admission exception to the hearsay rule.
Lloyd Krysti’s statements to Barbara Krysti, however, do not fall within any exception to
the hearsay rule. The record establishes that chlorine pricing was not substantially within the
scope of Lloyd Krysti’s employment. Lloyd Krysti was involved in the pricing and sales of
other chemicals and was rarely and only ministerially involved in chlorine sales. Lloyd Krysti
did not set prices for chlorine. Indeed, the plaintiffs themselves assert that Joe Ragusa was
14
We assume arguendo that Lloyd Krysti “found out” about the alleged conspiracy
through conversations with Ragusa or by overhearing Ragusa speak about the conspiracy. Even
if Lloyd “found out” about the alleged conspiracy in some other fashion, however, our
conclusion – that Barbara Krysti’s testimony is inadmissible – remains the same. No matter how
Lloyd Krysti “found out” about the conspiracy, Barbara Krysti’s recitation of his statements to
her is inadmissible hearsay for the reasons stated in the text.
18
solely responsible for setting chlorine prices in Alabama, and none of the many Harcros
documents in the record indicate otherwise. On the contrary, in a 1984 memorandum, Ragusa
severely upbraided several Harcros sales managers who set chlorine prices without his approval.
Because the content of Lloyd Krysti’s statements did not concern a matter within the
scope of his employment or agency, they do not fall within the party admission exception in Rule
801(d)(2)(D). See Wilkinson, 920 F.2d at 1565-66. In addition, Lloyd Krysti’s statements were
not made in furtherance of the alleged conspiracy, but “merely informed” Barbara Krysti – a
non-conspirator – of the existence of the alleged conspiracy. See Moss, 138 F.3d at 744; cf. Fed.
R. Evid. 801(d)(2)(E). Because Lloyd Krysti’s statements to Barbara Krysti do not fall within
any exception to the hearsay rule, we affirm the district court’s ruling excluding the testimony of
Barbara Krysti.
B.
We next turn to the district court’s rulings on the admissibility of the plaintiffs’ proffered
expert testimony. The district court excluded the testimony of Perry Garner, a certified public
accountant. Garner offered data and testimony regarding costs borne and profits garnered by the
defendants in the Alabama chlorine market, and also verified the data included in a database
prepared by another of the plaintiffs’ experts, statistician James McClave. McClave offered data
showing, and testimony regarding the statistical significance of, market shares in the Alabama
chlorine market, incumbency rates (i.e., the frequency with which companies retained chlorine
contracts with particular municipalities from year to year), the frequency of tie bids in the
market, prices bid by the defendants, winning bid prices, and costs borne by the defendants. The
19
district court excluded McClave’s testimony, in its entirety, as well. The data compiled by
McClave were also used by Dr. Robert Lanzillotti, an economist who offered deposition
testimony as well as a report regarding the economic structure of the Alabama chlorine market
and the likelihood, from an economic standpoint, that a price-fixing conspiracy existed in that
market. The district court criticized Lanzillotti’s testimony at length, see Harcros, 877 F. Supp.
at 1524-28, 1530-32, but did not exclude the evidence. See id. at 1538. The defendants do not
challenge the district court’s denial of their motion to exclude Lanzillotti’s testimony.
Federal Rule of Evidence 702,15 as explained by the Supreme Court in Daubert v. Merrell
Dow Pharmaceuticals, Inc., 509 U.S. 579, 589, 113 S. Ct. 2786, 2794-95, 125 L. Ed. 2d 469
(1993), and its progeny, controls determinations regarding the admissibility of expert testimony.
Expert testimony may be admitted into evidence if: (1) the expert is qualified to testify
competently regarding the matters he intends to address; (2) the methodology by which the
expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry
mandated in Daubert;16 and (3) the testimony assists the trier of fact, through the application of
15
Rule 702 reads:
Rule 702. Testimony by Experts
If scientific, technical, or other specialized knowledge will assist the trier of fact
to understand the evidence or to determine a fact in issue, a witness qualified as
an expert by knowledge, skill, experience, training, or education, may testify
thereto in the form of an opinion or otherwise.
16
The Daubert Court noted that “[t]he inquiry envisioned by Rule 702 is, we emphasize,
a flexible one.” Daubert, 509 U.S. at 594, 113 S. Ct. at 2797. “Many factors will bear on the
inquiry [into whether an expert’s reasoning or methodology is reliable], and we do not presume
to set out a definitive checklist or test.” Id. at 593, 113 S. Ct. at 2796. Nevertheless, the Court
did identify certain factors that may be pertinent to such an inquiry. These factors include:
“whether [the theory or technique at issue] can be (and has been) tested”; whether it “has been
20
scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in
issue. See Fed. R. Evid. 702; Daubert, 509 U.S. at 589, 113 S. Ct. at 2794 (holding that “under
the [Federal] Rules the trial judge must ensure that any and all scientific testimony or evidence
admitted is not only relevant, but reliable.”); Joiner v. General Elec. Co., 78 F.3d at 529-30,
rev’d on other grounds, — U.S. —, 118 S. Ct. 512, 139 L. Ed. 2d. 508 (1997) (stating that Rule
702 requires that the expert be qualified and that his testimony assist the trier of fact); see also
Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1238 (3d Cir.), cert.
denied sub nom. Moyer Packing Co. v. Petruzzi’s IGA Supermarkets, Inc., 510 U.S. 994, 114 S.
Ct. 554, 126 L. Ed. 2d 455 (1993) (combining Rule 702’s requirements with the reliability
requirement in a three-part test for admissibility).
We conclude that the district court abused its discretion in excluding Garner’s testimony
and therefore reverse that ruling. We further conclude that the district court’s interpretations of
Daubert and of Rules 104 and 702, which formed the basis for the court’s exclusion of the
testimony of McClave, were erroneous as a matter of law. We also believe, however, that
portions of McClave’s testimony lie outside of his competence as a statistician and that the
methodology underlying a small portion of McClave’s data and testimony is fundamentally
flawed, thus requiring the exclusion of those portions of McClave’s data and testimony.
Accordingly, we affirm the district court’s ruling with regard to these portions, but reverse its
ruling excluding the remainder of McClave’s testimony.
subjected to peer review and publication”; the “known or potential rate of error” of the
technique, as well as the “existence and maintenance of standards controlling [its] operation”;
and the degree to which the relevant scientific community accepts the theory or technique as
reliable. Id. at 593-94, 113 S. Ct. at 2796-97. We discuss these factors in greater detail in note
25, infra.
21
1.
