F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
SEP 19 2002
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
LANTEC, INC., a Utah corporation; LANCOMPANY
INFORMATICA LTDA., a Brazil corporation;
LANTEC INFORMATICA LTDA., a Brazil
corporation; LANTRAINING INFORMATICA
LTDA., a Brazil corporation, No. 01-4109
Plaintiffs - Counter-Defendants - Appellants,
v.
NOVELL, INC., a Delaware corporation,
Defendant - Counter-Claimant - Appellee.
Appeal from the United States District Court
for the District of Utah
(D.C. No. 2:95-CV-97-ST)
P. Bruce Badger (Robert A. Garda and Stanford B. Owen of Fabian & Clendenin,
Salt Lake City, Utah; and Evan A. Schmutz of Hill, Johnson & Schmutz, P.C.
Provo, Utah, with him on the briefs) of Fabian & Clendenin, Salt Lake City, Utah,
for Plaintiffs - Counter-Defendants - Appellants.
Stanley J. Preston (R. Brent Stephens and Maralyn M. Reger with him on the
brief) of Snow, Christensen & Martineau, Salt Lake City, Utah, for Defendant -
Counter-Claimant - Appellee.
Before KELLY, Circuit Judge, BRORBY, Senior Circuit Judge, and HARTZ,
Circuit Judge.
BRORBY, Senior Circuit Judge.
While the Microsoft antitrust case has captured much media attention, this
antitrust case is just as important to the computer program developers involved.
Here, the Lantec companies appeal a district court order dismissing state-law
contract and promissory estoppel claims on summary judgment. The Lantec
companies also argue the district court incorrectly granted Novell, Inc.’s
(“Novell”) motion for judgment as a matter of law on several antitrust claims.
The facts and legal issues in this case are complex and will be discussed at length.
However, the Lantec companies’ basic argument is Novell drove them out of
business.
We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.
FACTUAL BACKGROUND
Beginning in the mid-1980s, Novell sold a network operating system for
connecting computers called NetWare. James E. Gaskin, Mastering NetWare 5,
20 (1999). A network operating system “is the software used to connect
computers and other devices, share resources, transfer files, and perform other
network services and activities.” Sue Plumley, Network Administration Survival
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Guide 25 (1999). It controls access to the network and allows users to share data.
Id.
Novell also distributed Message Handling System and Global Message
Handling System. These products were messaging transport agents 1 for NetWare.
A messaging transport agent essentially acts as the computer version of a post
office; it routes, stores, and delivers messages sent by e-mail or groupware
programs. 2 Message Handling System and Global Message Handling System were
designed to be used with the NetWare operating system and groupware programs.
In addition to routing messages, Message Handling System and Global Message
Handling System allow groupware to access security features, printing, file
sharing, and other data shared through the NetWare operating system.
Although Novell began marketing Message Handling System and Global
1
Throughout the record and the briefs, messaging transport agents are
variously referred to as messaging engines, messaging transcript agents, and
messaging transfer agents. Some of the discrepancies may be attributed to the
fact some testimony was translated from Portuguese to English. Because
“messaging transport agent” appears to be the preferred term, we have chosen to
use it in this opinion.
2
The parties agree the term “groupware” refers to any software containing
an e-mail application plus one other collaborative application such as calendaring,
scheduling, or task management.
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Message Handling System in the early 1990s, it did not immediately develop
groupware programs to be used with Message Handling System and Global
Message Handling System. Instead, independent software programers developed
this groupware. By making the application program interfaces 3 in Message
Handling System and Global Message Handling System publicly available, Novell
enabled independent programers to write groupware. Software designed using the
Message Handling System and Global Message Handling System application
program interfaces can communicate with Message Handling System or Global
Message Handling System and therefore with NetWare.
In addition to providing application program interfaces, Novell participated
in a group known as the Message Handling System Alliance. The Alliance was a
group of independent software developers interested in Message Handling
System. Through this group, Novell helped independent software programers
3
Application program interfaces allow a programer writing an application
to instruct an operating system or another program to carry out specific tasks. In
essence, application program interfaces act as building blocks. When programers
have the application program interfaces, they can create software to complete
tasks through the program providing the interfaces by putting the interfaces
together. See United States v. Microsoft Corp., 253 F.3d 34, 53 (D.C. Cir.), cert.
denied, 122 S. Ct. 350 (2001). If programers do not have the application program
interfaces they must completely recreate instructions for the tasks with original
code. Id.
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market, and provide technical support for, their groupware products.
Lantec, Inc. (“Lantec”), LanCompany Informatica Ltda. (“LanCompany”),
Lantec Informatica Ltda. (“Lantec Brazil”), and LanTraining Informatica Ltda.
(“LanTraining”) (collectively “the Lantec companies”) were interested in making
groupware using the application program interfaces in Message Handling System
and Global Message Handling System. All the Lantec companies grew out of a
predecessor Brazilian software development company called DataRede.
Originally, DataRede worked with Novell to distribute NetWare in Brazil. At that
time, Brazil refused to allow foreign software developers access to the Brazilian
market unless there were no similar software products designed by Brazilian
companies. DataRede conducted similarity tests to help convince Brazilian
regulators to allow Novell’s products in Brazil.
One of the contract disputes in this case arises from a February 1990 letter
from Novell to DataRede that discusses DataRede’s participation in the similarity
tests. LanCompany now refers to this letter as the “DataRede Agreement” and
claims Novell breached the Agreement by failing to fully compensate DataRede or
its successor company for conducting the similarity tests.
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Although disputes subsequently developed, DataRede began doing more
work with Novell. As DataRede’s Novell business increased, it transferred that
business to three new companies headed by Marcello Thoillier and other partners
in the DataRede organization. Lantec Brazil was created to develop software
compatible with Novell products, particularly NetWare and Message Handling
System. LanCompany was to market Novell software, and LanTraining was to
train people to use Novell products. In Utah during 1991, Mr. Thoillier and his
associates incorporated Lantec, an American sister corporation to the Brazilian
companies. Lantec was charged with translating Lantec Brazil’s products from
Portuguese to English. Lantec also began looking for companies to manufacture,
market, and distribute the products in the United States.
The Lantec companies developed XPostWare, a package of software
containing menu, e-mail, fax, and calendaring applications. XPost, the e-mail
portion of XPostWare, used Novell’s Message Handling System to transport
messages using NetWare. Lantec and Lantec Brazil each entered an Original
Equipment Manufacturer Agreement with Novell to allow them to package
XPostWare with Novell’s NetWare and Message Handling System.
Just as Lantec was on the verge of offering its XPostWare package in the
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United States, Novell and WordPerfect announced plans to merge. At this point,
the relationship between Novell and the Lantec companies became strained. The
day of the announcement, Mr. Thoillier indicated he was going to shut down
Lantec’s business. The next day, the Lantec companies put all their marketing,
advertising, and packaging projects on hold. Less than a month later, a Novell
executive left Mr. Thoillier a voice message stating other executives at Novell
wanted to terminate the relationship between Novell and the Lantec companies.
Although Novell subsequently sent a letter stating it was willing to work with the
Lantec companies and continue the Original Equipment Manufacturer
Agreements, Lantec and Lantec Brazil argue the letter should be discounted
because another Novell executive later threatened to drive the Lantec companies
out of business. The Lantec companies never shipped XPostWare and made no
attempt to actively sell XPostWare after the Novell/WordPerfect merger.
The Novell/WordPerfect merger changed Novell’s approach to Message
Handling System and Global Message Handling System. After the merger, Novell
released GroupWise. Rather than being solely a messaging transport agent like
Message Handling System and Global Message Handling System, GroupWise
contains both the messaging transport agent and groupware. This software design
strategy was similar to WordPerfect’s pre-merger messaging software which also
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contained both the messaging transport agent and groupware. Ultimately, Novell
quit developing Message Handling System and focused solely on GroupWise.
PROCEDURAL HISTORY
Based on these facts, in 1995, Lantec filed a complaint in federal district
court in Utah. More than a year later, Lantec Brazil, LanCompany, and
LanTraining joined the suit as plaintiffs. The Lantec companies brought state law
tort claims, breach of contract claims, and a promissory estoppel claim. In
addition, they alleged Novell violated federal and state antitrust laws by (1)
unlawfully merging with WordPerfect; (2) contracting combining, or conspiring
to unreasonably restrain trade; (3) monopolizing, attempting to monopolize, and
conspiring to monopolize the worldwide groupware for NetWare market; (4)
unlawfully using its monopoly power in the network operating system market to
gain a competitive advantage in what the Lantec companies designate the
“groupware for NetWare market”; and (5) unlawfully tying the sale of its
groupware to NetWare. See 15 U.S.C. §§ 1, 2, 14, 18; Utah Code Ann. § 76-10-
914(1), (2).
