UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 95-1460
COASTAL FUELS OF PUERTO RICO, INC.,
Plaintiff - Appellee,
v.
CARIBBEAN PETROLEUM CORPORATION,
Defendant - Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. P rez-Gim nez, U.S. District Judge]
Before
Torruella, Chief Judge,
Watson,* Senior Judge,
and Lynch, Circuit Judge.
William L. Patton, with whom Thomas B. Smith, Kenneth A.
Galton, Ropes & Gray, Rub n T. Nigaglioni and Ledesma, Palou &
Miranda were on brief for appellant.
Michael S. Yauch, with whom Neil O. Bowman, Roberto Boneta
and Mu oz Boneta Gonz lez Arbona Ben tez & Peral were on brief
for appellee.
March 12, 1996
* Of the United States Court of International Trade.
TORRUELLA, Chief Judge. This appeal involves claims of
TORRUELLA, Chief Judge.
price discrimination, 15 U.S.C. 13(a) (1994); 10 L.P.R.A. 263
(1976), monopolization, 15 U.S.C. 2 (1994); 10 L.P.R.A. 260
(1976), and Puerto Rico law tort, 31 L.P.R.A. 5141 (1976),
brought against appellant Caribbean Petroleum Corp. by appellee
Coastal Fuels of Puerto Rico, Inc. After a jury trial, the
district court entered judgment for $5,000,000 -- $1.5 million in
antitrust damages trebled plus $500,000 in tort damages. CAPECO
seeks that the judgment of the district court be reversed and
judgment be granted to CAPECO on all counts, or alternatively,
that the judgment be reversed and the case remanded for a new
trial. We affirm the price discrimination and Puerto Rico law
tort verdicts, as well as the tort damage verdict. However, we
reverse the monopolization verdict, vacate the antitrust damages
verdict, and accordingly remand for further proceedings on price
discrimination damages.
BACKGROUND
BACKGROUND
We relate the evidentiary background in the light most
favorable to the jury verdicts. See Kerr-Selgas v. American
Airlines, Inc., 69 F.3d 1205, 1206 (1st Cir. 1995).
Coastal Fuels of Puerto Rico, Inc. ("Coastal") was
formed in 1989 as a wholly-owned subsidiary of Coastal Fuels
Marketing, Inc. ("CFMI"), a company that ran marine fuel
operations in numerous ports using a staff of sales agents in
Miami, Florida. Caribbean Petroleum Corp. ("CAPECO") owns and
operates a refinery in Bayam n, Puerto Rico, which produces a
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number of fuel products, as well as residual fuel. A principal
use of residual fuel is in the production of "bunker fuel," which
is used by cruise ships and other ocean-going vessels outfitted
with internal combustion or steam engines.
At trial, Coastal introduced testimony and letters
showing that CAPECO had committed to supply Coastal on the same
terms and conditions as other resellers in San Juan, Puerto Rico,
in 1990, but Coastal deferred the start of its operations because
of uncertainty due to the Gulf War. Eventually, Coastal began
business operations in Puerto Rico in October 1991, buying bunker
fuel in San Juan and reselling it to ocean-going liners at berth
in San Juan Harbor. Based on CFMI's experience and reputation,
Coastal produced a business plan which shows that it expected to
reach a sales volume of 100,000 barrels a month, approximately
25-30% of the sales volume in San Juan Harbor. The plan also
shows that Coastal assumed it could obtain an average gross
margin (sales revenues less product costs) of $1.65 a barrel.
In September 1991, CAPECO agreed to charge Coastal
prices based on a formula involving the previous Thursday/Friday
New York market postings, minus discounts that varied by volume.
These prices were to cover the six month period from October 1991
to March 1992. Unknown to Coastal, CAPECO was almost
simultaneously offering Coastal's two competitors in San Juan
Harbor, Caribbean Fuel Oil Trading, Inc. ("Caribbean") and Harbor
Fuel Services, Inc. ("Harbor"), new contracts that gave Caribbean
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and Harbor bigger discounts from the formula price than Coastal
received.1 Trial evidence introduced by CAPECO's own expert
witness quantified the total price discrimination in favor of
Caribbean and Harbor as $682,451.78 for the period from October
1991 to April 1992.
Coastal filed this suit in May of 1992 when it learned
of CAPECO's price discrimination against it. This court affirmed
the district court's denial of a preliminary injunction requiring
that CAPECO end its price discrimination. See Coastal Fuels of
Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25, 26
(1st Cir. 1993). After Coastal filed suit, CAPECO proposed a new
price formula to Coastal. According to trial testimony
introduced by Coastal, CAPECO basically made a "take it or leave
it" offer, which Coastal took. Expert testimony Coastal offered
at trial contended that competitively significant price
discrimination continued until Spring of 1993, when CAPECO cut
Coastal off entirely.
Additionally, Coastal presented evidence that, while
throughout this period CAPECO would from time to time inform
Coastal that it had no fuel available, in fact, CAPECO had
available fuel. Coastal also presented evidence that it was
1 CAPECO tried to argue below and again argues here, that the
contracts it executed with Caribbean and Harbor were
qualitatively different in their non-price terms and conditions
from CAPECO's arrangement with Coastal, justifying the discounts.
Coastal responds that it was never offered the terms and
conditions that Caribbean and Harbor received. In light of the
jury's verdict for Coastal on the price discrimination claim,
from conflicting evidence such as this, we draw the (reasonable)
conclusion in Coastal's favor.
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discriminated against in terms of the quality of fuel that it
received from CAPECO. Finally, on March 31, 1993, CAPECO
informed Coastal in writing that it would not sell any more
product to Coastal, and shortly thereafter, Coastal went out of
business.
The case was tried to a jury on claims (1) that CAPECO
discriminated in price in violation of Section 2(a) of the
Clayton Act, 38 Stat. 730 (1914) (current version at 15 U.S.C.
13(a)), as amended by the Robinson-Patman Act, 49 Stat. 1526
(1936), and in violation of Section 263(a) of Title 10 of the
Laws of Puerto Rico; (2) that CAPECO monopolized trade or
commerce in violation of Section 2 of the Sherman Act and Section
260 of Title 10 of the Laws of Puerto Rico; (3) that CAPECO
violated Section 5141 of Title 31 of the Puerto Rico Civil Code
by engaging in tortious conduct that injured Coastal; and (4)
that CAPECO committed a breach of contract in violation of
Sections 3371 et seq. of Title 31 of the Puerto Rico Civil Code.
As reflected in the jury's answers to the Special
Interrogatories, the jury found for Coastal on the first three of
these claims, but found for CAPECO on the breach of contract
claim. The jury awarded damages of $1,500,000 for the antitrust
violations combined and $500,000 for the Puerto Rico tort
violation. The antitrust damages were trebled, see 15 U.S.C.
15(a), bringing the total award to $5,000,000.
DISCUSSION
DISCUSSION
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CAPECO argues for a reversal of the district court's
judgment, or alternatively, for a new trial. We address the
arguments for reversal first.
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I. Arguments for Reversal
I. Arguments for Reversal
The first set of issues involves the district court's
denial of CAPECO's motions for judgment as a matter of law under
Fed. R. Civ. P. 50. With respect to matters of law, our review
is de novo. Sandy River Nursing Care v. Aetna Casualty, 985 F.2d
1138, 1141 (1st Cir. 1993).
Seeking judgment as a matter of law, CAPECO has raised
a set of issues on appeal that concern the application of federal
and Puerto Rico law on price discrimination and monopoly, as well
as Puerto Rico tort law, to the facts of this case. With respect
to these issues, we review the court's decision de novo, using
the same stringent decisional standards that controlled the
district court. See Sullivan v. National Football League, 34
F.3d 1091, 1096 (1st Cir. 1994); Gallagher v. Wilton Enterprises,
Inc., 962 F.2d 120, 125 (1st Cir. 1992). Under these standards,
judgment for CAPECO can only be ordered if the evidence, viewed
in the light most favorable to Coastal, points so strongly and
overwhelmingly in favor of CAPECO, that a reasonable jury could
not have arrived at a verdict for Coastal. See Sullivan, 34 F.3d
at 1096; Gallagher, 962 F.2d at 124-25.
A. Price Discrimination
A. Price Discrimination
Section 2(a) of the Clayton Act, amended in 1936 by the
Robinson-Patman Act, makes it
unlawful for any person . . . to
discriminate in price between different
purchasers of commodities of like grade
and quality, where either or any of the
purchases involved in such discrimination
are in commerce, . . . where the effect
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of such discrimination may be
substantially to lessen competition or
tend to create a monopoly in any line of
commerce, or to injure, destroy, or
prevent competition with any person who
either grants or knowingly receives the
benefit of such discrimination . . . .
15 U.S.C. 13(a). A pair of sales at different prices makes out
a prima facie case. See Falls City Indus., Inc. v. Vanco
Beverage, Inc., 460 U.S. 428, 444 n.10 (1983); FTC v. Anheuser-
Busch, Inc., 363 U.S. 536, 549 (1960) ("[A] price discrimination
within the meaning of [the statute] is merely a price
difference.").