Garner analyzed the costs, revenues, and profits of the defendants and verified the data
compiled by McClave and used by McClave and Lanzillotti. Although the defendants did not
move to exclude Garner’s testimony, the court excluded it sua sponte without benefit of a
Daubert hearing and with little discussion:
The “expert” testimony of Mr. Perry Garner, C.P.A., is also inadmissible. He is
no more qualified than Dr. McClave to testify on opinions based on economic
theory. His deposition testimony regarding Van Waters’ actual profit margins
shows only that he did not consider a number of important cost factors.
Significantly, exhibits produced by Mr. Garner have all been produced since his
deposition at which time he expressed no opinions concerning the possibility of
the existence of or the members of any antitrust conspiracy.
Harcros, 877 F. Supp. at 1532.
In evaluating the district court’s reasoning under our three-part test for admitting expert
testimony, we begin by concurring with the district court’s assertion that Garner was not
qualified to render opinions based on economic theory. Nowhere in his extensive testimony,
however, did Garner offer any such opinion. As to the testimony that Garner did offer, it seems
apparent that he was qualified to provide it.17 With respect to the reliability element, the district
court did not identify the “important cost factors” that Garner ostensibly overlooked and that
could have affected the reliability of his methodology. Upon review of Garner’s testimony, we
17
Garner holds a C.P.A. license and has experience analyzing the books of companies
that participate in allegedly collusive markets. The defendants, who did not move for the
exclusion of his testimony, do not attack his methodology on appeal. We do not doubt that
accounting expertise is among the sorts of technical and specialized expertise the use of which is
governed by Rule 702 and Daubert. See Morse/Diesel, Inc. v. Trinity Indus., Inc., 67 F.3d 435,
444 (2d Cir. 1995) (stating in dicta that expert testimony of certified public accountants is likely
to be admissible); Frymire-Brinati v. KPMG Peat Marwick, 2 F.3d 183, 186 (7th Cir. 1993)
(requiring application of Daubert standard to accountant’s expert testimony).
22
find that he considered material costs, labor costs, overhead costs, transportation costs,
depreciation costs, insurance costs, and a host of other costs. We are at a loss to identify any
“important cost factors” that Garner overlooked. Finally, Garner need not have expressed any
opinion regarding the existence of any conspiracy in order for his testimony to be admissible
under Rule 702; his testimony need only have “assist[ed] the trier of fact to understand the
evidence or to determine a fact in issue.” Fed. R. Evid. 702. Garner’s testimony does so by
calculating, compiling, and explaining the costs borne and profits enjoyed by the defendants
during the period of the alleged conspiracy; this information would assist the trier of fact in
determining whether, for purposes of the antitrust claims, the defendants acted in a consciously
parallel fashion18 and whether, for purposes of the fraud claims, defendants’ costs impelled price
increases. We therefore conclude that the district court abused its discretion in excluding
Garner’s testimony.
2.
The district court criticized at length the testimony of the plaintiffs’ statistician, Dr.
James McClave, and ultimately excluded McClave’s testimony in its entirety. We hold that the
district court excluded McClave’s data and testimony on the basis of a legally erroneous
interpretation of Rule 702, and that the court abused its discretion in excluding McClave’s
18
As is discussed in part III.A.3, infra, in order to prevail on their claim of the existence
of a price-fixing conspiracy without direct evidence, the plaintiffs must show (1) that the
defendants acted in a consciously parallel fashion, and (2) “plus factors” that tend to exclude the
possibility of non-collusive action. See Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575, 1583
(11th Cir. 1988); Gainesville Utils. Dep’t v. Fla. Power & Light Co., 573 F.2d 292, 300-02 (5th
Cir. 1978).
23
testimony in its entirety. We conclude, however, that parts of McClave’s testimony must be
excluded because those parts concern issues that are outside McClave’s area of competence as a
statistician. We also hold that a small portion of McClave’s data and testimony must be
excluded because of a flaw in the statistician’s definition of the relevant market.
The district court’s memorandum opinion offered several grounds for excluding
McClave’s testimony.19 See Harcros, 877 F. Supp. at 1528-30. Some of these grounds are
sufficient to warrant the exclusion of parts of McClave’s testimony. As the following discussion
demonstrates, however, none of these grounds is sufficient to warrant the exclusion of
McClave’s testimony in its entirety (as would, for instance, a finding that McClave was not
qualified to testify as an expert in antitrust statistics).20 We therefore conclude that the district
court abused its discretion in excluding admissible portions of McClave’s testimony by ruling
that McClave’s testimony in its entirety was inadmissible.
The district court first attacked McClave’s methodology:
McClave’s methodology to determine the existence of a conspiracy is his
subjective judgment. His subjective judgments, however, cannot be tested. His
opinions about whether high losing bids are signals is based on looking at the data
using his “experience” and “judgment.” He admits there is no statistical test to
determine that a high losing bid is a signal. His statistical analysis is not
impressive. Having testified, McClave has not made a case under Fed. R. Evid.
104. His statistics show anything but a successful conspiracy.
19
The district court’s opinion is far from clear. The grounds for the exclusion of
McClave’s testimony that we identify are those that we are able to reconstruct from the
conclusory and disjointed miscellany that constitutes the district court’s discussion of McClave’s
testimony.
20
The defendants do not assert, and could not reasonably assert, that McClave is not
qualified to testify as to statistical evidence in antitrust cases. McClave holds a Ph.D. in
statistics and has considerable experience in the analysis of markets alleged to be collusive.
24
Harcros, 877 F. Supp. at 1529. Review of this passage reveals two fundamental legal errors. We
first consider an error that pervades the court’s opinion: the confusion and conflation of
admissibility issues with issues regarding the sufficiency of the plaintiffs’ evidence to survive
summary judgment.21 To put it succinctly, McClave’s data and testimony need not “show a
successful conspiracy” to be admitted under Rule 702 as circumstantial evidence of a conspiracy.
As expert evidence, the testimony need only assist the trier of fact, through the application of
scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in
issue. As circumstantial evidence, McClave’s data and testimony need not prove the plaintiffs’
case by themselves; they must merely constitute one piece of the puzzle that the plaintiffs
endeavor to assemble before the jury. See Burrell v. Board of Trustees of Ga. Military College,
970 F.2d 785, 793 (11th Cir. 1992); 1 John W. Strong et al., McCormick on Evidence § 185, at
777 (4th ed. 1992) (“Direct evidence is evidence which, if believed, resolves a matter in issue.