Prior to trial, the district court granted Novell’s motion for summary
judgment on the tort, contract, and promissory estoppel claims. It also dismissed
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the antitrust claims brought by LanCompany and LanTraining for lack of
standing. The case, however, proceeded to trial on the remaining antitrust
claims. After the Lantec companies presented their case to the jury, Novell
moved for judgment as a matter of law. The district court ruled in Novell’s favor.
Lantec, Inc. v. Novell, Inc., 146 F. Supp. 2d 1140, 1142 (D. Utah 2001).
On appeal, the Lantec companies raise several issues. We first address the
contract and promissory estoppel issues and then examine the antitrust issues.
CONTRACT AND PROMISSORY ESTOPPEL CLAIMS
The Lantec companies argue the district court erred in granting summary
judgment on (1) the breach of contract claim based on the “DataRede
Agreement”; (2) the breach of contract claim based on the Original Equipment
Manufacturing Agreements; (3) the breach of the oral “Message Handling System
Agreement” claim; and (4) the promissory estoppel claim.
We review a grant of summary judgment de novo. Cliffs Synfuel Corp. v.
Norton, 291 F.3d 1250, 1257 (10th Cir. 2002). Summary judgment is only
appropriate “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no
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genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c). “In applying this standard,
we examine the factual record and draw reasonable inferences therefrom in the
light most favorable to the nonmoving party.” Clinger v. New Mexico Highlands
Univ., 215 F.3d 1162, 1165 (10th Cir. 2000), cert. denied, 531 U.S. 1145 (2001).
We will address the Lantec companies’ contract and promissory estoppel
arguments in light of this standard.
I. THE “DATAREDE AGREEMENT”
LanCompany argues the district court erred in granting summary judgment
on its claim Novell breached the “DataRede Agreement.” 4 The “DataRede
Agreement” claim is based on a February 7, 1990 letter from Novell’s director of
new business development to DataRede. Prior to the letter, DataRede had, under
the direction of Novell, conducted similarity tests necessary to allow Novell to
distribute NetWare in Brazil. After the completion of the similarity tests, Novell
sent the February letter promising a license to build network interface cards with
4
Paulo Rufino, a former president of DataRede, testified DataRede
assigned the agreement to LanCompany. Consequently, LanCompany is the sole
entity appealing this issue.
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no up-front fee. LanCompany refers to this letter as the “DataRede Agreement”.
Specifically, the letter states: “Novell has agreed to the following measures
as recognition of DataRede’s special contribution to the registration and approval
of NetWare .... No up-front fee for NE1000 & NE2000.” NE1000 and NE2000
are network interface cards. They are essentially hardware that allows a computer
to communicate with a network. Although Novell had the technology for these
cards, it typically licensed the technology to other hardware manufacturers rather
than producing the cards itself. LanCompany contends Novell breached the
Agreement by failing to deliver the license.
The district court granted summary judgment in favor of Novell, concluding
there was no contract because there was no consideration for the letter. The court
found “there was no consideration for the claimed contract because the benefits
granted by the letter were past consideration for DataRede’s earlier participation
in the Brazilian registration process, a process completed two months before the
... [l]etter.” Furthermore, the court said even if the “letter was an agreement, the
evidence is that Novell did comply with the terms of the letter.” The district
court later denied a request for rehearing on this issue.
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LanCompany argues there was sufficient consideration for an enforceable
contract because the parties had intended Novell “to compensate DateRede for its
participation in the similarity test.”LanCompany explains “[e]ven though the
DataRede Agreement is dated after the similarity test, Novell’s promises that were
memorialized in the document were not made independent of DataRede’s
promised performance.” LanCompany claims “DateRede, therefore, had a claim
for its efforts, and even if the claim for a reward might not have been enforceable,
the surrender of its claim in exchange for the DataRede Agreement was sufficient
consideration for the contract.” Although LanCompany does not specifically
mention accord and satisfaction, it directs us to accord and satisfaction cases.
Generally, past services cannot serve as consideration for a subsequent
promise. Dementas v. Estate of Tallas ex rel. First Security Bank, 764 P.2d 628,
633 (Utah Ct. App. 1988) (“Events which occur prior to the making of the
promise and not with the purpose of inducing the promise in exchange are viewed
as ‘past consideration’ and are the legal equivalent of ‘no consideration.’”);
Jensen v. Anderson, 468 P.2d 366, 368 (Utah 1970) (“Past services, when
rendered under ... circumstances as to create no legal liability, are not
consideration for a subsequent promise” (citations omitted).). Utah law does,
however, enforce a subsequent promise based on completed services when the
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completed service was not meant to be gratuitous and the subsequent promise
meets the requirements of an accord and satisfaction. See England v. Horbach,
905 P.2d 301, 304 (Utah Ct. App. 1995), rev’d on other grounds, 944 P.2d 340,
344 (Utah 1997); Jensen, 468 P.2d at 368 n.6. “A party seeking to prove an
accord and satisfaction must show (1) an unliquidated claim or a bona fide
dispute over the amount due; (2) a payment offered as full settlement of the entire
dispute; and (3) an acceptance of the payment as full settlement of the dispute.”
ProMax Dev. Corp. v. Raile, 998 P.2d 254, 259 (Utah 2000).
We are not persuaded by LanCompany’s arguments. The “DataRede
Agreement” lacks sufficient consideration to constitute an enforceable contract.
LanCompany readily admits DataRede completed the registration tests before
Novell sent the letter allegedly creating the DataRede Agreement. Although
LanCompany’s brief suggests the letter simply “memorialized” promises made
prior to the completion of the registration tests, there is no evidence in the record
to support this suggestion. Viewed in the light most favorable to LanCompany,
the record merely reveals testimony the parties expected DataRede would receive
some compensation. But, the parties had not agreed upon the terms of
DataRede’s compensation before Novell sent the February 7, 1990 letter. We,
therefore, will enforce the promises in the letter only if they meet the
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requirements of an accord and satisfaction.
Even assuming LanCompany is correct in its assertion there was a dispute
as to the compensation Novell owed LanCompany for conducting the similarity
tests, we cannot conclude the DataRede Agreement amounts to an enforceable
accord and satisfaction. In this case, LanCompany needed to show the agreement
was in satisfaction of the dispute. See ProMax Dev., 998 P.2d at 259. But, there
is no indication DataRede or LanCompany ever surrendered any of its potential
claims against Novell. In fact, the letter embodying the DataRede Agreement
shows the Agreement was not in satisfaction of any claims. As the letter itself
explains:
In the course of events, DataRede made special requests to
Novell .... These requests were made without prior agreements, and,
in some cases, without a precise definition of the scope or [sic] the
request. Some of the requests have been granted, others have been
subject to negotiation, and still others must be further defined.
As the letter states, negotiations were still underway concerning DataRede’s
requests made incident to the registration tests. Furthermore, LanCompany does
not direct us to any other evidence suggesting the “DataRede Agreement” was
reached in satisfaction of any claims or in full settlement of any dispute. There is
simply no evidence to support LanCompany’s contention it surrendered potential
claims against Novell to receive the benefits in the February 1990 letter.
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Consequently, the alleged “DataRede Agreement” fails for lack of consideration.
Because we conclude the promises in the letter lack consideration, we need
not consider whether Novell breached the alleged agreement. The district court
was correct in granting summary judgment on the breach of the “DataRede
Agreement” claim.
II. BREACH OF ORIGINAL EQUIPMENT MANUFACTURER AGREEMENT
Lantec and Lantec Brazil claim Novell breached its Original Equipment
Manufacturer Agreements. These Agreements allowed Lantec and Lantec Brazil
to package their products with Novell’s NetWare and Message Handling System
products. Lantec and Lantec Brazil claim Novell terminated the Agreements in
April 1994 when Ron Palmeri, a Novell executive, left Mr. Thoillier a voice mail
message. They also claim Tom Pesut, a Novell executive, subsequently confirmed
the repudiation when he “declared that [Novell] would refuse to do business in
the future with any of the Lantec Companies.”
The district court granted Novell’s motion for summary judgment
dismissing the claims involving the Original Equipment Manufacturer Agreements
because there was “no showing of anticipatory repudiation by Novell.” The court
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concluded the Agreements “required written notice of termination and none was
given.” In addition, the court noted Novell sent a letter reaffirming the
Agreements and “demonstrated a willingness to continue with the agreement[s] as
[they] existed or to modify [them] in a way that would be acceptable to all” at a
subsequent meeting with the Lantec companies. The district court later denied
Lantec and Lantec Brazil’s motion for reconsideration on this issue.