Section 2(a) includes two offenses that differ
substantially, but are covered by the same statutory language. A
"primary-line" violation occurs where the discriminating seller's
price discrimination adversely impacts competition with the
seller's direct competitors. See, e.g., Brooke Group Ltd. v.
Brown & Williamson Tobacco Corp., U.S. , 113 S. Ct. 2578,
2586, reh'g denied, 114 S. Ct. 13 (1993). See generally Herbert
Hovenkamp, Federal Antitrust Policy: The Law of Competition and
its Practice 8.8 (1994). In contrast, a "secondary-line"
violation occurs where the discriminating seller's price
discrimination injures competition among his customers, that is,
purchasers from the seller. See, e.g., FTC v. Sun Oil Co., 371
U.S. 505, 519 (1963); Caribe BMW, Inc. v. Bayerische Motoren
Werke, A.G., 19 F.3d 745, 748 (1st Cir. 1994); J.F. Feeser, Inc.
v. Serv-A-Portion, Inc., 909 F.2d 1524, 1535-38 (3d Cir. 1990),
cert. denied, 499 U.S. 921 (1991). See generally Hovenkamp
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14.6. The theory of injury is generally that the defendant's
lower price sales to the plaintiff's competitor (the favored
purchaser) placed the plaintiff at a competitive disadvantage and
caused it to lose business. Id.
We address first CAPECO's contention that the district
court erred in treating this case as one of secondary-line price
discrimination rather than primary-line price discrimination.
Specifically, CAPECO protests the district court's instruction to
the jury that injury to competition among competing purchaser-
resellers may be inferred from proof of substantial price
discrimination by a producer among competing purchaser-resellers,
an inference appropriate to secondary-line discrimination. See
FTC v. Morton Salt Co., 334 U.S. 37, 50-51 (1948). CAPECO argues
that Coastal is affiliated with an organization that competes
with CAPECO, and therefore this was a primary-line case; as a
result, the Morton Salt inference would not apply.
We do not consider the argument that this is a primary-
line case, because CAPECO has chosen to make this argument for
the first time on appeal. While CAPECO did object to the Morton
Salt instruction at the district court, that objection was
directed at the use of the word "infer" couched in a generalized
attack on the instruction as suggesting a presumption not borne
out by case law.2 We have noted before that "Rule 513 means what
2 We address this distinct argument below.
3 Fed. R. Civ. P. 51 states, in pertinent part, that
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it says: the grounds for objection must be stated 'distinctly'
after the charge to give the judge an opportunity to correct his
[or her] error." Linn v. Andover Newton Theological School,
Inc., 874 F.2d 1, 5 (1st Cir. 1989); see also Jordan v. United
States Lines, Inc., 738 F.2d 48, 51 (1st Cir. 1984). Leaving
aside whether the district court in fact erred in making the
questioned instruction, it seems clear that CAPECO did not set
forth the argument it now advances when it objected to the
instruction at issue. And if CAPECO did intend to express this
argument, it neither advised the district court judge of this
problem in a manner that would allow him to make a correction,
nor informed him what a satisfactory cure would be. Linn, 874
F.2d at 5. Because the argument was thus not preserved, we will
reverse or award a new trial only if the error "resulted in a
miscarriage of justice or 'seriously affected the fairness,
integrity or public reputation of the judicial proceedings.'"
Scarfo v. Cabletron Systems, Inc., 54 F.3d 931, 945 (1st Cir.
1995) (quoting Lash v. Cutts, 943 F.2d 147, 152 (1st Cir. 1991)).
We fail to find such concerns of judicial propriety implicated
here.4
[n]o party shall assign as error the
giving or the failure to give an
instruction unless that party objects
thereto before the jury retires to
consider its verdict, stating distinctly
the matter objected to and the grounds of
the objection.
4 While this court has admitted "occasional" exceptions to the
"raise-or-waive" principle, see National Assoc. of Social Workers
v. Harwood, 69 F.3d at 627-28, the concerns that justify an
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As a result, we analyze this case as one of secondary-
line discrimination. Thus, the theory of injury is that CAPECO
sold bunker fuel to Coastal at an unfavorable price relative to
Harbor and Caribbean, and consequently, competition between
Coastal, Harbor and Caribbean was thereby injured. On appeal,
CAPECO makes three arguments based on what it purports to be
required elements for Coastal's price discrimination damages
claim: first, that the sales in question were not "in commerce"
and so section 2(a)'s prohibitions do not apply; second, that
Coastal failed to make the requisite showing of competitive
injury to prevail; and third, that Coastal failed to carry its
burden of proving actual injury in order to be entitled to an
award of money damages.
1. "In Commerce"
1. "In Commerce"
CAPECO argues, correctly we conclude, that section 2(a)
of the Clayton Act does not apply because in the instant case,
neither of the two transactions which evidence the alleged price
discrimination crossed a state line. Gulf Oil Corp. v. Copp
Paving Co., 419 U.S. 186, 200-201, 200 n.17 (1974). For a
transaction to qualify, the product at issue must physically
cross a state boundary in either the sale to the favored buyer or
the sale to the buyer allegedly discriminated against. See,
e.g., Misco, Inc. v. United States Steel Corp., 784 F.2d 198, 202
exception are not implicated here, see id., 69 F.3d at 627-28
(finding exception given certain circumstances including the fact
that failure to raise issue did not deprive court of appeals of
useful factfinding, and the fact that the issue in question
raises constitutional concerns).
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(6th Cir. 1986); Black Gold Ltd. v. Rockwool Industries, Inc.,
729 F.2d 676, 683 (10th Cir.), cert. denied, 469 U.S. 854 (1984);
William Inglis & Sons Baking Co. v. ITT Continental Baking Co.,
668 F.2d 1014, 1043-44 (9th Cir. 1981), cert. denied, 459 U.S.
825 (1982); S&M Materials Co. v. Southern Stone Co., 612 F.2d
198, 200 (5th Cir.), cert. denied, 449 U.S. 832 (1980); Rio Vista
Oil, Ltd. v. Southland Corp., 667 F. Supp. 757, 763 (D. Utah
1987).
However, this issue is not dispositive, because the
jury found that CAPECO violated the Puerto Rico price
discrimination statute, which is identical to Section 2(a) except
that it contains no interstate commerce requirement.5 CAPECO has
not challenged the district court's supplemental jurisdiction
stemming from Coastal's Sherman Act claims. The relevant statute
states that "in any civil action over which the district courts
5 The relevant language is as follows:
It shall be unlawful for any person,
either directly or indirectly, to
discriminate in price between different
purchasers of commodities of like grade
and quality, where such commodities are
sold for use, consumption, or resale in
Puerto Rico, and where the effect of such
discrimination may be substantially to
lessen competition or tend to create a
monopoly in any line of commerce in
Puerto Rico, or to injure, destroy, or
prevent competition with any person who
either grants or knowingly receives the
benefit of such discrimination, or with
customers of either of them.
10 L.P.R.A. 263 (1976). Furthermore, Puerto Rico law includes a
counterpart for the section 4 of the Clayton Act's authorization
of treble damages. See 10 L.P.R.A. 268 (1976).
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have original jurisdiction, the district courts shall have
supplemental jurisdiction over all other claims that are so
related to claims in the action . . . that they form part of the
same case or controversy." 28 U.S.C. 1367 (1994). In
application, "[i]f, considered without regard to their federal or
state character, a plaintiff's claims are such that [it] would
ordinarily be expected to try them all in one judicial
proceeding, then, assuming substantiality of the federal issues,
there is power in federal courts to hear the whole." United Mine
Workers of America v. Gibbs, 383 U.S. 715, (1966); see Rodr guez
v. Doral Mortgage Corp., 57 F.3d 1168, 1175-76 (1st Cir. 1995)
(interpreting and applying 28 U.S.C. 1367). In the instant
case, the price discrimination claims flow out of the same set of
facts and require the same evidence as the Sherman Act claims.
Because we uphold the district court's jurisdiction over the
Sherman Act claims, see 15 U.S.C. 4 (1994) (investing "[t]he
several district courts of the United States . . . with
jurisdiction to prevent and restrain violations of [Title 15]
sections 1 to 7[,]" which includes the Sherman Act), we also must
conclude that the district court properly exercised supplementary
jurisdiction over the price discrimination claims.
Thus, we conclude that the district court erred in
applying section 2(a) of the Clayton Act to the conduct at issue,
and accordingly reverse that part of its opinion. However, we
find applicable section 263 of the Puerto Rico Anti-Monopoly Act,
10 L.P.R.A. 263. Because section 263 was patterned after and
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is almost identical to section 2(a) of the Clayton Act, as
amended by the Robinson-Patman Act, we look to the jurisprudence
interpreting federal law as a guide in applying the statute.6
Given that the one key difference between the federal and Puerto
Rico statutes is the lack of an "in commerce" requirement in the
Puerto Rico analogue, we conclude that we should interpret
section 263 as intended to extend the provisions of section 2(a)
of the Clayton Act to price discrimination within Puerto Rico,
the situation which we confront in the instant case. Given the
relative lack of applicable section 263 case law and the well-
developed jurisprudence concerning Clayton Act section 2(a), we
will focus on the latter in assessing the price discrimination
claims.