Circumstantial evidence may also be testimonial, but even if the circumstances depicted are
accepted as true, additional reasoning is required to reach the proposition to which it is directed.”
(internal citation omitted)). In requiring that McClave’s data and testimony “show a successful
conspiracy” in order to be admitted into evidence, therefore, the district court misinterpreted
21
It is apparent that this problem, along with many others that we identify in this part of
the opinion, might have been avoided had the district court simply held a Daubert hearing to
allow the parties to clarify their positions, as well as the law, regarding the admissibility of these
experts’ testimony. While Daubert hearings are not required by law or by rules of procedure,
they are almost always fruitful uses of the court’s time and resources in complicated cases
involving multiple expert witnesses, such as the instant case.
25
Rule 702 and thus abused its discretion. See Koon, 518 U.S. at 100, 116 S. Ct. at 2047 (“A
district court by definition abuses its discretion when it makes an error of law.”).22
The district court also erred in relying upon Rule 104 of the Federal Rules of Evidence as
support for its exclusion of McClave’s data and testimony. Rule 104(b) allows a district court to
determine preliminary questions of fact necessary to apply the Federal Rules of Evidence. The
rule itself, however, does not provide a ground for the exclusion of any evidence as inadmissible
under the Rules. The district court’s incorrect use of Rule 104 was apparently rooted in its
concern about the reliability of McClave’s testimony.23 This concern, however, is properly
addressed under Rule 702 and Daubert. See Daubert, 509 U.S. at 589, 113 S. Ct. at 2795. The
district court’s erroneous reliance upon Rule 104 is thus a second ground for concluding that the
court abused its discretion in excluding McClave’s testimony in its entirety.
The district court’s fundamental criticism of McClave’s testimony – that McClave’s
assertions regarding the existence of a conspiracy in general, and his characterization of certain
bids as “signals” to co-conspirators in particular, were outside of his competence as a statistician
– is, however, essentially correct. McClave’s testimony is admissible only insofar as it assists
22
This error is repeated in the district court’s discussion of McClave’s analysis of tie
bids, see Harcros at 1529, and of Industrial’s profits, see id. at 1529-30. Whether or not
McClave’s testimony, standing alone, supports an inference that Industrial or any other
defendant actually conspired to fix prices is not relevant to the question of the admissibility of
the testimony; it is instead a matter for consideration at summary judgment, when the court must
determine whether a trier of fact could find for the plaintiffs on the evidence adduced. See Cohen
v. United Am. Bank of Cent. Fla., 83 F.3d 1347, 1349 (11th Cir. 1996).
23
We draw this conclusion on the basis of the district court’s conclusory statement that
McClave’s “statistical analysis is not impressive.” As we explain below, we conclude that a
small portion of McClave’s testimony is in fact unreliable and inadmissible. At this point,
however, we endeavor to clarify the legal errors that permeate the district court’s discussion of
McClave’s (and Lanzillotti’s) testimony.
26
the trier of fact, through the application of scientific, technical, or specialized expertise, to
understand the evidence or to determine a fact in issue. His characterizations of documentary
evidence as reflective of collusion, and his characterizations of particular bids as “signals,” do
not do so, because the trier of fact is entirely capable of determining whether or not to draw such
conclusions without any technical assistance from McClave or other experts. In addition,
McClave’s opinions regarding the legal standards applicable to this case are outside of his
competence and must be excluded.
On the other hand, most of McClave’s testimony is entirely within his competence as a
statistician and would be helpful to a trier of fact. Moreover, McClave utilized well-established
and reliable methodologies in the preparation of most of his statistics and his testimony. He
generated the statistics underlying his testimony through simple compilation of data from the
plaintiff municipalities’ records, from documents and books obtained from the defendants
through discovery, and from public sources.24 McClave’s compilations of that data into utile
measurements of bid prices, costs, tie bid frequencies, incumbency rates, and so on, and his
testimony regarding estimated damages, are the products of simple arithmetic and algebra and of
multiple regression analysis, a methodology that is well-established as reliable. See, e.g., Askew
v. City of Rome, 127 F.3d 1355, 1365 n.2 (11th Cir. 1997) (in voting rights case, district court
admitted expert statistical testimony based in part on multiple regression analysis); Petruzzi’s,
998 F.2d at 1238.25
24
The defendants do not attack the provenance or authenticity of McClave’s raw data.
25
Twenty-nine states, along with the territories of Guam and Puerto Rico, have briefed
this appeal as amici curiae in support of the appellant municipalities. The amici helpfully point
out that, although “an important aspect of assessing scientific validity (and therefore evidentiary
27
We therefore conclude that most of McClave’s testimony (all that is within his
competence as a statistician) satisfies the three interrelated requirements for admission under
Rule 702: McClave is qualified to testify regarding statistical measurements of events in the
Alabama chlorine market during the period of the alleged conspiracy, such testimony will assist
the trier of fact, and the methodologies that McClave used in measuring these events are
generally reliable. Upon closer review, however, we find that the methodology underlying a
small portion of McClave’s data and testimony is fundamentally flawed, and that the evidence
based thereon is consequently unreliable and must be excluded.
reliability) is the ability of other scientists to test or retest a proponent’s theory,” not every
scientific or technical methodology applied by expert witnesses is susceptible to such an
analysis. In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 758 (3d Cir. 1994), cert. denied sub
nom. General Elec. Co. v. Ingram, 513 U.S. 1190, 115 S. Ct. 1253, 131 L. Ed. 2d 134 (1995).
Economic or statistical analysis of markets alleged to be collusive, for instance, cannot readily be
repeatedly tested, because each such case is widely different from other such cases and because
such cases cannot be made the subject of repeated experiments. The proper inquiry regarding
the reliability of the methodologies implemented by economic and statistical experts in this
context is not whether other experts, faced with substantially similar facts, have repeatedly
reached the same conclusions (because there will be few or no cases that have presented
substantially similar facts). Instead, the proper inquiry is whether the techniques utilized by the
experts are reliable in light of the factors (other than testability) identified in Daubert and in light
of other factors bearing on the reliability of the methodologies. See supra note 16; see also, e.g.,
Ohio ex rel. Montgomery v. Louis Trauth Dairy, Inc., 925 F. Supp. 1247, 1252-53 (S.D. Ohio
1996) (noting that Daubert factors should be applied flexibly in determining admissibility of
economic and statistical expert testimony); In re Aluminum Phosphide Antitrust Litig., 893 F.