We will consider each fact relevant to Novell’s alleged wrongful breach of
the Original Equipment Manufacturer Agreements in turn. We first consider
whether Mr. Palmeri’s telephone message constitutes triable evidence indicating
Novell repudiated the Original Equipment Manufacturer Agreements. Next, even
if Novell did repudiate, we ask whether Novell successfully retracted the
repudiation. Finally, we address whether the district court abused its discretion in
striking a portion of an affidavit Lantec and Lantec Brazil intended to use to
establish Mr. Pesut’s alleged threat to refuse to deal with the Lantec companies.
Ultimately, we affirm the district court’s decisions related to the Agreements.
A. Voice Mail Message
In April 1994, Mr. Palmeri of Novell left a voice mail message for Mr.
Thoillier. In relevant part, it stated:
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I had a meeting with Tom Pesut yesterday and Jim Sullivan, who is
the director of channel sales and they want to terminate the
relationship between the companies. I want to let you know. Leave
me a voice mail and let me know that you did get in fact this
message, I don’t want you to be surprised when the letter comes
from our legal. OK? I’ll try to give you a ring back again but it is
just gonna be a lit [sic] tough to reach for the next couple of days.
Lantec and Lantec Brazil argue this message could reasonably be viewed as an
anticipatory repudiation of the Original Equipment Manufacturer Agreements.
A repudiation occurs when a party to a contract makes “an overt
communication of intention or an action which renders performance impossible or
demonstrates a clear determination not to continue with performance.” Uniform
Commercial Code § 2-610 cmt. 1 (1989). “[T]o constitute a repudiation, a party’s
language must be sufficiently positive to be reasonably interpreted to mean that
the party will not perform.” Scott v. Majors, 980 P.2d 214, 218 (Utah Ct. App.
1999) (quotation marks and alterations omitted). See also Utah Code Ann. § 70A-
2-610. “Mere expression of doubt as to [a party’s] willingness or ability to
perform is not enough to constitute a repudiation.” Restatement (Second) of
Contracts § 250 cmt. b (1979). Anticipatory repudiation requires more than
statements revealing a party does not want to perform the contract or has
misgivings about the contract. Hurwitz v. David K. Richards & Co., 436 P.2d
794, 795-96 (Utah 1968).
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Viewing Mr. Palmeri’s voice message in the light most favorable to Lantec
and Lantec Brazil, we conclude the message was not definite enough to serve as
an anticipatory repudiation. The message only states two Novell executives
wanted to terminate Novell’s relationship with the Lantec companies. Nowhere in
the message does it state Novell would not perform its duties under the Original
Equipment Manufacturer Agreements.
B. Retraction
Even if the voice mail message had been definite enough to act as a
repudiation, the undisputed facts show Novell subsequently reaffirmed the
Agreements. Utah law provides a repudiating party “can retract [its] repudiation
unless the aggrieved party has since the repudiation canceled or materially
changed [its] position or otherwise indicated that [it] considers the repudiation
final.” Utah Code Ann. § 70A-2-611(1). A party may retract “by any method
which clearly indicates to the aggrieved party that the repudiating party intends to
perform.” Utah Code Ann. § 70A-2-611(2).
After receiving the telephone message, Mr. Thoillier sent Novell a letter
stating: “I am writing this letter to confirm your termination of the [Original
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Equipment Manufacturer] Agreement[s].” 5 Novell responded with a letter stating:
“I must take exception to [a] comment[] made in your letter. .... [Y]ou referred to
Novell’s ‘termination’ of the Lantec agreement[s]. [Those] agreement[s] can only
be terminated in writing and with appropriate notice.” On appeal, Lantec and
Lantec Brazil argue “the notion that Novell could not repudiate unless it
terminated the contract[s] in writing was simply nonsensical and poorly
reasoned.” Assuming termination did not need to be in writing, the letter
nevertheless shows Novell did not intend to terminate the Agreements. Further
5
The letter further states: “I received notice of your termination by
telephone message from Ron Palmeri last week.” In their reply brief, Lantec and
Lantec Brazil argue this letter shows they treated the telephone call as a final
repudiation. They therefore argue Novell’s “attempt to retract the repudiation
came too late” under Utah Code § 70A-2-611. We conclude Lantec and Lantec
Brazil waived this argument. In spite of the fact the district court’s opinion
concluded Novell retracted any repudiation, they did not raise their argument that
Novell’s retraction was ineffective in their initial appellate brief. In fact, prior to
the reply brief, the only time the Lantec companies raised this argument was in a
motion for reconsideration before the district court. The district court denied the
motion for reconsideration because the argument “could have been, but was not,
raised in the prior briefing and is therefore inappropriate in a motion to
reconsider.” Similarly, the Lantec companies’ argument has been brought to our
attention too late. “We are not obligated to address an argument which was not
[properly] made in the district court, nor even in this court until the reply brief.”
Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 887 (10th Cir. 1991).
See also Stump v. Gates, 211 F.3d 527, 533 (10th Cir. 2000) (explaining
arguments initially raised in a reply brief “rob[] the appellee of the opportunity to
demonstrate that the record does not support an appellant’s factual assertions and
to present an analysis of the pertinent legal precedent”). Thus, we decline to
consider this argument.
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showing Novell’s commitment to the Agreements, the letter established a meeting
between Novell and the Lantec companies on May 4, 1994, in Las Vegas. In
closing, the letter reaffirmed, “Novell is willing to consider any reasonable
proposal with respect to the ... [a]greement[s] to make th[ose] agreement[s]
workable for Lantec (e.g., mutual termination of the agreement[s], restructuring
of payment terms, reduction of volume commitment, etc.). I think you will find
Novell to be very accommodating on this issue.”
Novell’s actions following the reaffirming letter also demonstrate a
commitment to the Original Equipment Manufacturer Agreements. In May 1994,
the parties met in Las Vegas to discuss the Agreements. The undisputed outcome
of the meeting was that “[t]he parties did not reach any agreement as to their
respective rights and duties under the Lantec [Original Equipment Manufacturer]
[A]greement[s],” but that the Lantec companies would “evaluate their business
relationship with Novell.”
Consequently, we conclude the undisputed material evidence shows Novell
successfully retracted any repudiation of the Original Equipment Manufacturer
Agreements.
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C. Alleged Threat
In their appellate brief, Lantec and Lantec Brazil argue a threat made by
Tom Pesut immediately following the Las Vegas meeting “raised a clear disputed
fact about Novell’s intention to repudiate the [Original Equipment Manufacturer]
Agreement[s].” According to a portion of an affidavit submitted by Marcello
Thoillier, Mr. Pesut, a Novell executive, said if the Lantec companies opposed the
Novell/WordPerfect merger “Novell would immediately sever its relationship with
these companies and put them out of business.” Lantec and Lantec Brazil argue
the alleged threat “belied the notion that Novell intended to continue doing
business with Lantec.”
The district court did not consider whether the alleged threat created a
material issue of fact. Instead, the district court struck the portion of Mr.
Thoillier’s affidavit pertaining to the threat because the court found it was an
attempt to create a “sham issue of fact.” The court noted “Mr. Thoillier was
extensively deposed over a period of several days on the same subject matters
which form the bases for his affidavit.” The court determined the relevant
allegation “conflicts with Mr. Thoillier’s prior deposition testimony regarding the
meeting.”
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We review a district court’s decision to exclude evidence at the summary
judgment stage for abuse of discretion. Sports Racing Servs., Inc. v. Sports Car
Club, 131 F.3d 874, 894 (10th Cir. 1997). Under this standard we will not disturb
the district court’s decision “unless [we have] a definite and firm conviction that
the lower court made a clear error of judgment or exceeded the bounds of
permissible choice in the circumstances.” United States v. Ortiz, 804 F.2d 1161,
1164 n.2 (10th Cir. 1986.)
There is authority for the proposition that in determining
whether a material issue of fact exists, an affidavit may not be
disregarded because it conflicts with the affiant’s prior sworn
statements. In assessing conflict under there circumstances,
however, courts will disregard a contrary affidavit when they
conclude that it constitutes an attempt to create a sham fact issue.
Franks v. Nimmo, 796 F.2d 1230, 1237 (10th Cir. 1986) (citations omitted). In
deciding whether an affidavit is an attempt to create a sham issue of fact, the
relevant factors are “whether the affiant was cross-examined during his earlier
testimony, whether the affiant had access to the pertinent evidence at the time of
his earlier testimony or whether the affidavit was based on newly discovered
evidence, and whether the earlier testimony reflects confusion which the affidavit
attempts to explain.” Id.
Lantec and Lantec Brazil argue affidavit references to the alleged threat did
not directly contradict Mr. Thoillier’s deposition testimony. According to their
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argument, counsel for Novell never asked Mr. Thoillier about his meeting with
Mr. Pesut. Instead, Mr. Thoillier’s deposition testimony only concerned the May
1994 meeting in Las Vegas with Novell officials and counsel for the Lantec
companies and Novell. According to the affidavit, Mr. Pesut’s threat came not in
the scheduled meeting, but in a private conversation immediately following the
meeting.
