Opinion
Civil No. 01-CV-2059 (RBK).
March 21, 2005
OPINION
This matter is before the Court on motion for summary judgment by Plaintiff/Counterclaim Defendant Koch Materials Co. Specifically, Koch moves for summary judgment on the counterclaims by Shore Slurry Seal, Inc. and Asphalt Paving Systems, Inc. ("APS") alleging Koch violated the Robinson-Patman Act. Koch's motion sets forth three arguments in favor of granting summary judgment: (1) this Court does not have jurisdiction over the Robinson-Patman Act claims; (2) Shore and APS have failed to demonstrate that Koch's pricing practices have harmed competition; and (3) Shore and APS cannot demonstrate that they suffered actual injury as a result of Koch's pricing practices. The Court, for the reasons expressed in the Opinion below will grant the motion for summary judgment only on the basis of the third argument. In short, Koch is correct that Shore and APS cannot, with the evidence in the record, demonstrate a causal link between Koch's pricing practices and any actual harm suffered as a result of those practices.
I. INTRODUCTION
Shore, at the times relevant to this suit, was a road-paving company that performed public roadwork projects. Most of the projects Shore performed were in New Jersey and Pennsylvania, but some were also in Maryland, Delaware, and New York. An important and large cost item in road-paving is asphalt emulsion. Shore purchased all of its asphalt emulsion needs from Koch, who also supplied asphalt emulsion to Shore's competitors in the public roadwork business. Additionally, as addressed at length by the Court in its published Opinion, Koch Materials Co. V. Shore Slurry Seal, Inc., 205 F. Supp. 2d 324 (D.N.J. 2002), Shore transferred all, or most, of its interest in the roadpaving business to APS in May of 2001. After that transfer, APS began to purchase asphalt emulsion from Koch through Shore. Shore continued to bid on public roadwork projects after this transfer, but invariably subcontracted the work it won to APS. By statute, these public roadwork jobs could be awarded only to the lowest bidder.
The disputes in this case are numerous; but the one addressed in this Opinion centers on the differences in the prices that Koch charged Shore, and thus APS, and the prices Koch charged Shore's competitors for the same product. Some evidence in the record tends to show that Koch charged Shore higher prices than it did other roadpaving companies for the same product. On the strength of these price differences, Shore and APS have brought counterclaims against Koch, alleging secondary line price discrimination in violation of sections 2(a) and 4 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §§ 13(a) 15. Secondary line price discrimination cases typically involve a seller that allegedly discriminated in its pricing practices with competing buyers. See J.F. Feeser v. Serv-A-Portion, Inc., 909 F.2d 1524, 1526 (3d Cir. 1990). Facts further relevant to this Opinion are incorporated into the discussion below, as appropriate.
As a final note, the Court will address Shore and APS together as "Shore and APS," though most of the evidence in the record pertains only to the relationship between Shore and Koch, before APS acquired Shore's assets.
II. STANDARD OF REVIEW
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). In deciding whether there is a disputed issue of material fact, a court must view the facts and all reasonable inferences in a light most favorable to the nonmoving party. Id. at 250; Anderson v. Consol. Rail Corp., 297 F.3d 242, 247 (3d Cir. 2002).
The moving party always "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the `pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the nonmoving party bears the burden of persuasion at trial, however, "the burden on the moving party may be discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325. The non-moving party "may not rest upon the mere allegations or denials of" its pleadings and must present more than just "bare assertions, conclusory allegations or suspicions" to establish the existence of a genuine issue of material of fact. FED. R. CIV. P. 56(e); Jalil v. Avdel Corp., 873 F.2d 701, 707 (3d Cir. 1989) (citation omitted). "A party's failure to make a showing that is `sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial' mandates the entry of summary judgment." Watson v. Eastman Kodak Co., 235 F.3d 851, 857 (3d Cir. 2000) (quoting Celotex, 477 U.S. at 322).
III. DISCUSSION
The Court will address Koch's motion for summary judgment as follows. First, the Court will briefly address Koch's arguments that Shore and APS cannot establish jurisdiction and that they cannot establish harm to competition. In short, the Court is not persuaded that summary judgment is appropriate on either basis. Next, the Court will address Koch's argument that Shore and APS cannot establish that they were actually injured by Koch's pricing tactics and thus are not entitled to damages under section 4 of the Clayton Act. The Court agrees with this argument and finds the record inadequate to establish actual injury for purposes of section 4 of the Clayton Act.