Supp. 1497, 1506 (D. Kan. 1995) (“To the extent that Daubert factors are relevant to its
determination [whether an economist’s methodologies are reliable], the Court considers them
along with any other relevant factors. . . . The inquiry is a flexible one, with the overarching
subject being the evidentiary relevance and reliability of the principles that underlie a proposed
submission.”). One factor left unenumerated by the Daubert Court is whether “the methods used
by the expert to derive his opinion satisfy the standards for scientific methodology that his
profession would require of his out-of-court research.” People Who Care v. Rockford Bd. of
Educ., Sch. Dist. No. 205, 111 F.3d 528, 537 (7th Cir. 1997). Taking this factor into account
along with the factors identified in Daubert, we readily conclude that McClave’s methodologies
are quite reliable, with the small exception explained infra.
28
The district court correctly pointed out that McClave’s database included data regarding
chlorine sales in the Florida panhandle as well as in Alabama.26 See Harcros, 877 F. Supp. at
1528 & n.57. The inclusion of Florida sales data is problematic because, as the district court
pointed out, “[t]he suit alleges a conspiracy in the state of Alabama – not Alabama, the Florida
panhandle, and the Southeastern states.” Id. Data relevant to allegations of collusive activity in
Florida may be used for corroborative purposes, but should not be commingled with data
regarding Alabama transactions for purposes of making calculations intended to be used as
circumstantial evidence of collusive behavior in Alabama. Including data regarding transactions
that were not part of the alleged conspiracy in the database skews any cumulative measurements,
such as percentages or frequencies, that depend upon the size and characteristics of the database
as a whole and that are intended to describe the alleged conspiracy.
On the other hand, most of McClave’s data, as well as the testimony regarding that data,
do not suffer from this problem; these data either do not include any information regarding
transactions in Florida, include only Florida data that can readily be separated from Alabama
data, or are not expressed in percentages or frequencies and thus are not skewed by the inclusion
of Florida data. McClave’s data regarding the frequency of tie bids and of incumbent bidders
retaining contracts, for instance, are for the Alabama market alone, and do not include Florida
26
The district court also attacked McClave’s market definition on the ground that “Dr.
McClave calls his statistics ‘market’ shares, but admits that his numbers only include that
portion of the market in which the plaintiffs buy chlorine by sealed bids.” Harcros, 877 F. Supp.
at 1529 n. 58. Our review of the record reveals that the court’s assertion is false; McClave’s
database did indeed include data from the Alabama municipalities that purchased chlorine
through negotiations with the defendants and other chemical companies rather than through
sealed-bid auctions, and McClave so stated in both his prepared report and his deposition
testimony.
29
data; these data, and the testimony based thereon, are thus reliable and admissible. McClave’s
data on bid prices and on the costs borne by the defendants are not expressed in percentages or
frequencies but in mere compilations of prices and costs. Since the Florida data on prices and
costs can readily be separated from the Alabama data, the Florida data may be used by the trier
of fact for corroborative purposes if they indicate collusive behavior in the Florida panhandle or
ignored if they do not. McClave’s market share measurements regarding the northern half of
Alabama do not include Florida data and are therefore admissible; McClave’s measurements of
the defendants’ respective market shares for the southern half of Alabama and for the Florida
panhandle, on the other hand, are skewed by the inclusion of the Florida data and must be
excluded.
In sum, we affirm the district court’s exclusion of McClave’s data and testimony in part
and reverse it in part. We affirm the district court’s exclusion of McClave’s measurements and
testimony regarding market shares in the southern Alabama submarket. We also affirm the
district court’s exclusion of McClave’s opinions regarding the law controlling the case and of his
characterizations of documentary evidence as tending to show collusive behavior. We reverse
the district court’s exclusion of the remainder of McClave’s data and testimony.27
27
As noted in the introduction to part II.B, supra, the district court lengthily criticized the
testimony of Dr. Robert Lanzillotti, an economist whose testimony as an expert was proffered by
the plaintiffs; the court did not, however, exclude Lanzillotti’s testimony. The defendants have
not questioned the district court’s denial of their motion to exclude Lanzillotti’s testimony. We
note in passing that much of Lanzillotti’s testimony does indeed appear to warrant exclusion:
specifically, Lanzillotti’s opinions regarding the legal standards applicable to the case are outside
of his competence as an economist (and are erroneous) and should be excluded. The same is true
of Lanzillotti’s characterizations of pieces of documentary evidence as tending to show
collusion; such judgments are for the court to make at summary judgment and for the trier of fact
to make at trial. Furthermore, we point out that Lanzillotti’s professed market definition is
clearly wrong. Lanzillotti stated in his report that “[t]he relevant geographic market is the
30
III.
We now turn to the district court’s rulings granting summary judgment in favor of the
defendants. We consider the court’s rulings on the plaintiffs’ antitrust claims,28 and then the
court’s treatment of the plaintiffs’ fraud claims.
A.
1.
We first take up the district court’s entry of summary judgment in favor of Jones
Chemicals. The district court concluded that summary judgment in favor of Jones Chemicals
was warranted because Jones “do[es] not have that much economic power to make a conspiracy
stick.” Harcros, 877 F. Supp. at 1535. We read this statement as an indication that the district
largest market for which data are available and facilitate a more comprehensive understanding of
what transpired in the State of Alabama.” This is contrary to law and scholarship; the relevant
geographic market is the market that includes “producers that provide customers of a defendant
firm (or firms) with alternative sources for the defendant’s product or services.” Levine v.
Central Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1552 (11th Cir.), cert. denied, — U.S. —, 117 S.
Ct. 75, 136 L. Ed. 2d 34 (1996) (quoting IIA Phillip E. Areeda et al., Antitrust Law ¶ 530a, at
150 (1995)). Whether the litigants in a particular case are able to compile data regarding a
particular market is irrelevant to the market definition analysis. See also Thompson v.
Metropolitan Multi-List, Inc., 934 F.2d 1566, 1573 (11th Cir. 1991) (discussing geographic
market definition process in detail). We express no opinion as to whether the market definition
that Lanzillotti actually used in his analysis is the one that he professed to use in his report; nor
do we express any opinion as to whether the use of the professed market definition would have
any derogatory effect upon the reliability of his testimony. We merely point out that the sort of
market definition that Lanzillotti professed to use in his report – one with an apparent eye toward
litigation – is inaccurate.
28
As explained in note 8, supra, our disposition of the plaintiffs’ state-law antitrust
claims is identical to our disposition of their federal antitrust claims.