After reviewing the deposition and affidavit, we conclude the district court
did not abuse its discretion in ruling parts of the affidavit contradicted Mr.
Thoillier’s deposition testimony. During the deposition Mr. Thoillier was
specifically asked whether Mr Pesut was “receptive to a discussion” about
continuing Novell’s association with the Lantec companies. Mr. Thoillier
answered he did not “recall these exact words.” Counsel for Novell then asked
whether “Novell had communicated that as far as it was concerned, it was
prepared to go ahead with the [Original Equipment Manufacturer Agreements].”
Mr. Thoillier said it “was discussed.” Searching for further clarification, counsel
for Novell asked to identify the result of the meeting. Mr. Thoillier admitted
Lantec and Lantec Brazil were supposed to decide whether they wanted to modify
their agreements with Novell and then schedule another meeting with Novell.
Nothing in the deposition questioning suggested Mr. Thoillier should limit his
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answers to discussions occurring when all of the people attending the meeting
were present. During his deposition, Mr. Thoillier never mentioned any threats
from Mr. Pesut. Consequently, the district court did not abuse its discretion in
concluding the portions of the affidavit related to the alleged threat were
contradictory.
Lantec and Lantec Brazil also argue the relevant portion of the affidavit
was not “intended to create a sham issue of fact.” They point to the deposition
testimony of LanCompany’s Chief Financial Officer, Ovidio Rovell, who testified
Mr. Thoillier told him of Mr. Pesut’s alleged threat. Novell conducted Mr.
Rovell’s deposition before Mr. Thoillier’s. Because Mr. Rovell’s testimony of
Mr. Thoillier’s hearsay statements gave Novell prior notice of the alleged threat,
Lantec and Lantec Brazil argue the affidavit cannot be viewed as an attempt “to
fabricate a disputed factual issue.”
While it is true Novell had notice of the alleged threat, we cannot conclude
the district court abused its discretion when other factors suggest the affidavit
was intended to create a sham issue of fact. First, Mr. Thoillier was represented
by counsel and cross-examined during his deposition. See Franks, 796 F.2d at
1237. Second, because the alleged threat is not newly discovered evidence, there
-24-
is no question Mr. Thoillier should have known about the alleged threat at the
time of the deposition. See id. Third, there is nothing in the deposition testimony
reflecting any level of confusion or uncertainty concerning Mr. Thoillier’s
testimony requiring clarification or explanation. See id. Given these
circumstances, we do not have a definite and firm conviction the district court
exceeded the bounds of permissible choice in striking the portions of Mr.
Thoillier’s affidavit related to the alleged threat. Consequently, we will not
consider whether the alleged threat would have raised a material issue of fact.
In short, we conclude Novell was entitled to summary judgment on the
claims involving the Original Equipment Manufacturer Agreements. Mr.
Palmeri’s telephone message was not definite enough to amount to a repudiation
of the Agreements. Even assuming otherwise, the record shows Novell
subsequently sent a letter reaffirming the Agreements and acted in accordance
with the reaffirmation at a subsequent meeting. Aside from properly stricken
portions of an affidavit, Lantec and Lantec Brazil have not directed us to any
portion of the record suggesting otherwise. Therefore, we affirm the district
court’s grant of summary judgment on the breach of the Original Equipment
Manufacturer Agreement claims.
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III. THE ALLEGED MESSAGE HANDLING SYSTEM ORAL AGREEMENT
Lantec and Lantec Brazil next argue Novell breached an oral agreement
regarding Messaging Handling System. According to the verified complaint,
Novell agreed to provide:
(1) increased marketplace exposure; (2) approval and promotion of
the manufacturer’s messaging applications; (3) competitive
advantages in the messaging applications marketplace because of
association with NetWare; (4) opportunity for direct input to Novell
concerning the growth and development direction of [Message
Handling System]; (5) heavy support and promotion of [Message
Handling System] as the dominant [Network Operating System]
messaging [transport agent] and promotion of [Message Handling
System] for many years to come; and (6) freedom from the fear or
competition with the [network operating system] or messaging
[transport agent] manufacturer – Novell.
In return, Lantec and Lantec Brazil contend they agreed to “(1) join in and
actively (but not financially) support the [Message Handling System] Alliance; (2)
convert existing products to [Message Handling System]; (3) migrate exclusively
to the [Message Handling System] engine for development of future messaging
applications; and (4) promote NetWare as the [Network Operating System] of
choice for all messaging applications.” They believe Novell broke these promises
by merging with WordPerfect, manufacturing GroupWise, and failing to develop
Message Handling System and Global Message Handling System after the merger.
The district court granted Novell’s motion for summary judgment. The
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court stated Lantec and Lantec Brazil “rely exclusively upon the allegations of
their Verified Amended Complaint to show the existence and terms of the alleged
[Message Handling System] oral agreement.” The court concluded Lantec and
Lantec Brazil had not produced specific evidence “to show the existence of the
alleged oral [Message Handling System] Agreement.”
Unsatisfied, Lantec and Lantec Brazil filed a motion for reconsideration
arguing they should have been allowed to rely on their verified complaint at the
summary judgment stage. In ruling on the motion, the court recognized that
verified complaints can sometimes be used to avoid summary judgment. The
district court, however, determined the relevant paragraphs of the complaint could
not be treated as an affidavit because they did not relate to facts within Mr.
Thoillier’s personal knowledge. The court further stated “the factual allegations
relied upon for this motion ... are conclusory .... For example, the [complaint]
lack[s] specific details of who made the alleged promises on behalf of Novell.”
For these reasons, the district court also denied the motion for reconsideration.
On appeal, Lantec and Lantec Brazil argue the district court erred in
refusing to consider the averments in their amended verified complaint as
evidence of the contract. They believe the verified complaint shows genuine
-27-
issues of material fact precluding summary judgment.
“[W]e review a district court’s decision to exclude evidence at the summary
judgment stage for abuse of discretion.” Sports Racing Servs., 131 F.3d at 894.
Under this standard, we will not disturb a district court’s ruling “unless [we have]
a definite and firm conviction that the lower court made a clear error of judgment
or exceeded the bounds of permissible choice in the circumstances.” Ortiz, 804
F.2d at 1164 n.2.
A district court may treat a verified complaint “as an affidavit for purposes
of summary judgment if it satisfies the standards for affidavits set out in Rule
56(e).” Conaway v. Smith, 853 F.2d 789, 792 (10th Cir. 1988). According to
Rule 56(e), an affidavit must “be made on personal knowledge, shall set forth
such facts as would be admissible in evidence, and shall show affirmatively that
the affiant is competent to testify to the matters stated therein.” Fed. R. Civ. P.
56(e). Furthermore, a district court need not treat a verified complaint as an
affidavit if “the allegations contained in the pleading are merely conclusory.”
Conaway, 853 F.2d at 793. See Adler v. Wal-Mart Stores, Inc., 144 F.3d 664,
671-72 (10th Cir. 1998) (“The conclusory allegation in Plaintiff’s complaint,
although verified, are of ... little help in carrying her burden under Rule 56(e).”);
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Sheinkopf v. Stone, 927 F.2d 1259, 1262 (1st Cir. 1991) (holding a trial court
must disregard conclusory allegations in a verified complaint when considering a
motion for summary judgment).
We conclude the district court did not abuse its discretion in refusing to
consider the amended verified complaint as an affidavit for summary judgment
purposes. We agree the allegations in the complaint were conclusory and the
district court was, therefore, free to disregard these allegations. This case is
similar to Mitchael v. Intracorp, Inc., 179 F.3d 847 (10th Cir. 1999), where we
stated an affidavit was “conclusory, vague, and/or lacking in foundation” and was
insufficient to support the conclusion an agreement had been formed. Id. at 855
n.9. In Mitchael, the affiant “fail[ed] to state how he learned of [the] agreement,
who exactly represented the other ... companies, how he could speak for what they
wanted or needed, when this agreement or understanding was formed, and how it
was to operate.” Id. Here, Mr. Thoillier’s averments in the complaint do not
reveal who represented Novell in making the oral contract. He did not state
where or how the agreement was communicated and explains only that the
agreement was reached “in approximately June 1993.” With respect to the
formation of the alleged Message Handling System oral contract, the amended
verified complaint did little more than state a legal conclusion as to the terms of
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the contract. Thus, we hold the district court was within the bounds of
permissible choice in concluding the verified complaint was conclusory and
refusing to consider the complaint as an affidavit.