A. Jurisdiction and Harm to Competition 1. Jurisdiction under the Robinson-Patman Act.
Koch also argues that Shore and APS cannot satisfy the jurisdictional requirements of the Robinson-Patman Act. Koch's footnote does not necessarily reflect the best method by which to challenge the power of this Court to adjudicate the Robinson-Patman Act claim. The Court must, of course, satisfy itself of jurisdiction. Wymard v. McCloskey Co. 342 F.2d 495, 497 (3d Cir. 1965) ("It is the continuing responsibility of trial counsel and trial courts to see that all essential jurisdictional facts are alleged and adequately established in the record."). In many cases, especially those where the issue can be characterized as purely jurisdiction, it is enough for a party to make a "suggestion" that the Court does not have jurisdiction. FED. R. CIV. P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action."); see also Clissuras v. City University of New York, 359 F.3d 79, 81 n. 3 (2d Cir. 2004) (treating a letter sent to the court as a "suggestion" under Rule 12(h)(3) of a lack of jurisdiction). But under the Robinson-Patman Act, the jurisdictional question blends readily into a merits question and is, for that reason, normally treated as an issue of fact for the jury. Edward J. Sweeney Sons, Inc. v. Texaco, Inc., 478 F. Supp. 243, 272-73 n. 62 (E.D. Pa. 1979) aff'd 637 F.2d 105 (3d Cir. 1980); Hasbrouck v. Texaco, 663 F.2d 930, 933-34 (9th Cir. 1981); see also R.S.E. Inc. v. Pennsy Supply, Inc., 489 F. Supp. 1227, 1233-34 (M.D. Pa. 1980) (deciding "in commerce" question by summary judgment standard); Zoslaw v. MCA Distributing Corp., 693 F.2d 870, 880 (9th Cir. 1982) (reversing district court's grant of summary judgment on "in commerce" question because there were genuine issues of material fact in dispute). Given that Koch raises the Robinson-Patman jurisdictional issue within its brief in support of its motion for summary judgment and the parties do not suggest the Court should use a different standard, the Court will analyze Koch's challenge under the standard provided by Federal Rule of Civil Procedure 56.
Jurisdiction under the Robinson-Patman Act is determined by a three-part test, through which the plaintiff must establish the following: (1) the defendant engages in interstate commerce, generally; (2) the allegedly discriminatory sales occurred in the course of interstate activities; and (3) at least one of the allegedly discriminatory sales was made "in commerce." Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195 (1974).
Under the Robinson-Patman Act, the third jurisdictional requirement — that one sale was "in commerce" — requires that the allegedly discriminatory sale crossed state lines. It is not enough to meet this requirement by showing that the defendant's activities or sales in general impact interstate commerce. Instead, "the state of being `in commerce' under [section] 2(a) requires physical movement of the relevant products across state lines." SM Materials Co. V. Southern Stone Co., 612 F.2d 198, 200 (5th Cir. 1980) (citing Gulf Oil, 419 U.S. at 200 ("With almost perfect consistency, the Courts of Appeals have read the language requiring that `either or any of the purchases involved in such discrimination (be) in commerce' to mean that [section] 2(a) applies only where `at least one of the two transactions which, when compared, generate a discrimination . . . crosses a state line.'") (citation omitted)); see also McCallum v. City of Athens, Ga., 976 F.2d 649, 656 (11th Cir. 1992) ("Claims under the Robinson-Patman Act must be predicated on the occurrence of an interstate sale of the relevant commodity.") (citation omitted).
Thus, to determine jurisdiction, the Court must examine the transactions between Koch and Shore and APS, along with the transactions between Koch and other companies that, when compared to the transactions between Koch and Shore and APS, demonstrate pricing discrimination. But the Court cannot simply compare any two transactions in the record. Rather, a relevant transaction for purposes of the Robinson-Patman Act is one that was for the same, or substantially the same, material; was made within the same general time frame; was made within the same geographic area (or competitive market); and was made between Koch and a company with which Shore and APS were competing. See Mayer Paving Asphalt Co. v. Gen. Dynamics Corp., 486 F.2d 763, 769-70 (1973) cert. denied 414 U.S. 1146 (1974) (limiting "in commerce" inquiry to only those transactions that would constitute Robinson-Patman Act violations in the first place). Only when the transactions are thus categorized can the Court begin to examine whether a relevant sale took place in commerce. Id. Otherwise, the Court is left to guess as to which of the sales documented in the record are relevant. For instance, exhibit 15 contains invoices for a sale to Shore and a sale to "Suit-Kote." The invoices show that the sales were made within eleven days of each other and that Suit-Kote paid less for the same product. The invoices are unclear as to how the products were delivered, if at all. The invoice for the sale to Shore is marked "FOB: ORIGIN," while the invoice for Suit-Kote is marked "FOB: Destination." So it is possible that Koch shipped this sale to Suit-Kote, whose address on the invoice is in New York State. But whether such a shipment actually occurred is far from clear. It is also far from clear whether Suit-Kote and Shore were competing for the same business at the time of the sales evidenced in exhibit 15.