2. Injury to Competition
2. Injury to Competition
CAPECO's second argument in support of reversing the
price discrimination portion of the judgment is that Coastal
failed to demonstrate injury to competition. As noted above, we
analyze this case as one of secondary-line price discrimination,
6 See Caribe BMW, Inc., 19 F.3d at 753 (1st Cir. 1994)
(interpreting "Puerto Rico's laws as essentially embodying the
jurisprudence relevant to the parallel federal law," where
antitrust plaintiff asserted claims under a Puerto Rico antitrust
law that paralleled its federal antitrust law claim); Whirlpool
Corp. v. U.M.C.O. Int'l Corp., 748 F. Supp. 1557, 1565 n.4 (S.D.
Fla. 1990) (noting that "federal precedents construing the
[Clayton Act, as amended by the] Robinson-Patman Act are
applicable to the interpretation of Section 263" of the Puerto
Rico Anti-Monopoly Act); see also Diario de Sesiones, 1964, Vol.
18, Part 4, pp. 1425-26, 1509, 1512, 1707-09; Arturo Estrella,
Antitrust Law in Puerto Rico, 28 Rev. Jur. del Col. Ab. P.R. 615
(stating that interpretations of the Federal Robinson-Patman Act
are to be looked to in construing section 263).
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and thus Coastal bears the burden of showing injury to
competition between Coastal and its rival bunker fuel resellers,
Harbor and Caribbean. Addressing the burden of the secondary-
line plaintiff, the Supreme Court has stated that
[i]t would greatly handicap effective
enforcement of the Act to require
testimony to show that which we believe
to be self-evident, namely, that there is
a "reasonable possibility" that
competition may be adversely affected by
a practice under which manufacturers and
producers sell their goods to some
customers substantially cheaper than they
sell like goods to the competitors of
these customers.
Morton Salt Co., 334 U.S. at 50. As a result, the Supreme Court
has held that "for the purposes of section 2(a), injury to
competition is established prima facie by proof of a substantial
price discrimination between competing purchasers over time."
Falls City, 460 U.S. at 435 (citing Morton Salt, 334 U.S. at 46,
50-51); see also Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 559
(1990); Monahan's Marine, Inc. v. Boston Whaler, Inc., 866 F.2d
525, 528-529 (1st Cir. 1989) (noting lower burden for antitrust
plaintiff under Clayton Act, as amended by the Robinson-Patman
Act, than under Sherman Act); Boise Cascade Corp. v. FTC, 837
F.2d 1127, 1139 (D.C. Cir. 1988).
CAPECO challenges the district court's finding of
competitive injury in two ways, arguing that the Morton Salt rule
is no longer good law, or alternatively, that the Morton Salt
rule was incorrectly applied in this case. We first address
CAPECO's direct challenge to the vitality of the Morton Salt
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rule, a challenge based on the Supreme Court's opinion in Brooke
Group, 113 S. Ct. 2578. In that case, the Supreme Court ruled
that, because primary-line price discrimination injury is of the
"same general character" as predatory pricing schemes actionable
under Sherman Act section 2, Brooke Group, U.S. , 113 S.
Ct. at 2587, a primary-line injury plaintiff bears the same
substantive burden as under the Sherman Act, that is, the
plaintiff must show that the predator stands some chance of
recouping his losses, id. U.S. at , 113 S. Ct. at 2588.
In so deciding, the Supreme Court implicitly overruled Utah Pie
Co. v. Continental Baking Co., 386 U.S. 685 (1967), in which the
Supreme Court had set forth different standards for primary-line
injury. Brooke Group, U.S. at , 113 S. Ct. at 2587
(explaining that Utah Pie was merely an "early judicial
inquiry").
According to CAPECO, the Supreme Court's recent
emphasis in Brooke Group on reconciling the area of price
discrimination with other antitrust law requires that we find
that the Morton Salt rule no longer is good law. CAPECO notes
that both primary-line and secondary-line price discrimination
are prohibited by the same language of section 2(a) as amended by
the Robinson-Patman Act. Furthermore, CAPECO contends that the
Supreme Court in Brooke Group apparently undercut any reliance on
a principled distinction between the aims of section 2 of the
Clayton Act and other antitrust laws' purported emphasis on
protecting "competition, not competitors," Brooke Group, 113 S.
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Ct. at 2588 (emphasis in original) (citation omitted); see also
Monahan's Marine, Inc., 866 F.2d at 528-29 (not discussing the
Morton Salt rule, but noting that "unlike the Sherman Act, which
protects 'competition not competitors,' . . . the [Robinson-
Patman] Act protects those who compete with a favored seller, not
just the overall competitive process." (emphasis in original)).
Thus, according to CAPECO, precedent that pre-dates Brooke Group
and applies the Morton Salt rule must be reexamined. See, e.g.,
496 U.S. at 544; Falls City, 460 U.S. at 436; Boise Cascade v.
FTC, 837 F.2d 1127, 1153 (D.C. Cir. 1988).
While CAPECO's argument has merit, we join the two
other circuits that have addressed competitive injury in
secondary-line cases since Brooke Group in refusing to disregard
the rule the Supreme Court formulated in Morton Salt, for three
reasons.7 First, the statutory structure that prohibits primary-
line price discrimination "stands on an entirely different
footing" than the statutory scheme that proscribes secondary-line
discrimination. See Rebel Oil Co., 51 F.3d at 1446. Congress
first forbade primary-line price discrimination with the Clayton
7 See Stelwagon Manufacturing Co. v. Tarmac Roofing Systems,
Inc., 63 F.3d 1267, 1271 (3d Cir. 1995) (applying Morton Salt
rule without discussion of Brooke Group); Rebel Oil Co. v.
Atlantic Richfield Co., 51 F.3d 1421, 1446 (9th Cir. 1995)
(noting in dicta that "in holding that a primary-line plaintiff
must demonstrate an injury flowing from an aspect of the
defendant's conduct injurious to consumer welfare, we intend in
no way to affect the standard for antitrust injury in secondary-
line cases"). But see also Bob Nicholson Appliance, Inc. v.
Maytag Co., 883 F. Supp. 321, 326 (S.D. Ind. 1994) (holding that
"we are persuaded that the Seventh Circuit would extend the
reasoning of Brooke Group and require actual injury to
competition").
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Act of 1914, which originally condemned discrimination that might
"substantially . . . lessen competition or tend to create a
monopoly in any line of commerce." Clayton Antitrust Act, 38
Stat. 730 (1914) (codified as amended at 15 U.S.C. 13(a)
(1994)). The statute was intended to prevent large corporations
from invading markets of small firms and charging predatory
prices for the purpose of destroying marketwide competition, and
thus specifically applied only to primary-line injury. See H.R.
Rep. No. 627, 63rd Cong., 2d Sess. 8 (1914); E. Thomas Sullivan
& Jeffrey L. Harrison, Understanding Antitrust and Its Economic
Implications 8.03 (1988).
By contrast, secondary-line discrimination is
forbidden by the Robinson-Patman Act, 49 Stat. 1526 (1936), 15
U.S.C. 13-13b, 21a (1988), which amended the original Clayton
Act's price discrimination proscriptions. Congress clearly
intended the Robinson-Patman Act's provision to apply only to
secondary-line cases, not to primary-line cases. See H.R. Rep.
No. 2287, 74th Cong., 2d Sess. 8 (1936),8 cited in Rebel Oil
Co., 51 F.3d at 1446. In contrast to the Sherman Act and the
Clayton Act, which were intended to proscribe only conduct that
threatens consumer welfare, the Robinson-Patman Act's framers
"intended to punish perceived economic evils not necessarily
8 The Robinson-Patman Act "attaches to competitive relations
between a given seller and his several customers. It concerns
discrimination between customers of the same seller. It has
nothing to do with . . . requir[ing] the maintenance of any
relationship in prices charged by a competing seller." H.R. Rep.
No. 2287, 74th Cong., 2d Sess. 8 (1936).
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threatening to consumer welfare per se." Rebel Oil Co., 51 F.3d
at 1445. See generally Hovenkamp 2.1a. In particular, the
Robinson-Patman Act's amendments to the Clayton Act stemmed from
dissatisfaction with the original Clayton Act's inability to
prevent large retail chains from obtaining volume discounts from
big suppliers, at the disadvantage of small retailers who
competed with the chains. See S. Rep. No. 1502, 74th Cong., 2d
Sess. 4 (1936); H.R. Rep. No. 2287, 74th Cong., 2d Sess. 3-4
(1936); see also Morton Salt, 334 U.S. at 49 ("Congress intended
to protect a merchant from competitive injury attributable to
discriminatory prices"); Rebel Oil Co., 51 F.3d 1421, 1446;
Monahan's Marine, Inc., 866 F.2d at 528-29.
Second, we are persuaded by the reasoning of the Ninth
Circuit's opinion in Rebel Oil Co. that the amendment to the
Clayton Act effected by the Robinson-Patman Act supports the
continued vitality of the Morton Salt rule, even in the face of
Brooke Group's alteration of standards for primary-line price
discrimination. While the Clayton Act only proscribed conduct
that may "substantially lessen competition or tend to create a
monopoly[,]" the new law added the following passage: "or to
injure, destroy, or prevent competition with any person who
either grants or knowingly receives the benefit of such
discrimination, or with customers of either of them." See Rebel
Oil Co., 51 F.3d at 1447. The purpose of this passage was to
relieve secondary-line plaintiffs -- small retailers who are
disfavored by discriminating suppliers -- from having to prove
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harm to competition marketwide, allowing them instead to impose
liability simply by proving effects on individual competitors.