Lantec and Lantec Brazil do not direct us to portions of the record, other
than their verified complaint, to support the alleged breach of the Message
Handling System oral contract. This is so even though Mr. Thoillier provided an
extensive deposition and a supplemental affidavit. Because Lantec and Lantec
Brazil have not provided record citations, we need not sift through the record in
an attempt to find evidence of the alleged oral contract. See Gross v. Burggraf
Constr. Co., 53 F.3d 1531, 1546 (10th Cir. 1995). For these reasons, the breach
of the Message Handling System oral contract claim fails.
IV. PROMISSORY ESTOPPEL
The Lantec companies next appeal the district court’s grant of summary
judgment on their promissory estoppel claim. They argue, under the doctrine of
promissory estoppel, Novell should be held to its promises: “(1) Novell would
never compete in the applications market; (2) developers who agreed to work with
Novell would be given access to technical information necessary to write
applications for NetWare; and (3) those developers would profit by designing
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applications solely for NetWare.”The Lantec companies allege they relied on
these promises to their detriment and should therefore be compensated.
The district court held Novell was entitled to summary judgment because
the Lantec companies had not presented any evidence to support their contention
Novell made enforceable promises to the Lantec companies. It pointed out “Mr.
Thoillier ... candidly admits he can’t recall any occasion when a representative of
Novell ever said that Novell would ‘never, ever’ enter the applications business.
As to the other alleged promises, plaintiffs have pointed to no evidence of such
promises other than the allegations in their Amended Verified Complaint.” Thus,
the district court concluded, “[t]his is [a] case where plaintiffs rely on their
subjective understanding of alleged vague and nonspecific conversations with
Novell representations. This is not sufficient to support a promissory estoppel
claim.”
The Lantec companies first argue the district court “improperly disregarded
the Amended Verified Complaint in reaching its determination.” In our prior
discussion of the alleged Message Handling System oral contract, we rejected the
argument that the district court acted inappropriately in refusing to consider
portions of the amended verified complaint relevant to the oral contract claim.
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Here, we conclude the portion of the complaint related to the promissory estoppel
claim is similarly conclusory. The complaint does not reveal which of Novell’s
officers or employees made the alleged promises nor does it reveal when, where,
or how the promises were communicated. Instead the complaint merely recites
the alleged promises and concludes Novell “made the representations and
promises ... with the knowledge and intention that Lantec and Lantec Brazil
would detrimentally rely on such representations and promises.”The district court
did not abuse its discretion in refusing to consider these conclusory allegations as
an affidavit. See Conaway, 853 F.2d at 792-93.
The Lantec companies have not directed us to any portion of the record,
other than their complaint, to support their claim Novell promised to give
developers technical information. Likewise, they have not provided citations to
the record to support their claim Novell promised developers would profit by
designing applications solely for NetWare. Because these alleged promises have
no support in the record, the district court properly dismissed them.
The Lantec companies have, however, directed us to portions of the record
to support their claim Novell promised to never enter the applications business.
Therefore, we must decide whether this evidence supports a promissory estoppel
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claim. We conclude it does not.
Under Utah law, the elements of promissory estoppel are:
(1) The promisee acted with prudence and in reasonable
reliance on a promise made by the promisor; (2) the promisor knew
that the promisee had relied on the promise which the promisor
should reasonably expect to induce action or forbearance on the part
of the promisee or a third person; (3) the promisor was aware of all
material facts; and (4) the promisee relied on the promise and the
reliance resulted in a loss to the promisee.
J.R. Simplot Co. v. Sales King Int’l, Inc., 17 P.3d 1100, 1107 (Utah 2000)
(quotation marks and alterations omitted). “[T]he alleged promise must be
reasonably certain and definite, and a claimant’s subjective understanding of the
promissor’s statements cannot, without more, support a promissory estoppel
claim.” Nunley v. Westates Casing Servs., Inc., 989 P.2d 1077, 1089 (Utah 1999).
See also J.R. Simplot, 17 P.3d at 1107.
The Lantec companies argue the district court “improperly disregarded”
deposition testimony from Mr. Thoillier, deposition testimony from two
independent software developers, and internal Novell documents. We will begin
our analysis with Mr. Thoillier’s testimony. The Lantec companies direct us to a
portion of Mr. Thoillier’s deposition. It states:
Q: The allegation is made Novell promised developers,
including Lantec and Lantec Brazil, that Novell was only in the
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business of marketing, distributing NetWare and would never
compete with such developers in the NetWare applications market.
Were you ever present when such representations were made?
A: Yes
Mr. Thoillier continued, saying Novell employees Jared Blauser, Roy Olsen, and
Ray Noorda all made such promises.
But this is not the end of Mr. Thoillier’s testimony. Upon further
questioning, Mr. Thoillier retreats from the position he heard specific promises
Novell would not enter the applications business. When asked specifically what
Novell said, Mr. Thoillier answered:
It was the same speech. We are in the application business. We are
not in the – I’m sorry, we are in the operating systems business. We
are not in the application business blah-blah-blah. We are – in fact,
the whole industry talks about Novell being the Switzerland of the
software. That’s why Novell partnered with so much [sic]. That’s
why you have so may application vendors that began to develop for
Novell networks.
While this statement supports the proposition Novell was not then in the
applications business, it does not show a certain and definite promise not to enter
the applications business. In fact, Mr. Thoillier eventually admitted he could not
recall an instance where Novell promised it would never enter the applications
business.
Q: ... Do you recall any occasion when any Novell officer or
director or employee in your presence said under no circumstances,
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or words to that effect, will Novell get in the quote-unquote
“applications” business?
A: I don’t recall. I just recall until such a time as the merger
happened the speech was the same. Novell was not going to enter
into the application business until the time the merger happened.
And then everyone was, even the Novell employees ... were all
speechless.
Q: But you do not recall an occasion where Novell said – when
anyone associated with Novell ever said Novell, under no
circumstances, will ever get into the applications business; isn’t that
true?
A: No. I don’t recall.
Mr. Thoillier’s testimony established only that Novell had stated it was not in the
applications business. This is not a clear and definite promise. Furthermore, to
the extent Mr. Thoillier’s deposition claims a promise, it is only his subjective
understanding of Novell’s statements that is insufficient to support the claim
Novell promised it would not enter the applications business.
In addition to Mr. Thoillier’s testimony, other Lantec employees testified
they could not recall any instance where Novell clearly stated it would never enter
the applications business. The Lantec companies never produced an employee or
officer of any kind who heard Novell make a clear or definite promise Novell
would not enter the applications business. We cannot see how, as a matter of law,
the Lantec companies could reasonably rely on a promise when nobody at the
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Lantec companies can recall Novell specifically making that promise.
Nevertheless, we turn to other evidence offered by the Lantec companies.
They direct us to the testimony of two independent software developers who were
making applications for use with Message Handling System. One developer
testified Novell repeatedly said it was not in the applications business. “[T]he
phrase that I kept hearing from Novell people was that we are not in the
application – we don’t develop applications. We develop the network operating
system or as they call it, the plumbing.” Again, this testimony, at most,
establishes the fact Novell was not initially in the applications business, but does
not show Novell promised it would never enter the applications business. Other
similar testimony is, likewise, unhelpful to the Lantec companies’ argument.
Finally, the Lantec companies direct us to internal Novell documents
written by Jeff Callo, a Novell employee. Novell argues “these documents were
not part of the record below when the district court granted summary judgment
and Lantec cannot rely upon them now.” The Lantec companies do not respond to
this argument in their reply brief. After reviewing the copies of the summary
judgment motion and response provided as part of the record on review, it appears
these documents, while referenced in the Lantec companies brief, were not
-36-
presented to the district court. Our examination on review “is confined to an
examination of materials before the lower court at the time the ruling was made.”
Allen v. Minnstar, Inc., 8 F.3d 1470, 1475 (10th Cir. 1993) (quotation marks and
alterations omitted). We “will not reverse the grant of summary judgment based
on evidence not before the district [court].” Id. (quotation marks and alterations
omitted). Consequently, we will not consider the documents written by Mr. Callo.
In sum, we affirm the grant of summary judgment on the promissory
estoppel claim. The Lantec companies are not entitled to rely on their conclusory
verified complaint. They have offered no additional evidence on their claim
Novell promised it would provide technical information or their claim Novell
promised the Lantec companies would profit by developing Message Handling
System applications. In addition, the Lantec companies failed to produce any
evidence of a clear and definite promise Novell would never enter the
applications business. Further, the Lantec companies’ reliance on any promise
was unreasonable when they could not produce a single officer or employee who
remembered hearing the promise.
ANTITRUST CLAIMS
Having resolved the contract and promissory estoppel claims, we turn to the
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antitrust claims. In their complaint, the Lantec companies alleged: (1) the
Novell/WordPerfect merger was an unlawful vertical 6 merger because it lessened
competition in the “groupware for NetWare” market in violation of 15 U.S.C.