But the more fundamental problem raised by Koch's motion is that its footnote discussing jurisdiction is insufficient to carry Koch's burden as the party moving for summary judgment. The entire text of that footnote reads as follows
Although not necessary for this Court to rule in Koch's favor, Shore and APS also cannot satisfy, among the other requirements of the RPA, the fundamental requirement . . . that the products at issue crossed state lines. First, most of the purchases in each state (New Jersey and Pennsylvania) were used in that state. See Capo Dep. at 137:24-138-10 (Ex. D); Messina Dep. at 189:24-190:3 (Ex. E). Further, regardless of where the emulsion was purchased, Shore and APS cannot prove where the emulsion purchased was used, how much emulsion was used on a particular project, or when it was used. See Transcript, dated Feb. 20, 2004, at 409:2-413-19 (Ex. H); Capo Dep. at 135:25-137:15, 150:10-24 (Ex. D); Messina Dep. at 225:22-225:6 (Ex. E). All of this further assumes that Shore's driving emulsion across a state line would satisfy [the in commerce requirement] as to Koch, which is doubtful.
Koch's footnote is insufficient to demonstrate that there is no genuine issue of material fact regarding the jurisdictional in commerce question because it never addresses the sales to Shore's competitors. That is, the in commerce requirement is satisfied when one out of the two sales that make up an instance of price discrimination is shipped across state lines. See Gulf Oil, 419 U.S. at 200 ("[section] 2(a) applies only where at least one of the two transactions which, when compared, generate a discrimination . . . crosses a state line."). Koch never argues that sales to competitors of Shore and APS did not meet this requirement and Koch never points to evidence, or a lack of evidence, of sales to Shore's competitors that demonstrates that there is no genuine issue regarding the in commerce question. Rather, Koch focuses solely on the inabilities of Shore and APS to establish where they used Koch product, and follows up with commentary, unsupported by citation to case law, that it is "doubtful" that driving the product across state lines is sufficient. Koch, therefore, has not addressed the entire jurisdictional element of Shore and APS's prima facie case.Levendos v. Stern Entertainment, Inc., 860 F.2d 1227, 1229-30 (3d Cir. 1988) ("[A]lthough Levendos has the ultimate burden of persuasion at trial, Stern, as the moving party on summary judgment, has the burden on this motion of demonstrating that Levendos did not establish the presence of a genuine issue of material fact regarding her prima facie case."). By not addressing sales to competitors of Shore and APS, Koch has failed to meet its initial burden on summary judgment with respect to the in commerce requirement under the Robinson-Patman Act.
The Court will, therefore, deny summary judgment on the jurisdictional issue. Koch will, of course, be able to address this issue again at trial, if one is necessary.
2. Harm to Competition
Koch also moves for summary judgment by arguing that Shore and APS cannot establish that Koch's actions were harmful to competition A plaintiff can establish harm to competition in two ways. First, the plaintiff can present direct evidence of lost sales or profits. Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1272 (3d Cir. 1995). Or, second, the plaintiff can establish the requisite harm to competition by submitting "proof of a substantial price discrimination between competitors over time." Id. Koch argues that Shore and APS have failed to establish harm to competition because, due to the nature of bidding for public entity projects, there is no competition once the lowest bidder is selected. According to Koch, "[i]t is well-established that there is no substantial lessening of competition when two companies purchase products to perform separate government contracts they previously won in competitive bids." For support, Koch cites several cases from the Fifth Circuit, including M.C. Mfg. Co. Inc. v. Texas Foundries, Inc., 517 F.2d 1059, 1066-68 (5th Cir. 1975). The essential holding of the Texas Foundries opinion is that there was no competition between the disfavored and favored customers because they were purchasing products for resale contracts already won. Id. at 1066-67. To the Fifth Circuit, it was clear that the disfavored and favored customers were not in competition because "[e]ach contract represented a separate, distinct market open only to a single producer." Id. at 1067.
In the present case, however, no particular sale from Koch to Shore and APS, or their competitors can be attributed to a particular government project. Rather, the undisputed evidence shows that Shore, and later APS, bought large quantities of asphalt emulsion without necessarily earmarking the product for a bid already won. The undisputed evidence also demonstrates that Shore, and later APS, was in constant competition with E.J. Breneman for government contracts. Thus, the evidence in the record of several instances, over four years, in which Breneman and other competitors received favorable pricing on asphalt emulsion, is sufficient to establish a substantial price difference over time. Therefore, the Court will decline to enter summary judgment on this basis.