See id.; H.R. Rep. No. 2287, 74th Cong., 2d Sess. 8 (1936).
Such legislative intent directly supports maintaining the Morton
Salt rule, which puts into practice Congress' concern with
placing the same burden on secondary-line plaintiffs that other
antitrust plaintiffs face. Thus, the comparison that the Supreme
Court drew between primary-line price discrimination and
predatory pricing in Brooke Group stands on a different, and
stronger, footing than any comparison that could be made between
secondary-line price discrimination and other area of antitrust
law, including, but not only, predatory pricing.
Third, and finally, the holding of the Brooke Group
opinion on its face applies only to primary-line cases, not
secondary-line cases. As a result, given the legislative history
and statutory language distinctions, we will not presume, without
more guidance, that the Supreme Court intended in Brooke Group to
alter the well-established rule that it adopted in Morton Salt.9
Thus, we hold that the Morton Salt rule continues to apply to
secondary-line injury cases such as the present one.
9 While concerns about overenforcement harming overall consumer
welfare may be valid, the Supreme Court retains the option of
speaking further on this issue. See generally Paul Larule,
Robinson-Patman Act in the Twenty-First Century: Will the Morton
Salt Rule Be Retired? 48 S.M.U. L. Rev. 1917, 1927 (1995)
(concluding that "[w]hen an appropriate case comes before it, the
[Supreme] Court may well decide to make the final cut");
Hovenkamp 14.6a (arguing that, after Brooke Group, "a
reinterpretation of Robinson-Patman so as to permit secondary-
line injury only when competition itself is threatened is long
overdue").
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The Morton Salt rule provides that, for the purposes of
secondary-line claims under section 2(a), "injury to competition
is established prima facie by proof of a substantial price
discrimination between competing purchasers over time." Falls
Cities Industries v. Vanco Beverage, Inc., 460 U.S. 428, 435
(1983) (citing Morton Salt, 334 U.S. at 46, 50-51). If the
plaintiff makes such a showing, then "[t]his inference may be
overcome by evidence breaking the causal connection between a
price differential and lost sales or profits." Falls City, 460
U.S. at 435. Barring evidence breaking that connection, however,
"for a[] plaintiff to prove competitive injury under Robinson-
Patman, he [or she] need only show that a substantial price
discrimination existed as between himself [or herself] and his
[or her] competitors over a period of time." Hasbrouck v.
Texaco, Inc., 842 F.2d 1034, 1041 (9th Cir. 1987), aff'd, 496
U.S. 543 (1990).
Here the jury properly inferred prima facie injury to
competition since Coastal produced sufficient evidence before the
jury to conclude (1) that the discrimination in question was
continuous and substantial and (2) that the discrimination
occurred in a business where profit margins were low and
competition was keen. 4 Von Kalinowski, Antitrust Laws and Trade
Regulation 31.04(1). First, the discrimination lasted all 18
months that Coastal was in business, and always exceeded the five
cents per barrel that witnesses testified was competitively
significant. Additionally, there was ample testimony that the
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marine fuel oil business, in which Coastal competed against
Caribbean and Harbor, was characterized by thin margins and
intense competition. At any rate, on appeal, CAPECO does not
make the argument that Coastal failed to produce evidence
required for a prima facie showing of injury to competition under
the Morton Salt rule.
However, CAPECO argues that the Morton Salt inference
was undercut by evidence "breaking the causal connection" between
CAPECO's price discrimination and Coastal's lost sales or
profits, Falls City, 460 U.S. at 435, and showing an absence of
competitive injury, Boise Cascade Corp. v. FTC, 837 F.2d 1144,
1146 (D.C. Cir. 1988). According to CAPECO, overall market
forces depressed the price for bunker fuel more than 30 percent
between late 1991 and early 1992, and it was this fact, rather
than CAPECO's price discrimination, that led to Coastal's demise.
CAPECO points to the admission of Coastal's CEO that Coastal's
sales agents based their price quotes to ships on the prices
being charged by competitors in San Juan and other ports, often
without even knowing the cost of the fuel that was to be
delivered. According to CAPECO, if prices were set when costs
were unknown, then discounts from CAPECO could not have been a
material factor in setting prices.
We reject the argument that this evidence rebuts
Coastal's prima facie showing of price discrimination. In
reviewing the jury verdict, "[w]e are compelled . . . even in a
close case, to uphold the verdict unless the facts and
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inferences, when viewed in a light most favorable to the party
for whom the jury held, point so strongly and overwhelmingly in
favor of the movant that a reasonable jury could not have arrived
at this conclusion." Chedd-Angier Production Co. v. Omni
Publications Int'l Ltd., 756 F.2d 930, 934 (1st Cir. 1985); see
also Rodr guez v. Montalvo, 871 F.2d 163, 165 (1st Cir. 1989);
Castro v. Stanley Works, 864 F.2d 961, 963 (1st Cir. 1989); Brown
v. Freedman Baking Co., 810 F.2d 6, 12 (1st Cir. 1987). Thus, in
this case, the appellants must "persuade us that the facts of
this case so conclusively point to a verdict in [their] favor
that fair-minded people could not disagree about the outcome."
Chedd-Angier Production Co., 756 F.2d at 934.
Here, neither section 2(a), section 263, nor their
attendant case law, requires that the price discrimination in
question be directly factored into the prices that favored and
disfavored purchaser-resellers offered to their customers.
Presumably, regardless of whether these costs were factored
directly into the prices that Coastal offered, or were later
calculated into Coastal's bottom line, these costs affected
Coastal's pricing. Certainly, no argument can be made from this
evidence alone that bunker fuel costs, no matter when accounted
for, were not causally connected to Coastal's lost profits. See,
e.g., Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1039-41 (9th Cir.
1987), aff'd, 496 U.S. 543 (1990) (finding that evidence that
"some portion" of small extra discounts of 2 -5 on gasoline was
passed on by favored customers sufficient, particularly when
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retail gasoline market was "strongly price sensitive").
Additionally, the fact that Coastal's sales agents operated
without complete knowledge of the prices at which other Coastal
agents were purchasing the bunker fuel that would later be
delivered does not, without more, show an absence of competitive
injury.
3. Actual Injury
3. Actual Injury
CAPECO also contends that Coastal failed to present
adequate evidence of actual injury to support the verdict. On
appeal, CAPECO does not complain that the court's instructions to
the jury on the actual injury requirement were erroneous. Thus,
the only question regarding this issue is whether the evidence
that Coastal presented to the jury was adequate to permit a
reasonable inference of actual injury.
Although we have concluded that Coastal has proved
competitive injury under Title 10, Section 263 of the Laws of
Puerto Rico, in order to collect damages as a private plaintiff,
Coastal must show that CAPECO's offense was a "material cause" of
injury. See Zenith Radio Corp. v. Hazeltine Research, 395 U.S.
100, 114 n.9 (1969); Hasbrouck, 842 F.2d at 1042; Allen Pen Co.
v. Springfield Photo Mount Co., 653 F.2d 17, 21-22 (1st Cir.
1981). Coastal was required to show that, as a result of
CAPECO's price discrimination, it "lost sales and profits."
Hasbrouck, 842 F.2d at 1042; see Allen Pen Co., 653 F.2d 17, 21-
22 (1st Cir. 1981). CAPECO contends that, to do so, Coastal was
required to "indicate and document specific losses of business
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[for Coastal] and corresponding gains by [favored competitors],
or otherwise show that [Coastal's] losses were caused by
[CAPECO's] practices." Foremost-McKesson, Inc. v.
Instrumentation Laboratory, Inc., 527 F.2d 417, 420 (5th Cir.
1976); see also Falls City, 460 U.S. at 437-38 (ruling that
findings based on "direct evidence of diverted sales" "more than
established the competitive injury required for a prima facie
case under section 2(a)").
Assuming arguendo that CAPECO correctly claims that
Coastal needed to show specific losses of business, CAPECO's
argument fails to persuade us.10 CAPECO concedes that a Coastal
employee, Andrew McIntosh ("McIntosh") testified that Coastal was
getting "feedback" from its customers that its prices were not
competitive. Whether or not to credit such testimony is a
decision best left to the factfinder. See Wytrwal v. Saco School
Bd., 70 F.3d 165, 171 (1st Cir. 1995); Flanders & Medeiros, Inc.
v. Begosian, 65 F.3d 198, 204 n.4 (1st Cir. 1995). McIntosh's
testimony, if believed, could lead a jury to reasonably infer
actual injury in the form of lost sales.
CAPECO also contends that because McIntosh's testimony
was based on statements other Coastal employees had made to him,
10 There is conflicting authority for the proposition that a
jury may infer actual injury from circumstantial evidence. See
Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690, 697-700
(1962). However, we need not consider here whether this
standard, which is more favorable to Coastal, applies rather than
the standard that CAPECO advocates, since Coastal actually did
proffer evidence, albeit only employee testimony, that its prices
were causing it to lose business.