31
court, viewing the evidence in the light most favorable to the plaintiffs, concluded that the trier
of fact could not find for the plaintiffs and against Jones on the basis of the economic and
statistical evidence and on the basis of other circumstantial evidence (such as memoranda and
other documents that, the plaintiffs assert, indicate attempts by the defendants to establish and
maintain the alleged conspiracy). If this was the district court’s conclusion, we hold that the
court erred for the reasons discussed in part III.A.3, infra.
More importantly, we hold that the entry of summary judgment in favor of Jones
Chemicals must be reversed because Robert Jones’ admissions to the Cassassas constitute
powerful direct evidence that Jones Chemicals was involved in collusive behavior in the
Alabama chlorine market during the mid-1980s. In the absence of overwhelming evidence to the
contrary (and as discussed infra, we conclude that no overwhelming evidence has been produced
by the defendants), the trier of fact could well find in favor of the plaintiffs against Jones
Chemicals on the basis of these admissions alone. The district court’s entry of summary
judgment in favor of Jones Chemicals on the plaintiffs’ several antitrust claims is therefore
reversed.
2.
We next turn to the entry of summary judgments in favor of Van Waters and PB & S.
The district court correctly pointed out that PB & S
was a nonplayer in the “South Alabama” submarket, as defined by plaintiffs, and
had only a handful of sales in the North Alabama market. PB & S had no
business in South Alabama and the Florida Panhandle area, and won only three
bids in North Alabama from 1984-1990. It had a nonexistent market share from
1985 to 1990, the period of the purported conspiracy. PB & S was not a player in
32
sales to municipalities. Plaintiffs have produced no evidence that PB & S was
motivated to, participated in, or benefited from a conspiracy.
Harcros, 877 F. Supp. at 1535. The record reflects that Van Waters also had a zero or near-zero
market share in Alabama during the period of the alleged conspiracy. See id. at 1527-28. As the
district court pointed out, Van Waters’ and PB & S’ participation in a conspiracy that garnered
them zero or near-zero market shares would be irrational. The plaintiffs and their experts assert
that Van Waters and PB & S participated in the alleged conspiracy because they were afforded a
quid pro quo; these two companies, the plaintiffs assert, were allotted extra chlorine contracts in
markets outside Alabama in exchange for their participation in the collusive behavior in
Alabama. The plaintiffs have put forward no evidence, however, to show any such quid pro quo
or even to show that Van Waters’ and PB & S’ market shares increased elsewhere. The
appellants’ case against Van Waters and PB & S thus amounts to an allegation that those two
defendants took part in a conspiracy that earned them zero market share and zero dollars. There
is no direct evidence against these two, and the circumstantial evidence, including the plaintiffs’
expert testimony, does not support the conclusion that Van Waters and PB & S participated in a
conspiracy that excluded them from the market. No trier of fact could find against Van Waters
33
and PB & S on such a basis.29 The entry of summary judgment in favor of Van Waters and PB &
S on the plaintiffs’ antitrust claims is therefore affirmed.
3.
We now turn to the plaintiffs’ antitrust claims against Industrial and Harcros. The
documentary circumstantial evidence proffered by the plaintiffs is not alone sufficient to take
Industrial or Harcros to trial because none of the documentary evidence supports the inference
that the defendants colluded to fix prices in the Alabama repackaged chlorine market. The Caine
affidavit, for instance, says nothing about Industrial’s motivation in passing on the Mobile
contract. Industrial argues that it withdrew its bid to avoid conflict with its supplier, Jones
Chemicals, and Caine’s affidavit would not enable a trier of fact reasonably to reject Industrial’s
contention and accept that of the plaintiffs. Likewise, memoranda showing that Joe Ragusa
exercised strict control over chlorine pricing at Harcros support an inference that Ragusa was
frustrated with his subordinates’ failure to follow an innocuous allocation of responsibility as
easily as they support an inference that Harcros centralized pricing authority in Ragusa in order
29
See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct.
1348, 1356, 89 L. Ed. 2d 538 (1986) (“It follows from these settled principles that if the factual
context renders [plaintiffs’] claim implausible – if the claim is one that simply makes no
economic sense – [plaintiffs] must come forward with more persuasive evidence to support their
claim than would otherwise be necessary.”); Eastman Kodak Co. v. Image Technical Svcs., Inc.,
504 U.S. 451, 468-69, 112 S. Ct. 2072, 2083, 119 L. Ed. 2d 265 (1992) (“Matsushita demands
only that the nonmoving party’s inferences be reasonable in order to reach the jury . . . . If the
plaintiff’s theory is economically senseless, no reasonable jury could find in its favor, and
summary judgment should be granted.”); Helicopter Support Sys., Inc. v. Hughes Helicopter,
Inc., 818 F.2d 1530, 1534 (11th Cir. 1987) (“Matsushita dictates that if the alleged conspiracy is
economically infeasible or irrational then, as a matter of law, summary judgment must be entered
against the plaintiff.”).
34
to conceal the alleged conspiracy from other employees. Like these memoranda and the Caine
documents, the rest of the plaintiffs’ circumstantial documentary evidence is in equipoise, and in
the absence of further evidence of collusion, summary judgment against the plaintiffs would be
in order. See James v. Otis Elevator Co., 854 F.2d 429, 432 n.3 (11th Cir. 1988) (“A fact that
can only be decided by a coin toss has not been proven by a preponderance of the evidence, and
cannot be submitted to the jury.”); Pan-Islamic Trade Corp. v. Exxon Corp., 632 F.2d 539, 558
(5th Cir. 1980) (requiring that circumstantial evidence “support an inference of the existence of
an agreement” in order for claim of unlawful boycott to survive summary judgment).30
Viewing the plaintiffs’ experts’ proffered data and testimony in addition to the
documentary evidence, however, we conclude that the plaintiffs’ circumstantial evidence is
sufficient to take their antitrust claims against Harcros and Industrial to trial. It is settled law
that a threshold requirement of every antitrust conspiracy claim, whether brought under section 1
or section 2 of the Sherman Act, is “an agreement to restrain trade. To prove that such an
agreement exists between two or more persons, a plaintiff must demonstrate ‘a unity of purpose
or a common design and understanding, or a meeting of minds in an unlawful arrangement.’”
Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d 1555, 1573 (11th Cir. 1991) (quoting American
Tobacco Co. v. United States, 328 U.S. 781, 810, 66 S. Ct. 1125, 1139, 90 L. Ed. 1575 (1946)).
“We recognize that it is only in rare cases that a plaintiff can establish the existence of a
conspiracy by showing an explicit agreement; most conspiracies are inferred from the behavior
30
In Bonner v. City of Pritchard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to
October 1, 1981.