Koch moved for summary judgment on this competition element solely on the theory established in the Texas Foundries case. Koch does not argue that there is not evidence that Shore and APS regularly compete for the same contracts with the other Koch customers found in the record. Hence, the Court will not cast judgment on whether Shore and APS have produced enough evidence of a competitive relationship with companies such as Suit-Kote, Anderson James Construction, and Mid-Atlantic Asphalt. Koch's arguments on summary judgment did not address the relationships between Shore and APS and these companies, so Shore and APS never had the burden to produce such evidence.
B. Damages under Section 4 of Clayton Act
Showing injury to competition under section 2(a) of the Robinson-Patman Act establishes a plaintiff's entitlement to an injunction and warrants a further examination into whether the plaintiff suffered actual injury. Stelwagon, 63 F.3d at 1273. To recover damages for a violation of the Robinson-Patman Act — under section 4 of the Clayton Act — a plaintiff must demonstrate that it was actually injured by the complained of antitrust violation. Specifically, in the Robinson-Patman Act setting, the Third Circuit has explained that there must be "at least some attempt to link the discrimination to harm to the plaintiff."J.F. Feeser, Inc. v. Serv-a-Portion, Inc., 909 F.2d 1524, 1540 (3d Cir. 1990). More specifically, "a plaintiff must establish cognizable injury attributable to the antitrust violation and some approximation of damage." Stelwagon, 63 F.3d at 1273 (quoting J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 561 (1981)).
The precise contours of the proof required of a plaintiff are, however, indeterminate. Generally, a plaintiff will have to establish that the price discrimination was a material cause of some identifiable damage suffered; but it does not need to rule out all other possible causes. Callahan v. A.E.V., Inc., 182 F.3d 237, 247 (3d Cir. 1999) (explaining that in reviewing evidence of actual damages on summary judgment "all we are concerned with is whether [the plaintiff] has established that the defendants' illegal conduct was a material cause of [his] injury."); see also Reeder-Simco GMC, Inc. v. Volvo GM Heavy Truck Corp., 374 F.3d 701, 713-14 (8th Cir. 2004) ("Reeder was not required to prove Volvo's price discrimination was the only reason for its injuries, or the only reason for heavy truck customers' purchasing decisions — it was enough that Reeder showed the price discrimination was a `material' cause of its injuries.") (citing Zenith Radio Corp. v. Hazeline Research, Inc., 395 U.S. 100, 114 n. 9 (1969)). To that end, Robinson-Patman plaintiffs have "both the burden and opportunity of proving damages `on the basis of plaintiff's estimate of sales it could have made absent the violation.'" Reeder, 374 F.3d at 714 (quoting J. Truett Payne, 451 U.S. at 565). The jury may not, however, "render its verdict based on speculation or guesswork, but it may make a just and reasonable estimate or approximation." Reeder, 374 F.3d at 714 (citing Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264-66 (1946) Moreover, theJ. Truett Payne Court provided that causation could be inferred:
[D]amage issues in these cases are rarely susceptible of the kind of concrete, detailed proof of injury which is available in other contexts. The Court has repeatedly held that in the absence of more precise proof, the factfinder may `conclude as a matter of just and reasonable inference from the proof of defendants' wrongful acts and their tendency to injure plaintiffs' business, and from the evidence of the decline in prices, profits and values, not shown to be attributable to other causes, that defendants' wrongful acts had caused damage to the plaintiffs.'J. Truett Payne, 451 U.S. at 565-66 (quoting Bigelow, 327 U.S. at 264).
As the Third Circuit has clarified, however, despite the relatively light burden imposed on plaintiffs at this stage — proving damages under section 4 of the Clayton Act — there must nonetheless "be some direct evidence of injury to support an award of damages." Stelwagon, 63 F.3d at 1274. In Stelwagon, the district court had found the plaintiff's evidence sufficient to support an award of damages. Id. That evidence consisted of the testimony of an expert witness and anecdotal evidence of the plaintiff's customers' stated reasons for choosing not to purchase from the plaintiff. Id. The Third Circuit disagreed that this evidence was sufficient to support an award of damages.Id. First, the court found that the customers' statements, though admissible to show customer motive, were inadmissible to prove "actual antitrust damages, in the form of lost sales. . . ." Id. at 1274-75. Second, the Court found the testimony of the plaintiff's expert insufficient to establish actual injury. Id. at 1275-76. The plaintiff's expert, Dr. Perry, described his method for assessing damages as follows:
In order to forecast the lost sales of MAPs by Stelwagon as a result of the price advantage of other distributors, we begin with the year 1988 when Stelwagon first successfully introduced Tarmac's products in the Philadelphia metropolitan area. But for the price advantage of other distributors, we assume that Stelwagon's sales of MAPs would have followed a pattern similar to Stelwagon's sales of other products (excluding MAPs). . . . For this reason, we use Stelwagon's sales of other products to forecast the sales of MAPs. . . . From this forecast, we then calculate the lost sales of MAPs in the years following 1988. These lost sales can be converted into lost profits by applying Stelwagon's markup on these products.Id. at 1275.