§ 18; 7 (2) Novell contracted, combined, and conspired to unreasonably restrain
trade and commerce in violation of 15 U.S.C. § 1; (3) Novell monopolized,
attempted to monopolize, and conspired with WordPerfect to monopolize the
groupware for NetWare market in violation of 15 U.S.C. § 2; and (4) Novell
unlawfully used its monopoly power in the network operating system market as
leverage to gain a competitive advantage in the groupware for NetWare market in
violation of 15 U.S.C. § 2. 8 The Lantec companies also brought identical claims
6
“Economic arrangements between companies standing in a supplier-
customer relationship are characterized as ‘vertical.’” Brown Shoe Co. v. United
States, 370 U.S. 294, 323 (1962). “The primary vice of a vertical merger or other
arrangement tying a customer to a supplier is that, by foreclosing the competitors
of either party from a segment of the market otherwise open to them, the
arrangement may act as a ‘clog on competition.’” Id. at 323-24 (citation omitted).
7
The Lantec companies originally alleged unlawful competition in the
“NetWare Messaging Applications Market.” Later, the Lantec companies refined
their description to the “groupware for NetWare market.” Following the parties
and the district court we use the latter term. Lantec, 146 F. Supp. 2d at 1144 n.1.
8
The Lantec companies also brought a claim alleging Novell unlawfully
tied its groupware product to NetWare thereby lessening competition in the
groupware for NetWare market in violation of 15 U.S.C. § 14. The district court
dismissed this claim, Lantec, 146 F. Supp. 2d at 1155, and Lantec and Lantec
Brazil have not appealed the dismissal.
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under Utah antitrust statutes. See Utah Code Ann. § 76-10-914(1), (2). 9
Prior to trial, the district court granted Novell’s motion to dismiss the
antitrust claims brought by LanCompany and LanTraining finding the court
lacked subject matter jurisdiction. Neither LanCompany or LanTraining appealed
this ruling.
The case proceeded to trial on the antitrust claims brought by Lantec and
Lantec Brazil. After Lantec and Lantec Brazil presented their case, Novell moved
for judgment as a matter of law. Lantec, 146 F. Supp. 2d at 1142. The district
court granted the motion concluding the antitrust claims should fail because (1)
Lantec and Lantec Brazil failed to establish the existence of the alleged
groupware for NetWare market; (2) Lantec and Lantec Brazil failed to produce
evidence of any conspiracy between Novell and WordPerfect; and (3) Lantec and
Lantec Brazil failed to produce evidence of antitrust injury. Id. at 1156. In their
appeal, Lantec and Lantec Brazil challenge each of these conclusions.
9
The parties agree the Utah antitrust claims are duplicative of the federal
antitrust claims. We, therefore, will not address the Utah antitrust claims
separately.
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We review the district court’s grant of judgment as a matter of law de novo,
using the same standard as the district court. Baty v. Willamette Indus., Inc., 172
F.3d 1232, 1241 (10th Cir. 1999). According to the Federal Rules of Civil
Procedure, “[i]f during a trial by jury a party has been fully heard on an issue and
there is no legally sufficient evidentiary basis for a reasonable jury to find for that
party on that issue, the court ... may grant a motion for judgment as a matter of
law against that party.” Fed. R. Civ. P. 50(a)(1). Judgment as a matter of law “is
warranted only if the evidence points but one way and is susceptible to no
reasonable inferences supporting the party opposing the motion.” Baty, 172 F.3d
at 1241 (quotation marks and citation omitted). We must, however, affirm the
grant of judgment as a matter of law in favor of Novell “if there is no legally
sufficient evidentiary basis with respect to a claim ... under the controlling law.”
Id. (quotation marks and alterations omitted). With this standard in mind, we will
examine each of the district court’s conclusions.
I. Relevant Market
Lantec and Lantec Brazil argue they produced evidence sufficient to
establish a world-wide groupware for NetWare market. We disagree.
The relevant market is “a market relevant to the legal issue before the
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court.” SCFC ILC, Inc. v. Visa USA, Inc., 36 F.3d 958, 966 (10th Cir. 1994)
(quotation marks and citation omitted). In order to prevail on all their antitrust
claims, except the conspiracy to monopolize claim, 10 Lantec and Lantec Brazil
must establish the relevant market. United States v. E.I. du Pont de Nemours &
Co., 353 U.S. 586, 593 (1957) (holding “[d]etermination of the relevant market is
a necessary predicate to a finding of” unlawful merger under 15 U.S.C. § 18); TV
Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022,
1027 (10th Cir. 1992) (holding a 15 U.S.C. § 1 unreasonable restraint of trade
claim requires proof “the defendant entered a contract, combination or conspiracy
that unreasonably restrains trade in the relevant market” (emphasis added)); Full
Draw Prods. v. Easton Sports, Inc., 182 F.3d 745, 756 (10th Cir. 1999) (holding
monopolization and attempted monopolization claims under 15 U.S.C. § 2 require
10
See Salco Corp. v. General Motors Corp., 517 F.2d 567, 576 (10th Cir.
1975) (“Specific intent to monopolize is the heart of a conspiracy [to monopolize]
charge [under 15 U.S.C. §2], and a plaintiff is not required to prove what is the
‘relevant market.’”). We note there is a split among the circuits as to whether
proof of the relevant market is required to prove a conspiracy to monopolize
claim. Compare Salco, 517 F.2d at 576 (holding proof of relevant market is not
required) with Doctor’s Hosp. of Jefferson, Inc. v. Southeast Med. Alliance, Inc.,
123 F.3d 301, 311 (5th Cir. 1997); Bill Beasley Farms, Inc. v. Hubbard Farms,
695 F.2d 1341, 1343 (11th Cir. 1983) (holding proof of relevant market is
required). In this case, Novell does not argue Lantec and Lantec Brazil should be
required to establish the relevant market to succeed on the conspiracy to
monopolize claim. Furthermore, we are bound by our precedent and therefore
need not revisit this rule. See In re Smith, 10 F.3d 723, 724 (10th Cir. 1993).
-41-
proof of the relevant market); Catlin v. Washington Energy Co., 791 F.2d 1343,
1349 (9th Cir. 1986) (holding leveraging claims under 15 U.S.C. § 2 require proof
of the relevant primary and secondary markets). 11
In this case, Lantec and Lantec Brazil bear the burden of defining the
relevant market. See Tarabishi v. McAlester Reg’l Hosp., 951 F.2d 1558, 1569
n.15 (10th Cir. 1991). The relevant market is made up of the product at issue and
available substitutes for that product. See Visa USA, 36 F.3d at 966. “In defining
the relevant market, two aspects must be considered: the product market and the
geographic market.” Rural Tel. Serv., Co. v. Feist Publ’ns, Inc., 957 F.2d 765,
768 n.2 (10th Cir. 1992). In this case, we divide our discussion of Lantec and
Lantec Brazil’s evidence of a worldwide groupware for NetWare market first into
expert testimony and then into lay testimony.
11
There is a circuit split as to whether leveraging is an independent claim
under 15 U.S.C. § 2. See Eleven Line, Inc. v. North Tex. State Soccer Ass’n, Inc.,
213 F.3d 198, 206 n.16 (5th Cir. 2000) (recognizing circuit split). We have not
yet decided whether leveraging is an independent claim in the Tenth Circuit and
need not reach the issue in this case. Even assuming the existence of an
independent § 2 leveraging cause of action, Lantec and Lantec Brazil’s leveraging
claim fails because they have not established the relevant market.
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A. Expert Testimony
Lantec and Lantec Brazil argue the testimony of their economic expert, Dr.
John C. Beyer, is sufficient to establish the groupware for NetWare market. Dr.
Beyer testified the relevant market was “groupware for NetWare users.” After
hearing Dr. Beyer’s testimony at trial, the district court found the testimony
lacked foundation, was unreliable, and should be excluded in its entirety. The
district court concluded “Dr. Beyer did not employ in the courtroom the same
level of intellectual rigor that characterizes an expert in the field of economics
and industrial organization.” Specifically, the court stated Dr. Beyer (1) used
unreliable data; (2) did not understand computers or the computer market; (3)
testified the relevant market was determined by consumer purchasing patterns but
did not conduct or cite surveys revealing consumer preferences; (4) did not
calculate the cross-elasticity of demand to determine which products were
substitutes; (5) changed his opinion from the opinion he gave in an earlier expert
report; and (6) did not address changes in the computer market. Further, the
district court found portions of Dr. Beyer’s testimony were non-technical in
nature and would not assist the jury. We agree with the district court’s
assessment.
Federal Rule of Evidence 702 governs the admissibility of expert witness
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testimony. Fed. R. Evid. 702. Under Rule 702, expert testimony is admissible if
it will assist the trier of fact and if “(1) the testimony is based upon sufficient
facts or data, (2) the testimony is the product of reliable principles and methods,
and (3) the witness has applied the principles and methods reliably to the facts of
the case.” Id. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 593-95
(1993), outlines the framework a district court should use in determining whether
to admit evidence under Rule 702.