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it was both inadmissible hearsay evidence, see Fed. R. Evid. 802,
and even if admissible, legally insufficient to support a finding
of actual injury. In making this argument, CAPECO cites two
cases, Stelwagon Manufacturing Co. v. Tarmac Roofing Systems,
Inc., 63 F.3d 1267, 1275-76 (3d Cir. 1995), and Chrysler Credit
Corp. v. J. Truett Payne Co., 670 F.2d 575, 581 (5th Cir. 1982).
However, the two cases are inapposite. Apparently unlike the
defendant in Stelwagon, CAPECO did not make a lower court hearsay
objection to the testimony in question. See Stelwagon Mfg. Co.,
63 F.3d at 1275, n.17.
Additionally, the Fifth Circuit's opinion in J. Truett
Payne is distinguishable in a significant manner from the instant
case. In a preceding Supreme Court opinion, the Court noted that
[a]lthough [Payne Co.'s owner] asserted
that his salesmen and customers told him
that the dealership was being undersold,
he admitted that he did not know if his
competitors did in fact pass on their
lower costs to their customers.
J. Truett Payne, Co. v. Chrysler Motors Corp., 451 U.S. 557, 564
(1981). Likewise, Payne Co.'s expert witness did not testify
that the lower costs were passed on in the retail price. Id.
The Court found important the lack of evidence that competitors
passed on discounts to customers. Id. at 564, n.4. On remand,
the Fifth Circuit noted, in finding the evidence insufficient,
that Payne Co.'s witnesses only "spoke to either the supposed or
hypothesized effect of the programs." J. Truett Payne, 670 F.2d
at 581. By contrast, while Coastal offered similar testimony of
feedback about being undersold, it also put forth expert
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testimony that Caribbean and Harbor had fully passed on their
lower costs to the ships purchasing marine fuel. Coastal's
expert testified that "CAPECO gave discriminatory low prices to
Harbor and Caribbean . . . [that] were fully passed on . . . to
the ships purchasing marine fuel." Thus, because Coastal
proffered evidence linking the discounts in question to actual,
not hypothetical, effects, J. Truett Payne is inapposite.
We conclude that, once admitted, this evidence could
have led the jury to reasonably infer actual injury to
competition.
B. Monopolization
B. Monopolization
Section 2 of the Sherman Act, 15 U.S.C. 2, condemns
"every person who shall monopolize, or attempt to monopolize . .
. any part of the trade or commerce among the several States."
Similarly, Title 10, Section 260 of the Laws of Puerto Rico
tracks this language. Claims under this Puerto Rico analogue are
to be analyzed in the same manner as claims under section 2 of
the Sherman Act. See R.W. Intern. Corp. v. Welch Food, Inc., 13
F.3d 478, 486-88 (1st Cir. 1994); Americana Indus., Inc. v.
Wometco de Puerto Rico, 556 F.2d 625, 626-28 (1st Cir. 1977); see
also Pressure Vessels of Puerto Rico v. Empire Gas of Puerto
Rico, 94 JTS 144, *432 (P.R. 1994). To successfully prove a
monopolization offense, a plaintiff must show that (1) the
defendant has monopoly power and (2) the defendant "has engaged
in impermissible 'exclusionary' practices with the design or
effect of protecting or enhancing its monopoly position."
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Hovenkamp 6.4a. On appeal, CAPECO challenges the jury's
verdict that it had monopoly power, and also contends that it did
not engage in impermissible 'exclusionary' practices in order to
protect or gain a monopoly.
To determine whether a party has or could acquire
monopoly power in a market, "courts have found it necessary to
consider the relevant market and the defendant's ability to
lessen or destroy competition in that market." Spectrum Sports
v. McQuillan, 506 U.S. 447, 456 (1993). CAPECO's first argument
is that the jury erred in finding San Juan Harbor as the relevant
geographic market for bunker fuel. In general, the relevant
geographic market consists of "the geographic area in which the
defendant faces competition and to which consumers can
practically turn for alternative sources of the product."
Baxley-DeLamar v. American Cemetary Assn., 938 F.2d 846, 850 (8th
Cir. 1991); see also Tampa Electric Co. v. Nashville Coal Co.,
365 U.S. 320, 327 (1961).
In its monopolization claim, Coastal argued that CAPECO
took steps to drive it out of San Juan Harbor because Coastal is
affiliated with a refinery in Aruba. Coastal apparently had the
capacity to import the residual oil and diesel into San Juan from
Aruba. Coastal also had storage capacity. CAPECO feared, so
Coastal's theory went, that this would allow the refinery in
Aruba to compete with CAPECO and threaten CAPECO's ability to
sell its targeted 10,000 barrels of residual oil per day to
dealers. Coastal's argument is that CAPECO, fearing that
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Coastal's affiliate posed a competitive threat, decided to drive
Coastal out by (1) engaging in price discrimination against
Coastal, (2) discriminating in the provision of residual oil, (3)
discriminating in the quality of the residual oil available, and
(4) threatening to cut off plaintiff entirely, eventually doing
so.
Coastal successfully argued to the jury that the
relevant geographic market was San Juan Harbor, since neither it
nor its competitors, Caribbean and Harbor, could practicably
obtain supplies in San Juan Harbor from anyone other than CAPECO.
Coastal produced evidence that CAPECO made 90% of the sales of
bunker fuel to resellers in the San Juan Harbor market -- and
CAPECO does not dispute this figure on appeal.
CAPECO's main argument regarding monopoly power is that
the choice of San Juan Harbor as the relevant market was
incorrect. Instead, it maintains that because the broader market
for bunker fuel among cruise ships and other vessels plying the
waters of the Caribbean and the southeastern United States
constrains the prices CAPECO can charge resellers in San Juan
Harbor, the proper geographic market should have been defined to
include a much wider area. A larger geographic market would of
course lead to a lower figure for the percentage of sales in the
market made by CAPECO, likely defeating the monopoly power prong
of the monopolization offense.
In assessing CAPECO's argument, we must bear in mind
that "market definition is a question of fact" and "we therefore
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must affirm the jury's conclusion unless the record is devoid of
evidence upon which the jury might reasonably base its
conclusion." Weiss v. York Hospital, 745 F.2d 786, 825 (3d Cir.
1984); see also Rebel Oil Co., 51 F.3d at 1435 (stating that
standard upon motion for directed verdict, judgment
notwithstanding the verdict, and summary judgment is "whether the
jury, drawing all inferences in favor of the nonmoving party,
could reasonably render a verdict in favor of the nonmoving party
in light of the substantive law") (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249-52 (1986)).
In order to show that CAPECO had monopoly power,
Coastal was required to show that CAPECO had sufficient market
power to raise price by restricting output. IIA Phillip E.
Areeda et al., Antitrust Law 501 (1995). "[S]ubstantial market
power that concerns antitrust law arises when the defendant (1)
can profitably set prices well above its costs and (2) enjoys
some protection against [a] rival's entry or expansion that would
erode such supracompetitive prices and profits." Id. Market
power can be shown through two types of proof. A plaintiff can
either show direct evidence of market power (perhaps by showing
actual supracompetitive prices and restricted output) or
circumstantial evidence of market power. Rebel Oil Co., Inc. v.
Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir.), cert.
denied, 116 S. Ct. 515 (1995). Market power may be proved
circumstantially by showing that the defendant has a dominant
share in a well-defined relevant market and that there are
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significant barriers to entry in that market and that existing
competitors lack the capacity to increase their output in the
short run. Id. Coastal's evidence at trial was of the
circumstantial type and thus the question the parties have
presented on appeal is whether Coastal supplied sufficient
evidence for that CAPECO had a dominant share in the relevant
market.
Before determining market share, however, the relevant
geographic market must be defined.11 Although, "[f]inding the
relevant market and its structure is not a goal in itself but a
surrogate of market power," see Areeda, supra, 531a, "[m]arket
definition is crucial." Rebel Oil Co., 51 F.3d at 1434.
"Without a definition of the relevant market, it is impossible to
determine market share." Id. Proving market definition is the
plaintiff's burden. See H.J., Inc. v. Int'l Tel. & Tel. Corp.,
867 F.2d 1531 (8th Cir. 1989) ("The plaintiff carries the burden
of describing a well-defined relevant market, both geographically
and by product, which the defendants monopolized."); Neumann v.
Reinforced Earth Co., 786 F.2d 424 (D.C. Cir.) ("The plaintiff
bears the burden of establishing the relevant market."), cert.
denied, 107 S. Ct. 181 (1986); M.A.P. Oil Co., Inc. v. Texaco,
Inc., 691 F.2d 1303, 1306 (9th Cir. 1982) ("the proponent of [the
monopolization] theory must identify the relevant product and
11 The plaintiff must also define the relevant product market.
H.J., Inc. v. Int'l Tel. & Tel. Corp., 867 F.2d 1531, 1537 (8th
Cir. 1989). The parties agree that the relevant product market
is residual fuel oil sold by all refineries for use as bunker
fuel for ocean-going vessels.
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geographic markets as a threshold requirement"). Although
Coastal has properly pointed out that the question of market
definition is one of fact for the jury, a plaintiff must present
sufficient evidence from which a reasonable jury could find the
existence of the proposed relevant market. Cf.