The court criticized this testimony for its failure to establish a causal link between discrimination and declining sales and for its failure to address alternative reasons for a decline in sales: "Dr. Perry's analysis failed to sufficiently link any decline in Stelwagon's sales to price discrimination. The sales may have been lost for reasons apart from the price discrimination — reasons that Dr. Perry's analysis apparently did not take into account." Id. Having thus analyzed all of the evidence submitted to prove actual injury, the court summarized as follows:
[T]he only evidence directly linking the Robinson-Patman violation to any decline in sales and profits Stelwagon may have experienced is the anecdotal testimony of Stelwagon employees that, as discussed above, should not have been admitted as proof of lost sales' profits. Not only did Stelwagon fail to offer any documentary evidence as to the effect of the discrimination on resale prices, it also failed to identify a single lost customer. As a result, Stelwagon's claim for damages under section 4 of the Clayton Act must fail.Id. at 1275-76.
In reaching its conclusion, the Stelwagon court noted that the proof in the case before it was in contrast to the proof submitted in J.F. Feeser. In that case, the dispute was over pricing for wholesale food sales. The plaintiff's evidence regarding lost sales as a result of price differentials was substantial. In particular the plaintiff offered testimony from its sales people to the effect that the plaintiff lost sales to longtime customers that chose to purchase their wholesale foods from the plaintiff's competitor — Weis Markets — solely because of a lower price. J.F.Feeser, 909 F.2d at 1536. Weis Markets received favorable pricing from the defendant. Id. Other testimony showed that for sales to one particular diner, a sales person was forced to reduce prices to compete with Weis markets, but eventually lost the sales altogether because of "his inability to match Weis Markets' prices." Id. Yet another sales person deposed that he had problems selling a particular product to a restaurant due to competition from Weis Markets because he "got blown out of there on price." Id. This sales person also testified that his inability to offer competitive prices "resulted in a loss of his business integrity with that particular customer." Id. The record in J.F. Feeser contained several other similar stories from sales people. See id.
In addition to the testimony from its sales force, the plaintiff in J.F. Feeser offered the testimony of several customers who related that they chose to purchase from Weis Markets instead of the plaintiff because the plaintiff could not offer competitive prices. See id. at 1537. This evidence, along with the plaintiff's expert's report was sufficient to create an issue of fact for trial on damages. Id. at 1540. Specifically, the court ruled that plaintiff had submitted sufficient proof to present a triable issue for the jury by offering (1) direct evidence of lost sales; (2) "evidence that the substantial price discrimination reflected in the resale prices of Feeser and the favored competitors directly resulted in Feeser losing certain sales and losing profits on other sales because it had to cut its margins," and (3) an expert report "outlining the magnitude of the price difference." Id. The causation requirement discussed in Stelwagon and Fessler is an outgrowth of the Supreme Court's ruling in J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 561 (1981), where the Court rejected the so-called "automatic damages theory" under the Robinson-Patman Act. Understanding the rejected automatic damages theory is essential to an understanding of the proof required of plaintiffs seeking to recover damages under section 4 of the Clayton act. The theory of automatic damages was that a "jury should be permitted to infer the requisite injury and damage from a showing of a substantial price discrimination." J. Truett Payne, 451 U.S. at 561; see also J.F. Feeser, 909 F.2d at 1539-40. In rejecting this theory, the Supreme Court explained that a violation of the Robinson-Patman Act is established by "showing that `the effect of such discrimination may be substantially to lessen competition.' As our cases have recognized, the statute does not `require that the discriminations must in fact have harmed competition.'" J. Truett Payne, 451 U.S. at 561-62 (quoting Corn Products Refining Co. v. FTC, 324 U.S. 726, 742 (1942)). The Court read section 4 of the Clayton Act as less permissive of uncertainty and ruled that to recover the treble damages for which that statute provides, one must "make some showing of actual injury attributable to something the antitrust laws were designed to prevent." J. Truett Payne, 451 U.S. at 562 (citing Perkins v. Standard Oil Co., 395 U.S. 624, 648 (1969) (plaintiff "must, of course, be able to show a causal connection between the price discrimination in violation of the Act and the injury suffered.")). And because mere evidence of price discrimination serves only to establish that an anti-competitive injury "may result," it is insufficient to establish causation for the purposes of section 4 of the Clayton Act. J. Truett Payne, 451 U.S. at 562.
More recently, the Third Circuit found the following evidence sufficient to withstand summary judgment on the issue of damages: "(1) testimony concerning customers who no longer shop at the plaintiffs' stores and their statements about their reasons for not doing so; and (2) expert opinion testimony concerning the cause of the plaintiffs' loss of income."Callahan, 182 F.3d at 250. The testimony regarding lost customers and their motives consisted of customer statements — offered to show customer motive, i.e., chasing the better price — as well as testimony from the plaintiffs that they actually saw former customers buying from their competitor. Id. at 253. This evidence established, therefore, both fact the fact of lost customers and the reason the customers were lost. Id.