35
of the alleged conspirators,” Seagood, 924 F.2d at 1573-74,31 and from other circumstantial
evidence (economic and otherwise), such as barriers to entry and other market conditions. When
a plaintiff seeks to prove a conspiracy by inference, courts must be mindful that
“[o]n summary judgment the inferences to be drawn from the underlying facts . . .
must be viewed in the light most favorable to the party opposing the motion.”
United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d
176 (1962). But antitrust law limits the range of permissible inferences from
ambiguous evidence in a § 1 case. Thus, in Monsanto Co. v. Spray-Rite Service
Corp., 465 U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984), we held that
conduct as consistent with permissible competition as with illegal conspiracy does
not, standing alone, support an inference of antitrust conspiracy. Id., at 764, 104
S. Ct., at 1470. See also [First National Bank of Ariz. v. Cities Serv. Co., 391
U.S. 253, 280, 88 S. Ct. 1575, 1588, 20 L. Ed. 2d 569 (1968)]. To survive a
motion for summary judgment or for a directed verdict, a plaintiff seeking
damages for a violation of § 1 must present evidence “that tends to exclude the
possibility” that the alleged conspirators acted independently. 465 U.S., at 764,
104 S. Ct., at 1471. [Such plaintiffs], in other words, must show that the
inference of conspiracy is reasonable in light of the competing inferences of
independent action or collusive action that could not have harmed respondents.
See Cities Service, supra, 391 U.S., at 280, 88 S. Ct., at 1588.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S. Ct. 1348, 1356-
57, 89 L. Ed. 2d 538 (1986). This circuit applies these observations to section 2 conspiracy
claims as well. See Seagood, 924 F.2d at 1573-74.
A specific standard has developed for application to cases, such as the instant case, in
which the defendant oligopolists32 assert that evidence seeming to indicate collusion in fact
31
See also DeLong Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d 1499, 1515
(11th Cir.1989).
32
The parties agree that the market for repackaged chlorine in Alabama is oligopolistic.
See Harcros, 877 F. Supp. at 1509. An oligopolistic market may be defined as a market in which
“the dominant participants . . . engag[e] in interdependent or parallel behavior and [have] the
capacity effectively to determine price and total output of goods or services.” Republic of Tex.
Corp. v. Board of Governors of the Fed. Reserve Sys., 649 F.2d 1026, 1044 & n.32 (5th Cir. Unit
A June 1981) (quoting United States v. Marine Bancorporation, 418 U.S. 602, 630, 94 S. Ct.
36
reflects only a pattern of uniform business conduct known as “conscious parallelism.” The
Supreme Court has defined conscious parallelism as a “process, not in itself unlawful, by which
firms in a concentrated market might in effect share monopoly power, setting their prices at a
profit-maximizing, supracompetitive level by recognizing their shared economic interests and
their interdependence with respect to price and output decisions.” Brooke Group Ltd. v. Brown
& Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S. Ct. 2578, 2590, 125 L. Ed. 2d 168
(1993). In other words, conscious parallelism is the practice of interdependent pricing in an
oligopolistic market by competitor firms that realize that attempts to cut prices usually reduce
revenue without increasing any firm’s market share, but that simple price leadership in such a
market can readily increase all competitors’ revenues. See Coleman v. Cannon Oil Co., 849 F.
Supp. 1458, 1467 (M.D. Ala. 1993) (quoting VI Phillip E. Areeda et al., Antitrust Law ¶ 1410b
(1986)); VI Areeda, supra, ¶ 1429a-b.
“[I]t is well settled in this circuit that evidence of conscious parallelism [alone] does not
permit an inference of conspiracy unless the plaintiff [either] establishes that, assuming there is
no conspiracy, each defendant engaging in the parallel action acted contrary to its economic
2856, 2874, 41 L. Ed. 2d 978 (1974)).
37
self-interest,”33 Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1456 n.30 (11th Cir. 1991),34
or offers other “plus factors” tending to establish that the defendants were not engaging merely
in oligopolistic price maintenance or price leadership but rather in a collusive agreement to fix
prices or otherwise restrain trade. See Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575, 1583
(11th Cir. 1988);35 Gainesville Utils. Dep’t v. Fla. Power & Light Co., 573 F.2d 292, 300-
33
For the sake of clarity, we read this reference to a defendant’s “economic self-interest”
as a reference to what that defendant’s legitimate economic self-interest would be under the
assumption that it acted alone; a price-fixing conspiracy, if successfully implemented, is in the
collective self-interest of the conspirators. Cf. Bolt v. Halifax Hosp. Med. Ctr., 891 F.2d 810,
826-27 (11th Cir. 1990) (“[T]he plaintiff must establish that each defendant would have acted
unreasonably in a business sense if it had engaged in the challenged conduct unless that
defendant had received assurances from the other defendants that they would take the same
action.”); ABA Section of Antitrust Law, Antitrust Law Developments 10 & n.51 (4th ed. 1997).
34
The second sentence of note 30 in Todorov reads: “Conscious parallelism is uniform
business conduct by competitors that permits a court to infer the existence of a conspiracy
between these competitors.” We read this, in accordance with the remainder of that footnote and
with the established law and scholarship on the point, to state only the first part of the test; that
is, consciously parallel behavior permits a court to infer the existence of a conspiracy only in the
presence of “plus factors,” such as the implausibility that the defendants would have acted as
they did had they not been unlawfully conspiring in restraint of trade.
35
The district court read Dunnivant to require plaintiffs to show that the defendants’
actions were contrary to their legitimate economic self-interest, in addition to showing “plus
factors” that tend to exclude the possibility that the defendants were merely practicing conscious
parallelism. See Harcros, 877 F. Supp. at 1522-23. There is support for such a reading in the
wording of Dunnivant. As explained in the text, however, we read Dunnivant, in accordance
with the bulk of the law on point and with eminent scholarship, to establish only that the plaintiff
either must prove that the defendants’ actions were contrary to their legitimate economic self-
interest or must show other “plus factors” tending to exclude the possibility of lawful action.
See Gainesville Utils., 573 F.2d at 300-02; VI Areeda, Antitrust Law ¶ 1434, at 213-221 (noting
on p. 213 that, “[w]ith rare exception, the courts have been very clear that mere parallelism,
including interdependent conscious parallelism[,] cannot support a conspiracy finding unless
there are additional or ‘plus’ factors.”); ABA, Antitrust Law Developments 8-14. In other
words, whether the defendants’ actions were contrary to their legitimate economic self-interest is
only one prominent “plus factor” that plaintiffs may attempt to prove.