Flegel v. Christian Hosp. Northeast-Northwest, 4 F.3d 682 (8th
Cir. 1993) (affirming grant of summary judgment on grounds that
there was insufficient evidence to support plaintiffs' proposed
market definition).
A market may be any grouping of sales whose sellers, if
unified by a hypothetical cartel or merger, could profitably
raise prices significantly above the competitive level. If the
sales of other producers substantially constrain the price-
increasing ability of the hypothetical cartel, these others are
part of the market. Areeda, supra, 533b; see also Rebel Oil
Co., 51 F.3d at 1434 (relying on Professor Areeda's formulation
of the test for the relevant market). "The definition of
relevant market depends upon economic restraints which prevent
sellers from raising prices above competitive levels." H.J.,
Inc., 867 F.2d at 1537.
Coastal and CAPECO have presented two competing
conceptions of the relevant market. Coastal argues, and the jury
found,12 that the relevant market was the market for residual oil
12 The jury answered "yes" to the special interrogatory asking
"Did Coastal establish that there is a relevant market comprising
of the sale of residual fuel oil or diesel to bunker fuel
resellers in the port of San Juan and that CAPECO has monopoly
power in the relevant market?"
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for bunker fuel in San Juan. Coastal presented evidence that
resellers in San Juan (Harbor, Caribbean and Coastal) purchased
90% of their supplies for bunker fuel from CAPECO. CAPECO, in
contrast, has argued that the relevant market is broader,
consisting of all sales of residual oil for bunker fuel in the
Caribbean and Southeastern United States. Our review of the
issue leads us to conclude that it would be unreasonable for a
juror to infer from the evidence presented that the sales of
residual oil for bunker fuel outside of San Juan should be
excluded from the relevant market.
The residual oil CAPECO sells is blended with diesel
into bunker fuel and sold by resellers like Coastal, Harbor and
Caribbean to large ocean-going vessels. Residual oil refiners
and bunker fuel resellers exist throughout the Caribbean and
Southeastern United States. The parties agree that the ocean-
going vessels can choose to refuel from whatever supplier in the
Caribbean and Southeastern United States offers the best terms as
to price, quality and dependability. The market for bunker fuel
is therefore extremely fluid and competitive, as the parties
agree.
Coastal argues that, because of this competition,
margins for resellers are razor thin and it is virtually
impossible for a reseller in San Juan, like Coastal, to obtain
residual oil from anyone other than CAPECO. Transporting
supplies from other refineries, such as the refinery Coastal is
affiliated with in Aruba, would increase the cost of the fuel to
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such an extent (transportation costs, import taxes, risk of price
changes, and storage costs) that it is not an economically viable
alternative. (Of course, this is, it might be observed, somewhat
inconsistent with the theory that CAPECO was so afraid of the
'threat' from Coastal and its Aruba affiliate, that it drove
Coastal out of business.) Consequently, Coastal argues,
resellers of bunker fuel must purchase from CAPECO when they do
business in San Juan. In Coastal's view, the San Juan resellers'
inability to purchase from suppliers outside of San Juan makes
San Juan the relevant market.
We do not agree. The touchstone of market definition
is whether a hypothetical monopolist could raise prices. See
Rebel Oil Co., 51 F.3d at 1434. Although a reseller based in San
Juan may have nowhere else to turn to in San Juan for its fuel,
Coastal did not produce sufficient evidence that this meant
CAPECO has the ability to restrict supply and raise prices in San
Juan to supracompetitive levels. Indeed, the evidence points in
the other direction. CAPECO cannot sell its residual oil for
bunker fuel unless it does so at a price at which the resellers
will be able to sell the fuel to its ultimate consumers, the
ocean-going vessels. Those ocean-going vessels can go anywhere
in the Caribbean and Southeastern United States to get their
bunker fuel. If CAPECO were to raise its prices to the
resellers, the resellers could not offer the bunker fuel to the
ocean-going vessels at competitive prices and the ocean-going
vessels would simply get their fuel at another port.
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Given these facts, the immobility of the resellers does
not mean that CAPECO could maximize profits by raising prices
significantly above the competitive level. Raising prices in San
Juan would repel the ultimate consumers, who would seek other
suppliers. The resellers would either stop purchasing residual
fuel or cease business, or both. CAPECO would then lose its
ability to sell its residual oil for bunker fuel and this would
redound to the benefit of CAPECO's competitors. While under most
circumstances the immobility of the resellers would be of
considerable importance in defining the market, it does not
control here where the mobility of the ultimate consumers
protects the immobile resellers. Cf. Ball Memorial Hosp., Inc.
v. Mutual Hosp. Ins., Inc., 784 F.2d 1325 (7th Cir. 1986)
(Easterbrook, J.) (relevant market for purposes of health
insurance coverage to Indiana consumers was "regional or
national" not simply Indiana, even though Indiana consumers could
not get insurance from any source other than defendant doing
business in Indiana; the mobility of potential rivals to the
defendant protected the consumers whose mobility was restricted).
Under the circumstances here, defining the market as San Juan is
too narrow. It does not capture the likelihood of expanded sales
by CAPECO's rivals in the event that CAPECO were to raise prices
in San Juan.
Once the relevant market is defined to include a
geographic region larger than San Juan (i.e., the Caribbean and
Southeastern United States), Coastal has not satisfied its burden
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of showing that CAPECO had a dominant market share. While
Coastal might, at least in theory, have shown that all refineries
throughout the Caribbean and the Southeastern United States
behaved like a cartel and priced their residual oil to capture
the transportation and other costs of getting oil from sources
outside the local ports, it has not done so here and it has
failed to produce evidence sufficient for a reasonable jury to
infer that such was the case. In short, Coastal has not shown
that CAPECO had monopoly power over the relevant market. Cf.
Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 886-87 (9th Cir.
1982) (secondary-line price discrimination under Robinson-Patman
Act does not necessarily violate Sherman Act), cert. denied, 103
S. Ct. 1777 (1983). Accordingly, Coastal's monopolization claims
fail under both section 2 of the Sherman Act and Title 10,
Section 260 of the Laws of Puerto Rico and we reverse the
monopolization verdicts. We note that because we affirm the
price discrimination verdict, the reversal on the monopolization
theory, by itself, leaves unchanged the amount of antitrust
damages awarded, subject to our discussion on damage evidentiary
sufficiency in Part I.D., infra.
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C. Puerto Rico Law Tort
C. Puerto Rico Law Tort
CAPECO also challenges the judgment on Coastal's claim
under 31 L.P.R.A. 5141 ("Article 1802").13 CAPECO claims that
Coastal was required to allege and prove the elements of a
recognized tort, and failed to do so. According to CAPECO,
because the Supreme Court of Puerto Rico has recently declined to
rule that violation of an antitrust statute will also necessarily
give rise to a violation of Article 1802, the violation of an
antitrust statute does not give rise to a per se violation of
Article 1802. See Pressure Vessels of Puerto Rico, 94 JTS 144,
*438-39. Additionally, CAPECO challenges the sufficiency of the
evidence supporting the judgment on this issue. CAPECO asks for
a reversal of the verdict on these grounds.
CAPECO's arguments may well have merit. However, we
need express no opinion regarding CAPECO's arguments as CAPECO
waived them by failing to object to the jury instructions
regarding the Article 1802 claim. See Linn v. Andover Newton
Theological School, Inc., 874 F.2d 1, 5. These are not simply
technical requirements. By failing to object to the jury
instructions, CAPECO denied "the judge an opportunity to correct
his error," assuming that CAPECO rightly contends that an error
13 Article 1802 states, in pertinent part, that:
[a] person who by an act or omission
causes damage to another through fault or
negligence shall be obliged to repair the
damage so done.
Id.
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was made. Id. While CAPECO may correctly contend that antitrust
violations do not fall within the scope of Article 1802, the
district court's jury instructions were not strictly limited to
antitrust offenses. It is entirely possible that, had an
objection been made, the district court could have charged the
jury with antitrust offenses as an Article 1802 ground separately
from other Article 1802 grounds that may have applied in the
present case. For example, it could have charged the jury with
tortious interference with contractual relations, since CAPECO
may well have intentionally complicated, via its refusal to deal,
Coastal's efforts to meet its obligations to deliver bunker fuel.
See General Office Products Corp. v. A.M. Capen's Sons, Inc., 780
F.2d 1077, 1081 (1st Cir. 1986) (noting that even in the absence
of a contract, liability may be incurred under other judicial
principles) (citing General Office Products Corp. v. A.M. Capen's
Sons, Inc., No. 0-84-278, Trans. Op. at 6-7 (P.R. June 29,
1984)). By failing to object to the instructions in question,
CAPECO has deprived us of factual findings that would aid in the
resolution of these issues. Because of the generality of the
instruction, we conclude that evidence existed of CAPECO's
possibly tortious conduct sufficient for the jury to reasonably
reach the verdict that it did.
CAPECO also challenges the sufficiency of the evidence
supporting the Article 1802 findings. However, CAPECO has waived
review here of this argument too by failing to move at any time
for a judgment as a matter of law on this ground under Fed. R.