Under Daubert, courts measure reliability of scientific evidence by
considering (1) whether the technique can and has been tested; (2) whether
the technique has been subjected to peer review; (3) the known or potential
error rate of the technique; (4) the existence and maintenance of standards
controlling the technique’s operation; and (5) whether the technique has
gained general acceptance in the scientific community.
United States v. Call, 129 F.3d 1402, 1404 (10th Cir. 1997) (citing Daubert, 509
U.S. at 593-95), cert. denied, 524 U.S. 906 (1998). “We review de novo whether
the district court properly followed the framework set forth in Daubert.” Id. at
1405. If, however, the district court correctly applied the Daubert standards, we
may reverse only if we find the district court abused its discretion. Id.
From its order, it is clear the district court followed the Daubert
framework. Therefore, we look to see whether the district court abused its
discretion in excluding Dr. Beyer’s testimony. After reviewing Dr. Beyer’s
testimony, we conclude the district court order excluding the testimony is
-44-
thorough and well-reasoned. We see little benefit in reproducing the reasoning
from the district court’s eighteen-page order.
We will, however, comment on one particularly troubling aspect of Dr.
Beyer’s testimony. Throughout his testimony, Dr. Beyer relied heavily on his
personal experience as president of a consulting firm which installed a new
network operating system. Before Lantec and Lantec Brazil hired Dr. Beyer as an
economic expert, his consulting firm was looking for a new network operating
system. In an effort to make an informed purchase, Dr. Beyer spoke with the
technology experts at two or three other consulting firms in the Washington, D.C.
area. Lantec and Lantec Brazil characterize Dr. Beyer’s limited personal
experience as reliable and scientific “first-hand interviews.” In reality, Dr. Beyer
attempted to spin anecdotes from a handful of personal conversations with firms
in a limited geographic area into evidence of a worldwide product market. These
conversations are not sufficient facts or data to support Dr. Beyer’s conclusions.
The district court did not abuse its discretion in excluding Dr. Beyer’s testimony.
B. Lay Testimony
Lantec and Lantec Brazil argue “[e]ven without Dr. Beyer’s testimony,
there was more than sufficient evidence for the jury to find the existence of the
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groupware for NetWare market.”
The district court held Lantec and Lantec Brazil had not produced
sufficient lay testimony or other evidence to establish a relevant market. Lantec,
146 F. Supp. 2d at 1149. It concluded Lantec and Lantec Brazil had not presented
evidence to support the groupware for NetWare product market because they did
not present “evidence on the costs of the various products or of how the consumer
would react to a price increase in such costs, there is no evidence of price
sensitivity. There is no evidence of consumer preferences.” Id. at 1148-49. The
district court also held the “skimpy evidence of [Lantec and Lantec Brazil’s] own
experiences” was not sufficient to support a world-wide geographic market. Id. at
1149.
In their opening brief, Lantec and Lantec Brazil argue the district court
impermissibly “weighed evidence and made credibility determinations in holding
as a matter of law that Lantec failed to establish the existence of the groupware
for NetWare market.” Lantec and Lantec Brazil point to Novell documents
stating Novell’s belief customers wanted groupware tightly integrated with
NetWare. They further claim “Lantec’s ... marketing firm ... recognized the
existence of the groupware for NetWare market ... [and] advised Lantec to focus
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on the submarket of groupware made for NetWare.”
While Lantec and Lantec Brazil offered lengthy arguments as to how the
record supports their definition of the product market, their opening brief did not
challenge the district court’s conclusion that they had not proven a geographic
market. Novell responded to Lantec and Lantec Brazil’s opening brief by arguing
Lantec and Lantec Brazil had waived any appeal of the district court’s ruling on
the geographic market. Only then, in their reply brief, did Lantec and Lantec
Brazil argue “the worldwide geographic market was established.”
We are under no obligation to address the district court’s geographic
market ruling because Lantec and Lantec Brazil did not raise the issue in their
opening brief. See Stump, 211 F.3d at 533. Since proof of relevant market
requires evidence of both a product market and a geographic market, Feist, 957
F.2d at 768 n.2, we can affirm the district court’s decision simply because Lantec
and Lantec Brazil failed to properly appeal the geographic market ruling.
Even if Lantec and Lantec Brazil had properly raised their argument against
district court’s ruling on the geographic market, their definition of a “worldwide
geographic market” fails. “The geographic market consists of the area of effective
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competition.” Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 893 (10th
Cir. 1991). It is “the narrowest market which is wide enough so that products
from adjacent areas cannot compete on substantial parity with those included in
the market.” Westman Comm’n Co. v. Hobart Int’l, Inc., 796 F.2d 1216, 1222
(10th Cir. 1986) (quotation marks and alterations omitted), cert. denied, 486 U.S.
1005 (1988). The size of the relevant geographic market depends on a number of
factors, including “[p]rice data and such corroborative factors as transportation
costs, delivery limitations, customer convenience and preference, and the location
and facilities of other producers and distributors.” T. Harris Young & Assocs.,
Inc. v. Marquette Elecs., Inc., 931 F.2d 816, 823 (11th Cir. 1991). See also
Kaplan v. Burroughs Corp., 611 F.2d 286, 292 (9th Cir. 1979).
Lantec and Lantec Brazil have not pointed us to any facts in the
approximately 10,000 pages of record that specifically address price data, the
location and facilities of other producers, or any of the other factors cited by
courts as relevant to determining the relevant geographic market. Instead, Lantec
and Lantec Brazil claim they presented evidence sufficient to establish a
worldwide geographic market because “Lantec established that it sold XPost, its
first groupware product, around the world.”They also state they “established that
[Lantec] intended to sell XPostWare around the globe as evidenced by the
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numerous domestic and foreign distribution contracts it negotiated.”
Neither of Lantec and Lantec Brazil’s arguments is effective. First, under
Lantec’s definition of groupware (products containing e-mail and one other
messaging application), XPost is not groupware. XPost consisted solely of an e-
mail application. Consequently, sale of XPost in several different international
markets cannot establish a worldwide groupware market. 12 Second, the fact
Lantec and Lantec Brazil were, through distributorship agreements, attempting to
sell their products in several different countries is not, by itself, helpful. “[T]he
geographic market is not comprised of the region in which the seller attempts to
sell its product, but rather is comprised of the area where his customers would
look to buy such a product.” Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715,
726 (3rd Cir. 1992). See also Morgan, Strand, Wheeler & Biggs v. Radiology,
Ltd., 924 F.2d 1484, 1490 (9th Cir. 1991) (holding where the plaintiff company
12
The distinction between groupware and Lantec’s XPost e-mail
application is not merely semantic. Had Lantec and Lantec Brazil’s antitrust
claims survived judgment as a matter of law, they would have had a tactical
advantage in narrowly defining the “groupware for NetWare” market to exclude
competitors whose applications only contained an e-mail program. Since Lantec
and Lantec Brazil narrowly define the relevant product market in order to bolster
their product market and monopoly power arguments, Lantec and Lantec Brazil
must, at a minimum, live with this narrow definition in establishing the relevant
geographic market.
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competes does not define the relevant geographic market).
Because Lantec and Lantec Brazil have not properly appealed the district
court’s determination of the geographic market and, in any event, did not
introduce evidence from which a jury could find a worldwide market, we need not
consider whether they introduced evidence sufficient to establish a groupware for
NetWare product market. We, therefore, affirm the district court’s grant of
judgment as a matter of law on the unlawful vertical merger claim, conspiracy to
restrain trade claim, monopolization claim, attempted monopolization claim, and
leveraging claim.
II. Conspiracy
Having affirmed the dismissal of the other antitrust claims, we must now
consider whether Lantec and Lantec Brazil have established their conspiracy to
monopolize claim brought under 15 U.S.C. § 2. According to Tenth Circuit case
law, a conspiracy to monopolize claim requires proof of “(1) the existence of a
combination or conspiracy to monopolize; (2) overt acts done in furtherance of
the combination or conspiracy; (3) an effect upon an appreciable amount of
interstate commerce; and (4) a specific intent to monopolize.” TV
Communications Network, 964 F.2d at 1026 (quotation marks and citation
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omitted).
The district court granted judgment as a matter of law on the conspiracy to
monopolize claim, concluding Lantec and Lantec Brazil had not produced
sufficient evidence for a jury to find a conspiracy between Novell and
WordPerfect prior to the merger. The court stated: “[I]f this case the evidence
produced by Plaintiffs at trial is that WordPerfect and Novell representatives met
in the period between merger announcement and completion. Among other things
they discussed were [Message Handling System] and integration. Some persons
in the two companies were in favor of [Message Handling System] and some were
not.” Rather than suggesting a common scheme, the court concluded the evidence
“shows the opposite, that the companies had different views on how things should
proceed.” Consequently, the court held “Plaintiffs’ evidence is mere speculation
and conjecture, and that will not suffice.” Lantec and Lantec Brazil have
appealed the district court’s conclusion there was no evidence of a conspiracy.