The evidence of a causal link submitted by Shore and APS is no more than an attempt to gain "automatic damages" and is in stark contrast to the evidence offered in J.F. Feeser. There is no evidence that Shore and APS lost sales or suffered a loss in profits due to Koch's pricing. In their brief, Shore and APS argue that "Shore Slurry and APS have shown that their own profits were reduced during this period as a result of Koch's discriminatory pricing." In support, they cite only to the report and deposition testimony of their expert Brian Blonder and to the testimony of Shore's controller, Steven Plummer. Plummer deposed as follows:
Q. You're seeking damages because you lowered your price to be competitive?
A. [from Steven Plummer, Shore's Controller] We feel at this time — here's the situation. Let's pick this municipality that we're sitting in right now, Camden. You're coming across the river here and you're . . . quoting a price to a competitor that we have lower than us and you're able to bid that lower because you're receiving more favorable pricing. In order for us to get the work, we're bidding out these projects at reduced profit percentages that we feel are attributable to the fact that you and I are both buying product from the same person, same company. The company is selling you the same product they're selling us at a reduced price. You seem confused that that would give you a competitive advantage.
Plummer Dep. at 235.
Shore and APS cite to one other part of Plummer's deposition in which he explained "We could have made more because we could have paid less." Plummer Dep. at 173.
As for Blonder, his deposition offers only economic theory and his report offers mere conclusions based on the fact of price discrimination. Blonder's report does nothing to establish a causal link between price discrimination and actual harm suffered by Shore and APS; and his deposition testimony confirms the Court's suspicion that his report is no more than conlcusory. At page ten, paragraph thirty-five, of his report, Blonder wrote
Competition was adversely affected by Koch's discriminatory pricing because it tainted competitive bidding for public entity projects. The cost of materials used by the providers of road paving and construction work is generally a significant portion of the total bid amount on projects to be performed for public entities. Therefore, the results of bid competitions for public entity work is affected by the prices, terms of conditions for the purchase of raw materials as offered to one bid competitor by a raw materials supplier if they are different from the raw material purchase prices, terms or conditions offered to another bid competitor by the same raw material supplier. Because Koch sold product to competitors at lower prices than the prices charged to Shore and APS (through Shore) for functionally equivalent product to be used in the same relevant market, Koch practiced discriminatory pricing.
Regarding his method for calculating damages, Blonder wrote, beginning at page ten, paragraph thirty-seven, that he compared all sales to Shore and APS's competitors to the sales made to Shore and APS, and totaled up the difference to arrive at a damage figure of $959,000. No part of Blonder's report reflects an attempt on his part to attribute these damages to some harm other than a difference in sales price. Indeed, his deposition testimony betrays his failure to do so:
Q. Have you calculated what Shore and APS's profits would have been but for Koch's actions
A. I don't think I needed to. I'm trying to think in Robinson-Patman if it is described as lost profits. Breach of contract I think you would refer to the price differential as lost profits. In Robinson-Patman it might be just referred to as price differential.
Q. So the answer to the question is you haven't calculated what their lost profits would have been but for Koch's actions?
A. It would have been a lot of work and I don't see the point in it. . . .
A. [in response to another question about calculation of damages] If you've charged too much for a price and you should have charged a little bit less and everything else would have been the same, that price difference, times the application of the sales that are affected, gives you the bottom line affect as it flows to the bottom line.
Blonder Dep. at 114:2-115:15
Q. As you sit here today, Mr. Blonder, you are aware of not one bid that Shore lost and was unable to generate profits on because of Koch's conduct; is that correct?
A. I have not included any damages related to that as a result of not at this point being able to conclude. That would be an example of another area that given additional information from Breneman, we might be able to do that or from other parties.
Blonder Dep. at 117:11-20
Q. Can you tell me how they were harmed?
A. Again, they were paying more than they would have for the product if Koch had been following or had not been doing things that caused them to be guilty of not complying to the Robinson-Patman.
Q. So, it is the same harm that they were suffering under the exclusive supply agreement, they were paying more for the product?
A. Generally, if you're liable in an action, you harm others as a result of it.
Q. So, for the purposes of the damages that are in your expert report that you're going to opine on, the damages that you're relying upon are the pricing differences, correct?
A. The method for calculating damages is the difference in price.
By way of background, the exclusive supply agreement established, essentially, that Shore would receive at least the same pricing terms as other Koch customers. Therefore, any damages under that agreement would likely be calculated by first comparing differences in prices paid.