Our review of this circuit’s law on point did disclose the following statement from Bolt v.
Halifax Hosp. Med. Ctr., 891 F.2d 810, 826 (11th Cir. 1990): “The rule in this circuit is that
evidence of conscious parallelism does not permit an inference of conspiracy unless the plaintiff
38
02 (5th Cir. 1978); Donald F. Turner, The Definition of Agreement Under the Sherman Act:
‘Conscious Parallelism’ and Refusals to Deal, 75 Harv. L. Rev. 655, 659 (1962) (“Even the fact
that competitors have knowingly charged identical prices is a neutral fact in the absence of
evidence which would lead one to expect that the prices would have been different if truly
independent decisions had been made.”). The requirement of “plus factors” is necessary because
evidence of consciously parallel behavior alone leaves the circumstantial evidence of collusion
in equipoise; consciously parallel behavior by oligopolists does not in itself support an inference
of agreement, of “a meeting of the minds,” any more strongly than it supports an inference of
establishes that each defendant engaging in the parallel action acted contrary to its economic
self-interest.” As explained in the preceding paragraph, a showing that the defendant acted
contrary to its legitimate economic self-interest, see supra note 33, is sufficient to satisfy the
requirement that the plaintiff show “plus factors” beyond mere consciously parallel action.
Other “plus factors,” however, may also exist.
On a different note, we observe that the district court cited our decision in Helicopter
Support Systems., Inc. v. Hughes Helicopter, Inc., 818 F.2d 1530, 1534 & n.4 (11th Cir. 1987),
as support for its addition of another prong to the established test for finding an agreement to
restrain trade: that the plaintiff is required to “exclud[e] the possibility of independent action on
the part of the defendants.” See Harcros, 877 F. Supp. at 1532. This citation was erroneous for
two reasons. First, the language that the district court relied upon was addressed to plaintiffs
who bring distributor-termination claims; that type of claim was not brought in this case. See
Helicopter Support, 818 F.2d at 1534 (“[T]he plaintiff in a distributor-termination case must also
be able to point to evidence which tends to exclude the possibility that the manufacturer was
operating independently in making his determination to terminate the distributor.”). In addition,
the Helicopter Support language merely restated Matsushita’s requirement (drawn from
Monsanto) that the plaintiff show that an inference of conspiracy is reasonable, i.e., that the
plaintiff allege a plausible conspiracy that is sufficiently supported by the circumstantial
evidence. See Helicopter Support, 818 F.2d at 1533 (after noting that evidence excluding
independent action is required by Monsanto, we stated that, “[i]n short, Monsanto establishes
that conduct which is as equally consistent with permissible competition as it is with an illegal
conspiracy does not, without more, support even an inference of conspiracy.”). Helicopter
Support, therefore, does not provide a basis for grafting an additional requirement onto the
established test.
39
legal price maintenance or leadership. Thus, this requirement “ensures that unilateral or
procompetitive conduct is not punished or deterred.” Todorov, 921 F.2d at 1456 n.30.
The circumstantial evidence in the instant case – that is, the documentary evidence and
the plaintiffs’ experts’ data and testimony – will thus be sufficient to take the price-fixing claims
against Harcros and Industrial to trial if it meets the above standard. In sum, the plaintiffs first
must produce evidence showing that the defendants engaged in consciously parallel action.
Second, the plaintiffs must show “plus factors” that tend to exclude the possibility that the
defendants merely were engaged in lawful conscious parallelism. One prominent “plus factor,”
to which antitrust plaintiffs often take recourse, is a showing that the defendants’ behavior would
not be reasonable or explicable (i.e. not in their legitimate economic self-interest) if they were
not conspiring to fix prices or otherwise restrain trade – that is, that the defendants would not
have acted as they did had they not been conspiring in restraint of trade. See, e.g., Theatre
Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540-42, 74 S. Ct. 257, 259-60, 98
L.Ed 273 (1954).
We hold that the circumstantial evidence adduced by the plaintiffs against Harcros and
Industrial satisfies this standard. For all the inadequacies of the record on appeal, it suffers from
no shortage of evidence of consciously parallel behavior in the market; most importantly, Garner
and McClave’s data and testimony reveal that prices in the market moved in a notably parallel
fashion during the period of the alleged conspiracy, and that prices uniformly rose during that
period much more quickly than the defendants’ costs. In addition, the fact that the chlorine-
buying municipalities publicly announced the bid submitted by each competitor constitutes
evidence that these defendants were conscious of each other’s prices during this period.
40
The necessary “plus factor” is established by the high and rising incumbency rates
demonstrated by McClave’s data;36 these rates peaked at over 90 percent during the middle of the
period of the alleged conspiracy in the southern Alabama submarket, and at nearly 90 percent in
the northern submarket, during a period of stable costs, high and rising prices, and high and
rising profits.37 Oligopolists behaving in a legal, consciously parallel fashion could achieve high
and rising prices, even as costs remained stable, by engaging in price leadership. See VI Areeda,
Antitrust Law ¶ 1429, at 176. The odds that they could achieve a price and profit increase and
maintain incredibly high incumbency rates – that is, maintain the very same distribution of
municipal contracts year after year – are minuscule, however, unless the oligopolists were
communicating with one another.38 In sum, this combination of high profits and high
36
Cf. Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1245
(3d Cir.), cert. denied sub nom. Moyer Packing Co. v. Petruzzi’s IGA Supermarkets, Inc., 510
U.S. 994, 114 S. Ct. 554, 126 L. Ed. 2d 455 (1993) (in finding that defendants’ refusal to bid on
existing accounts as aggressively as new accounts constituted a plus factor, the court stated:
“absent an agreement it does not make economic sense for defendants not to bid on an account,
unless they have some problem like capacity or they know that the existing price is too high.”);
id. at 1246 (“It is one thing for competitors all to charge the same price, as a perfectly
competitive market could lead them to do so. It is quite another for competitors all to refrain
from soliciting each other’s accounts.”); VI Areeda, Antitrust Law ¶¶ 1420d & 1420' (1986 &
Supp. 1997).
37
The plaintiffs also point to other evidence that, they assert, supports the existence of
two additional “plus factors”: delivered pricing (i.e., pricing that includes all transportation
costs) and departure from the business practices that prevailed before the period of the alleged
conspiracy. (The remainder of the plaintiffs’ asserted “plus factors” are certainly no more
supportive of an inference of collusion than of an inference of conscious parallelism.) We do not
consider whether delivered pricing and departure from previous business practices do in fact
establish “plus factors” in this case, however, because our conclusion regarding incumbency
rates in the market suffices to support the holding we reach today.