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Civ. P. 50(a), see Wells Real Estate, Inc. v. Greater Lowell
Board of Realtors, 850 F.2d 803, 810 (1st Cir. 1988)
("[a]ppellate review may be obtained only on the specific ground
stated in the motion for directed verdict").14
As a result of CAPECO's failure to preserve its
arguments for review on appeal, we affirm the judgment on the
Article 1802 claim.
D. Sufficient Evidence on Damages
D. Sufficient Evidence on Damages
CAPECO also argues that Coastal's evidence on damages
was inadequate as a matter of law, and therefore, the jury's
verdict on damages must be reversed. In particular, CAPECO
argues that, as a new market entrant, Coastal was required to use
the "yardstick" method of estimating damages.
With respect to the issue of how accurately damages
must be measured, "there is a clear distinction between the
[relatively high] measure of proof necessary to establish that [a
plaintiff] has sustained some damage and the [relatively low]
measure of proof necessary to enable the jury to fix the amount."
Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S.
555, 562 (1931). In the antitrust context, "the most elementary
conceptions of justice and public policy require that the
wrongdoer shall bear the risk of the uncertainty which his own
14 In 1991, Rule 50 was amended, and the term "judgment as a
matter of law" was adopted "to refer to preverdict" (directed
verdict) and "postverdict" (judgment notwithstanding the verdict)
"motions with a terminology that does not conceal the common
identity of two motions made at different times in the
proceeding." See Fed. R. Civ. P. 50 advisory committee's note.
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wrong has created." Bigelow v. RKO Radio Pictures, 327 U.S. 251,
256 (1946). Nonetheless, the plaintiff must still produce
evidence from which the jury can make a just and reasonable
inference. Wells Real Estate, Inc. v. Greater Lowell Board of
Realtors, 850 F.2d 803, 816 (1st Cir.), cert. denied, 488 U.S.
955 (1988).
Citing Home Placement Service v. The Providence Journal
Co., 819 F.2d 1199 (1st Cir. 1987), CAPECO argues that Coastal
was required to use the yardstick method for calculating lost
profits, rather than the "before-and-after" method. Id. at 1205-
06. Under the yardstick approach, the plaintiff attempts to
identify a firm similar to the plaintiff in all respects but for
the impact of the antitrust violation. Hovenkamp 17.6b2. By
contrast, under the "before-and-after" method, the court looks at
the plaintiff's business before the violation occurred, during
the violation period, and after the violation ended, and
estimates the amount by which the violation reduced the
plaintiff's profits. Id. 17.6b1.
We conclude that whether a yardstick record must be
used ultimately requires an appraisal of the reliability of a
firm's track record, and the length of that track record is one
factor to consider. The plaintiff in Home Placement Services had
operated as planned only weeks before the alleged violations
began. Home Placement Services can best be read as demonstrating
both the type of situation in which a yardstick method is
preferable, and the factors that should go into a court's
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evaluation of the comparability of the yardstick firm or firms
with the plaintiff.15
Ultimately, the proper method should be determined by
the district court in accord with the facts of the situation. In
this case, the district court will have exactly that opportunity,
since we must vacate the district court's damages award and
remand for further proceedings. The district court charged the
jury with an instruction to find an amount for "antitrust
damages," comprising awards for both price discrimination and
monopolization claims.16 Because we reverse the monopolization
verdict, if left to stand, the jury's antitrust damages award
would likely constitute an excessive recovery. In coming to its
conclusion, the jury may well have weighed harms resulting from
conduct that was pleaded with respect to the monopolization
offense (e.g. refusal to deal with a customer, lying, etc.) but
would have been additional to harms resulting from price
discrimination, the claim we uphold. Furthermore, were we to
15 We note in passing that the plaintiff-appellant in Home
Placement Services was challenging the district court's award of
nominal damages and instead sought damages based on a yardstick
analysis; the appeals court upheld the nominal damages finding
because the evidence was "not 'sufficient to get the Court beyond
the guessing stage.'" Id. at 1209 (quoting William Goldman
Theatres, Inc. v. Loew's, Inc., 69 F. Supp. 103, 106 (E.D. Pa.
1946), aff'd, 164 F.2d 1021, 1022 (3d Cir. 1947), cert. denied,
334 U.S. 811 (1948)).
16 We understand the difficult choice that the district court
faced. As a practical matter, it would be difficult, if not
impossible, for a juror to segregate antitrust damages due to a
monopolization offense but not due to illegal price
discrimination from antitrust damages due only to price
discrimination, where as here, the facts and conduct involved in
both allegations greatly overlap.
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allow the verdict to stand despite our reversal of the
monopolization verdict, there would exist the strong likelihood
that the jury had granted Coastal a duplicative recovery under
monopolization and tort law, for injury caused by the same
conduct, such as refusal to deal and lying. The law "abhors
duplicative recoveries." Dopp v. HTP Corp., 947 F.2d 506, 517
(1st Cir. 1991) (vacating damage award for, among other reasons,
"a strong likelihood that the remedies thus far conferred
overlap"). Thus, we find that the district court's award rests
on an error of law. See Adams v. Zimmerman, No. 94-2161, slip
op. at 17, F.3d , , (1st Cir. 1996) (stating that a
"district court's award is reviewed for an abuse of discretion
unless it relies on an erroneous legal determination"). As a
result, we must vacate the antitrust damage award of $4.5 million
($1.5 million trebled), and remand for further proceedings.
II. Arguments for a New Trial
II. Arguments for a New Trial
In addition to its arguments for reversal of the
district court's findings, CAPECO makes several arguments for
reversal of the district court's denial of its motion for a new
trial.
"The authority to grant a new trial . . . is confided
almost entirely to the exercise of discretion on the part of the
trial court." Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33,
36 (1980), cited in Wells Real Estate, Inc. v. Greater Lowell Bd.
of Realtors, 850 F.2d 803, 810 (1st Cir. 1988). "Only abuse of
discretion will trigger reversal of a denial of a motion for new
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trial." Vel zquez v. Figueroa-G mez, 996 F.2d 425, 427 (1993).
In reviewing for abuse of discretion, we must bear in mind that
the trial court's discretion is quite limited concerning motions
for new trials. "A trial judge may not upset the jury's verdict
merely because he or she would have decided the case
differently." Id.
A. Duplicative Judgment
A. Duplicative Judgment
In support of its request for a new trial, CAPECO
argues that the damages awards constituted an impermissible
double recovery. CAPECO contends that both Coastal's antitrust
and tort claims were grounded in the same set of acts. Because
we vacate and remand the antitrust damages for further findings
on price discrimination damages, we construe CAPECO's argument
that price discrimination and tort damages would constitute
duplicative damage recoveries, see Borden v. Paul Revere Life
Ins. Co., 935 F.2d 370, 382 (1st Cir. 1991) ("recovery against a
defendant under one tort theory precludes any duplicative
recovery for the same damages under some other tort theory"), and
so a new trial or remittitur is required, see Dopp v. HTP Corp.,
947 F.2d 506, 516 (1st Cir. 1991).
We reject this argument for three reasons. First,
CAPECO failed to object to the form or content of the special
interrogatories to which the jury answered. Second, CAPECO may
well have waived its right to raise this issue here, since it
failed to raise the issue in a timely manner with the trial
court. Previously, we have held that a defendant may not argue
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verdict inconsistency if he or she failed to object "after the
verdict was read and before the jury was discharged." See
McIsaac v. Didriksen Fishing Corp., 809 F.2d 129, 134 (1st Cir.
1987). This rule is grounded in the realization that "to decide
otherwise would countenance 'agreeable acquiescence to
perceivable error as a weapon of appellate advocacy.'" Id.
(quoting Merchant v. Ruhle, 740 F.2d 86, 92 (1st Cir. 1984)).
The same concern should make us hesitate to consider arguments
about verdict redundancy that were similarly not put forth below.
Finally, "[a] special verdict will be upheld if there
is a view of the case which makes the jury's answers consistent."
McIsaac, 809 F.2d at 133. As we have noted above, Coastal may
have had a legitimate Article 1802 claim apart from any overlap
with antitrust law. Had CAPECO chosen to object to the district
court's instructions, the district court may have corrected this
problem. Accordingly, giving the district court the benefit of
the doubt, had it responded to a timely objection by CAPECO and
given an Article 1802 instruction that did not overlap with
antitrust claims, the jury's damages verdicts on tort and
antitrust claims could have been consistent. Even assuming,
arguendo, that CAPECO correctly asserts that such overlap
occurred, to grant CAPECO a new trial now on the basis of
duplicative recovery would allow it to avoid the result of its
own failure to object to the Article 1802 instruction.
B. CAPECO's Experts
B. CAPECO's Experts
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Additionally, CAPECO argues that the district court's
refusal to allow its two experts, Dr. Jorge Freyre ("Dr. Freyre")
and Dr. El as Guti rrez ("Dr. Guti rrez"), to testify was based
on a fundamental error of law and was an abuse of discretion that
requires that we reverse the district court and order a new
trial.
In order to evaluate CAPECO's contentions, we must
review the district court's orders leading up to the exclusion of
the relevant testimony. The district court's June 22, 1993
Scheduling Order stated that "[t]he parties will announce the
names and qualifications of their experts by October 1, 1993."