Blonder Dep. at 176:1-12, 178:5-10.
At paragraph thirteen of Koch's statement of material facts, it states that Shore achieved the same profit margin on every public roadwork contract performed. Shore disagreed: "Genuine issue, as stated. This paragraph implies that Shore Slurry calculated a profit margin on each job, which it did not." In paragraph 14 of Koch's statement of facts, it states "Shore and APS's financial statements indicate that during the time that Shore and APS were purchasing emulsion from Koch, their contract revenues and gross profits generally increased each year." Koch continued in this same paragraph by providing the following figures drawn directly from Shore's financial statements at exhibits I, J, and K, respectively: (1) 1998: $20.019 million in contract revenues, $4.324 million in gross profit, 21.5% gross profit margin; (2) 1999: $24.071 million in contract revenues, $5.497 million in gross profit, 22.8% gross profit margin; (3) 2000: $23.002 million in contract revenues; $6.832 million in gross profits, 29.7% gross profit margin. The profit margins are calculated by dividing gross profits by contract revenues. Shore contends there is a genuine issue of fact regarding these figures: "Genuine issue, financial statements speak for themselves; Genuine issue regarding the definition of gross profits."
Continuing with Koch's statement of material facts, at paragraph 16 it states "[b]ut Shore and APS are not seeking damages for bids or sales lost as a result of Koch's alleged violation of the [Robinson-Patman Act]." Shore agreed, with commentary: "No genuine issue. These results are not acceptable. Shore Slurry and APS would have made greater profits if Koch had complied with the Exclusive Supply Agreement and the Robinson-Patman Act." So from these three exchanges between the parties regarding Shore's profits, it is clear (1) that Shore does not calculate a profit margin for each job; (2) that the financial statements speak for themselves but that Shore contests Koch's definition for gross profits; and (3) that Shore and APS are not seeking damages for bids or sales lost as a result of Koch's pricing discrimination; rather they seek damages for lost profits.
But Shore and APS never discuss their own financial statements or otherwise suggest how the Court should define profits. Presumably, Shore and APS prefer the definition provided by Shore president, Robert Capoferri: "[A]llocation of all general and administrative expenses, income taxes, interest income and expense and other extraordinary items." Even if the Court were to accept it, Shore and APS have not offered a profit calculation under that theory. If the financial statements do indeed speak for themselves, then there can be no dispute as to what Shore's gross profits were from 1998 through 2000. Shore and APS do not discuss in their brief even once how their profits were actually affected. Aside from the broad assertion that "Shore and APS have also shown that their own profits were reduced during this period as a result of Koch's discriminatory pricing," their brief in opposition to Koch's motion for summary judgment never discusses their profits in anyway. Blonder, their only expert, never offered an analysis of Shore's financial statements from 1998 through 2000 or of APS's financial statements from 2001, with respect to the price discrimination claim. This is a fatal omission inasmuch as Shore and APS seek damages solely on a theory of lost profits. The only analysis of profits is found in Koch's statement of material facts and shows that Shore's gross profit margin — stated as a percentage — rose each year: 21.5% in 1998; 22.8% in 1999; and 29.7% in 2000. And as pointed out by Koch, the financial statement of APS in 2001 is necessarily affected by its purchase of Shore's business, but nonetheless shows a gross profit margin of 17.9%.
In support of their claim that they have "shown" that their profits were reduced, Shore and APS cite not to their financial statements or an analysis of their financial statements, but rather to Blonder's deposition: "If you've charged too much for a price and you should have charged a little bit less and everything else would have been the same, that price difference, times the application of the sales that are affected, gives you the bottom line affect as it flows to the bottom line."; and to portions of the deposition of Plummer: "We could have made more because we could have paid less." Shore and APS also cite to the portion of Plummer's deposition that is quoted several paragraphs above in which he offered his hypothetical example of bidding on a paving project in Camden.
The portions of the testimonies of Plummer and Blonder cited by Shore and APS amount to no more than the automatic damages theory restated in terms of the asphalt emulsion and road-paving markets. Neither deponent discussed sales or bids that were actually affected by Koch's pricing practices. Indeed, Blonder had no time for it. He deposed, very clearly, that he assessed damages solely by comparing differences in price over several years. By his theory, Shore and APS are entitled to damages for each time that they paid higher prices than competitors, irrespective of whether sales or profits were lost. It is true that a court cannot, at this stage, demand very specific damages calculations, but this testimony reveals much more than just an inaccurate damages calculation. Blonder's testimony is symptomatic of Shore and APS's entire damages theory, which relies solely on the fact of price discrimination to assess damages. Plummer's deposition is stated in terms of a hypothetical example and does not recall an actual historical instance where Shore reduced its bid due to Koch's pricing, nor does his testimony address the actual effect this discrimination had on Shore and APS's profits.