38
Defendant Van Waters astutely points out in its brief that, if the defendants had wished
to conspire, it would have been smarter to “rotate incumbencies,” i.e., to alter the distribution of
contracts from time to time in order to minimize incumbency rates and prevent a holding such as
the one we reach today. We agree (although we also point out that such an arrangement likely
41
incumbency would not be likely to occur if the defendants39 either were vigorously competing
with each other or were engaging in competitive price leadership. It would be permissible for a
jury to find, therefore, that the defendants were not in fact competing for contracts but were
concertedly protecting each others’ incumbencies and pushing up prices.
We therefore conclude that the circumstantial evidence produced by the plaintiffs
establishes Harcros’ and Industrial’s consciously parallel behavior in the market for chlorine in
Alabama. We further conclude that the evidence of very high incumbency rates in the market
during the period of the alleged conspiracy, at a time of high and rising prices and profits but
stable costs, establishes the necessary “plus factor” tending to exclude the possibility that the
defendants were merely engaging in conscious parallelism. We therefore reverse the district
court’s entry of summary judgment in favor of Industrial and Harcros on the plaintiffs’ antitrust
claims.
B.
Finally, we review the district court’s entry of summary judgment on the plaintiffs’ fraud
claims. The plaintiffs brought two types of fraud claims against the defendants. First, the
plaintiffs claimed that the defendants committed fraud by sending to the municipal authorities
would have required more explicit, and hence more dangerous, collusion); nonetheless, the high
incumbency rates exhibited in the market would not likely have occurred in the absence of some
sort of communication among the defendants. Those rates therefore establish the necessary
“plus factor.”
39
In this part of the opinion we review the district court’s entry of summary judgment on
the antitrust claims against Harcros and Industrial. As stated in part III.A.1, however, this
discussion applies to Jones Chemicals as well.
42
letters apologizing for price increases and claiming that all price increases were the result of
increasing costs.40 Second, the plaintiffs asserted that the defendants committed fraud by signing
bid documents that included clauses in which the defendants represented to the plaintiff
municipalities that the bids being submitted were not the result of collusive behavior.41 The
district court tersely rejected the plaintiffs’ fraud claims: “Having ruled there is no conspiracy,
the court finds there can be no fraud for failure to disclose it.” Harcros, 877 F. Supp. at 1537.
We first note that this finding is an insufficient ground for granting summary judgment on the
claims that arise out of the price increase letters; those claims do not depend upon the existence
of a conspiracy because the plaintiffs could potentially prove that the representations made – that
price increases were due to cost increases – were false without also proving that the defendants
conspired to bring about the referenced price increases by collusive behavior. We therefore
vacate the district court’s entry of summary judgment as to the fraud claims based on the
defendants’ letters. We remand for a determination of which claims are supported by evidence
of representations by specific defendants to specific plaintiffs. The claims that are supported by
the record must go to trial.
40
One such letter, from Jones Chemicals, read:
Although it in no way reflects the wishes of Jones Chemicals, we find it necessary
to adjust our selling prices from time to time in order to keep up with the ever
increasing cost of staying in business as a reliable source of chemicals.
41
One such clause, included in a bid document executed by Harcros for the benefit of the
City of Lafayette, stated:
I hereby affirm I have not been in any agreement or collusion among bidders or
prospective bidders in restraint of freedom of competition, by agreement to bid at
a fixed price or to refrain from bidding, or otherwise.
43
Furthermore, because we hold that the plaintiffs’ antitrust claims against Harcros,
Industrial, and Jones survive summary judgment, we vacate the district court’s entry of summary
judgment as to all of the plaintiffs’ fraud claims with support in the record that are based upon
these three defendants’ alleged concealment of a price-fixing conspiracy.42 We remand for the
district court to determine which of these defendants submitted bid documents containing the
allegedly false representations to which plaintiffs, and thus which fraud claims of this second
type should go to trial.43
IV.
For the foregoing reasons, we REVERSE the district court’s exclusion of the testimony
of Loraine and Peter Cassassa, REVERSE the district court’s exclusion of the affidavit of O. W.
Caine, and AFFIRM the district court’s exclusion of the testimony of Barbara Krysti. We
42
Because we affirm the district court’s entry of summary judgment on the antitrust
claims against Van Waters & Rogers and PB & S, we also affirm its entry of summary judgment
on the plaintiffs’ claim that these two defendants made fraudulent representations of non-
collusion in bid documents.
43
In its order granting summary judgment, the district court also held that the defendants’
fraud, if it occurred, was excused by the lack of a “confidential relationship with the plaintiffs
requiring disclosure of the existence of a conspiracy.” Harcros, 877 F. Supp. at 1537. The court
cited Lowder Realty, Inc. v. Odom, 495 So. 2d 23, 26 (Ala. 1986); Holdbrooks v. Central Bank
of Ala., N.A., 435 So. 2d 1250, 1252 (Ala. 1983); and Tonsmeire v. Tonsmeire, 233 So. 2d 465,
468 (Ala. 1970), in support of this proposition. These cases, and the doctrine they reflect,
require that a close relationship exist between two parties before there arises a duty to disclose –
that is, not to remain silent – about facts material to the relationship. See id. In the instant case,
however, the plaintiffs allege not that the defendants merely failed to speak up about the alleged
conspiracy, but that the defendants made affirmative and explicit misrepresentations to them
regarding the existence of the conspiracy and the defendants’ costs. These cases, and the
doctrine underlying them, are therefore inapposite.
44
REVERSE in part the district court’s exclusion of the data and testimony of Perry Garner and
James McClave, and AFFIRM in part. On the basis of the evidence as it appears
now that the admissibility questions are settled, we REVERSE the district court’s entry of
summary judgment on the plaintiffs’ antitrust claims against Jones Chemicals, Harcros, and
Industrial. We AFFIRM the district court’s entry of summary judgment on the plaintiffs’
antitrust claims against Van Waters and against PB & S. Finally, we AFFIRM the district court's
entry of summary judgment on the plaintiffs’ claim that Van Waters and PB & S made
fraudulent representations of non-collusion in bid documents. In all other respects, we
VACATE the district court’s entry of summary judgment on the plaintiffs’ fraud claims against
the defendants and REMAND for further proceedings in accordance with this opinion.
SO ORDERED.
45