In considering whether Lantec and Lantec Brazil have produced evidence
of a conspiracy, we are guided by relevant case law. Initially, a conspiracy
requires at least two parties. A corporation is not capable of conspiring with
itself. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 769-72
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(1984). A plaintiff can prove a conspiracy with either direct or circumstantial
evidence. See American Tobacco Co. v. United States, 328 U.S. 781, 809-10
(1946) (“The essential combination or conspiracy in violation of the Sherman Act
may be found in a course of dealing or other circumstances as well as in any
exchange of words.”). When a plaintiff attempts to prove conspiracy through
circumstantial evidence, “ambiguous conduct that is as consistent with
permissible competition as with illegal conspiracy does not by itself support an
inference of antitrust conspiracy.” Multistate Legal Studies, Inc. v. Harcourt
Brace Jovanovich Legal & Prof’l Publ’ns, Inc., 63 F.3d 1540, 1556 (10th Cir.
1995) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
588 (1986)), cert. denied, 516 U.S. 1044 (1996). 13 “A plaintiff must offer
evidence tending to exclude the possibility that the alleged conspirators either
acted independently or colluded in a way that could not have harmed the
plaintiff.” Id.
13
In describing the necessary evidence to infer a conspiracy, both
Multistate Legal Studies and Matsushita are specifically addressing a conspiracy
to restrain trade under 15 U.S.C. § 1 rather than a conspiracy to monopolize under
15 U.S.C. § 2. However, the limits on inferences of concerted actions under § 1
apply in § 2 cases. See AD/SAT v. Associated Press, 181 F.3d 216, 232-33 (2d
Cir. 1999); In re Beef Indus. Antitrust Litig., 907 F.2d 510, 516 (5th Cir. 1990);
Stephen Jay Photography, Ltd. v. Olan Mills, Inc., 903 F.2d 988, 996 (4th Cir.
1990). But see H.L. Hayden Co. v. Siemens Med. Sys., Inc., 879 F.2d 1005, 1019
& n.9 (2d Cir. 1989) (raising the possibility inferential restraints under § 1 do not
apply to § 2).
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A. Pre-Merger Conduct
In arguing for an inference of a pre-merger conspiracy, Lantec and Lantec
Brazil first direct us to several actions Novell took after merging with
WordPerfect. They claim: (1) “Novell created incompatibility with [Message
Handling System] and [Global Message Handling System] post-merger”(emphasis
added); (2) “Novell ‘did not do a lick’ to enhance [Message Handling System]
post-merger” (emphasis added); (3) Novell “refus[ed] to provide the [application
program interfaces] to GroupWise”; (4) “Novell refused to ‘unbundle’ the
GroupWise [message transport agent] from the rest of the application”; (5) Novell
prevented independent software programers “from using its trade dress after the
merger” (emphasis added); and (6) “Novell abandoned all marketing activities on
behalf of [independent software programers] after the merger” (emphasis added).
Although Lantec and Lantec Brazil appear to acknowledge Novell and
WordPerfect could not, as a matter of law, conspire after the merger, their theory
is the post-merger actions raise an inference Novell and WordPerfect conspired
before the merger.
In carefully reviewing the record, we could not find a shred of evidence
suggesting Novell and WordPerfect agreed to any of these post-merger changes
before the merger was complete. Novell’s post-merger actions taken alone are
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just “as consistent with permissible competition” agreed to after the merger as
they are “with [an] illegal conspiracy” agreed to before the merger. See
Multistate Legal Studies, 63 F.3d at 1556. Therefore, in this instance, Novell’s
post-merger actions are not sufficient to raise an inference of conspiracy to
monopolize. See id.
Lantec and Lantec Brazil next argue Novell’s “termination of the [Original
Equipment Manufacturer] Agreement[s] point[s] to a conspiracy.” This argument
fails because we have already concluded Novell did not terminate the
Agreements.
B. GroupWise Application Program Interfaces
Lantec and Lantec Brazil continue their attempt to show a conspiracy by
stating “the evidence established that the GroupWise developers within
WordPerfect received pre-release [NetWare application program interfaces] prior
to consummation of the merger, thus establishing, if not at least raising an
inference of, an agreement to monopolize.” According to Lantec and Lantec
Brazil, a GroupWise “version was released in October of 1994, at approximately
the same time as NetWare 4.1, yet was totally integrated with NetWare 4.1.
These circumstances strongly indicate that the GroupWise developers received
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pre-release [application program interfaces] before consummation of the merger.”
After reviewing the record, we conclude it lacks any evidence showing
GroupWise developers were given pre-release NetWare application program
interfaces. Lantec and Lantec Brazil’s assertions rest on the testimony of their
witness Antonio Sergio Martins. Mr. Martins’ testimony is speculative and does
not lead to the conclusion Novell and WordPerfect conspired. Mr. Martins
testified:
I am speaking theoretically, hypothetically. If GroupWise went out
on the market a few weeks after NetWare came out already prepared
as a ready product, a product that was edited, documented, already
produced for computers, it is very probable that the GroupWise team,
the group which was developing the software, would have had access
to that quite a bit before, previously. A few weeks before. I am
speaking hypothetically just based on my experience.
When asked whether he had “any specific knowledge as to whether or not
GroupWise developers actually received or actually wrote any GroupWise product
to any unpublished [application program interfaces],” Mr. Martins said he could
not “say anything about that except hypothetically.” Mr. Martins went on to
admit the application program interfaces from a previous version of NetWare
were publically released and could have been used to write the 1994 GroupWise
program. Other portions of the record uniformly state the GroupWise version
released in 1994 was written with the public application program interfaces from
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a prior version of NetWare. Consequently, the record does not support the
conclusion Novell conspired with WordPerfect by giving WordPerfect pre-release
NetWare application program interfaces.
C. Business Justification
Lastly, Lantec and Lantec Brazil claim there is evidence showing prior to
the merger Novell and WordPerfect intended to shift all of the Message Handling
System customers to GroupWise. They argue this is sufficient evidence to
support the inference Novell and WordPerfect conspired to monopolize. Novell
denies “that Novell and WordPerfect took any actions to migrate [Message
Handling System users] to GroupWise” during the time when a conspiracy could
have been formed. Novell further argues its shift from Message Handling System
to GroupWise was “fully justified by its efforts to compete with Microsoft and
Lotus in a market that was ever changing, rapidly evolving, fiercely competitive,
and technologically complex.” In response, Lantec and Lantec Brazil claim there
is no evidence in the record showing “Novell had a plausible business
justification to take these actions.”
After careful consideration of the record, we conclude any agreement
between Novell and WordPerfect to move from Message Handling System to
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GroupWise had legitimate business justifications. Uncontested evidence shows
the groupware, messaging engine, and e-mail markets were in flux. Novell’s key
rivals, Microsoft and Lotus, were developing completely new groupware products
to compete with Message Handling System, as well as with other groupware and
e-mail applications. Eventually, Microsoft, Lotus, and other developers began
giving e-mail applications away for free. Novell could not expect independent
developers to be interested in developing products other companies were giving
away. In this rapidly changing environment, there were obvious pro-competitive
justification for Novell to develop a new messaging engine and complimentary
groupware software. Because conduct as consistent with permissible competition
as with illegal conspiracy does not support an inference of antitrust conspiracy,
Matsushita Electric Indus., 475 U.S. at 588, any shift from Message Handling
System to GroupWise does not support the inference Novell and WordPerfect
conspired to monopolize.
In sum, we conclude Lantec and Lantec Brazil have not produced evidence
from which a jury could draw an inference of a conspiracy to monopolize.
Therefore, their conspiracy to monopolize claim under 15 U.S.C. § 2 fails.
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III. ANTITRUST INJURY
Because we have affirmed the district court’s decisions that Lantec and
Lantec Brazil failed to prove the relevant market and failed to prove a conspiracy,
there are no antitrust claims remaining. We, therefore, decline to address whether
Lantec and Lantec Brazil provided proof of an antitrust injury.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s decision. 14
14
In its brief, Novell urges us to sanction the Lantec companies for
inaccurate and misleading record citations. We may impose sanctions if we
determine an appeal is frivolous. Fed. R. App. P. 38. While an appeal may be
frivolous if it consists “of irrelevant and illogical arguments based on factual
misrepresentations and false premises,” Romala Corp. v. United States, 927 F.2d
1219, 1222 (Fed. Cir. 1991), the Lantec companies’ misstatements are not
egregious enough to warrant sanctions in this case.
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