The deficiencies in Blonder's report and deposition are more obvious when compared to the expert evidence analyzed by the Third Circuit in Callahan and Rossi v. Std. Roofing, Inc., 156 F.3d 452 (3d Cir 1998). In both cases the Third Circuit found the expert evidence sufficient to establish a causal link between the discrimination and actual injury. In Callahan, the expert analyzed the gross profits of the plaintiffs over a sixteen-year period, comparing average gross profits from five years before the discrimination began with the average gross profits from the eleven years during which the plaintiffs suffered discrimination.Callahan, 182 F.3d at 254-55. He then calculated the difference in average gross profits between those two periods and multiplied that number by the number in which there was discrimination and by the number of plaintiffs involved. Id. at 255. He also concluded, based on his assessment of the relevant market after having taken into account the advertising tactics of the main competitor, the marked increase in profits of the competitor, and the sharp decline in profits once the price discrimination began to abate, that the lost profits were caused by price discrimination Id. The Callahan court, though recognizing that this report was not perfect, concluded that it was sufficient to create a material issue of fact for trial: "In sum, we believe that, although the question is close, [the expert's] report . . . is sufficient to create a genuine issue of material fact concerning the fact of damage. Id. at 259. The expert report in Rossi was similar in that it made damages calculations based on past performance in terms of sales revenues, all of which was drawn from financial documents of two companies. Rossi, 156 F.3d at 485-86. In essence, the plaintiff was trying to establish his losses based on the performance of other defendants. Id. This was based, primarily, on the theory that the plaintiff had previously managed one defendant's business and could, therefore, achieve similar results in his own business. See id. at 458-59 486. After finding this expert report was an adequate assessment of damages, the court inRossi concluded that the plaintiff had created a genuine issue of fact for trial: "Rossi has established a prima facie case of antitrust injury. . . . He has adduced evidence of specific lost transactions showing causation or fact of injury, which is bolstered by an expert damage report that is not overly speculative as a matter of law. The combination of this evidence, while not conclusive, provides enough of a foundation that an eventual finder of fact would be justified in making a `just and reasonable inference' of the damages Rossi may have suffered as a result of the defendants' allegedly unlawful activities." Id. at 487. Inasmuch as Blonder's report offers no analysis based on the financial statements of Shore or APS and does not offer any assessment of damages aside from a comparison of sale prices, his report pales in comparison to even the report described inCallahan, which the Third Circuit described as creating a "close question" in the first place.
Shore and APS also offer some evidence that during the time that Shore and APS were being discriminated against by Koch in terms of pricing (roughly 1998 to 2001), their "bid win rate" decreased as their competitor Breneman saw its bid win rate increase. The glaring problem with this evidence is that Shore and APS stated in their response to Koch's statement of material facts that there was "No genuine issue" with Koch's statement that "Shore and APS are not seeking damages for bids or sales lost as a result of Koch's alleged violation of the RPA." In other words, according to Shore and APS, this evidence is irrelevant. In addition, the Court finds this evidence is insufficient to establish a causal connection between Koch's pricing tactics and injury suffered by Shore and APS. This is especially so inasmuch as the underlying data used to calculate the bid win rates are drawn from different documents that were tracking different types of information. Compare Shore and APS exhibit 7 with Shore and APS exhibits 38, 39, 45. Without some explanation for how this apparently disconnected comparison tends to show injury, the Court cannot, on its own, see how it does so.
Far from imposing its vision of exactly how one should attempt to prove injury from price discrimination, the Court simply finds that Shore and APS have not met their burden on summary judgment. Koch carried its burden by pointing to a lack of evidence of actual, rather than automatic, injury. Because it will be their burden to prove injury at trial, it was incumbent on Shore and APS to demonstrate where in the record there was a genuine issue of material fact regarding actual injury. Instead, they pointed to the deposition testimonies of Plummer and Blonder. Neither discusses lost profits of Shore and APS in any real sense. Their testimonies presented economic theory for how a price differencewould or could affect Shore and APS, but never discussed an instance where it actually did. The only other evidence offered by Shore and APS is irrelevant due to their clear stipulation found in their statement of material facts that they seek damages only for lost profits. Based on this record, a jury would be left to speculate and guess as to how Shore and APS actually suffered as Koch customers. In sum, there is no evidence that Shore and APS suffered lost profits due to Koch's pricing.
Accordingly, the Court concludes that Shore and APS have failed to demonstrate that there is a genuine issue of material fact for trial because they have not pointed to any evidence from which a reasonable jury could infer that pricing discrimination caused them actual injury.
IV. CONCLUSION
For the reasons stated above, the Court will enter judgment in favor of Koch on the claims of Shore and APS for damages under section 4 of the Clayton Act.