This date was modified subsequently to December 1, 1993. In
compliance with this order, CAPECO named C sar Figueroa
("Figueroa") and Rafael Mart nez-Margarida ("Mart nez-
Margarida"). On March 1, 1994, pursuant to a motion by new
counsel for Caribbean, the district court modified the previous
order and issued a revised scheduling order stating "all experts
are to be announced by March 30," and also specifying that expert
reports to be used "during each party's case-in-chief" were to be
exchanged on June 3, 1994, and that expert rebuttal reports were
to be exchanged on July 1, 1994. Upon CAPECO's June 1 motion,
the date for reports to be exchanged was extended by an "Omnibus
Order" to ten days after service of that order, dated August 15,
1994. On August 29, 1994, Coastal delivered to CAPECO expert
reports prepared by Dr. Sherwin and Dr. Zalacain, and CAPECO
provided Coastal with an expert report prepared by Figueroa.
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These experts were deposed between September 9 and September 14,
and thereafter CAPECO retained experts Dr. Freyre and Dr.
Guti rrez ostensibly as rebuttal witnesses under Fed. R. Civ. P.
26(a)(2)(C). CAPECO informed Coastal on September 20, 1994, that
it had retained Dr. Freyre as a rebuttal witness, and similarly
informed Coastal of Dr. Guti rrez on or about October 4, 1994.
CAPECO informed the district court about Dr. Freyre and Dr.
Guti rrez on October 5, 1995.
The district court instructed CAPECO to produce
Dr. Freyre and Dr. Guti rrez and to make them available for
depositions. On October 5 and October 6, Coastal filed motions
in limine to exclude Dr. Freyre and Dr. Guti rrez, respectively,
on the theory that neither witness could properly be
characterized as a "rebuttal" witness within the meaning of Rule
26(a)(2)(C), and thus both should have been disclosed previously.
After oral argument, the district court granted Coastal's motion
and excluded the testimony of Dr. Freyre and Dr. Guti rrez. The
district court, upon CAPECO's admission that it planned to use
Dr. Freyre and Dr. Guti rrez in its case-in-chief, noted that
"you got a problem with my orders because you have not complied
with my orders insofar as Freyre and Guti rrez [are] concerned,"
apparently referring to the previous scheduling order deadline
for experts in the case-in-chief to be disclosed.
CAPECO argues (1) that because the Omnibus Order did
not provide a deadline for the exchange of rebuttal expert
reports, no scheduling order applied, and therefore the
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disclosure of Dr. Freyre and Dr. Guti rrez was controlled by Rule
26(a)(2)(C);17 and (2) that the district court misconstrued Rule
26(a)(2)(C) to signify that a defendant cannot offer testimony to
"contradict or rebut" under Rule 26(a)(2)(C). We need not
consider whether the district court in fact misconstrued Rule
26(a)(2)(C), because, for three reasons, we find no abuse of
discretion in its exclusion of these witnesses as rebuttal
witnesses. First, at no time did CAPECO ever seek leave of the
court to announce the names of experts not disclosed by
December 1, 1993, as originally required, or by March 30, 1994,
as permitted by the trial court. CAPECO's motion of June 1
sought extension principally due to alleged noncooperation by
Coastal in discovery, making CAPECO's experts' task difficult to
complete by the deadline then in effect. We cannot conclude, as
CAPECO does, that the Omnibus Order's extension rendered all
other orders unbinding. Because CAPECO did not ask for its
extension on the grounds it now argues, the district court could
not have had such an effect in mind, nor was it given an
opportunity to consider such effect. A trial court may "readily
exclude a witness or exhibit if some previous order had set a
deadline for identification and the proponent [has], without
adequate excuse, failed to list the witness or exhibit." Fusco
17 Rule 26's schedule concerning the duty to disclose
information concerning expert witnesses and their opinions may be
altered by the court. See Fed. R. Civ. P. 26(a)(2)(C) (setting
forth schedule of disclosure of expert testimony "[i]n the
absence of other directions from the court or stipulation by the
parties").
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v. General Motors Corp., 11 F.3d 259, 265 (1st Cir. 1993); see
also Freund v. Fleetwood Enter., Inc., 956 F.2d 354 (1st Cir.
1992).
Additionally, we cannot agree that the district court's
March 1, 1994, Scheduling Order was necessarily superceded, given
that that order scheduled trial for October 24, 1994, and in
fact, trial began on that date. The proximity in time between
CAPECO's attempts to bring in Dr. Freyre and Dr. Guti rrez and
actual trial casts doubt on any argument that CAPECO was somehow
misled into thinking that previous Scheduling Orders did not
apply. Finally, even assuming that CAPECO is correct that the
Scheduling Order's provisions regarding rebuttal witnesses had
been superceded and thus Rule 26(a)(2)(B) applied, the district
court might still have enforced its previous deadlines regarding
experts in the case-in-chief. For better or for worse, at oral
argument on October 21, 1994 (three days before trial was to
start), counsel for CAPECO identified Dr. Freyre and Dr.
Guti rrez as witnesses in its case-in-chief.18
Given the circumstances, we cannot conclude that the
exclusion of the testimony of Dr. Freyre and Dr. Guti rrez was an
abuse of discretion warranting a new trial.
C. CAPECO's Meeting Competition Defense
C. CAPECO's Meeting Competition Defense
18 At one point in the oral argument over Coastal's motion in
limine to exclude Dr. Freyre and Dr. Guti rrez, the court asked
"And when are you going to bring them?" To this question,
counsel for CAPECO directly responded, "We are going to use
[them] in our case [in] chief."
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CAPECO also argues that the district court should have
given jury instructions on the affirmative defense of meeting
competition. Section 2(b) of Clayton Act, as amended by the
Robinson-Patman Act, permits a defendant to rebut a prima facie
case of violation by showing that its lower price "was made in
good faith to meet an equally low price of a competitor." 15
U.S.C. 13(b). The "meeting competition" defense can be raised
only by a defendant who responds in good faith to the believed
lower price of a competitor. United States v. United States
Gypsum Co., 438 U.S. 422 (1978), appeal after remand, 600 F.2d
414 (3d Cir. 1979), cert. denied, 444 U.S. 884 (1979).
We need not consider CAPECO's argument that it believed
in good faith that it was responding to a competitive threat
posed by Coastal in combination with its parent CFMI, because we
conclude that even assuming that Coastal and CFMI were a single
entity, they do not constitute a competitor in the same specific
area as CAPECO, see Falls City, 460 U.S. at 448. In Falls City,
the Supreme Court concluded that Congress intended the meeting
competition defense "to allow reasonable pricing responses on an
area-specific basis where competitive circumstances warrant
them." Id. at 448. Here, the district court could reasonably
conclude that the defense did not apply, since there was a lack
of evidence, beyond CAPECO's own employees' testimony about what
they believed to be the case, that CFMI offered lower prices on
bunker fuel in San Juan than CAPECO. See Rose Confections, Inc.
v. Ambrosia Chocolate Co., 816 F.2d 381, 391-93 (8th Cir. 1987)
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(ruling defense rejected where seller relied on "assumption or
speculation" without verification that competitor's prices were
in fact lower). Therefore, we do not find abuse of discretion in
the district court's denial of a new trial based on its refusal
to issue a jury instruction on the meeting competition defense.
D. CAPECO's Puerto Rico Law Tort Counterclaim
D. CAPECO's Puerto Rico Law Tort Counterclaim
CAPECO contends that the district court erred in
dismissing its counterclaim grounded in Article 1802, 31 L.P.R.A.
5141. According to CAPECO, it was a compulsory counterclaim
and was thus not barred by the one year statute of limitations,
at least to the extent of defeating the main claim.
We reject CAPECO's argument for two reasons. First, in
opposition to Coastal's motion for summary judgment on the
counterclaim, it failed to inform the district court of the
theory it now advances, that it is entitled to recoupment
notwithstanding the statute of limitations. Additionally, the
gist of CAPECO's counterclaim argument was that the threat posed
by Coastal and CFMI allegedly working in concert forced CAPECO to
give Harbor and Caribbean discounts, costing CAPECO potential
profits. Given that we uphold the district court's finding that
these discounts were illegal price discrimination, it appears at
least doubtful under Puerto Rico law that CAPECO can collect for
any lost profits thereby incurred. See, e.g., Rubio-Sacarello v.
Roig, 84 D.P.R. 344, 351 (P.R. 1962) (stating, in a contract
context, that one who is guilty of illegality cannot bring an
action). As a result, we fail to find abuse of discretion by the
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district court in its decision not to grant a new trial on this
basis.
CONCLUSION
CONCLUSION
Coastal succeeded below on three claims: price
discrimination, monopolization and tort. CAPECO's failure to
make the points below that it now argues on appeal hamstrung its
attempt to obtain reversal of the price discrimination and tort
claims. But the definition of relevant market Coastal espoused
could not be reasonably adopted by the jury, since this
definition was legally insufficient in neglecting to account for
downstream constraints on the proposed monopoly, and in failing
to draw on sufficient evidence regarding those constraints.
For the foregoing reasons, the judgment of the district
court is affirmed in part, reversed in part, and remanded.
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